How to Pivot Your Pricing Strategy as Stores Reopen
Originally published in RIS News.
As doors reopen, the first step for retailers is to determine how to adjust their pricing strategy in a COVID-19 world. Here are the questions you need to ask.
With retail’s doors reopening, customers are facing the difficult decision of when and whether to go back into the store. According to a recent poll, 66% of Americans don’t think their states should reopen stores yet. Retailers are struggling with how to bring customers in the store, and if they do, how to ensure that it’s a good thing for both their bottom line and community.
Pricing strategy holds a big role in how things play out, and there are a number of factors to consider in this changing landscape. The first step for retailers is to evaluate the following questions in order to identify the best price strategy for their business moving forward.
Has the role of each channel changed?
Online and offline consumption rates continue to come more into balance, especially now that consumers feel less safe browsing for items in store. In fact, Adobe’s Digital Economy Index shows that U.S. eCommerce jumped 49% in April compared to early March.
The shift to online for customers, either by preference or necessity, means that an intelligent and well-defined omnichannel pricing strategy is now also crucial for retailers. Channel preferences aren’t as tied to relatively static factors like geographic location, convenience, willingness to wait, etc. as they were just months ago, so the influence of price in the equation must change as well.
Depending on their mix of online and brick-and-mortar business, retailers have different levels of sophistication in how they develop their COVID-19 promotional strategies across channels. Many retailers will need to work quickly to adapt to these changes and future-proof their pricing strategy with an aligned and coordinated approach.
Should your pricing strategy look different online vs. in-store?
A retailers’ pricing strategy across channels will depend largely on what the retailer values as most important.
Many retailers find tremendous value in providing a consistent experience for shoppers, so whether they go into the store or browse online, they’ll see the same price and receive the same quality of service. These retailers have prioritized the need to achieve price alignment and create a seamless omnichannel experience. Having aggregated data that applies across channels will offer powerful insight for their pricing strategy.
On the other hand, there are many organizations that choose not to employ a unified pricing strategy between their physical and online stores. In many of these cases, they may set prices at the store level based on complex calculations around local supply and operational costs, competitive pressures and customer willingness to pay. This can be highly beneficial for not only supporting various financial goals like total sales and margin, but can also incentivize customers in some areas to choose one channel over another to get the best deal.
What’s the right way to issue promotions and markdowns during COVID-19?
With retail reopening, many stores have excess inventory they want to quickly get rid of. To do it, many retailers will run promotions and markdowns. But knowing when and how to issue these markdowns has proven difficult, especially in unprecedented times when consumer trends can’t be easily predicted.
For brick-and-mortar stores, the right promotion and markdown strategy will depend on the supply level at each individual location. If one store has hundreds of units that are going out of style and need to be bought off the shelves fast, but another store only has ten units, the retailer will need to track each level of inventory and have the capability to rapidly mark deeper discounts at the first store. Online, retailers have more flexibility in terms of inventory since it’s shared across the national supply chain, making it less nuanced and dictated by individual store inventory levels.
To keep track of all this data, retailers will need the pricing tools and prescriptive analytics to optimize promotions at the store level and move through different inventory quickly. They need to know when to promote the right items with the right vehicles to maximize investments and profitably clear all merchandise.
What about holiday promotions?
Black Friday and holiday crowds will certainly look different this year. That means planning for these big end-of-year promotions won’t be the same, and lessons learned from years of campaigns won’t mean much. It will be more important than ever to look at the full scale of prior, existing and emerging trends to build an optimal, holistic approach.
That’s why data-driven retailers who turn to AI to gather and evaluate real-time insights will be the winners this holiday season. They will need to pivot from the promotions they had previously planned and be prepared to think strategically about the changes that will come this year.
Build a Pricing Structure for Tomorrow
We’re living in a constantly evolving and shifting reality. Retailers should consider all the possibilities and constantly re-evaluate their pricing strategies to make the right decisions. Driving traffic to the right channels and converting sales at the right price for the business and the customer will require dynamic strategies and technology for the emerging retail economy.
There is no better time for retailers to reset and build a pricing structure for tomorrow – one built on the analytical tools and data that will make retailers successful no matter what’s to come. If you need help navigating pricing for today’s retail landscape, our consulting team is here to guide you towards the best course forward.