60% Of RSR Survey Respondents Say “Improving Margins” Is Top Retail Pricing Challenge

A just-released RSR Benchmark Research Study on Retail Pricing Practices indicates that retailers are sending an escalating number of price changes to their stores and other channels, due, among other things, to perceived consumer price sensitivity and perceived increased competitive pressures. The study also indicates that the retailers don't have a lot of information about the potential impact of changes to price, and they also lack retail data analysis with which to predict the actual impact of those tactical price changes.

In Tough Love: An In Depth Look at Retail Pricing Practices,* Retail Systems Research (RSR) managing partners Nikki Baird and Paula Rosenblum take a look, among other things, at the Top Three Strategic Pricing Business Challenges; Top Three Pricing Opportunities; and Organizational Barriers Impacting More Effective Pricing Practices that retailers say they face this year.

Source & Permission: RSR Research, April 2013 

The "Top Three (3) Strategic Pricing Business Challenges identified by the respondents were:

-- Increased consumer price sensitivity (57% of respondents).

-- Increased pricing aggressiveness from competitors (41%).

-- The need to get a better return on inventory investment through pricing -- a new option added this year: (40%). Adding an answer option that focused on return on inventory investment yielded strong results. Forty percent of respondents highlight this as a top-three concern, clearly trumping consumer price sensitivity, competitor pricing aggressiveness and price transparency.

Other business challenges varied significantly depending on retailer performance, however. In answer to the question of, "The Top Three Opportunities for Pricing To Contribute To Your Business Strategy In Next Two Years," retailers resonded "To Improve Margins, Improve top-line sales, increase market share for key categories or products, create more profitable promotions, and provide a more price competitive image for our customers." Only the bottom at 23% want to gain margin advantage through more dynamic pricing.

Source & Permission: RSR Research, April 2013 

When it came to Top Three Pricing Opportunities, respondents registered a whopping 60% desire to improve margins, followed by "improve top-line sales (39%), increase market share for key categories or products (31%); and then create more profitable promotions (29%)." After that, the retailers indicated they'd like to "create a more price competitive image for our customers (28%, a decline from 41% in 2010). Using price to "Provide a more seamless cross-channel experience to customers" grew in importance from 12% in 2010 to 26% today.

Bottom Line For Your Bottom Line

You can't be competitive if you don't price "right'. When it comes to pricing, the retailers appear to know what they want and need, yet the rest of the study shows that they're not so sure about how to get there -- or the results of their actions. On the other hand, retailers should remember the ever-present basic pricing considerations of: Price sensitivity, increased consumer price transparency, increased power to the consumer, increased promotional intensity, a need for consistency across channels, and increased interest in targeted promotions.  Each one is a reason that it's essential to get your pricing right -- and why you need to be tracking your competitors' prices and assortment daily.

In future posts, I plan to address the parts of the study dealing with: "Why Pricing Technology Tools & Assortment Solutions Are Vital For Retailers Today," and "The Organizational Barriers Impacting Retailers' Ability To implement More Effective Pricing Practices."

*RSR conducted the online survey from January - April 2013 and received answers from 134 retail Senior Management, Vice Presidents, Director/Managers, Staff; Internet Consultants, and others representing businesses with annual sales of less than $50 million to those with sales over $5 Billion. Products included fashion/short lifecycle/seasonal; durable goods/consumer electronics; basics/replenishment goods; and perishables. While respondents were located worldwide, the majority had their headquarters and retail presence in the US; also Canada, Europe and Asia/Pacific.

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Gilon Miller, CMO

About Author

Gilon is a seasoned marketing, sales and business development executive with over 15 years of experience in the software and Internet business. He is the Founder and CEO of GuruShots. Previously, Gilon was the CMO of Upstream Commerce, VP of Marketing at iMDsoft and Director of Global Marketing at SAP. He earned an MBA at the MIT Sloan School of Management and a BS in Electrical Engineering from Tufts University.
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