Lack of a Demand-Centric Pricing Strategy is a Big Stumbling Block for Retailers

Best-in-Class retailers are responding to competitors including the likes of Amazon by undertaking price changes in close to real-time by using advanced competitive pricing analytics, price elasticity analysis and in some cases even using smart shelves for real-time dynamic pricing updates. Dynamic pricing takes a consumer’s perceived ability to pay for a product. On the other end of the spectrum, most other retailers are facing the wrath of unrelenting promotional pricing pressures and sub-optimal markdowns that are hurting operating profit and margin. Lack of optimization and dynamic approaches in pricing, promotions and markdowns gets translated into loss in operating profit, gross margin and inventory turns. Despite having the knowledge that effective pricing and promotions is the key to remain competitive, both large (turnover over $1 bn.), and mid-market retailers (turnover between $100 mn. and $1 bn.), have faced challenges in such implementations. EKN surveyed 105 softlines and hardlines retailers in November 2016 of which the larger retailers highlighted the top 2 challenges as (1) lack of actionable pricing & promotion analytics to drive profitable decisions and (2) inability to measure pricing or promotion effectiveness and financial impact. For mid-market retailers, the main challenges faced are (1) increased vendor costs and ineffective vendor negotiations and (2) inability to connect pricing, promotions and markdown approach to a company strategy. It is quite evident that large and mid-market retailers are struggling to connect the dots between pricing and promotion effectiveness and profitability. Is a more dynamic pricing approach the answer to the retailers’ problems? Retailers have tried to adapt themselves in this dynamic environment by resorting to frequent in-store price-related changes which...

Key Trends & Challenges Impacting Private Label Retail

Retailers who sell private label products as part of their assortment-mix today have a reason to fear Amazon’s entry into private label assortments or collections. It has increased the threat of further online competition. EKN’s 2016 Private Label Sourcing survey (in partnership with CBX) of 50 North American retailers has revealed that compared to 2014 or prior, retailers are giving higher importance to private label brands for their top line and bottom line net earnings. Taking into account the threat from the likes of Amazon and an already high forecast growth within eCommerce and mobile channels till 2018 (14.5% & 29.4% CAGR, respectively¹), omnichannel operations is the top trend shaping the state of private label brands especially in the area of strategic private label sourcing and product development. Private label is no longer a store phenomenon and moving forward retailers fully expect private label categories to grow in the physical-digital domain. The second biggest trend impacting private label brands, sourcing and development is new consumer demand. These new consumer demand patterns are as much about growing private label demand as it is about growth in main street retail, subscription retail and food retailing in formerly non-food stores (i.e. drug). Price sensitivity is definitely increasing as there is an increase in off-price stores emerging in luxury categories. Retailers are well aware that the price sensitive consumer cares a lot about private label or store brands. Within private label, sales reached $118.4 billion in 2015, an all-time record and an increase of +$2.2 billion over the previous year. In the past two years alone, annual sales are up by +5%, or +$5.4...

3rd Annual Analytics in Retail

Now in its 3rd year, EKN’s annual Analytics in Retail industry benchmark is based on a survey of 200+ retailers. Consistent with findings of past studies, retailers continue to view analytics as extremely strategic, yet struggle to derive commensurate value from their analytics investments. 80% state they lag behind Amazon in terms of the strategic use of analytics. Business analytics will only evolve further into a strategic capability that sits at the intersection of customer preferences, business strategy and business processes. Insights will be deeply embedded across a retailer’s functional value chain, affording it both the ability to be investigative and predictive (strategic), as well as the adeptness to be efficient and agile (operational). A smarter, integrated brand of retail cannot be delivered without the ability to improve decision-making across the board via deeper customer insights. In 2014 retailers will focus on delivering existing insights to the right person at the right time with the relevant context (investments in Mobile Business Intelligence and Digital Dashboards will rise) and on ensuring insights are easily consumed and acted upon by business users (Data Visualization). In-store customer location tracking will be one of 2014’s analytics buzzworthy use cases, whereas investments in Big Data will continue to be byte sized. However, to build sustainable competitive differentiation through business analytics, retailers will need to go one step further than just focusing on data, tools and resources. Those that are able to overlay their analytics capabilities with a strategy and organizational capability tightly linked with their business model will lead the way. Therein lies the future of retail analytics. In this report: The hindsight > insight...