RETAIL PRICING OUTSOURCING
In a volatile environment with declining customer demand and rising production costs, many retailers are facing declining gross margin profitability, which is the most critical parameter in a retailer’s business model. The ability to flexibly and quickly manage retail prices based on price sensitivity considering the competitive environment is the major competence of any retailer. However, a flexible and fast pricing process requires additional organizational resources and investment in the development and introduction of software solutions. Nowadays, many retailers have Pricing Departments, which usually have enough resources only for price monitoring and competitive pricing of a limited number of SKUs (about 1 500—2,500).Prices for the remaining SKUs are set by the mark-up to purchase price and are actually managed by the suppliers and not by the retailer. The cycle then repeats. The company is constantly in the ‘putting out fires’ mode.This approach is ineffective even in the midterm, and everyone loses both the company, since it spends resources on vicious cycle, while not revealing its sale potential, and customers since it does not understand the Relailer’s positioning thus reducing customers loyalty and pushing them to decide in favor of more stable and clear Relailers.
To break this vicious cycle, we have developed a special Retail Pricing Outsourcing service based on our industry expertise and SmartPricing technology, which allows you to flexibly and quickly manage your company’s retail prices without increasing fixed costs, thus achieving a stable increase in profitability on average from 3% to 5% of totalgross margin.
In fact, we act as your Pricing Department (if you have no), or we help it and Category Managers to more effectively achieve the best results in increasing revenue, gross margin , and sales.
- Independent and prompt assessment of the company's current price positioning
- Opportunity to supplement expert opinion “with a single click” and improve the accuracy of decisions made with the data obtained through the in-depth analysis of sales history
- Opportunity to optimize labor costs and focus on key and strategic positions forming the price image
- Chance to increase gross margin and retain traffic
- Chance to organize a centralized and systematic pricing process and pay only for the result
- Chance to effectively compete with big retailers using the most up-to-date pricing tools and expertise, without the need to maintain a staff of Pricing Managers, analysts, and programmers
- Prompt and regular reporting on the main factors affecting the effectiveness of sales and price positioning
- Regular interaction with pricing experts to identify urgent problems and develop a set of measures to solve them
The most important benefit and advantage of retail pricing outsourcing is payment for achieving the Revenue and Gross Margin key indicators
- current pricing audit
- identification of critical issues and product categories
- analysis of competitive positioning and tuning-out paths
- balance analysis by price segment
- choosing pricing tactics for each category and format, defining the roles of categories
- KVI basket formation
- Configuring the integration of IT system data with SmartPricing
- Monitoring schedules formation
- Regulation of the pricing process and Pricing Committee establishment
- Weekly Business Reviews of prices; price revaluation and pricing
- Loss optimization tools through pricing tools
- Analysis of the Revenue, Gross margin, and Sales key indicators
- Analysis of the category balance by profitability (rotation recommendations)
- Evaluation of effectiveness and results
- KVIs and pricing parameters improvement for each category and format
Our experts
Aleksandr Vygolko
Retail Pricing Outsourcing Project Manager
In retail since 2013.
Over 7 years of retail pricing expertise in food and FMCG. He rose through the ranks from Pricing Specialist to the Head of the Range and Pricing Management Department. Aleksandr has extensive experience of working at large Russian companies and understands well the specifics of their work. From 2013 to 2016, he worked for Verny. From 2016 to 2018, he worked for Zaodno/HomeMarket, Head of Pricing Department. He was the Head of the Range and Pricing Management Department at Miratorg.
Applying a smart retail pricing approach
“Begemag” is a Kemerovo Retail “convenience store” format, which successfully competes with federal chains in the Kuzbass market.
Challenges
- Traffic drop; competitive pressure from other chains
- Margin decrease, including due to the use of regular price promotion activities
- Retail price and margin management, taking into account the buyers’ price sensitivity
Results
- An approach to retail pricing based on SmartPricing technology and methodology allowed to better feel the consumer perception of prices and to extract value in the form of a significant gross yield increase without losing sales and traffic.
- Average 4.2% increase in gross yield while maintaining category penetration index
Increased competition will inevitably result in the decrease in the traffic of many local retail chains, especially those without a differentiated value proposition. Some retailers’ traffic is reduced by 5%, someone’s — by 10%. In response to this, many managers and owners take a reactive management decision: to return traffic, the number of checks …
You are definitely already familiar with the term “omnichannel (multichannel) retail”. According to Retail TouchPoints, nearly 95% of the world’s retailers defined their strategy as omnichannel in 2014.. But this term is often associated with technological aspects, i. e. with the use of the Internet when interacting with a customer.
