Reseller Pricing Strategy: Stop Relying on Comps and Boost Your Profits
Welcome to Lesson 3 of The GCC Pricing Strategy! In our previous lessons, we covered:
- The Power of Pictures and Presentation: How great visuals can double the perceived value of your product.
- The Importance of Brand and Market Value: Why understanding supply and demand is key to pricing effectively.
Today, we’re tackling one of the biggest myths in the reseller world: pricing based on comps (recently sold prices). Let me be blunt—this could be costing you serious profits.
Why Comps Aren’t the Whole Story
Let’s start with a quick definition:
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Comps, or comparable sales, are the prices at which similar items recently sold. Resellers often use comps as the primary basis for pricing.
But here’s the issue: comps don’t equal market value. Pricing solely on comps overlooks critical factors like demand, condition, and your unique market positioning.
Let’s break down why pricing based on comps can actually hurt your profits.
What Are Comps, and Why Are They Misleading?
In retail, comps refer to a store’s sales compared to its previous performance or another store in the same chain. These comparisons work because the businesses are virtually identical in pricing, strategy, and customer base.
Now, resellers have adapted this concept, but instead of using their own data, they rely on other people’s sales data. And this is where the problem begins.
Using comps in reselling is like Gucci Beverly Hills pricing its items based on Neiman Marcus sales. It doesn’t make sense because:
- The businesses aren’t identical.
- You have no information about the circumstances of those sales (e.g., why the seller accepted a low offer).
Let’s explore some examples to illustrate how this can hurt your bottom line.
Real-Life Examples: Why Comps Fail
Scenario 1: Mrs. Jones and the Wedding Shoes
Mrs. Jones, a stay-at-home mom, buys a pair of $745 Manolo Blahnik pumps for her daughter’s wedding. A year later, she lists them on Poshmark for $200. Someone offers her $150, and she accepts because she just wants them gone.
Does this comp of $150 mean the shoes are worth $150? Absolutely not.
Mrs. Jones simply wanted to declutter. Her sale doesn’t reflect the true market value of Manolo Blahnik shoes.
Scenario 2: The Marie Kondo Effect
Mrs. Correa, a retired lawyer, owns a massive designer shoe collection. Inspired by Marie Kondo, she lists several pairs of shoes for $200 each, not caring about the money. I (the reseller) swoop in, bundle four pairs for $500, and flip them for $399 each.
Why? I know the real market value.
Mrs. Correa’s motivation (decluttering) doesn’t dictate the true worth of those shoes.
Why Pricing Based on Comps Hurts Your Profit
Here’s the core issue: comps don’t account for supply and demand.
For example, if you have a pair of Manolo Blahnik shoes in excellent condition, priced at $399, and there are no similar listings in the market, why would you lower the price to $150 based on comps?
By pricing based on comps, you risk:
- Undervaluing your inventory.
- Losing potential profit.
- Reinforcing a buyer’s market.
How to Create a Smarter Pricing Strategy
1. Focus on Brand and Market Value
Ask yourself these questions:
- Is this brand in high demand?
- Is the market saturated with this product?
- How does the condition of my item compare to others?
For example, if your Manolos are the only size 38s listed, you have a pricing advantage. Use it.
2. Leverage Supply and Demand
Supply and demand are the ultimate pricing tools. If demand is high and supply is low, you control the price.
Take the infamous Tickle Me Elmo craze: a $35 toy sold for $1,000 because it was sold out everywhere. That’s the power of demand.
3. Use Comps as a Starting Point, Not the Rule
Comps can help you decide whether to source an item, but they shouldn’t dictate your pricing. Combine comps with other factors like:
- Market trends.
- Condition and packaging.
- Seasonal demand.
Are You Leaving Money on the Table?
If you’re only using comps, you’re likely undervaluing your inventory. Instead, focus on:
- Brand reputation: What’s the brand worth to consumers?
- Current demand: Is the item trending or rare?
- Supply levels: Are there too many similar items listed?
By shifting your pricing strategy, you can turn undervalued inventory into profitable sales.
Final Thoughts
Pricing based on comps may seem easy, but it’s not the smartest approach. The most successful resellers use a combination of:
- Brand and market research.
- Supply and demand analysis.
- Data-driven pricing strategies.
If you’re ready to level up your reselling business, ditch the comp-based pricing and start leveraging market value.
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