This is a story about savvy, value-conscious shoppers using personal technology for shopping and showrooming. It's how that behavior led to competitive tactics by retailers -- using pricing intelligence software as their guiding tools for correct pricing. It's about dynamic pricing, that, in turn, affected sales; It's about how sales, in turn, affect profits… Thus, we arrive at the importance of pricing intelligence. In November 2013 RIS (Retail Info Systems News) Custom Research polled senior executives of large retail firms on the status of pricing intelligence in their companies. RIS was surprised to find, that, although price intelligence wasn't at the forefront of polls in the last 18 months, pricing intelligence had already been quietly (and effectively) adopted by more than 22.6% of the respondents. For the record, 6.5% of the others said they planned to add pricing intelligence software in the next six months; 29% planned to add it within 12 months; and 41.9% reported No plans.
How The Need For Pricing Intelligence Evolved
According to the RIS narrative, the need for pricing intelligence evolved as online comparison engines become more sophisticated and various competitive pricing practices came into existence. Retailers realized they were losing sales to competitors who had lower prices and customers who were looking at products in stores and then using personal technology to search for lower prices -- well known by now as showrooming.
Industry research quoted in the RIS report indicated that retailers were making price changes numbering in the tens of thousands per week. Best Buy and Walmart were implementing price changes in excess of 50,000 times per month; and Amazon was purportedly implementing more than 3 million price changes daily during the 2013 holidays.
What the retailers were missing was real-time pricing intelligence capability to dynamically change prices at high speeds. Here's what some of the besieged retailers indicated in the survey about their
"Best Chain-Wide Pricing Strategies to Combat Showrooming":
64.5% Getting prices right the first time online and in-store.
51.6% Creative in-store price matching capability.
35.5% Create customer-specific promotions.
35.5% Dynamic pricing.
22.6% Arm retail associates with real-time competitive price intelligence.
6.5 % (Said) No response to showrooming was needed.
6.5 % (Said) Focus only on online price matching.
And how better to do any of this than employ sophisticated pricing intelligence?
Retailers are also codifying tactical decisions to maintain competitiveness. At the top of the list is to honor website prices in stores in real-time, meaning that whenever the retailer’s website changes prices the stores are automatically authorized to match them.
Retailers' Policies for Managing Frequent Price Changes in Stores:
46.7% Change prices no more than once a week.
20% Honor website prices in stores in real-time.
16.7% Change prices as frequently as websites.
10% Change prices more than once a day.
3.3% Enable store shoppers to order from website.
Although the largest batch of respondents (46.7%) recommend changing store prices only once per week, RIS notes that this is a minority approach when compared to the aggregate of speedier options, i.e. increasing the frequency of price changes is in the future for all brick-and-mortar stores.
So What Is Your Competition Planning To Do About Price Intelligence?
Since it is clear that dynamic pricing has altered the center of gravity in retailing, every retailer will be forced to respond with the use of new technology.
* The largest group of retailers, according to study data, say they're planning to use a cloud-based or SaaS solution (40%) to enable dynamic pricing. This makes sense because the online channel readily accommodates cloud-based, plug-in applications.
* The second largest group (36.7%) say they plan to use internally built applications, which is a frequent reaction by retailers who (think they) understand their own internal IT architecture better than anyone.
* Just 16.7% say they plan to use packaged software, which means purchasing a license as opposed to a cloud subscription. As software providers catch up to the rising retailer interest in dynamic pricing. (I'll be interested to see how packaged software will allow for changes, human oversight, predictions, analysis, and benchmarking, as sophisticated cloud-based price intelligence solution subscriptions already do.
Bottom Line For Your Bottom Line
To RIS' surprise, many of the respondents (22.6%) had been using pricing intelligence solutions -- quietly and effectively -- for quite a while. After all, who would announce to your competitors that you're using pricing and assortment intelligence to make your most important pricing decisions? More than 35% of the other retailers plan to get on the bandwagon in the coming year, or, as RIS calls it, join "the price intelligence war."
You'll be making a big mistake if you think that pricing intelligence is only about competitive pricing. Your premier price intelligence solution is critical for assortment management, promotions, industry benchmarking, product life cycle, automated rule-based price changes, the ability to make recommendations and predictions, and so much more.
PS My money is on cloud-based solutions.
RIS Custom Research Poll: Pricing Intelligence Goes To War.