Competitive Pricing And The New Normal
So far, 2020 has been quite a year – in a horrible, ‘never again’ sort of way. If you are wishing you could hit CTRL-Z and go back to December 31st of 2019, take comfort in the fact that there are approximately 7.8 billion people in the world who probably feel the same way. Unfortunately, that isn’t an option, so the next best thing is to understand where things are, what’s coming next, and what you can do to prepare. Let’s dive in:
Update on the economy
For the first time in several weeks, the economy delivered some good news. After many economists predicted that unemployment might hit 20%, we were delighted to learn that it actually fell to 13.3% in May. Additionally, retail sales jumped almost 18% for the month. Grocery sales remain strong and are up 14% over last year as more people are learning to cook at home. Where would we be without the Food Network and cooking tutorials on YouTube?
True to form for 2020, prices in most categories are falling at a record pace with the core CPI registering its largest drop since records began in 1957. Not to be outdone, grocery prices are an exception to the rule, increasing 2.6% in April. Yes, that is also a multi-decade record, just in the other direction. If you like indulging in a nice breakfast, times are especially rough as egg prices are up over 16%. Donuts are up too.
When it comes to the grocery industry, pricing strategy has mostly been on autopilot. Costs have been rising as the food supply chain copes with massive disruption due to the pandemic. At the same time, unprecedented demand is pushing prices higher, as stores struggle to keep gondolas stocked. We’re looking at you toilet paper hoarders.
But things are beginning to normalize. Many items that have been perpetually out of stock are starting to appear again. People are emerging from their COVID induced hibernations, and it’s time to get ready for what’s coming next.
Preparing for the new normal
Some things are normalizing, but that doesn’t mean everything will be the same as before. At least not for a long time. While unemployment is headed in the right direction, it is still at a record high, and many shoppers will need to be frugal. The pandemic has altered consumer behavior over the last few months, and the rapid adoption of online grocery shopping could be a lasting trend. Moving forward, stores need to rethink their strategies.
This is particularly true when it comes to competitive pricing. While strategy took a back seat to keeping shelves stocked and stores sanitized for the last few months, the time for complacency is past. Getting ahead in the new environment will require paying close attention to what your competitors are doing both on the shelf and in the digital frontier. Occasional price checks may have been sufficient in the past, but stores with more frequent and holistic data collection practices will now gain a noticeable advantage.
If you don’t have the capabilities to collect and analyze pricing information, our team at RW3 can help. We combine years of industry experience with the latest technology to help retailers track relevant data streams from a host of disparate sources. Our mission is to provide clients with real-time actionable intelligence, so they are always prepared to respond to market shifts.
These are challenging times, and the future is very uncertain. But by keeping a pulse on the situation and preparing for what’s next, you can position your organization to emerge from the storm more robust than ever. Stay tuned for further updates.
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