Tough Love: An In-depth Look at Retail Pricing Practices

360 pi better price intelligence PRESENTS Tough Love : An In Depth Look at Retail Pricing Practices Pricing continues to change the face of retail. With smartphones, price transparency and online price comparison having revolutionized retail, you can hardly read a retail publication without talking about showrooming and what retailers are doing about the changing pricing game. 2. How are retailers really responding? What is their read on the pricing environment? That is what the Retail Systems Research (RSR Research) Annual Pricing Benchmark sets out to discover. Over 100 retailers participated in the 6th annual benchmark study and the results have given retailers a chance to see how their pricing strategies compare to their competitors' and an opportunity to learn from their peers about pricing tactics. Here are some of the key highlights of the study. Increased price sensitivity of consumers and increased pricing aggressiveness from competitors are a top challenge for retailers INCREASED PRICE SENSITIVITY OF CONSUMERS 57% INCREASED PRICING AGGRESSIVENESS FROM COMPETITORS 41% NEED TO GET BETTER RETURN ON OUR INVENTORY INVESTMENT THROUGH PRICING 40% NEED TO PROTECT OUR BRAND'S PRICE IMAGE 34% INCREASED PRICE TRANSPARENCY - THE IMPACT OF COMPARATIVE PRICE SHOPPING 33% INCREASED PROMOTIONAL INTENSITY OF COMPETITORS 25% NEED TO PROVIDE CONSISTENCY IN PRICE ACROSS CHANNELS 25% NEED TO PROVIDE MORE LOCALIZED PRICING 21% RESPOND TO SEGMENT BLURRING (COMPETITION COMING FROM UNEXPECTED PLACES) 13% Retailers believe that competitor pricing information is crucial to compete in this environment OF RETAILERS BELIEVE THAT COMPETITOR PRICING INFORMATION IS A 60% VERY VALUABLE COMPONENT OF THEIR PRICING STRATEGIES . but they don't have what they need to do so. Lack of clean pricing data is the top organizational barrier affecting effective pricing LACK OF CLEAN PRICE, COMPETITOR AND PURCHASE DATA 42% RESISTANCE TO CHANGE FROM STORES OR OTHER CHANNELS 42% LACK OF THE RIGHT SKILL SETS 40% CHANNEL ORGANIZATIONAL STRUCTURE MAKES IT DIFFICULT 34% TO COORDINATE PRICING STRATEGIES ACROSS CHANNELS LACK OF COORDINATION WITH MARKETING 34% WE CANT EXECUTE AT THE LEVEL OF GRANULARITY THAT 31% PRICING SOLUTIONS PROVIDE RESISTANCE TO CHANGE FROM MERCHANDISING 31% THE POSSIBILITY OF NEGATIVE CUSTOMER REACTION TO 29% CHANGES IN OUR PRICING STRATEGY HOPE BUT ALL HOPE IS NOT LOST 5 Ways to WIN the Pricing Game Become less promotions driven and stay the course with your pricing strategy How has your pricing strategy changed over the past 3 years? WE HAVE BECOME MORE OUR STRATEGY HAS NOT PROMOTIONS DRIVEN CHANGED 24% 32% 40% 9% 40% 15% O RETAIL WINNERS AVERAGE PERFORMERS LAGGARDS Make fewer/smarter price changes RETAIL SUCCESS E PRICE CHANGES Retail winners are almost 3x as likely as laggards to have decreased or maintained their number of price changes. Protect your brand's price image 3 47% NEED TO PROTECT OUR BRAND'S PRICE IMAGE 29% 17% O RETAIL WINNERS O AVERAGE PERFORMERS I LAGGARDS Price consistently across all your sales channels 4. 28% WE PRICED CONSISTENTLY ACROSS 29% ALL OUR SALES CHANNELS 11% RETAIL WINNERS AVERAGE PERFORMERS LAGGARDS Get the information you need to respond quickly to competitors' price changes 45% 45% of Retail Winners feel they have the ability to respond quickly to competitors' price changes, compared to 17% of laggards 17% RETAIL WINNERS O LAGGARDS Pricing Technology as your Secret Weapon Competitive pricing information has long been a desired data input for retailers to optimize their prices. There is a new breed of pricing technology, called Price Intelligence, that is revolutionizing how retailers acquire competitive pricing data. This technology helps them to make faster, fewer and smarter pricing decisions to win the pricing game. Subsequently, it is the most sought after pricing technology according to the 2013 Pricing Benchmark. Price Intelligence Technology Adoption 24% 18% 13% 12% SOLUTION EVALUATING / SELECTING FULLY EXPLORING / DEPLOYED SOLUTION PILOTING / BUDGETING IN ROLLOUT SOLUTION RETAIL WINNERS/LOSERS DEFINITION: Retailers are measured by year-over-year comparable store/channel sales improvements. Assuming industry average comparable store/ channel sales growth of three percent, those with sales above this hurdle are defined as "Winners," those at this sales growth rate as "Average," and those below this sales growth rate as "laggards" or "also-rans." 360pi better price intelligence Source: 2013 RSR Pricing Benchmark Study: Tough Love: An In-Depth Look at Retail Pricing Practices