During the annual NRF Big Show, the buzz was all about the digital store, with Rebecca Minkoff’s interactive video displays in SoHo and Warby Parker’s new Lincoln Park outlet on the tips of presenter’s tongues. Yet, when we spoke with dozens of enterprise retailers about their goals for 2015 and their true pain points, a couple of themes were recurring, and they were much more practical: inventory visibility, price parity across channels and data understanding and action to drive more profit. We asked Jenn Markey, the vice president of marketing & product management at 360pi to address one of these key issues for 2015: Omni-channel price parity. Here are her thoughts:
During the past decade, the time required for consumers to compare prices for the same product from multiple retailers (a.k.a showrooming) has decreased from hours (driving from store to store) to minutes (checking different retailer websites) to seconds (scanning a barcode in a store with a shopping app on a smartphone).
We live in a price transparent world – one where omni-channel retailers must keep a sharp focus on competitor pricing and assortment to attract and convert shoppers, while also protecting and growing margins. The concept of price intelligence has become known as one of the most dynamic and rapidly evolving categories in retail technology today.
Price intelligence gives today’s leading omni-channel retailers a complete view of the competitive landscape so they can offer prospective buyers the right product at the right price at the right time. As well, this complete view of the competitive landscape, lets retailers identify and act on opportunities to increase their margins and conversions with such intelligent pricing tactics and strategies as:
- Zone or regionalized pricing and assortments to address local market conditions;
- Day-of-week and time-of-day pricing which takes advantage of known competitor price change trends and cadence;
- Competitive pricing for private brands;
- Personalized pricing and promotions often rolled into a loyalty program to maximize share of customer wallets.
So you think you can price intelligently
Through our work with enterprise retailers including Ace Hardware, Best Buy Canada and Overstock.com, 360pi has found the following five secrets to a successful price intelligence deployment:
- Clarity and Alignment of Goals and Objectives: These include desired price perception in the market, expected outcomes, scope of categories/items to be included and competitors of interest.
- Product match accuracy: Poor product matches and completion rates lead to a “garbage in, garbage out” result.
- Price AND Product Intelligence: Price intelligence is a bit of a misnomer, since retailers need to go beyond just price to understand their relative competitive position including assortment, private label, shipping, and promotions.
- Proven Reliability: “Black Friday” highlights the importance of key shopping dates in the calendar to a retailer’s financial success. This makes it critically important to select a solution that can deliver real-time actionable insights during high-volume peak seasonal periods without service degradation or outage.
- Integrated Approach: Many price intelligence solutions try to be a ‘one-stop’ shop. The reality is that without ‘plug-and-play’ integration to other critical back office systems, such solutions end up being standalone silos that duplicate tasks, fail to leverage existing technology investments and ultimately deliver sub-optimal pricing, promotion, and assortment decisions.
Better price intelligence = Increased customer loyalty and sales
Retailers have a desired price perception and associated value proposition in the market that needs to be supported and reinforced through pricing. In turn, shoppers seek a price-value equation consistent with their specific objectives, which are based on a combination of their product requirements, brand perceptions, personal aspirations and budget reality. A competitive pricing strategy that delivers on and reinforces a retailer’s intended market strategy is key to building and maintaining loyalty with its target market.
Achieving price parity not only across all channels, but also to the individual
The objective of omni-channel pricing is not to offer the same price to all shoppers across all channels, but to deliver the same price to the same shopper across all channels. This makes the use of personalized pricing and promotions central to attaining cross-channel price parity.
As mentioned earlier, it’s not really about price parity across channels, but rather price parity to the individual consumer. For hard goods, which are easily comparable and available online, it often comes down to price with immediate gratification being the swing vote. For soft goods, specialty and luxury items, many other variables enter the purchase decision, notably customer perception and experience. In general, shoppers want to be treated fairly across all channels, but will be most price sensitive for hard goods where other purchase factors matter less, if at all.
Competing with Amazon and the future of intelligent pricing in retail
Retailers need to stay true to their desired price perception in the market. If they’re not seeking a low cost position, why try to compete on price with the likes of Amazon? They should look for opportunities to compete with:
- A unique assortment including local, specialty and private label among other tactics;
- Personalized pricing and promotions tied to repeat shopper behavior and purchase patterns;
- Other pricing tactics and strategies including zone, line and loss leader pricing.
Or, if having the lowest price is their game, be aware of the “fast follower” phenomenon. Amazon does not aspire to have the lowest price, but rather be the fastest follower of the lowest price, supported by their automated and algorithmic approach to pricing intelligence. If a retailer does not have a firm understanding of the competitive pricing landscape for their assortment, they may inadvertently be their own worst enemy by either over-pricing their products or, arguably worse, under-pricing them, engaging Amazon in a “race to the bottom.”
Successful retailers have come to the conclusion that to compete on price alone with the likes of Amazon is a largely unviable strategy, especially in the long term. After years of increased price transparency that reduced the retailer-consumer relationship to solely transactional, savvy retailers are putting the experience back in shopping. In the future, we expect less average online price dynamism as we witnessed this past holiday shopping season. We also expect pricing to go ‘underground’ largely supported by personalized pricing and promotions that let retailers realize a sustainable omnichannel strategy, build customer loyalty and effectively compete in the age of Amazon.