Retailers Reveal That Their Pricing Strategies Are Not Working With Customers
By Christine Kern, contributing writer
Report finds only verticals selling seasonal or basic/perishable goods are improving.
Retailers are now finally admitting that their pricing strategies are no longer working with their customers, according to the findings from RSR’s latest benchmark on retailers’ pricing strategies. Retailers continue to be haunted by the disappointments of 2015 across most segments, with only verticals where a majority of retailers see improving top-line sales as a top-three opportunity are those selling seasonal goods and those selling basics/perishables.
According to the findings, “only retailers selling basics and perishables are bullish on their ability to drive bottom line results (39 percent report they are very effective) — and even their ranks are somewhat thin. Fashion and short lifecycle retailers are particularly dismayed over their lack of effectiveness in driving revenue from their best customer segments. Forty-three percent of respondents report their pricing strategies are not effective at all in this area.”
The pressure has even started to affect Amazon.com, whose shareholders are pushing for more profits from its retail operations. The race to the bottom on price is proving both endless and fruitless. As retailers now begin to feel the negative impacts of their past pricing decisions, they must look in new directions to recover. As the research demonstrates, “Pricing practices simply aren’t effective and the race to the bottom is claiming more victims than proclaimed winners.”
As the old saying goes, the first step to recovery is admitting there is a problem. Now that retailers are fessing up to the failures of their current pricing strategies, how can they begin to move forward and regain sales momentum?
RSR’s Pricing 2016: Life Becomes Unmanageable contains analysis of the business drivers, opportunities, and organizational constraints surrounding retailers’ pricing strategies. It also offers baseline recommendations for navigating this brave new world for retailers.
The study found that an enormous organizational gap in capability exists between high performing retailers and their lower-performing peers, across people, process, and technology, with “Retail Winners” opting to wean consumers off the never-ending promotion cycle, though this process is being held back by one major concern: how consumers will react to these changes. You see, retailers have realized that pricing has more to do with customer demand than with product supply, so the key is how well marketing can find pockets of demand and meet that demand with a granular, personalized price.
These trends mean that retailers have shifted their technology focus from promotions back to regular price, and competitive price intelligence is taking on a new role in tech investments over the next eighteen months. And personalized pricing strategies are the future of retail.
Part of RSR Research's ongoing efforts to provide market intelligence on retail technology trends, the report is sponsored by Precima, supported by dunnhumby and Upstream Commerce, and can be downloaded here: www.rsrresearch.com/research/pricing-2016-life-becomes-unmanageable.