Wes Woolbright, MBA has over a decade of experience in pricing strategies, pricing operations, and revenue management across a variety of retailers, including Walmart (Director, Pricing Operations), Sam’s Club (Director, Pricing), BevMo! (Director, Pricing), and Safeway (National Category Director). Wes received his M.B.A. as well as dual degrees in Economics and History from Willamette University. Wes holds certifications with the Professional Pricing Society.
In Part 1, Wes Woolbright and Edris Bemanian discussed the evolving landscape of e-commerce, omnichannel retail, and the implications of inflation on pricing strategies. They explored how companies are adapting to consumer demand for convenience while balancing cost pressures and how these dynamics impact both brick-and-mortar stores and digital platforms.
Edris Bemanian: As you said earlier in the conversation, Wes, when QSRs or restaurants deploy promotions, the customer response and the incremental dollars that they generate can help to lower a company’s overhead costs. Another aspect that’s hard to measure, however, is the long term loyalty or price perception improvement driven by the new, creative, and sometimes aggressive promotions that they’ve been testing and announcing. It would be fascinating if more QSRs offered loyalty programs. I know Chick-fil-A One is an increasingly popular example of one. I know McDonald’s has been pushing their app as well in different ways, including via their self-serve kiosks. We might see more of that, but it would be interesting to see if companies like Nielsen have any panel or share data or if publicly traded QSRs are sharing information about repeat visits from loyal customers. I don’t think they’ve segmented it that way in their 10-K forms, but maybe you’ve seen something or know more about it than I do.
- Editorial note: In December of 2023, McDonald’s published a goal of expanding their loyalty program from 150 million to 250 million 90-day active users by 2027. Source.
Wes Woolbright: Well, what I can speak to more is from the historical perspective, especially if you think back to either the last recession or the pandemic-related recession, which is kind of an outlier for a whole lot of reasons. But if you go back to the great financial recession, what repeatedly happens as people get constrained on their resources is they do more deal shopping, and typically it expands their set of where they shop, right?
I may be a real loyal Walmart, Safeway, or Albertsons shopper, but now that economic circumstances have changed, I’m laying down three or four different ads on my dining room table. I’m going to go here and get these five items because they’re the lowest price in town, and then I’m going across the street to get these other five items to fill up what I need for the week so I can get that lowest price.
When that kind of behavior happens—and I think we’re probably seeing some of it even now, though we don’t officially have a recession—I think the inflation is driving that behavior, which erodes loyalty. At some point, when economic times get better, time becomes more of a priority than saving a few pennies or nickels. That’s when people start to coalesce around two or three stores they frequented during the economic difficulty, letting go of others to avoid extra stops and save time. But yes, economic tightness drives dispersion of how we spend our money, and that dispersion leads to an erosion of loyalty.
EB: And you’ve had such an interesting and diverse set of experiences across companies. You’ve led pricing functions and worked in different contexts. At Safeway, you’ve dealt with the high-low strategy. You’ve worked with Sam’s Club, focusing on the warehouse club model with membership-based pricing, and Walmart, where EDLP is the core strategy. And then there’s your work in the specialty adult beverage retailer, BevMo!.
In this current climate, how does a high-low retailer view the world compared to a specialty adult beverage retailer, a club membership model, and an EDLP retailer?
WW: I’ll start with the specialty adult beverage sector first. Although I wasn’t there during any particularly difficult downturn, I’ve supported that category for a number of years in various roles. There are two main points to consider. On one hand, there is some data suggesting that during tough times, people might “drown their sorrows” in alcohol, leading to a slight uptick in some categories. However, there’s also a noticeable trend of trading down to less expensive options. For example, a $100 bottle of wine might be too costly when you’re out of work, and a more affordable option like a $2 bottle of wine can satisfy the need.
The challenge for high-low retailers, especially if they’ve had very high prices on the high end, is the extent of the discount required to be effective. Compounding inflation means that percentage-driven price changes can significantly impact pricing compared to the actual cost itself. Prior to the Great Recession, high inflation pushed up base prices, creating a large gap when trying to promote sales. Discounting from these high prices can lead to more significant cannibalization of everyday sales.
Value players, such as Walmart, Target, ALDI, and Costco, have generally reported strong financials and are better positioned in tight economic conditions compared to high-low retailers. During tougher times, value players can weather the storm better. When economic conditions improve, high-low players may leverage and focus on the shopping experience to attract customers, reducing the need for steep discounts.
For club models and EDLP (Everyday Low Price) retailers like Walmart, they are typically in a better position to attract traffic and navigate tough economic conditions. The question remains about how much of this traffic is sticky once conditions improve. In general, value players are better positioned to survive challenging periods.
EB: Yeah. And when you think about it in the context of the in-store experience, I was in Zurich last month and walked into an ALDI Nord store in the Lindenhof district. I was blown away by how premium the experience felt—the store conditions, the layouts, the tags—everything felt very high quality. Even the produce section was impressive; the produce felt very fresh.
I spent quite a while just walking around and soaking it all in. One thing I noticed was the person responsible for ensuring the produce was fresh. She removed what some would call the “ugly produce” from the shelves, and she was very thorough, checking three times during the two hours I was there. She was quite strict with what she took out, which I found interesting. By that, I mean she made sure that all of the produce that was there was spotless. Even though she removed items that, in my opinion, she could have left in, you have to appreciate the dedication and commitment to adhering to their freshness standards.
Generally, when shopping at a discount supermarket, consumers typically expect to trade-down somewhat on product quality and experience in favor of a better value. If you take this store as representative of a trend occurring at discount grocers more broadly, you would say that those who typically shop for value are now also getting the benefit of the shopping experience improving as well. Perhaps retailers are investing more here because it’s a fixed one-time cost that influences perception and response.
You could argue that you’re seeing a convergence across retailers. Do you think there’s a point where grocery as a whole will be perceived as commoditized and trade-able across formats and banners? Or will there be enough differentiation within each of the different vertical sectors, retailers themselves to where we will continue to see the dynamics that we see today?
WW: I think that largely depends on execution. None of this is easy. You and I can sit and talk about it and describe it and make it sound like it’s easy, but I’ve been close enough to enough real estate overhauls and facility overhauls to know it’s a lot of blood, sweat, and tears to get what you think is right to begin with. Then, rolling it out at scale is a whole other challenge.
You mentioned that the ALDI store you visited in Zurich seemed somewhat high-scale and premium compared to what you might expect from ALDI. If you had gone to an ALDI in a lower-income area, such as Berlin, it might have been a different story. This reflects the intelligence to understand and cater to your customer base. For example, there was a supermarket that would fly in champagne and cheese from France on a regular basis because that was what their specific customer base expected. Meeting those expectations led to customer loyalty and increased purchases.
The challenge is to satisfy a diverse customer set without offending any group. As for the value players trying to upscale, it can be risky. We talked earlier about Loblaw’s No Name Discount Banner example and Food Lion’s Bloom banner, which were attempts to address lower-income demographics during past recessions. The difficulty often lies in addressing the needs of lower-income customers with products that meet their expectations without compromising on quality, which can drive up costs.
Creating products that are both satisfactory in quality and affordable for those with economic challenges is crucial. It’s important to empathize with their situation and offer products that they can afford and trust. Over time, as their situation improves, you can then offer products that align with their aspirations. But initially, you need to meet them where they are, not where they aspire to be.
EB: I gave you a very isolated, point-in-time experience, and you took it back up to the broader macro level, which I greatly appreciate. Your point is that the retailer knew to cater to the localized demand and expectations of the population shopping in the upscale part of Zurich whereas 50 or 500 miles away, they would certainly have had a different experience.
WW: And it shouldn’t have been the same experience. There’s an overhead cost to provide that level of service, and a client base that can’t afford to cover those costs is unsustainable.
EB: Absolutely. Consumers might be put off if their grocery store suddenly upscale, resulting in higher prices. They might feel the store no longer meets their expectations, especially if they came in search of affordable options.
You’ve also highlighted the challenge of change management in this context. While it’s possible to test and learn, scaling initiatives—whether for adjusting price perception, enhancing value, or improving convenience—is exceptionally challenging and cannot be approached with a one-size-fits-all mentality. It’s crucial to consider the specific needs and demands of local customer segments.
You were notably ahead of the curve in managing the change associated with technology adoption in my experience in working with you over the years. How has this approach benefited you throughout your career? Could you share some accomplishments you’re particularly proud of, as well as key learnings you’ve gained along the way?
WW: I learned a hard lesson before I met you during a price software rollout. I’m proud to say we successfully implemented the software. However, I later discovered that the adoption rate plummeted when I moved on to a different role and wasn’t involved with it daily. This experience taught me the importance of taking end users along for the journey.
Being transparent, understanding their real needs—not just what I think they need—and offering some degree of opt-in capability are crucial. For example, over the last 12 months, we rolled out some impactful technology. Despite its rudimentary nature, I encountered resistance and heard complaints like, “Do we have to do this?” At one point, a business partner explicitly said they didn’t want to participate. However, a couple of months later, they asked to join the pilot, and they ended up having success with it.
At a fundamental level, I’ve learned that when people are forced into something, they may perceive it negatively, similar to being forced to eat spinach or broccoli. This resistance can be mitigated if people feel they are being invited to participate in something special that others might not have access to.
EB: So a big part of your success with change management has been being collaborative and allowing people to come along at their own pace rather than forcing things upon them. Did you very intentionally recruit champions to drive the change management and prove it out before scaling, or did it happen more organically?
WW: There’s definitely an element of those who are less sure and more risk-averse. They need some beacons to confirm that this is the right thing to do. I’ve had extensive discussions with IT partners about this over the years. Especially when changes impact someone’s compensation, change management can sometimes overlook this aspect. While most changes will financially benefit the company in the long run, at an individual level, the impact can vary significantly. If someone’s compensation or bonuses are at risk due to these changes, and you’re not addressing this, the implementation will be more challenging. Identifying those who will benefit more clearly and partnering with them helps create examples that encourage others to join in.
EB: Why do price optimization implementations fail? One major reason is the misalignment between incentives and objectives. While this concept is widely understood, its impact is significant when people’s compensation is tied to specific metrics. If a person’s performance is measured by a particular SKU or category, and they have no incentive to care about the overall portfolio—especially if doing so would negatively impact their compensation—they may engage in detrimental behavior. This misalignment has been a recurring issue for price optimization implementations.
The “if X then Y” dynamics from an organizational incentive perspective can severely hinder technology adoption. They often result in adverse actions and create a situation where individuals may wish for the technology to fail. They might focus on isolated failures to justify why it doesn’t work for their category, which exacerbates the problem. This is why getting these incentives right is crucial; without alignment, even the best technology can struggle to gain traction.
WW: Yeah, I’ve had discussions with you and your team about competitive intelligence collection, where some retailers still use what I’d call paper and pen methods. The issue with these methods is that the consumers of this data often don’t trust it. Even if the data is 90% accurate, when you’re working manually and at scale, accuracy tends to suffer.
For someone making decisions that impact their compensation, knowing that the data is only 90% accurate without being able to discern which parts are correct and which are not renders it essentially useless. Conversely, collectors might see 90% accuracy as an “A” grade, but that doesn’t align with the needs of decision-makers who require much higher precision, especially when their compensation is at stake.
EB: Certainly. In our experience, a single poor pricing decision can typically eliminate around 20 basis points of profit opportunity on average. Does that align with what you have observed, or do you find this figure varies significantly in your context?
WW: I would hope that any robust system or process has checks and balances to prevent a bad price point from being implemented. The impact of a poor pricing decision depends largely on the volume of the item in question.
If it’s a key item and suddenly priced 25% higher than the market, it could significantly impact profitability, even if the rate of profitability seems higher. Conversely, if the price is set too low, it could also negatively affect profitability, especially given the viral nature of online social media.
Mistakes can be quickly corrected if identified within a day or two, and only affect those shopping at that time. However, a significant pricing error can lead to substantial issues, such as ridicule for overpriced items or unexpectedly high volume for items priced too low. This can be particularly dramatic if the item is important.
Stay tuned for part 3, the conclusion of this insightful conversation!
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