RETAIL PRICING OUTSOURCING

Retail Pricing Challenges

In a challenging retail landscape marked by declining customer demand and rising production costs, retailers are grappling with shrinking gross margin profitability—an essential metric in their business model. The ability to swiftly and flexibly adjust retail prices based on price sensitivity and competitive factors is paramount for any retailer’s success. However, achieving this requires substantial organizational resources and investment in software solutions.

Many retailers today have Pricing Departments, primarily focused on monitoring and competitively pricing a limited range of SKUs, typically around 1,500 to 2,500. However, prices for other SKUs are often dictated by suppliers, perpetuating an inefficient cycle that keeps the company in a constant ‘fire-fighting’ mode. This approach proves ineffective even in the midterm, as it drains resources and fails to unlock the company’s full sales potential. Moreover, it undermines customer loyalty by obscuring the retailer’s positioning, prompting customers to favor more transparent and stable alternatives.

What solution do we offer

To address these challenges, we offer a unique solution: our Retail Pricing Outsourcing service. Leveraging our industry expertise and SmartPricing technology, this service enables you to dynamically and swiftly manage your company’s retail prices without the need to increase fixed costs.

Essentially, we serve as your dedicated Pricing Department or augment your existing team, empowering Category Managers to achieve optimal results in revenue growth, gross margin improvement, and increased sales efficiency. On average, our solution delivers a stable profitability increase ranging from 3% to 5% of total gross margin.

Key Benefits

For companies already equipped with a Pricing Department

For companies lacking a dedicated Pricing Department

Opportunity to boost gross margin and maintain customer traffic
Establishment of a centralized and systematic pricing process with payment based on outcomes
Ability to compete effectively with major retailers by leveraging cutting-edge pricing tools and expertise without the burden of maintaining an in-house team of Pricing Managers, analysts, and programmers
Prompt and consistent reporting on key factors impacting sales effectiveness and price positioning
Ongoing collaboration with pricing experts to address immediate issues and devise actionable solutions

SUCCESS FEE

The most important benefit and advantage of retail pricing outsourcing is payment for achieving the Revenue and Gross Margin key indicators

How it works

Potential diagnostics and assessment comprise

Current pricing audit;
Identifying critical issues and product categories;
Analyzing competitive positioning and tuning-out paths;
Balance analysis by price segment

Price Positioning and Targeting involves:

Selecting pricing tactics for each category and format, outlining category roles;
Forming KVI (Key Value Item) baskets

Organizing a flexible pricing process involves:

Configuring IT system data integration with SmartPricing;
Establishing monitoring schedules;
Implementing pricing process regulations and forming a Pricing Committee;
Conducting weekly Business Reviews for price evaluation and adjustments;
Utilizing pricing tools for loss optimization

Evaluation of results and effectiveness includes:

Analyzing key indicators such as Revenue, Gross Margin, and Sales;
Assessing category balance based on profitability, with rotation recommendations;
Evaluating overall effectiveness and outcomes;
Improving KVIs and pricing parameters for each category and format

Ongoing consulting expert support to the Commercial Department and Pricing Department

Our experts

Aleksandr Vygolko

Retail Pricing Outsourcing Project Manager

In retail since 2013.

With more than 7 years of retail pricing expertise in food and FMCG, Aleksandr has ascended from a Pricing Specialist to the Head of the Assortment and Pricing Management Department. He possesses extensive experience working with large Russian companies, understanding their specific operational dynamics. Aleksandr’s tenure includes roles at Verny from 2013 to 2016, and as the Head of the Pricing Department at Zaodno/HomeMarket from 2016 to 2018. Subsequently, he served as the Head of the Assortment and Pricing Management Department at Miratorg.

ASK THE EXPERT

Cases and Examples

Applying a smart retail pricing approach

4,2%

“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

Insights

Competitive pricing error

Many local retail chains, particularly those lacking a differentiated value proposition, are experiencing decreased foot traffic due to increased competition. Some retailers see a 5% decline, while others face a 10% reduction. In response, many managers and owners resort to reactive management decisions, aiming to boost traffic by various means.

Omnichannel retail

You’re likely familiar with the concept of «omnichannel (multichannel) retail.» According to Retail TouchPoints, nearly 95% of the world’s retailers defined their strategy as omnichannel in 2014. However, this term is frequently linked to technological aspects, such as using the Internet to interact with customers.

Competitive Pricing webinar

During our Competitive Pricing webinar, we delved into essential topics including:

Crafting a compelling store price image;
Identifying Key Value Items (KVI) and prioritizing first-price products;
Establishing a transparent pricing system;
Strategic product profitability analysis.
Selecting optimal pricing strategies;
Implementing dynamic pricing techniques