Common pricing mistakes and missed opportunities retailers should avoid during the holidays
The holidays are already upon us, and it seems this year will be just as dynamic as last year. Retailers are up against some new and difficult challenges this holiday season, and also have to meet different market needs than in years past. All of this affects your pricing strategies and makes it harder to know what the best pricing moves are. While you navigate pricing in this season, make sure to avoid these holiday pricing pitfalls.
Wasting Pricing Labor
The holiday season is always a busy time that requires more hands in store. With a historic labor shortage, this year especially is not the year to waste labor efforts. Your stores will already be stretched to the max, and you will have fewer resources available to change prices. Every holiday pricing action you make needs to be carefully considered and optimized to be worth the effort and derive the most value.
This applies not only to everyday prices, but promotions as well. Ineffective promotions are rampant in retail. Now is the time to evaluate which promotions are going to drive the best results and only put in the labor efforts towards those.
Managing cost increases from inflation and your holiday promotions requires the right analytics to ensure a profitable balance between price perception, margins, and market share. If you want to know more, this other article shares additional details on how to get strategic with your pricing in the face of worker shortages.
Supply chain challenges are ripping through retailers and creating lumpy inventory across stores and distribution centers. Your competitors are also constantly changing prices to meet market demands. It will be critical to remain flexible with your pricing in order to stay competitive and balance demand.
You can leverage pricing to shift demand dynamically into products with healthy inventory levels and away from products with limited inventory. It is too late to impact supply for a large percentage of holiday products, but demand can still be shifted if pricing is executed in a data-informed, strategic way.
I also explore this topic further in the article ‘Pricing Strategies for Supply Chain Shortages,’ if you’d like more insights into how this can be done.
Waiting Too Long for Markdowns
Since the beginning of retail, the classic holiday mistake for retailers is to wait too long to begin marking down products. The ability to optimize markdowns will be particularly important this holiday with the aforementioned ‘lumpy’ supply chains and limited store resources.
Say you are used to taking three markdowns the week after Christmas in all stores. This year, you may only be able to take two marks. And with inventory levels varying greatly by store and warehouse, you would certainly benefit from taking different marks in different stores based on inventory and demand.
Taking markdowns sooner is also essential to reducing waste and limiting the number of major discounts you have to take at the end. Markdowns should capture waning demand, not try to recreate demand after it’s gone.
Pushing Only National Brands
The holidays are a great time to grow private label penetration for some retailers. Consumers are doing more cooking, shopping more categories, and looking for great deals to get that right present. With inflation driving up prices and supply chain issues threatening stock availability, more consumers are open to trying new brands to get what they need and save a little money.
Pricing and promotions can be extremely effective ways to channel more demand into your own store brands and boost your profits too. Data analytics can help you find those optimal brand gaps to entice customers to switch while still getting the most margin.
Ignoring New Affinities
Affinities matter more during the holiday season. Knowing which products to pair with which other products can help build bigger baskets, increase revenue and get customers to try new things that may surprise and delight them.
Everyone knows to group turkey and stuffing, or pie crust and pumpkin filling. But what about new or unique seasonal affinities? Could you drive additional purchases with wine and cheese or charcuterie pairings? What about baking dishes and insulated carriers? Holiday cards and packing tape? Digging into your data can help you find and optimize those affinities.
Have a Hectic but Happy Holidays
All signs point to a healthy holiday shopping season, despite the challenges ahead of retailers. If you can avoid these holiday pricing pitfalls, you’ll be well-positioned to meet customer pricing demands and close out 2021 with a good holiday performance.
If you need more guidance on how to avoid these pricing mistakes or need to identify some holiday pricing quick wins, don’t hesitate to reach out to our pricing experts.