Dynamic pricing is the automatic updating of price according to competitor prices, stock position, demand and a margin rule. It spread on marketplaces because Buy Box and ranking competition hinge on price. It works on rules: a floor margin is set and the price never goes below it. Automation built without a floor consumes margin rather than competition.
Automations set up without a floor end in a mutual price-cutting spiral with competitors and make the whole category unprofitable. The right setup defines the floor on contribution margin and accounts for commission, shipping and the return allowance. Raising the price as stock runs low, and clearing dead stock with staged markdowns, are also part of dynamic pricing. Where the automation runs daily, it should be locked manually during campaign periods; a platform campaign price colliding with an automation price produces loss-making sales.
Price floor = Product cost + Commission + Shipping + Return allowance + Target minimum contribution
On a product with a 280 TL floor, if a competitor drops to 265 TL the automation does not follow; that sale would book a loss anyway.
Automations set up without a floor end in a mutual price-cutting spiral with competitors and make the whole category unprofitable. The right setup defines the floor on contribution margin and accounts for commission, shipping and the return allowance. Raising the price as stock runs low, and clearing dead stock with st…
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