5 areas pricing organizations should focus on now
As you already know, the retail world around us has changed. 2020 made quite the impact on retail and consumer behavior, and inflicted a variety of challenges across different industries. Now, in the next normal, retailers are looking ahead to recovery and new opportunities. When it comes to pricing post-pandemic, these are the 5 key areas retailers should be targeting now.
Store closures and safety concerns pushed online shopping 5-10 years into the future. Not only from a growth standpoint, but for technology investment and omnichannel strategy as well. Now, omnichannel is all about personalization. Retailers are putting the infrastructure in place to offer customers the exact experiences and options they want, wherever they want them.
It’s not just that consumers are shopping online more, but how they shop online is shifting as well. Traditionally, customers shopped online with a certain product or brand in mind. They were shopping with a goal, not looking to browse. Product exploration was done in-store, where customers could see and touch new products or certain categories in person. But this is changing.
With many consumers doing much more of their shopping online, they want some of those in-store experiences brought into the digital world. The savvier retailers have caught onto this, and are leveraging tactics like associate livestreaming, virtual personal shoppers, online health and beauty consultations, and more to meet these customer needs.
And as online shopping habits and offerings change, so too must pricing. Retailers must have dynamic online pricing that can adapt alongside their online shopping experiences.
“The shift to online has changed grocery,” said Revionics Managing Director, Global Strategic Consulting Matthew Pavich. “No one is going to stand in the store and walk away from a jar of salsa because they know they can get it cheaper somewhere else. But online, I can shop multiple brands at the same time, place multiple orders from different grocers all delivered to my house, and all of this with even more convenience to me than going into a store. It makes the landscape more competitive for the grocers.”
To say consumer behavior changed is an understatement. McKinsey found that 62% of consumers shifted their loyalty to new retailers or brands during the pandemic. And that 73% of U.S. consumers have adopted new shopping behaviors with a high intent to continue. From bread making to gardening to new pets, consumers are keeping up with their new hobbies as the world returns to normal.
This means they will continue to fuel many of the categories that saw tremendous growth in the pandemic. And it also means that your key items have probably shifted. Retailers need to leverage analytics to reevaluate their assortments and make sure they are competitively priced on the right key items.
“We’ve definitely seen major shifts in category sales, like baking, fitness, home improvement, etc,” said Revionics Sr. Director Customer Success, Americas & APAC JJ Thorne. “However, it’s not just categories, but products as well. Assortments are changing and new brands are becoming more noticed. Eco-friendly products for example are coming more to the surface.”
Consumer demand shifts have also affected category pricing roles post-pandemic. Where before a category might have been a strategy driver, now perhaps it’s a margin enhancer. Not to mention, the shift to online introduces new competitors. Changes in category roles and competitors both have major impacts on your pricing strategies and goals.
“Any company will have growing pains during a period of rapid growth and change,” said Revionics Data Science Analyst Sneha Elango. “But there are a lot of low hanging fruit and instant margin wins out there available to retailers making investments in new or refreshed analytical services. With many companies aggressively adjusting their strategies, it’s important to not get left behind.”
For many retailers, it’s more essential than ever to bring shoppers back into the store. Pricing is a valuable tool retailers can use to help accomplish that. Pricing can be used to shift demand towards frequency-drivers like ready to eat, locally sourced, private label and sustainable products.
Promotions are another way pricing can help increase frequency. Running promotions designed to bring people in on days they wouldn’t normally shop, or buy items they wouldn’t normally buy can drive traffic without too much adverse effect on basket size. Restaurants and hotels live and die by frequency. There is a lot retailers can learn by studying these industries and how they leverage promotions.
Frequency is underpinned by customer loyalty, which can be bolstered through loyalty rewards such as extra discounts, exclusive promotions or VIP experiences. Long-term, having a great price perception is the best thing to drive shopper frequency. Reassess your competitive positioning now that things have changed and make sure you are still sitting where you want to be.
“In Latin America, we’ve also seen some creative ways retailers are trying to increase foot traffic to stores by partnering with financial institutions,” said JJ. “Customers can not only do their shopping, but also do some basic financial services like pay utility or credit card bills.”
Sustainability is a huge trend in retail right now, and it’s showing no signs of slowing down. Consumers are becoming more savvy about where their purchases are coming from and what impact they have, and they are pushing back on retailer environmental and social responsibility. You want to make sure you are offering the right products and assortments to meet these needs.
You can also strengthen sustainability across product lifecycles with optimized post-pandemic pricing strategies at every stage. Strong base pricing strategies drive demand towards greener items, while promotions create exposure for sustainable brands and establish which ones perform better. Markdown strategy optimization can help increase sell-through and capture rates to reduce waste.
The pandemic also pushed a ton of technology investment. On average, IT roadmaps have moved forward 2-5 years. Now that the pace has picked up, it’s not going to slow down to pre-COVID levels.
The time is now to invest, and not just in small, temporary patches, but big investments that lay the foundation for moving forward. According to the RIS April 2021 study, pricing is a #1 grocer investment priority post-pandemic. Those that aren’t investing in pricing now will quickly fall behind. And the same goes for AI. Artificial Intelligence is bigger than ever, and I’m willing to bet that those not using AI probably didn’t navigate 2020 as well as those who already were.
“Over the past year plus, we’ve seen AI enable faster, more scalable pricing,” said JJ. “Our retailers are able to respond faster to competitor price changes, automate their price relationships and families, and get more targeted with localized pricing strategies.”
Cohesive technology ecosystems are also the way of the new future. We’ll see more solutions aligned and connected to update and inform each other. Like how we brought Revionics and Aptos together to provide a more comprehensive end-to-end MLM suite.
Our one piece of advice
When asked what one piece of advice our pricing experts would give to retailers right now, they said it’s all about becoming a data-driven company. At Revionics, we help major retail players unlock their own data to make stronger, smarter, more confident pricing decisions. For more help with your pricing strategies post-pandemic, reach out to our experts today.