As the leading global provider of AI pricing and promotion software to the retail industry, Revionics is in a unique position to see global trends across the retail industry.
During this time of crisis, major retailers are focused on offering fair, appropriate pricing to their customers. It is important for them to avoid any reference to price gouging or to be perceived as taking advantage of the situation at the cost of their customers. As a result, many have frozen prices or are closely monitoring market prices in order to keep their prices fair.
However, doing so can come at a high cost for retailers. For example, many vendors are telling retailers to expect cost increases for their products. Normally, retailers would pass that cost on to their customers. But in today’s environment, retailers may be criticized on social media for raising prices on essential items. How can retailers solve this problem? Will retailers simply stop carrying these products or will they raise prices to a modest level?
The data show retailers are employing numerous strategies to meet this challenge.
Many are trying to stock up on goods before their costs are increased by suppliers. Others are reducing their range of products in order to focus on fulfilling demand on the most popular products. Some are planning to delay, or reduce, markdowns as new merchandise from China is impacted.
Some are cautiously raising prices in order to maintain some level of profitability. These price changes are being monitored closely and are approved at multiple levels within their organization. Other retailers, especially those in fashion, gardening and other seasonal categories have already triggered price markdowns in order to clear spring stock that isn’t moving and to generate cash.
The clear winner during this period has been E-Commerce, as consumers shift to purchase goods online and have them delivered directly to their home. The data show E-Commerce will likely have a significant gain in market share participation and will continue to increase, creating a new baseline. This will create a different cost structure and a need for price coherency. Retailers will need to adapt their pricing policies going forward.
Unfortunately, while many omnichannel retailers see an uptick in online sales, it has not yet been enough to make up for the lack of store sales or closures. Many new store openings will not move forward as originally planned until this period of crisis has subsided. For retailers who open new stores regularly, this is a major challenge to their growth model.
We will continue monitoring COVID-19 pricing and promotion trends and best practices throughout this crisis and pass along insights as they come to light.