What’s new for retail pricing in 2022, and what we can’t shake off from 2021
With the last two years of unprecedented events and major market changes, it may seem foolish to bother making any assumptions for what this year may hold. While we don’t have a crystal ball at Revionics, we do have decades of retail experience on our team. From talking to some of our experts and exploring what other retail publications and research firms have to say, we’ve pulled together these six retail pricing predictions for 2022.
Hybrid shopping is the new black
Pandemic-induced online shopping behaviors are here to stay, but the in-store experience can’t be completely replaced. Consumers are turning more and more to a hybrid form of shopping, merging online and in-store behaviors to make a purchase.
These hybrid habits underscore the importance of a strong omnichannel strategy, including omnichannel pricing.
The key to successful omnichannel capabilities is providing customers with the shopping experience they want, no matter what channel they use. Pricing is a big part of that customer shopping experience.
Done well, pricing can be used to incentivize certain behaviors that are more profitable or easier for the business to execute. But done poorly, disjointed pricing experiences from one channel to the next can disappoint customers.
As retailers continue to invest in omnichannel capabilities, pricing will be a major consideration in the process in 2022.
Inflation could curb shopping
Despite the rising prices in 2021, pent-up shopping demand continued to fuel sales growth. But inflation denial can’t last forever. If inflation doesn’t slow down soon, sales just might. Retailers that haven’t yet found a stable solution to inflation will struggle in 2022.
To prevent a sales slump, retailers need to find the balance between maintaining margins and delighting customers.
Where increases can’t be avoided, demand analytics can help you determine where to raise prices without killing sales. Analytics can also identify which prices should be left alone, or even decreased.
Taking this balanced approach not only protects your bottom line, but your price perception and market share as well.
Workers, wages, and a way forward
The ongoing labor shortage will continue to plague retailers further into 2022. As a result, we’ll see retailers making adjustments on both sides of the issue – offering better incentives to attract employees, as well as streamlining operations to run with a smaller labor force.
Of course, a large part of attracting talent comes down to better wages and perks, with higher operating costs likely to be the result. But just like we mentioned above with inflation, it is possible to mitigate higher costs without simply passing it all onto the consumer.
Retailers will continue to turn heavily to automation in 2022 to help run leaner operations. When it comes to pricing, there are several things retailers can do to slim down labor resource requirements and make a greater impact with less effort.
Knowing your key items can help ensure you are taking competitive pricing moves on the products that most influence your price perception. Another tactic is to leverage analytics to determine which promotions are the most successful and which are not worth the labor effort.
Further private label expansion
As we mentioned above, inflation denial is bound to wear off soon, leaving consumers more likely to switch brands to save a few cents. With prices at a record high and brand loyalty at a record low, the opportunity for private label products is stronger than ever.
And retailers know it. According to The Food Industry Associations’ 2021 Power of Private Brands report, 91% of retailers and manufacturers said they plan to moderately or significantly increase overall investments in private brands in the next two years, and 58% said they’re working to add new private brands.
A strong private label pricing strategy will not only draw customers to your owned brands but also align with your goals. You can find our best practices for private label pricing here.
Supply chain woes aren’t over yet
As much as we would all like to stop talking about the supply chain, it remains one of the hottest retail topics. While the retail industry is still trying to recover from last year’s disruptions, 2022 is bringing new disruptions of its own with Omicron.
But in truth, the last year-plus has revealed the weaknesses in an older, not-often-updated supply chain system. While many of 2021’s changes and adjustments were done out of the necessity to survive, 2022 will be the chance for retailers to really optimize and innovate their supply chains for the better.
In the meantime, retailers will need to find new, creative ways to handle supply shortages, including using pricing as a quick way to influence supply and demand.
Dynamic pricing becomes mainstream
For many of the reasons we mentioned above – i.e., low brand loyalty, higher price sensitivity, supply shortages, digitally connected consumers – dynamic pricing has been a key differentiator for leading retailers in 2020 and 2021, and we expect to see greater adoption in 2022.
Not only does dynamic pricing help retailers remain competitively priced, but AI-driven pricing also automates pricing processes so pricing teams can move faster. With a market that continues to rapidly evolve and change preferences, dynamic pricing is needed to keep up.
If you’re looking to implement an AI-powered dynamic pricing solution or need some help navigating this year’s pricing challenges, reach out to speak to one of our pricing experts.