If you’ve turned on the news lately or even glanced at a newspaper, you know that the U.S. is experiencing a labor shortage unlike any in recent memory. For retail specifically, one hiring agency said, “We’re working at a fraction of the workforce that we should be for a season like this.” Another headline reads, “Holiday workers have more options this year – and many aren't choosing retail.”
Leading into the busy final months of the year, employers are pulling out all the stops to try and attract new talent and retain existing staff. Raising hourly wages, offering sign-on and referral bonuses, increasing employee discounts – all to staff up as much as possible to meet the demands of holiday shoppers.
The fact that stores have fewer employees – and are paying more for the ones they do have – significantly impacts retailers’ pricing moves. Already facing higher costs from inflation, and now with fewer hands available to switch prices at the shelf, retailers must get more strategic and streamlined with their pricing.
So, how can you as a retailer price and promote in a way that still drives profits and positive price perception but doesn’t further burden your store associates? I’m so glad you asked.
If you are limited in how many pricing changes you can physically make, it becomes even more important to identify and prioritize the prices worthy of the most attention. Doing so requires you to know your key value items. Which products matter most to your customers? Do your key value items differ by region or channel? Being able to answer these questions is critical to meeting customers’ expectations in today’s hyper-competitive landscape.
In addition to defining those key items and optimizing their prices, AI and automation are incredibly helpful in identifying the most impactful price changes and streamlining processes to help your sales associates move quicker. “AI solutions enable rapid adaptation to circumstances as they evolve,” said Revionics Sr. Director Retail Innovation Matthew Pavich. “Anywhere data exists creates an opportunity for an AI solution to improve upon current practices.”
For example, the Revionics system actually ranks the value of each price change recommendation. So, if you are only able to take 100 price changes, you’ll know exactly which 100 will make the largest impact. When your pricing moves are limited, having a sophisticated pricing solution in place is key to establishing the right prioritization and deriving the most value.
Pricing can also help relieve your teams of frequent re-stocking activities by pushing trade-up strategies. Staffers are trying to keep empty shelves stocked, and by trading up into larger pack sizes, you help to reduce stocking needs while still allowing financial growth. And a note on growth – pricing can actually drive profit growth when done correctly, even funding the additional cost of labor. Something to consider!
If you can’t make the number of pricing changes you’d like because of staffing, chances are you have to dial back on the number of promotions as well. And do you know what a poor use of your labor is? Having them spend time changing prices or launching promos that won’t move the business forward. Using limited labor resources to keep an ineffective or even detrimental promotion running isn’t helping anyone. It’s more important now than ever to run effective promotions while eliminating ineffective ones.
With promotion performance analysis (PPA), you can quickly identify and eliminate the promotions that aren’t working. By leveraging data science, you can analyze effectiveness across all promotions to see which are driving profit and revenue, and which should be ended.
“Through PPA, we’ve seen retailers come to several ‘aha!’ moments,” said Matt. “The lightbulb went off for one retailer when they realized 5% of their promotions were contributing to half of their profit loss. Another’s eyes were opened when they realized that nearly two-thirds of their promotions generated no sales lift whatsoever. You might also learn that profit generated from promotions you’re running is cannibalized from other items.”
Markdown optimization is another thing to consider through this labor shortage. If you aren’t able to take as many markdowns as before, you need to get the most value out of each one. That means optimizing both the cadence and the amount of each mark. And with lumpy inventory exacerbating the problem, you need to have your markdowns tailored by location to account for supply and demand differences the most effectively (find more on pricing strategies for dealing with supply chain shortages here). With more sophistication, you can also have science make some of those markdown decisions for you.
When you are down team members and facing other challenges (inventory, inflation) at every turn, just getting through the busy holiday season may be the ultimate goal. But with some strategic thinking – and support from advanced analytics – you can shift your focus from basic survival to gaining share. Especially if you have a pricing solution to help prioritize better pricing moves and monitor them effectively.
The Revionics team is here to help. Let’s put our heads together to be sure your holiday pricing and promotions run smoothly.
Maisie is a content marketer and copywriter specializing in B2B SaaS, ecommerce and retail. She's constantly in pursuit of the perfect combination of words, and a good donut.