When the market gets flipped upside down, how do you know what is fair pricing?
Fair pricing is a fundamental element of every retailer’s brand value. Whether the brand’s identity is “everyday low price” (EDLP) or premium luxury, shoppers need to have confidence the retailers with whom they shop are operating ethically. Helping our retailer customers identify the fair pricing strategies that serve business goals and satisfy consumer expectations is a cornerstone of our own identity and value.
Under normal circumstances, fair pricing runs in lockstep with the laws of supply and demand. Of course, pricing becomes a competitive advantage when retailers strategically make adjustments to drive sales or margin, drive foot traffic, or promote a new product or service such as a BOPIS program. As the COVID-19 crisis disrupts every aspect of the business, setting and executing fair pricing strategies – strategies that are not only fair for customers but to the company – gets a whole lot tougher.
Grocery retailers have seen a once in a lifetime spike in sales volume since quarantine began and restaurants shuttered their doors. There was no “enjoyment” in that growth, however, as it came at the expense of margin on a number of their highest-volume and most desired products. With greater pressure on food supply chains, the cost of sourcing staple goods such as eggs, milk, and meat jumped to unsustainable levels for retailers.
The legislative twist
One of the biggest challenges is that most states and the federal government have anti-price gouging legislation on the books, originally triggered by various emergency declarations. These laws, designed to prevent unnatural pricing inflation during times of crisis, rightfully protect vulnerable communities from bad actors acting in self-interest.
However, these laws are designed for short-term and geographically isolated natural disasters like hurricanes and flooding. They were constructed under the assumption that national supply chains could, with a bit of effort, absorb any extra demand easily and without significant additional cost for a limited time. Unfortunately, almost none of these laws imagined a crisis that affected every part of the country, every vendor and every supply chain for half a year or longer.
So, as retailers heroically serve their communities during COVID-19, they face extreme cost hikes from suppliers (facing new struggles of their own) without any recourse in how to pass along those costs – costs that they cannot profitably absorb based on thin pre-pandemic margins.
Retail’s heroes find a way
So, what’s a retailer to do? Stop carrying critical items with negative margin pressure? Close up shop and come back to work when it’s over? Not a chance.
Instead, they’re getting into the data.
By looking at price holistically using intelligent pricing platforms like ours, they’re able to quickly evaluate each product in the context of the organization’s business goals. Instead of evaluating each product individually, they can find ways to fairly, morally, legally, and responsibly adjust the prices of all items they carry.
The AI can compute the impact of price on consumer behavior and help them make nuanced pricing adjustments in other areas to compensate for these new market conditions. Quickly and efficiently deploying a comprehensive pricing strategy across their business protects the majority of pre-crisis margin and profitability even when certain essential categories or products turn margin-negative.
These intelligent modeling features ensure that our retailer customers have the most accurate pricing predictions – and they can update and accommodate new conditions weekly, daily or hourly, based on their needs.
A unified effort
As the retail industry perseveres through the crisis and as stores across segments start to reopen and people go back to work, there will be a delicate balance between economic stability and public health. It’s our commitment to our customers to ensure that not only do their prices remain a strategic driver of their business success but also remain in alignment with community health in its full purview. Although many retailers have already been hit hard by this pandemic, it’s our job to make sure they have the tools they need to respond, and that new and emergent price pressures are just part of the optimal pricing equation.
If you’re struggling to quickly and consistently evaluate the impact of price on your business, we’d love to help you find the right solutions for your unique situation. Our AI-enabled suite of pricing, promotion and markdown solutions and team of top-tier price strategy consultants are eager to help you take a holistic approach to pricing strategy, tailored to your exact needs. Reach out today for a conversation so we can learn more about you!