How do you respond to a competitor who keeps undercutting your prices every week?

First confirm it is a rule, not a person

When the same competitor lands one or two dollars below you within hours of every change you make, you are almost certainly looking at automated repricing. A human merchandiser does not check your catalog at 3 a.m. on a Sunday. The tell is consistency: the same gap, the same delay, the same handful of SKUs. Pull the price history for those items and line up the timestamps against your own changes. If their move follows yours by a predictable window, you have found a rule, and rules are easier to plan around than people because they do not improvise. Related: How to Track Competitor Prices Without Crossing the Line

The second thing to check is scope. Undercutting across a whole catalog is rare and expensive. Far more often it is a slice: the top sellers, the items where you both buy from the same distributor, or a category where they are sitting on excess inventory. Knowing the boundary matters because your answer should be as narrow as their attack. Responding across the store to something that is happening on twenty SKUs gives away margin on hundreds of products that were never under pressure.

Keep reading: How to Track Competitor Prices Without Crossing the Line, Dynamic Pricing Basics for Small Online Stores, When to Match a Competitor's Price and When to Hold. See how PriceHawkly helps you competitor price monitoring for online stores.

Put a dollar figure on what the undercutting costs

Before you react, measure whether it hurts. Compare unit sales and conversion rate on the affected SKUs for the weeks before the pattern began and the weeks since. In many categories a small price gap does not move volume much, especially when your shipping speed, reviews, or return policy are better. If sales are flat, the competitor is paying for a position that is not buying them anything, and your best move is to leave them there. Related: MAP Policies Explained for Online Resellers

If sales did drop, estimate the margin you would give up by matching versus the margin you are losing to lost orders. Include the second-order effects: a lower price on a hero product often pulls in orders that carry accessories and repeat purchases. This is a rough calculation, not a model, but writing it down forces the decision to be about money rather than pride. Plenty of stores chase a competitor down purely because being second feels bad, and that feeling has no line on the profit and loss statement. Related: When to Match a Competitor's Price and When to Hold

Choose a response that a rule cannot follow

An automated undercutter follows your visible price, so change what it can see. Bundle the pressured item with a low-cost accessory and price the bundle instead of the single unit. Offer the same product with a longer warranty or a free faster shipping tier. Move promotions into cart-level discounts or loyalty credit that a scraper never records. None of this is trickery. It is simply competing on the parts of the offer their rule was not built to compare.

Where you do want to compete on the sticker price, set a floor and stop there. A competitor with a rule that says beat the lowest price by one dollar will follow you down to their own floor and then hold. Your goal is to discover their floor in as few steps as possible, not to drift toward it a dollar at a time. Drop once to a price you can live with for a quarter, watch whether they follow, and then hold. If they go below a level that cannot be profitable, let them have the volume and watch their stock.

Set up monitoring so the next round is calmer

The stores that handle undercutting well are the ones that noticed the pattern in the first week rather than the first quarter. Alerts on your top SKUs, with a threshold tied to the gap that actually changes buying behavior, will surface a new rule quickly. Log the competitor's floor once you have found it so you never spend margin rediscovering it. Keep a note of which of your SKUs are on their list, and check that list monthly, because automated rules get expanded.

Finally, watch for the day the rule breaks. Automated repricers depend on their own supply, and a competitor selling at thin margin will eventually run short, change suppliers, or turn the rule off. A price history that suddenly flattens or jumps is the signal that the pressure is gone. When that happens, restore your price deliberately rather than by inertia. The same monitoring that told you the undercutting started will also tell you when it is safe to stop responding. Related: Reading a Price History: What the Patterns Tell You