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It goes without saying that COVID-19 has introduced profound changes to the retail landscape, and to pricing practices in particular. No one could have anticipated this much change to the retail world in such a short period.
Revionics Customer Success Director Katja Langensteiner recently caught up with two leading Revionics customers to discuss how they’ve shifted their businesses through the pandemic, and how pricing played a vital role in their strategies.
Joachim Paulsen, Head of Pricing, Reitan Convenience - one of the largest convenience companies in Europe
Vlad Tikhomirov, Head of Pricing, Metro Russia – a major, multinational grocery and wholesale retailer
Metro Russia: Well, of course we all remember the initial panic behavior in the stores. It was a little bit later for us than in Europe, so we had a chance to observe what was happening from our colleagues in Germany and other countries.
We saw the same spikes in behavior with people stocking up on canned goods, essential goods, safety and sanitation. But this period was relatively short for us. Our focus during this was to keep prices fair and stable, and also reduce unnecessary investments.
Then when stores had to close, we were able to stay open as an essential food retailer, so we didn’t have to face any of those limitations. At this time we saw a really good response to our quantity discount pricing approach, as people were stocking up and buying more items in bulk. So it was a pricing practice we already had in place, but that really suited this shift in consumer buying behavior.
And because we already had quantity discount pricing, consumers already thought of Metro Russia as the place to go stock up. Even post-lockdown, consumers are still hesitant to visit a lot of shops, so we continued to see heavy stocking up behavior after restrictions were lifted.
Reitan Convenience: Our situation was very different. Everything changed overnight, and for convenience, our typical consumer is on the move. So, we lost about 50-60% of our traffic. Many of our stores are in train stations, bus stations, airports. With people staying home, people not going to work or school or traveling, there was just no traffic. So, this was not a good time for convenience.
In the beginning we really were just looking to reduce costs and focus on streamlining operations. We didn’t want to do any big changes on the pricing strategies yet because we didn’t want to seem like we were taking advantage of the situation.
But we did take a few small changes. We increased tobacco products a bit because we know it’s a lower elastic product. We also saw shifts in some products, for example antibacterial and bandages moved from margin products to traffic drivers because supply was strained since everyone was buying them. Shoppers also became more price aware on those products, so we had to lower the prices a bit to meet those expectations.
Metro Russia: Yes, that is absolutely similar. We saw some new price sensitivity around masks and sanitizers and certain food products. We also faced a lot of price increases from suppliers and we had translated that to the shelf, but it was not well perceived by customers, of course. After a couple of weeks the supplier recovered, so the fact that we were hit a little bit later than the rest of the world helped us to get inventory in stock sooner. The other thing we did was stop running most of our promotions.
In the times that we saw spiking demand, customers of course pay less attention to prices, but it is still really important not to shock customers with unfair pricing. That’s why we tried not to increase prices on high demand items, unless there was a supplier cost increase. When there is a shortage, you don’t have the privilege of choosing the cheapest supplier. You just have to take what you can get to put products on the shelf for your customers.
Reitan Convenience: We were focused on operations, and we didn’t know how long things were going to last, so we actually stuck to our promotion strategies and tried to deliver there. We also had some vendor agreements around promotions that we had keep.
However, our normal promotion strategies focused on customers in-store, so when you don’t have a ton of traffic that’s not good enough. So we focused on our promotion strategy and tried to make some small changes to get more people in the door.
Metro Russia: One important shift in behavior I haven’t mentioned was the rapid growth of ecommerce in grocery. With more people stuck at home and trying out these services, all the online grocery providers experienced fulfillment shortages across facilities, people and transport. But with the demand issues solved, now you have this increased customer base that have gotten over their barriers to entry for online grocery shopping. So that will stay with us after the pandemic.
Reitan Convenience: I do think some things will go back to normal when this is all over. People maybe will travel less than before, but as schools and businesses reopen certainly there will be more movement and traffic. What we can really do now is try to learn from the situation, see what the customers want, and maybe even learn from what grocery has done.
I'm almost certain that the best sellers will go back to where they were before, because in the summer we already did see some return to old habits, like food-to-go sales increasing.
Metro Russia: I also think another trend we saw that will stay is the rising importance of home cooking. People don’t really have the habit of ordering food to-go from cafes and restaurants, so when those closed, they started to cook a lot more at home. It was a big driver of the boost in grocery retail sales in general.
And so with some companies now thinking about flexible hours and flexible offices and allowing employees to work from home indefinitely, consumers will continue to stay in more and cook at home. So home grocery delivery, I think, is a big part of the future.
Metro Russia: Something that made us successful during this time was speed and flexibility. We had to learn how to take decisions really fast, and to be flexible in how we operate our business. We had to really trust the people running operations in the stores and be patient with everything that was going on. All this we will take with us. And hopefully consumers also learned something, like that they don’t need to panic stock up.
Retain Convenience: I think what we learned is that convenience was not all that prepared for the situation. So we have to look at what has worked and what has not worked on both pricing and promotion. We need to dig into the data and see how we can prepare for the future. [/vc_column_text][/vc_column][/vc_row]