Formulation of Product Pricing and Margin Structure

Abstract

The Company Sports365 is an ecommerce company and is well established in its area of operations. It enjoys a large customer base in institutional selling with almost zero competitors. It has two revenue streams but its majority of the revenue comes from the B2B2C model. It currently deals in product categories like sports and fitness equipment, school uniform and school shoes. The company is planning to expand its reach in existing as well as new markets by launching seven new product categories. It will sell these products on its online portal. The company does not have a proper price and margin structure for these products. To determine the price for a product, it is important to know how it will be manufactured/purchased, stored and delivered to the customer. Accurate costing of products is necessary to arrive at a feasible listing price. Apart from this, there are many internal and external factors which can affect the pricing decision of the company. It is a planned process which allows us to finally decide a pricing strategy. As all the products have different features and the markets are unexplored and complex, each product category has to be managed uniquely. Even within a product category, pricing strategies would need to be altered timely, depending upon the branded products, geographical constraints and value of the product. Analysis of a survey shows that local vendors would prefer selling their products on the competitor’s platform like Amazon and Flipkart because they have more visibility. So the company can implement an inventory model where it would purchase the products in bulk from these vendors either through JIT method or Sale – or – Return method. Industry analysis shows favourability for the company but the major factor currently being the on-going pandemic, the company will have to be careful before indulging in new ventures.