One of the main duties of the purchasing department of any company is to try to reduce the costs the company has. As every business wants to stay economically profitable, getting to negotiate favorable purchasing costs is the key to minimize costs and, specifically in the case of e-commerce stores, to be more competitive.
Pricing and the Procurement Department
We are saying there is a relationship between Pricing and the purchasing department. First of all, let us take a look at what Pricing is. In terms of marketing, Pricing is defined as the different methodologies employed by companies to determine the values of their products or services.
To do so, there are different aspects that companies should consider before adjusting the value of their products, such as the nature of the product, the vertical they are working in, the amount of competition, the listed price suggested by the brand, etc. All these factors affect a product’s value and will influence the final pricing decision.
On the other side, these are the primary duties of the procurement department of any e-commerce store:
It is the department in charge of managing brands and suppliers. This process entails searching and reaching suppliers and negotiating purchasing costs and conditions.
Negotiation of better purchasing conditions and improvement of products’ theoretical margin. And as a consequence, an increase in the range of operative margin.
Then, once we know what Pricing is and what the main duties of a purchasing department are, we can conclude what the primary relationship between both of them is: reducing costs and additional expenses and monetizing products. A good methodology to optimize the results of this relationship is commonly known as Dynamic Pricing. Let us take a look at how it works.
Dynamic Pricing: from market changes to e-commerce rules
Dynamic Pricing solutions offer pricing suggestions based primarily on a group of rules pre-adjusted by the store, and secondly on the current situation of competitors. Thus, it defines the products’ value according to both intern and extern aspects of your e-commerce. We want to remark this, as watching how your vertical and competition behaves turns out to be indispensable to boost your competitiveness.
If your company can watch which of your rivals has the lowest prices, you can take this information as a resource to renegotiate your acquisition costs with suppliers and try to increase the profit margin. Minimizing costs is one of the unmissable pillars any purchasing department has, and dynamic pricing solutions can help you optimize costs.
Besides, by monitoring your market and competition, you can detect conduct trends and patterns in your vertical’s prices, which can turn out to be an excellent way to identify pricing behavior patterns. This will not only be useful when choosing the best prices for your products, but it will also be helpful to determine what volume of stock you need, allowing you to minimize expenses.
Nonetheless, this solution is efficient for both the purchasing department and the pricing department, as they can go along and improve their performance thanks to these automated pricing optimization solutions.
For the pricing department, Dynamic Pricing is useful to visualize the three principal metrics of your e-commerce (price index, profit margin, and conversion rate); maximize profit margin by adjusting more competitive prices (knowing how to adapt prices to every change inside your market); or getting to monitor and clearly watch the prices evolution of various competitors in different countries.