Last week, Federal Reserve Bank Chairman Ben Bernanki announced that the US is on the “cusp of recovery.” I couldn’t agree more. As you can see from my previous posting, I have suspected a turn in the economy for the past few months, and have urged retailers to start focusing on the recovery. As a provider of pricing software, Revionics has a front-row seat to how leading companies adjust for different economic conditions. Despite the obvious economic improvements that we are starting to see, it is clear that consumers generally remain very price sensitive.
Responding to the more frugal shoppers, a price war has begun in the supermarket industry. Safeway announced the intent to lower their prices by 25%. And at Revionics, many of our clients are also making significant price investments. The goal for these retailers is to drive traffic and market share. It is hoped that absolute margin dollars will increase by selling a lot more goods to price sensitive consumers. Many retailers are reflecting on some key questions; How do I remain competitive while maintaining my margins? How do I reinvent my price image to better attract a value-centric shopper? If I lower my prices, will I see a corresponding increase in sales?
So, with the positive signs in the economy, this has been a very good time for companies like Revionics that offer consumer demand centric pricing and promotion systems. Retailers are looking for more sophisticated ways to make certain that their pricing and promotions are calibrated to the needs of their consumers. Old strategies, old systems, and old techniques are no longer adequate for the pricing challenges ahead in this very unique economic environment.