Posted in Research, Retail Operations

Retail winners, retail losers

US-based research company RSR brought out a research report on pricing strategies. The report compares winners (retailers exceeding the median 2% growth) and losers (retailers below 2% growth) on a range of issues related particularly to pricing.

I suppose the assumption is that it makes sense to copy the successful strategies; which is debatable assumption in my view, but it is interesting nevertheless.

The first finding relates to how often retailers change prices (up or down).

One hundred percent of retailers with annual revenue greater than $5 billion report they have increased the number of item price changes

I wonder if this is a necessity, or a case of fiddling with something because you can (enabled by technology) or possibly a case of not having any other ideas?

My favourite insight, to be trotted out to some of my clients in the near future is:

NO retail winners price match, vs. 19% of average performers and 13% of laggards

Retail winners are more likely to recognize that there has been an impact of channel proliferation.

In fact, 20% have “thrown in the towel” and returned to a single price across all channels, 15% understand that they really can’t even get started with different prices across channels, and a quarter believe that channel proliferation has created conflicts that they cannot resolve.

The next finding is particularly interesting. Where do you stand on this?

Winners are driving most of the opportunity shifts away from margin as the focus. Winners are much more aware of improving their competitive price image and the opportunity to increase market share, while peers remain focused on sales and margin.

The final finding to share is a difference between large and small (not winners and losers) that is particularly interesting. (Or maybe I am just a geek.)

In a world where consumers have near-perfect information on prices, how can a retailer compete? One is by focusing on promotions; particularly targeted promotions. One finding that the larger retailers have adopted but are NOT followed by smaller retailers is how aggressively they promote.

Only 23% of retailers with annual revenue under $250 million report they have become more promotional vs. 62% of retailers with revenue over $5 billion per year.

Do your strategies match those of the retail winners or losers?

Why? Why not?

 

Dennis

 

PS: If you want to approach pricing systematically, and need some clarity on some of the key concepts and factors, you can get the book here.

 

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