Three Trends in Competitive Pricing From Top Retailers
When it comes to maximizing profits in the retail industry, having a winning pricing strategy is critical. Not only do prices influence buyer value-perceptions and shopping decisions, they are also one of the most effective tools retailers can use to compete against rivals.
But in the digital age, the retail environment is changing rapidly and traditional pricing strategies are not as effective as they once were. Armed with on-the-go access to online pricing comparisons and a host of omnichannel shopping options, consumers are changing the way they purchase everything – from groceries to diapers and beyond.
That is why best in class retailers are proactively modernizing their pricing strategies by utilizing new sources of data as well as new processes and technology. Based on observing many of our clients in the industry, here are three of the top trends we see in competitive pricing today:
1) Leading retailers are evaluating more competitors
In the past, many retailers in the grocery space would evaluate pricing data from other grocery chains and Walmart. But as more specialty stores enter the scene and online retailers expand in the market, many retailers are broadening their competitor pricing evaluations.
While each retailer takes a different approach depending on their store locations and customer segments, we have found that many of our leading clients are now broadening their strategy and regularly checking prices at Target, Costco, BJs, Whole Foods, Trader Joe’s, Dollar General, Online retailers, and other stores.
The scope of these evaluations range from Full Book to Category and even KVI checks, but as a whole, they are intended to provide greater visibility into the competitors who are eating away at valuable basket building dollars.
The cost of acquiring this data is justified by the ROI it brings. Not only does it equip retailers to compete more effectively by keeping prices in certain categories within acceptable margin ranges, but it also allows them to optimize overall margins and basket value.
2) Retailers are scrutinizing key items more often and reacting to changes more rapidly
In addition to expanding pricing checks, we have also noticed an increase in how quickly and frequently leading retailers respond to changes made by competitors. Some retailers track KVI and SSKI data from a host of competitors weekly and even react with pricing adjustments within 24 to 48 hours.
Of course, the makeup of KVI lists change from one retailer to another, and while items like milk and eggs are common, other categories like meat and produce can often play a big part in the evaluation as well. By establishing the processes and technology needed to digest competitor pricing changes and respond nimbly, these retailers are building a distinct advantage over the rest of the market.
3) Price Zones Are Becoming Less and Less Reliable
In the past, pricing data aggregated in zones was accurate enough for decision-making purposes. But that is not necessarily true anymore as some retailers are now pushing pricing variations out on a store by store basis. Other retailers who wish to react to this strategy effectively must look at every store in these chains individually where they compete.
Unfortunately, developing the ability needed to process data from every store in a chain is a huge hurdle for many retailers. Depending on the approach taken, the investment required can be significant. At the same time, information that is obtained digitally may not be entirely accurate.
As McKinsey’s reaserch points out, the digital age continues to reshape consumer behavior, and retailers who wish to remain competitive must adapt their pricing strategies to keep pace. That is why it is more critical than ever to have access to timely pricing data from competitors and to have the processes to evaluate that information and respond rapidly.
Leading retailers are making great strides in this area, but many others are falling behind. That is why RW3 helps retailers of all sizes access the data and insights they need at the right time. You don’t have to face these challenges alone.
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