Around 29% of retailers are fearful that any change in prices could bring about a negative reaction from customers.
Precision pricing is more important than ever for grocers looking to drives sales during historic inflation.
Yet a new report from DemandTec by Acoustic, a retail pricing, promotions and markdown technology firm, shows a wide gap in the adoption of advanced pricing technology by retailers.
The study, “Retail Pricing 2022: Bringing Agility and Precision to the Art of Pricing,” was conducted by Retail Systems Research (RSR) and surveyed retail executives across five categories. The researchers found that while 60% of average and under-performing retailers rate competitive pricing their No. 1 issue, the greatest concern for top performers is that consumers are becoming increasingly troubled by rising prices and continue to increase their focus on pricing.
“Retailers and consumers alike are experiencing a storm of challenges, including record inflation and energy prices, making price more important than perhaps any other value attribute,” said Anis Hadj-Taieb, general manager of DemandTec. “Retailers – in a constant battle to fend off price leaders like Amazon and Walmart – know that even though offering a low price may not win new customers, having high prices will certainly cost them existing ones. As a result, to win customer share of wallet, precision pricing is a requirement for retailers to thrive in the market.”
As part of the study, RSR conducted an online survey of retail executives from December 2021 to January 2022 across five retail categories: fast moving consumer goods; apparel, footwear, and accessories; hard goods; general merchandise; and other retail. Of the retailers surveyed, 10% had worse than average sales (retail laggards), 35% had average sales, and 55% had better than average sales (retail winners). RSR set average sales growth at 4.5%.
Key findings include:
Gap in retailer attitudes. There are stark differences in retailers’ attitudes about what – and who – is driving pricing issues in the first place. While average and under-performers lament the aggressiveness of the competition (60% call it their number-one issue), the top concern for the majority of retail “winners” is that consumers continue to ratchet up their focus on price.
Gap in retailer capabilities. Retail leaders are far more satisfied in their current capabilities than average and under-performers are. According to the survey results, 64% say they are pleased with their ability to establish a price strategy for regular and promotional products. That number is much lower for average and underperformers: 36%.
Fear of customer reaction. Retail customers have been through a lot in the past few years. Lockdowns, social isolation, difficulty finding products due to supply chain woes: all have a cumulative effect. Rising prices have consumers on edge, and retailers are incredibly sensitive to this fact. As a result, 29% of retailers are fearful that any change in prices could bring about a negative reaction from customers.
Gap in retailer perception about AI. As it relates to technology enablers, AI has been the talk of the industry for years. But where are retailers’ perceptions amidst all the hype? More than half of average and lagging retailers deem it vital, while the remainder call it a nice-to-have feature. More important, nearly all the best performing retailers in the study say that advanced retail pricing technology is essential to drive business improvements going forward (82%).
Based on the data, the report offers several in-depth yet pragmatic suggestions on how retailers should proceed.