At eTail West: Pricing Transparency in an Omni-Channel World

I HAD THE PRIVILEGE on Feb. 27 of moderating an expert panel at the eTail West conference in Palm Springs, CA. I was accompanied by two of the industry’s bright lights: Wes Woolbright, National Pricing Director of Safeway, and Carol Spieckerman, President and CEO of newmarketbuilders.

The focus of the discussion was a presentation of a research study conducted by RetailWire.com late last year on the timely subject of Pricing Transparency. Some 284 retail and supplier executives participated. IBM was the sponsor.

The findings addressed the pervasive concerns about “showrooming,” a behavior in which shoppers examine products in a physical retail store but then seek out the lowest online price using their smartphones. They also looked at the more general issues surrounding pricing consistency for retailers who do business across multiple channels and/or geographic markets.

Panelists Wes and Carol both did a superb job, drawing from their years of professional experience to add perspective and insight to the discussion. The video runs 28 minutes, but I think it’s worth the time.

The event organizers, Worldwide Business Research, recorded and posted the YouTube presentation shown here and they have made a transcript download available.

You may also download the cited research study here.

© Copyright 2013 James Tenser

Price Transparency: An Opaque Matter?

ALMOST OVERLOOKED during the Autumn business conference-slash-election season was a nicely-done bit of research about the new price transparency.

Prepared by RetailWire.com and underwritten by IBM Smarter Commerce, the study “Pricing Transparency: Can Retailers Regain Control?” was released October 5. It was conducted in an effort to better understand the phenomenon known as “show-rooming,” where shoppers use apps on their mobile phones to check merchandise prices while shopping in-store.

The study authors define “pricing transparency” as “The ability to learn the relative price positions of a particular item across competitive retailers.”  The trend had some folks pretty nervous around mid-year, especially retailers who specialize in high-consideration purchases, like consumer electronics.

The findings indicated that Price Transparency falls mid-level on the continuum of general retailer concerns – below the economy, competition and consumer behavior. Considered among pricing practices, however,  respondents did worry about consumer price sensitivity in general (ranked as #1 concern by 35%) and transparency in particular (ranked #1 by 21%).

Increased price sensitivity seems to be an enduring consequence of the recent protracted economic downturn. Many shoppers have re-evaluated their purchasing behaviors. Smart phone apps both enable and reinforce these behavioral changes.

Retailers have some effective defenses available beyond absolute lowest prices. Most are related to enabling shopper success in other dimensions. Superior, relevant assortment, exclusive items, and excellent item availability all can have a positive influence here, the findings suggest.

The best practice formula remains somewhat murky in the brave new world of transparent prices, but this research begins to make matters clearer. An Executive Summary of the “Pricing Transparency: Can Retailers Regain Control?” study, can be downloaded at: http://www.retailwire.com/page/10133/.

© Copyright 2012 James Tenser
(This article was commissioned by IBM, which is granted the right of republication. All other rights reserved.)

Wrestling With Markdowns?
This Webinar Can Help

FOR SOFTLINES MERCHANTS, end-of-season markdowns are a necessary evil that clears the racks and frees cash, but too often margins are sacrificed in the process. A markdown analytics solution can bring vast improvements to these activities, resulting in markdowns that are fewer, better timed, and less deep.

Our friends at IBM DemandTec have teamed with Deloitte to offer a webinar geared especially for softlines retailers, which explores how integrating in-season (promotions) and end-of season (clearance) pricing decisions can reduce the amount of excess inventory that has to be heavily marked down at the end of each season.

Learn how these decisions can be optimized and implemented at the store and item level, ensuring greater shopper success and business performance. To register and attend this free webinar, click the banner below.

Markdowns in Softlines: Are you cutting your cloth too late?

Webinar Date: Nov. 7, 2012
Time: 8 am Pacific/11 am Eastern
Featured speaker: Chris Goodin, Principal Deloitte Consulting

© Copyright 2012 James Tenser
(This article was commissioned by IBM, which is granted the right of republication. All other rights reserved.)

Assortment – A ‘Matrix’ View

IN FAST-MOVING CONSUMER GOODS, the art and science of merchandising requires an informed balance of interrelated decision processes.

Microeconomics tells us that product sales rate will be related to price, albeit somewhat elastically. Space planning endeavors to allow sufficient quantities of each product to be stocked to meet shopper demand, without tying up excess capital. Assortment planning attempts to fit the most productive and satisfying mix of items into the space available. Inventory management balances the labor costs of replenishing shelves against in-stock levels.

There are other “levers” that figure into the process – from promotions, to new product introductions, to the depth and timing of markdowns, to the influence of competitors and even the weather. Taken collectively, these amount to a matrix of influencers on productivity and rates of sales.

For the retailer this comes down to the simultaneous management of customer engagement, assortment optimization, and pricing and profitability management. Or, as IBM DemandTec director of product management Carol Teng expressed in “A New Generation of Assortment Optimization,” a recent webinar hosted by PlanetRetail: “The right focus; the right product; the right price.”

[Learn more about IBM’s DemandTec solutions at its “Revolutionary Decisions” microsite.]

Teng shared five guiding principals for assortment optimization that are well worth summarizing here:

  1. Put the customer at the center.Make decisions based on actual customer demand, enabled by lowest level of data available. SKU proliferation adds costs for both retailers and manufacturers. Extreme choice does not necessarily drive more sales. Manufacturers face added costs due to forecasting and planning. Shoppers ultimately pay the cost for more unneeded variety.
  2. Don’t rationalize. Optimize. Keep key variety on the shelf, not just a simplified assortment that results from a “rank-and-cut” process. Use analytics to identify the weak-but-unique SKUs that are incremental and therefore important to keep. Identify products that are duplicative in the middle of the assortment curve, freeing up space to add truly incremental items.
  3. Localize. Average assortments yield average results. Store clustering enables assortments that are appropriately tailored to variations in consumer demand. Employ clustering tools that enable the right assortments to be derived based on demand variations across categories, banners and stores.
  4. Leverage available technology. This unlocks greater analytical potential. More sophisticated merchandising decisions are possible because computing power, customer intelligence, item intelligence, and connectivity are all on the increase. Mine available rich data sources: store, category, shopper and operational.
  5. Processs and organization changes are critical. Advisory functions currently in place support Category Management and vendor relations. In the near future, new advisory functions are needed with specific assortment optimization expertise at the cluster and banner level, based on insights about customer behaviors.

“We believe customer assortment truly is the next growth lever in retail,” Teng said. The building blocks for this capability begin with superior data sources, like POS and basket analysis; frequent shopper data on re-purchase and brand switching behavior; and shopper panels that reveal losses to competitors.

Assortment and other merchandising decisions are best made not in isolation, but in an inter-connected environment – a matrix, if you will. Ultimately assortment optimization will depend on an understanding of incremental demand and transferable demand. Practitioners must monitor these continuously as situations evolve. For each and every SKU and store cluster.

© Copyright 2012 James Tenser
(This article was commissioned by IBM, which is granted the right of republication. All other rights reserved.)
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