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02/01/2022

Intelligent Shoppers Demand Intelligent Retailers

Unified, autonomous merchandising in an age of massive retail disruption
Kevin Sterneckert
Chief Strategy Officer, DemandTec
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The framework of technology adoption defines five personae: Innovators, Early Adopters, Early Majority, Late Adopters and Laggards. Retailers that aren't Early Adopters in automated pricing may be left behind.

We are witnessing the rise of the intelligent shopper who often knows more about the retailer than the retailer knows about them. It’s time for that to change.

Retail is facing unprecedented threats, including panic shopping, supply shortages, explosive omnichannel expansion and, in recent months, inflation. Recent events illustrate why merchandising, price, markdown and promotion decisions have become even more challenging during the pandemic.

There’s also a more enduring challenge facing retailers however. Shoppers routinely leverage their digital devices to compare prices, item availability and delivery times among competing retailers. They’re getting very good at this. What may look like “cart abandonment” in your digital store is often just research. When shoppers discover that you can’t deliver desired items in the right timeframe and at the right prices, they simply click to a better choice.

Meet Intelligent Shoppers on Their Terms

Now is the right moment for retailers to modernize legacy merchandising technologies and practices to meet and master this reality. Advantages once enjoyed by only a few retail behemoths such as Amazon, Walmart and Alibaba are now accessible to retailers large and small. That means adopting unified and autonomous merchandising and pricing to provide an improved and personalized experience for each and every shopper.

There are five imperatives for retailers to modernize and automate these practices:

1. Consumer demand is changing faster. The ability to see, understand and respond to the customer in real time has become critical. Amazon and Walmart are expanding their omnichannel retail footprints by automating pricing, markdowns and promotions in real time across all channels. This capability has been out of reach to most retailers until recently.

Now, solutions for autonomous pricing and promotions enable retailers to rapidly respond to changing market dynamics and customer needs. Importantly, these actions can be unified and executed in collaboration with their supplier partners. The result: improved value perception through a personalized customer experience that provides the right price at the right time via the right channel.

New merchandising platforms for retailers provide real-time and autonomous merchandising, and will become the industry standard.

2. Competition is increasing and fragmenting across channels. As the technology becomes more democratized and accessible, a difficult practice is likely to get more difficult: managing competitive pricing. As more retailers gain the capability to adjust prices in real time, every retailer will need better competitive intelligence and autonomous tools to execute to win with customers.

Certainly, the more a retailer knows about its competitors and customer price sensitivity, the more able it is to meet customer needs. For example, certain customers could be price sensitive on certain items, but less sensitive on others. Tracking these tendencies will give you an edge against any retailer that doesn’t have intelligent autonomous pricing.

3. Pricing requires greater granularity and more effort than most retailers can manage. The sheer quantity and pace of pricing decisions – by item, by store, by promotion, by timeframe – overwhelm human decision-makers armed only with spreadsheet-based tools. Automating these decisions is another technique that intelligent retailers use to aggressively capture the attention of your customers.

An anonymized, granular view of customers enables intelligent retailers to better compete against the giants and move ahead of other retailers that have yet to modernize. With autonomous pricing, a retailer can be as expert in merchandising as any retailer across the competitive landscape. Investing in these capabilities today delivers near-term benefits, while also future-proofing against established and emerging competition.

4. Omnichannel retail multiplies challenges for brick-and-mortar retailers. Intelligent retailers must define a framework for pricing, markdowns and promotions that is effective across all channels, geographies and types of shopper interactions. A promotion that works for the physical stores may not perform as well online, and vice versa.

Large retailers like Walmart and Amazon have built proprietary platforms to enable these practices, at great effort and expense. They have this down to a science. It’s now a science that retailers of any scale can acquire and adopt.

5. Mass promotions are less effective as shoppers expect more personalization. Individualized prices have long been the golden goose in retail marketing, and it can’t be said that the giants have perfected it. In fact, it’s a capability that more nimble retailers might adopt and develop faster and better than larger retailers, leaping past the current techniques in the market.

The Diffusion of Retail Intelligence

So where does your organization stand on the path to greater merchandising and pricing automation? Are you serving your shoppers with the intelligent merchandising they expect? Like most technology innovations, autonomous pricing tools have been adopted and proved by a few bold retailers first, while others follow swiftly – or not so swiftly.

Certainly, retailers need to move decisively on this front to maintain competitiveness with leaders and outpace the laggards. But how assertive should you be? We believe retailers must begin now and take a methodical approach: crawl, walk, run.

For perspective, it may be useful to recall the work of Silicon Valley legend Geoffrey Moore, who offered a time-based analysis of technology adoption that reflects individuals’ biases against change. The model was expanded by Everett M. Rogers in his classic “Diffusion of Innovations” (1962). (See chart above.)

This familiar framework defines five personae: Innovators, Early Adopters, Early Majority, Late Adopters and Laggards. While very few retailers can accept the Innovator’s level of risk, most should strive to be among the Early Adopters, keeping a close watch on those pioneers who have proved the case. Waiting to be among the Early Majority sacrifices considerable competitive advantage. Delaying longer ensures that your organization will be left behind.

Intelligent retailers – those that acquire the tools for tracking their customers and competitors in real time – will be fortified for what’s shaping up to be a historic battle for the hearts, minds and wallets of customers. Make no mistake: Intelligent shoppers are calling the shots.

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