Best Practices: Competitive Pricing Strategies for Retail Grocers
The tides are turning in the food industry, and grocery retailers are feeling it. According to research by the Department of Agriculture, the food-at-home consumer price index for the first quarter of 2017 was 1.5 percent lower than in the first quarter of 2016 which means grocers need to ensure they provide the best competitive prices with optimal margin on every item.
Best Practices for Competitive Pricing
We recommend grocers review their pricing strategy annually, and when we’re asked about best practices in the industry our first question is always “Are you and other departments getting all the information you need out of competitive pricing collections?” To which they respond “Other departments?” Let me explain.
If you were to look at the utility of data collected from a competitive price check and imagined it uses a dartboard, the bullseye is solely price comparisons, but as you zoom out that data could provide greater insights than just price comparisons. That data is applicable to other departments as well as it can reveal insights around…
• New Item Introductions and Success
• Category Growth and Shrinkage
• Highlighted Ad Items and Promotions
• Competitive Pricing Zones
So How Do You Get This Information?
It all starts with the scope of the competitive price check.
Currently, there are three main types of competitive price checks
3) Full Book
Digital Price Checks
Digital price checks consist of using a manual or implementing a web scraper to collect online prices of a retailer. As omnichannel strategies continue to grow in importance, digital prices will be just as important as physical prices in the coming months.
Directed Price Checks
Directed price checks consist of a single list of items ranging anywhere from 25 – 5000+ items. These lists are focused on obtaining precise item sets for target analysis. With limited data though comes limited utility.
Full Book Price Checks
Full book price checks consist of collecting every item readily available in all the major departments of a store. These data sets give the greatest visibility of the retail grocer’s competitive pricing strategy.
Additionally, there is a hybrid of a full book and directed check that can be requested called a family full book price check which provides more insight than a directed check, but less than a full book and has some of its own disadvantages, which we will go into more detail on next week.