Tales from COVID: Pricing Advice for Consumables Retailers
How Revionics helped grocery and convenience customers adapt and respond to the evolving challenges in the consumables space from COVID-19
As COVID-19 swept across the globe earlier this year, retailers were left scrambling to protect their businesses and figure out how to keep operations moving. The crisis created considerable uncertainty around all facets of retail in the consumables market, including pricing. However, with robust science and a dedicated team, Revionics has been there to be a resource for our customers and help them navigate through each new turn of the pandemic.
Revionics has a large number of customers that sit in the consumables space. While the majority of these companies didn’t have to deal with the store closures and layoffs that were rampant in other areas of retail, our grocery and convenience customers faced a number of different challenges.
Price Gouging Regulations
Perhaps the biggest concern across the consumables market was price gouging, particularly in the United States and various Latin American countries. As panic buying and supply chain issues created major stock shortages in the U.S., many state governments passed new laws or fell to old, outdated emergency legislation to protect consumers from price gouging. This quick shift left many retailers scrambling to adjust their pricing rules, and fearful they might accidentally break one of the stringent regulations.
Because of this, several of our grocery and convenience retails chose to freeze prices altogether until they could better understand the new playing field. They did not want to be perceived as taking advantage of customers, and also wished to provide some stability for consumers in an uncertain market. Our grocery and wholesale retailers in particular saw such increased demand and traffic to their stores, they needed all employees focused on meeting consumer needs, and not have to spend time on price changes.
“That consistency for the consumer was really valuable, because many people were already worried about the economy and job security, but they didn’t have to worry about the cost of milk jumping up,” said Edward Kuehnle, Revionics Customer Success Director. “And a lot of our retailers got credit with their customers for not raising prices in that time.”
Adjusting to Cost Changes
However, while these rules restricted how much retailers could increase prices, there was no regulation around suppliers. Many of our customers, both in and out of the consumables space, faced a variety of supplier cost increases brought on by steep changes in demand and problems across the supply chain. Now they were dealing with managing through tighter margins, while already navigating uncertain consumer demand, inventory shortages on certain essential items, how to keep stores open safely, among a number of other challenges.
Because of these increased pressures, our retailers realized they needed to start making price changes again. The Revionics team helped customers model out cost changes and investigate the price gouging laws in their areas to better understand how to safely balance out margins while still keeping prices fair and competitive. Our strategists also worked directly with the retailers to establish price gouging safeguards directly in their Revionics configurations, to ensure they could trust the optimized prices the platform was recommending.
“We set rules in Revionics to keep us from violating any of these new anti-price gouging limits, and adjusted our strategy because cost was going up,” Don Dyess, Director of Pricing and Category Analytics at Vallarta Supermarkets recently said during a webinar with Revionics and RIS News. “We made some shifts to make sure we were presenting ourselves as a fair price retailer during this time”
Opportunity for Education
For some of our retailers, the chaos of COVID ended up being the perfect opportunity to learn from the pricing experts at Revionics. With a robust team of experienced pricing strategists and data scientists, Revionics provides customers with more than just a platform. Particularly in the consumables space, retailers wanted to better understand the changing elasticities on certain products and categories, and how those shifts should change their pricing decisions.
“Elasticity is a big factor of our pricing strategies and category sensitivities,” said Juan Thorne, Customer Success Senior Director at Revionics. “We helped them see how these changed categories should be managed and reshape their plan around pricing.”
Our teams also helped retailers form a strategy for items with especially changed elasticities and erratic demand, like hand sanitizer. Using Revionics analytics to identify exactly which items this applied to, the retailers then separated them out into their own group, to keep these items from affecting the data on the rest of the category.
With one food retailer in particular, COVID raised some questions around seasonal influences on elasticity. Looking at elasticity on certain products charted over time, our team was able to show the retailer how seasonality and certain demand changing events, like a pandemic, will affect elasticity, and also what that means for their pricing strategy.
“COVID has brought out all these questions and given us a chance to deepen the understanding of the customer pricing teams, around both the Revionics tool and pricing expertise in general,” said Doug Bean, Senior Price Strategist, Customer Support at Revionics. “So even when things go back to a relative normal, the extra education in this time will put our customers in a better position moving forward.”
Preparing for Tomorrow
While the initial chaos of COVID has settled, retailers across all industries are still adapting to constant market changes and the challenges brought on by the pandemic. As organizations move from reacting to responding, the question on everyone’s mind is, ‘What do we do next?’ While we continue to meet weekly or biweekly with customers, the Revionics strategists are diving into the data and watching market trends to help retailers prepare for what is to come.
“At this point, we have helped our customers maintain, to the best of their ability, the financial metrics that are most critical to them while knowing that they are handcuffed by the unknown,” said Kuehnle. “From here I think the biggest challenge for retailers is going to be, how do we measure success?” And as our customers tackle this and many other questions in the next few months, our team will, as ever, be here with science, experience, and a desire to help.