Omnichannel retail pricing today requires dynamic pricing that is strategic not reactive. It must be competitive and customer-centric. Retail price optimization delivers results – when properly constrained and configured – but where are retailers still coming up short on driving profits? In our blog series, we discuss subjects – less explored – which we think need attention. In this post, reflecting on discussions with retailers and industry influencers, we explore where retailers are losing money and what we can learn from current retail pricing science.
1. Is pricing consistent across product lines?
Cause. As a result of more frequent changes in assortment and price – in response to competition and cost changes – product lines are constantly in a state of transition. Current pricing science reveals inconsistencies in how products are priced inside product lines; across related items; and between private label and national brands.
Effect. Inconsistent prices and price image and lost profits.
Answer. Increase the rigor in analyzing and monitoring product relationships; automate compliance with pricing and product line rules; and implement an exception-based approach that alerts merchants when products and prices are out of compliance.
2. Do retailers know which products are price sensitive and which are not?
Cause. Customer demand for products online and in-store regularly shifts as a function of consumer behavior, competition, seasonality and availability. Current pricing science reveals overpricing on sensitive items and underpricing on insensitive items.
Effect. Inconsistent retail pricing strategy across assortments and lost profits.
Answer. More granular demand modeling to monitor store-SKU sensitivity (elasticity), SKU-level price competitiveness, and opportunities to reinforce price image and drive profits.
3. Do retailers know which competitors they should care about?
Cause. Increased availability of competitive pricing information can elicit a competitive price response when unnecessary. Current pricing science reveals that not all competitors exert the same “competitive pressure” on a retailers’ sales, sending false signals, and triggering unnecessary competitive price responses.
Effect. Unfavorable competitive price image and lost profits.
Answer. Analyze the “pressure” each competitors’ prices and assortments have on a retailers’ unit sales and decide which competitors/prices actually require a price response and the magnitude of the response.
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