The Real Cost of Being 10 % Too Expensive
Sales you lose to a cheaper shop never show up in a report. How to put a number on the price gap, test it on your own data, and spot the opposite problem.
Priceron teamIn this articleWhy you never see the loss
You sell a 24-inch monitor for €220.00. Nordline sells the same model for €200.00, yet nothing in your sales reports suggests there is a problem.
That is the problem. The customer who compared both shops and bought from Nordline leaves no trace in your system: no cancelled order, no complaint, no line in a report. Your monitor may be selling fewer units than it could, but because you cannot see the potential sales you missed, the price difference appears to have no cost. That potential cost is easy to overlook.
Why you never see the loss
Your shop records what happened: orders, revenue, margin. It doesn’t record what didn’t happen. A customer opens your product page, opens the same model in another shop in a second tab, sees a lower price and leaves. In your analytics that is one more visit without an order, mixed in with thousands of others.
The margin you keep on each sale, on the other hand, is very visible. With a selling price of €220.00 and a purchase cost of €160.00, you make €60.00 per unit before VAT and other costs. So the higher price looks like a success, and its cost shows up nowhere. That imbalance leads many shops to stay expensive for longer than they should, simply because one side of the trade-off is on a screen and the other isn’t.
Where the gap costs you, and where it doesn’t
Being 10 % above the cheapest shop doesn’t cost the same on every product. It matters most where customers can compare easily:
- Branded products with a clear model number. A customer can search for the model and compare prices across several shops in seconds.
- Products people research before buying. Customers often compare several offers before buying TVs, monitors, power tools or large appliances.
- Key value items. These are the products customers use to judge whether your shop is cheap or expensive. Being well above the market on them can make people doubt your other prices too.
It matters much less on own-brand products, small accessories, items bought together with something else, or products where you offer something competitors don’t, such as installation or fast local delivery. Which group a product belongs to is part of the rules in Repricing rules: when to match, when to hold, when to ignore.
Putting a number on the gap
You cannot directly measure how many sales a higher price may have cost you. However, you can calculate how many additional units you would need to sell at a lower price to maintain the same total margin.
Illustrative example: the 24-inch monitor
Illustrative example using hypothetical figures. For simplicity, margin here means the difference between the selling price and purchase cost, excluding VAT and other expenses.
Your purchase cost is €160.00. At €220.00 your margin is €60.00 per unit, and you sell 10 units a week: €600.00 of margin a week. At Nordline’s price of €200.00 your margin would be €40.00 per unit, so to earn the same €600.00 you would need to sell 15 units a week.
| Units a week at €200.00 | Weekly margin at €200.00 | Compared with €220.00 (€600.00) |
|---|---|---|
| 12 | €480.00 | Staying expensive earns €120.00 more a week |
| 15 | €600.00 | No difference |
| 20 | €800.00 | Staying expensive earns €200.00 less a week |
In the third row, keeping the higher price means earning €200.00 less per week. That amounts to €10,400.00 over 52 weeks, assuming sales remain consistent. In the first row, the higher price is the right call. The arithmetic doesn’t tell you which row you are in. It tells you the break-even point: here, the lower price has to sell at least 50 % more units to be worth it.
The break-even point depends on how much you make on each unit sold. If the difference between purchase cost and selling price is small, a price cut has to be made up by many more units sold. If it is larger, even a modest rise in sales may be enough for the cut to pay off.
Estimating it on your own data
Your own sales data provides the best starting point for estimating how price differences affect demand. Three practical ways to get closer to an answer:
- Look back at gaps that changed. Find products where your position moved in the past, for example because a competitor cut its price for a few weeks or you changed yours. Compare units sold per week before and after. Leave out weeks with stock-outs, your own promotions or obvious seasonal swings, or the comparison will tell you more about those than about price.
- Run a small, controlled test. Pick a handful of comparable products in the same category. Lower the price of half of them to the market level for a few weeks and leave the other half unchanged, then compare how sales moved in each group. Test across products, not across customers: showing different prices to different people at the same time causes more trust problems than it solves.
- Compare visits with orders. If a product page keeps its visits but orders drop after a competitor goes cheaper, the price gap may well be the reason. If visits drop too, look at other causes first: search ranking, advertising or the season.
None of these gives a precise figure, and small shops will see noisy results on low-volume products. That’s fine. The goal is not a perfectly precise figure, but a reasonable estimate of whether a price reduction could improve your overall margin.
When you’re cheaper than you need to be
The same arithmetic works in the other direction. If you sell a product for €180.00 and the next cheapest competitor charges €200.00, you may have room to increase your price. For example, raising it to €195.00 would add €15.00 in margin per unit, provided you maintained the same sales volume. This leak is just as invisible: the orders keep coming, so nothing looks wrong.
It often happens when a competitor’s promotion ends but your matched price stays, or when a supplier raises prices across the market and you haven’t moved. Regularly reviewing products priced well below the next cheapest competitor can reveal opportunities to increase margin without necessarily losing sales. How strongly sales react to price in each direction is the subject of Price elasticity explained for e-commerce owners.
When not to cut your price
Don’t cut prices just because the arithmetic shows a gap. If the cheaper shop is out of stock, sells a different pack size, or charges separately for delivery that you include, the gap may not be what it looks like. If your stock is limited and you will sell out at the higher price anyway, there are no lost sales to recover. And if customers choose you for advice, installation or easy returns, a modest premium may be exactly what your positioning should look like. With a small range that sells a few units a month, a test won’t show anything reliable; rely on judgement and the break-even point instead.
How Priceron helps
Priceron shows where you stand on each product. The price position and biggest gaps widgets show where you are above the market, and the headroom widget shows where you are well below the next shop and may be giving away margin. Ready-made reports on pricing position and price competitiveness can be viewed in the app or downloaded as CSV, and the price history lets you see when competitors changed their prices, so you can compare those changes with your own sales data.
Each listing also shows its stock status, so you can tell a real gap from one at a shop that can’t deliver.
Takeaway
- Sales you may have lost to a higher price never appear in a report, but the margin you keep always does. A higher margin per unit doesn’t necessarily mean a higher total margin.
- Work out the break-even point: how many more units a lower price would need to sell to earn the same margin, then check your own sales against it.
- The opposite leak is just as quiet: look regularly for products where you are far below the next shop.
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