Home Retail GUEST COMMENT Why intelligent pricing may prove a sensible alternative for retailers considering freezing prices this winter

GUEST COMMENT Why intelligent pricing may prove a sensible alternative for retailers considering freezing prices this winter

by Ozva Admin

In general, retailers face tremendous cost pressures with currency fluctuations, inflation, rising energy bills and commodity prices, higher transportation costs, and challenging job markets.

For online businesses, while they benefit from not also having to face the running costs of brick-and-mortar retailers, the lack of incidental footfall and fewer impulse buying opportunities may mean they feel the pinch of the consumer budget more acute.

Clearly, households will be looking for savings to help them manage their finances as we move into the fall and winter months, so those retailers that can offer them can win new customers.

Some major companies, such as Primark, recently pledged not to introduce any more price increases this fiscal year, in contrast to a wave of price increases from retailers in other markets.

Similarly, Sainsbury’s has announced it will invest £60m to keep food and grocery prices low, delivered through a series of initiatives that will see the grocer offer promotional prices on some of its higher volume lines.

While public price freeze statements can be a way for retailers to show they understand the difficult times their customers are in, price freezes are very often a lose-lose situation.

The Disadvantages of a Price Freeze

While Primark may have the advantage of being able to manage its store network to offset some of the rising costs and maintain its prices, and Sainsbury’s has the option to increase its prices outside of promotional items, in most cases the retailer simply he gives up. margin.

On top of this, there is no guarantee that the price freeze will not create further pressure as margins fall and costs rise. As a result, Primark has lowered its profit margin forecast for the next fiscal year, and Sainsbury’s investment will come directly from the bottom line. With customers tightening their belts and therefore making fewer purchases, a drop in revenue can make thin margins feel even more challenging.

Freezing prices across the board means retailers lose out on the benefits of a nuanced approach to their price execution and are unable to make adjustments in some channels or product lines to help with pressures elsewhere.

Looking ahead to the next financial period, any increase in brand reputation may be canceled out if retailers are forced to make large price increases while their customers are still managing their own slim budgets. If these increases occur out of step with the rest of the market, the impact is likely to be magnified.

Gain control with visibility

Instead of freezing prices, the alternative is a data-driven pricing strategy that uses smart pricing tools to respond to change. In today’s volatility environment, companies need to be able to make more frequent, targeted and responsive price adjustments, rather than relying on one-off price increases or widespread freezes.

more sophisticated pricing strategies they have the advantage of allowing businesses to respond, but are much more difficult to manage, especially when pricing remains a manual exercise for many.

In response to this, automated intelligent pricing offers one of the most effective solutions for companies managing complex pricing requirements. Its key benefit is that it allows companies to collect data from a wide variety of sources and bring it into one platform, giving them an immediate view of their costs and allowing them to see margins in real time.

Most companies will recognize that effective forecasting is increasingly impossible, as this month looks different than last month and different than the same month last year. This means that a pricing strategy must be agile enough to adapt to market variability.

Variability is best addressed with visibility, and visibility comes with having the overall pricing data to see margin performance across categories, subcategories, and SKUs. Visibility means that it is possible to model a margin strategy that allows give and take across all categories, but still hit margin targets.

Ultimately, when everything else feels unpredictable, proper visibility provides a much-needed sense of control and certainty. A good pricing strategy with the right pricing tools allows companies to execute pricing with certainty.

In conclusion

While price freezes may seem like a way to ensure customer loyalty in these turbulent times and may well be the right strategy for companies that can achieve efficiencies in other parts of their operations, smart pricing offers a much better strategy. more trusted by retailers as they continue to navigate the world. turbulence ahead.

John Moss is CEO of flintstone

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