Pricing Data Fuels Conversions, Revenues and Margins
Alexander Rink, CEO of price intelligence solutions provider 360pi, recently spoke with Chain Store Age to discuss the importance of accurate pricing data to retail success. By obtaining timely internal and external pricing information, retailers can ensure a consistent omnichannel customer experience and also prevent the loss of sales to lower-priced competitors.
What are the advantages of having up-to-date pricing information on your competitors?
The reality of price transparency, promulgated by comparison-shopping engines and mobile devices, means that retailers must now assume that a large percentage of their shoppers are checking their top competitors’ prices before making a purchase. Consequently, a price difference of even a few dollars can, and often does, translate into a lost sale.
It is essential that retailers know where they stand with respect to competitors’ prices in order to successfully execute any pricing strategy. Up-to-date pricing information gives retailers the price intelligence they need to “right-price” their offering in order to maximize conversions, revenues and margins.
How has the advent of omnichannel commerce affected retailers’ pricing strategies?
While many retailers may still be formulating or experimenting with their omnichannel pricing policy, shoppers are increasingly demanding a consistent experience across channels, and that experience includes the price they pay.
All retailers need to consider their and their competitors’ online pricing when formulating an omnichannel pricing strategy. It is imperative for retailers to leverage online price intelligence, regardless of the extent of their own e-commerce presence.
How can retailers use pricing technology to combat “showrooming”?
With the ubiquity of mobile devices and price comparison engines and applications, brick-and-mortar retailers must be right-priced at the point of purchase or risk having their in-store shoppers leave empty-handed and purchase the items from competitors.
What types of decisions can retailers fine-tune with pricing data?
Retailers can use price intelligence to fine-tune their pricing strategies and day-to-day pricing decisions. These include reducing overpriced products that are damaging the retailer’s price reputation, increasing the prices of underpriced products that are unnecessarily leaving margin on the table, strategically ensuring the retailer’s pricing is in line with their brand messaging, and tactically responding to new competitor price moves in hours instead of days or weeks.
Retailers can also use competitive pricing data to go on the offensive in the market, such as by dynamically highlighting products where they are priced most competitively, or by powering comparison shopping on their own websites through “Compare at [higher competitor price]” banners, which helps to increase site conversion rates.
What specific capabilities is 360pi providing its users via pricing tools?
360pi delivers continuous price intelligence for identical and comparable products along with supporting product information, such as shipping fees and product availability. Our proprietary platform enables retailers to access this product and price intelligence online and in-store, and provides easy integration into back-office systems.
The 360pi Competitive Intelligence solution suite includes capabilities for real-time price comparisons of exact and “like” products, evaluation of competitive assortments to identify gaps and opportunities, support for dynamic rules-based pricing, and other features.
Spreading Good Vibes
Feelgoodz Inc. likes to create a customer environment that is as carefree and comfortable as its signature merchandise: eco-friendly flip-flops.
Although the company operates one store in Raleigh, N.C., its e-commerce site serves as its primary direct-to-consumer selling channel, meaning that smoothly functioning order fulfillment is of paramount importance to maintaining positive customer-service vibrations.
In the beginning, Feelgoodz outsourced fulfillment to third-party logistics providers. But in the fourth quarter of 2012, the company decided to move fulfillment processes in-house. It soon realized the true scope of the task it had taken on.
“We opened our own warehouse and brought everything in-house when we made that switch,” said CEO Mark Saad. “We realized pretty quickly we had to get up to speed with the program. This included everything down to scheduling regular pickups.”
Further exacerbating the situation was the fact that Feelgoodz was moving from a mostly seasonal business focused on selling warm-weather flip-flops to a year-round enterprise that also offered closed shoes. In addition, the company, which does a large wholesale operation, was seeing increased traffic in its direct-to-consumer business.
Feelgoodz, originally founded by Kyle Brenner in 2008 and then merged with Saad’s similarly aligned eco-friendly footwear company Kinder Soles in 2011, had always used UPS for deliveries. When the company realized it needed assistance in effectively meeting the demands of a year-round consumer-focused supply chain, the company turned to the supplier for help.
“In moving fulfillment from third-party providers to in-house services, we send out shipments of various sizes,” Brenner said. “Shipping is one of the biggest costs we incur. Shipments can range from one pair of shoes to 100 pairs. UPS helped us figure out the best solution to ship each one.”
For example, Feelgoodz will generally send small shipments using UPS ground delivery. But for large shipments, the retailer often uses UPS SurePost, a hosted service where the logistics provider partners with the U.S. Post Office to help companies efficiently complete the all-important “last mile” of customer deliveries.
Delivering Something Extra
“SurePost cuts down the expense of customer deliveries,” said Saad. “It’s a great add-on.”
In addition, Feelgoodz started selling goods to customers in Canada, using UPS WorldEase international shipment service to fulfill those orders. However, the retailer leverages UPS hosted solutions to not only get deliveries to consumers more efficiently, but to turn them into high-tech marketing opportunities.
“We use UPS technology to add on branding and marketing to shipping labels for SurePoint deliveries,” Saad said. “We can add a code to the label that the customer can use for a discount on their next purchase.”
On the marketing side, Feelgoodz uses UPS to help stimulate its business.
“We can embed a QR code into the shipping label that the customer can scan to watch a video about our products,” Saad said.
Brenner and Saad both agreed that it is hard to calculate a specific return on their investment in hosted UPS solutions and services. However, in general, the retailers have no doubt about the value UPS is delivering.
“There is a significant amount of savings,” Saad stated.
Despite the digitization of most customer-facing communication, printed flyers are still an important promotional vehicle for many retailers. By analyzing terabytes of offer-, store- and item-level sales data for products promoted in its weekly flyers, Hudson’s Bay Company (HBC) is determining the true incremental return on printed promotions and optimizing the efficiency and effectiveness of its flyer-based marketing efforts for its Hudson’s Bay stores.
“Everyone knows printed mass communication is not the most efficient method of communicating with the customer,” said Ashley Whicher, VP marketing, HBC, Toronto, which operates 90 Hudson’s Bay department stores. “There is no customization. We didn’t have something to measure the incremental ROI of each offer.”
Getting What You Need
Whicher joined HBC about three-and-a-half years ago, coming from another Canadian retail chain that employed an off-the-shelf automated solution for determining the incremental ROI of offers in printed flyers. He quickly realized that HBC needed something similar. After about six months, he started evaluating potential solution vendors with the IT department and went through an RFP process that lasted about a year before HBC selected a custom-built solution from Saferock Retail.
Running on a virtual Oracle infrastructure, the solution enables Saferock to retrieve data from HBC servers through a multi-encrypted secure virtual link for optimization at SKU level. Data is stored on a Teradata data warehouse running on a separate physical server.
“There was a cost benefit in getting exactly what we needed from a custom-built solution,” explained Whicher. “With an off-the-shelf application there is the expense of development and ongoing maintenance and running of the system.”
Setting the Baseline
Once the hosted Saferock solution was up and running, HBC loaded more than 18 months of historical data about items featured in weekly print flyer offers.
“We determined the sales baseline,” said Whicher. “Promotions never offer a 100% return. They’re incremental.”
HBC launched its measurement of printed promotional effectiveness in the first quarter of this year. Each Friday morning, following the close of its Friday-Thursday marketing week, HBC uploads promotional data and by noon the following Monday, HBC receives data, including performance analysis by offer, incremental sales and incremental sales-driven gross margin.
The retailer uses the gross margin driven by incremental sales as the numerator to determine ROI at the offer level, as well as incremental sales lift and margin at the macro-and item-level. This allows HBC to perform comparisons, such as the incremental return of different promotions on the same item, as well as measure incremental sales driven by specific offers on specific items.
“We may repeat an offer with a lower ROI to help drive traffic,” said Whicher. “If you know in advance, you can build it into your profitability model. Obviously you can’t have every offer be low-ROI.”
Looking ahead, Whicher said HBC may use the Saferock tool to help create flyers segmented for market niches. Internally, the tool has had an important cultural impact, as well.
“We’ve changed the culture of how people look at the business,” he said. “We used to look at gross sales generation of promotions. With the tool, you can determine the baseline you would have gotten just by opening the doors and determine the actual incremental sales and margin, which are the true number.”