How Retailers Are Pricing For Profit No Matter The Season

EPSON scanner image"Bah humbug", said Ebenezer Scrooge -- until he was shown vignettes of his Christmas past, present, and future (in Charles Dickens' novel, A Christmas Carol). This year, it seems that retailers, with the use of predictive analytics, are finally taking a good look at their Christmas past, present, and future -- with regard to when it's appropriate to promote or discount their precious products for the greatest margin -- not just during the holidays, but year-round. 

For the past few years, we've run Marketoonist Tom Fishburne's version of the 12 Days of Christmas in the retail world.  The point was: Retailers would get overanxious and competitive and offer sales before even trying to get reasonable prices; media would sing out the gloom and doom of the season filled with promotions; and the prophecy would be fulfilled. Fishburne's 12 Days of Christmas sings quite well:  On the 12th Day of Christmas, Retailers Gave To Me: 12 Deals a-Dealing; 11 Sales a-Selling; 10 With Free Shipping; 9 Price Promotions; 8 Buy One Get Ones; 7 Cut-Rate Coupons; 6 Half-Price Offers… (pause): 5 Clearance Sales… 4 Discount Codes; 3 Markdowns; 2 Give-Aways, and lots of devalued brands under the tree. The full cartoon appears below:   

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12 Days of Christmas Marketoon with permission of Tom Fishburne

This year, with the increasing understanding and use of "data science", retailers, using predictive and dynamic pricing tools, are becoming ever more savvy about managing their inventory, and setting and getting the right prices, year-round.

In looking at this phenomenon, Upstream Commerce analyzed 300,000 products of seven large fashion retailers during the holiday seasons of 2013 and 2014 -- Holiday Promotions Strategies Report: 300,000 Products Hint At Promotion Strategies for the 2015 Holiday Season -- and found:  

* Both the number of discounted products and the depth of price promotions in the holiday season diminished over the past two holiday seasons and were likely to continue this holiday season.  

* That retailers were more selective of which products they choose to discount and carry those discounts into the post-holiday season.

In a recent report from RSR Research, Merchandising 2016: Big Changes Coming, RSR notes that retailers have been... too quick to cut prices in the past; reliance on promotions and price cuts has led to erosion of their overall brand; and so on. In fact, RSR has, for quite a while, noted the need for retailers to introduce new science, improve their ability to adjust to deviations from sales forecasts, and optimize markdowns to their fullest extent, to name just a few.  

On another front, a price intelligence software vendor noted, in a recent webinar, that retailers (like Amazon), using sophisticated technology, may possibly strategize to hold back a portion of popular inventory (until others sell out); then when the demand increases and competitors no longer have the product in stock, Amazon would offer the product -- while charging maximum prices.

Bottom Line For Your Bottom Line:

Holiday sales and promotion behaviors have changed as retailers adopt new retail strategies to maximize data outcomes and optimize revenues.  

In Christmas Past, there was a lot of doom and gloom in media predictions because retailers sold products at the wrong prices (too low) at the wrong times, especially at holiday season, the biggest selling season of the year.  

Upstream Commerce plans to look at the retailers' January 2016 data and results, to ascertain whether the predicted strategy trends occurred. Stay tuned.   

 

 

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Naomi K. Shapiro, Strategic Market Communications

About Author

Seasoned strategic market communicator, Naomi headed public information for several academic and professional associations as well as founding Creative Brilliance Associates Market Communications. She created and published Brilliant Ideas for Publishers Magazine and authored popular newspaper trade reference, The Brilliant Book of Promotions, Sales Tools & Special Events. Simultaneously, Naomi savored the world as an adventure travel writer that included trekking on glaciers, fishing with saltwater crocodiles and swimming with piranhas. Naomi holds her M.A. from the University of Wisconsin, including participation in a unique industry-science-technical writing program.
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