Last month, Robert Schaulis of Andnowuknow interviewed Engage3 COO Edris Bemanian on his observations of pricing pressures from the likes of Amazon and Lidl. “The biggest trend is that pricing and assortments are becoming more dynamic and localized,” Edris says. He notes that e-commerce is now becoming a fundamental part of retailers’ strategies versus just a “me too” approach. Read the full article in Andnowuknow.com.
Precise and Accurate Data
First and foremost, a competitive pricing platform must have the ability to collect precise and accurate pricing data. This allows retailers to target competitive shops, optimize frequency, and specify which items to focus on within regions or individual stores.
Rather than casting a wide net to see what useful data gets brought in, retailers must be able to get a global look at the actions of their competitors while also drilling down to store-specific opportunities. When they have both views, they can see clearly where they are winning and losing. Essentially, such a system puts both a telescope and a microscope into the hands of merchants and their pricing analysts, enabling them to comprehensively study their competitor’s universe. It allows them to reverse-engineer their competitor’s approach to pricing and to develop a targeted response, especially if they see a weakness.
Quality Assurance Workflow
A competitive pricing platform must also have a strong quality assurance workflow. With today’s mobile app-enabled technology, automated processes can greatly reduce manual errors and ensure that only quality data is being captured at shelf edge. Additionally, such apps can compare shelf data against historical records, flagging any SKU pricing that seems historically unreasonable. Advanced analytics can assure that the data being captured is accurate in terms of price, brand, sizing, and product attributes. This technology can eliminate much of the human error that has plagued competitive shop programs.
With the rise of private labels, competitive pricing platforms must be able to compare product attributes. In traditional competitive shop programs, as many as 40% of items go unaccounted for because there is no UPC match. To solve this problem, competitive pricing platforms must be able to utilize visual data capture technology and advanced character recognition to compare product attributes. This allows product linking to occur not just by UPC, but also by key attributes and statement of ingredient similarities, i.e. gluten-free and organic. This creates a more accurate picture of a competitor’s private label pricing strategy and their total value proposition.
Customized KVI Lists Based on Statistical Analysis
Historically, cost and timeliness have made it difficult to acquire quality competitive data. Given the dynamic nature of the retail environment, static KVI lists are not responsive enough to the realities of where to focus competitive pricing efforts across various geographies and store-specific categories. The retailer needs a pricing platform that allows them to shift from static KVI lists to ones that are easily customized by banner or even by specific store. Rather than taking a blanket approach, the critical decisions of where, what and when to comp shop should be based on strategic statistical analysis.
Merchants need the ability to drill down and understand the decisions competitors are making within specific regions, designated market areas (DMAs), cities and individual stores across their overall pricing strategy or within specific merchandise categories. This would enable merchants to lead their competition by being right on pricing with the right items that are important to customers at a localized level. Such flexibility in designing and executing a more targeted approach to competitor pricing would allow for significant savings in budgeted dollars for competitive shops. A retailer could go after the data they actually need when they need it, rather than spending dollars on costly full book programs.
Correlating Online and In-store Pricing
In today’s world of e-commerce, more and more retailers are taking an omni-channel approach to selling. A technology-enabled competitive pricing platform needs to take advantage of advanced web crawling algorithms to acquire this competitive data and correlate it against the data captured by auditors in physical store checks. This would enable a more efficient and cost-effective approach to acquiring competitive pricing data.
As advanced analytics enable faster and more accurate decision-making, organizations will need to change to more cross-functionally aligned metrics that strategically drive the financial success of a company. When considering today’s retail organizational structure, is what drives a merchant’s decisions the same as what motivates the employees in a pricing department? Having the data to make decisions regarding competitive pricing at the speed of retail requires a major step forward in enabling accurate pricing decisions to be made with a sense of urgency and strategic intent. However, to fully unlock its true impact to P&L, the retailer will benefit from progressive thinking around how to align objectives and an incentive structure that motivates and drives collaboration. This will enable different departments with complementary skill sets to pull the rope in the same direction and drive a total value proposition focused on the customer.
Imperial Distributors, a long time Engage3 customer & partner, is recognized throughout the Northeast, South Atlantic and Midwest states as a leader in both distribution and merchandising of supermarket non-foods. The Spring & Summer 2018 Seasonal show provided retailers with an opportunity to complement their food business with non-food offerings to drive sales & improve customer experience.
Ken Ouimet, Engage3 Founder & CEO, was a keynote speaker at Imperial Distributors’ seasonal show this year and discussed The Art & Science of Managing Your Price Image with attending merchandising & marketing executives.
Reach out to firstname.lastname@example.org to request information on the session and if you are interested in learning how to leverage competitive data and advanced analytics to compete more profitably.
Industry-expert and Chief Architect of Brick Meets Click, Bill Bishop, hosted a highly-anticipated webinar session with Engage3 CEO Ken Ouimet and COO Edris Bemanian. “Surviving the Emerging Price War” provides in-depth insights, tangible examples and tips and tricks on how to compete effectively in the face of a brutal and imminent price war among retailer powerhouses. The webinar supplies all of the key ingredients in making up a retailer’s survival toolkit.
“When elephants start to dance, mice get trampled.” Ouimet began the webinar with an analogy that accurately reflects the current state of affairs in the retail industry prior to highlighting Amazon, Aldi, Lidl, and Walmart’s price commitments in the emerging price war. As these giants begin investing in their pricing, the “mice” that are forced to follow but fail to react strategically remain in the elephants’ path.
Ouimet continues with a five-step plan on how to survive in the face of a price war and be met with some form of success or resilience. His ideas center around the notion that “the best offense is a good defense.”
Understand your customer’s perspective.
Using competitive intelligence data shouldn’t be the only tool retailers leverage. Retailers must identify which items are most important to their local customers and understand what items they are comparing against at their competitors’ stores. It’s essential to utilize accurate product linking practices to compare products in the way that customers do with attributes.
By understanding the way customers value their products and perceive the changes retailers make to their pricing, retailers will unlock opportunities to move their customers up the loyalty ladder. Engage3 is collaborating with customers to bridge sales, market share, customer survey, and competitive intelligence data to identify the items that are most relevant to their customers in each market and refine retailers’ KVI lists to reflect this.
Gain visibility into your local competition.
If retailers don’t have visibility into local competition, then they simply can’t compete. Convenience stores have a high level of what Engage3 calls “localization” (geo-specific pricing), and drug stores have a lower level of localization. However, as a time-series analysis shows, localization scores have been increasing, and retailers like Safeway, Kroger, and Publix are developing higher levels of localization. Kroger, especially, has been met with a high level of success with localized assortments.
If competitors are not very localized, it provides an opportunity to strike hard and fast without any visibility. Engage3’s platform, in particular, takes price change frequency and competitor assortment localization into account when improving competitive intelligence programs over time.
Fly under the radar and attack where they aren’t looking.
One suggested tactic could be moving away from larger competitive zones and instead into micro-zones. A regional grocery retailer that scores very highly with consumers in regard to their price reputation was able to maintain their positive reputation by leveraging their smaller zones to take advantage of their competitors’ blind spots through a mix of lower prices to earn price reputation points while taking higher margin on other items by allocating across zones. Engage3’s Competitor Strategy Analytics reverse-engineers retailers’ pricing and assortment strategies to identify margin opportunities and competitors’ price zones.
Strike hard and fast.
It’s not enough for retailers to attack from hidden angles, but they must also have an element of speed behind them. Amazon has a high price change frequency on several items found in conventional grocery stores, and the juggernaut’s price change algorithms are highly responsive. Retailers are taking notice of Amazon’s practices and efficient strategies and are beginning to follow suit.
Retailers need to minimize the time it takes to respond to margin opportunities or price reputation risks by getting data that is as fresh as possible to maintain visibility. Engage3 has helped customers identify when retailers can confidently leverage online data to provide a faster signal to increase visibility and proactively identify opportunities.
Reinvest benefits to defend your turf.
The environment of a price war is pressing and inevitable, so the first step to surviving is determining how to invest optimally in your respective markets by efficiently monitoring the local competition. Once retailers can establish a robust process in a program, they should be able to reinvest those savings to identify additional margin or price opportunities.
The segment concluded with a last, but certainly important, strategic lever in fighting a price war: personalization. Ouimet believes that the future is personal and that personalization is unique in the way that it’s a highly desirable tool for consumers that also helps create a tighter relationship within retail communities. It provides more loyalty and more convenience for the consumer, and when applied to pricing, it becomes the ultimate segmentation and the most powerful means to “fly under the radar.”
The five-step plan is heavily reliant on updating competitive shop programs and price optimization strategies. According to Ouimet, those retailers seeking to constantly improve will be well prepared if there is a price war.
To register to watch the full webinar and find out more invaluable insights, click here.
Milk: it does a body good, but what does it do to your finances? Conventional wisdom has it that prices always rise, and milk is one of the most consistently expensive items in its aisle – everyone needs it for something, from breakfast to baking, so of course the price of milk is going to go up over time, right?
Well, kind of. In the first round of our Store Brand vs. National Brand Analyses, we examined promotional and regular pricing trends for Organic and Conventional milk, and while a few of these analyses turned up what we might expect – regular price trends for conventional milk are both positive, with nationally branded items showing a significantly steeper increase over the past year than store brands — we found several surprising results as well.
Let’s start with the major one: compared to store brands, the average price of nationally branded organic milk is plummeting, dropping by nearly a quarter per gallon over the past year. Store brand pricing has held steady at around $6.00 per gallon; but where nationally branded items once averaged close to $6.15, that average has fallen to $5.87 in the span of 14 months, now beating store brands. Promotional prices on organic milks are also dropping steadily, though store brands are outpacing national brands there.
The choice seems clear in one regard: if you’re an organic milk drinker, don’t just default to the store brand. It’s a good bet a gallon of Horizon might be easier on your wallet.
The Sherlock Holmes of Retail
The phrase “competitive intelligence” is tossed around among competitive retailers and pricing strategists looking to grow revenue and expand their reach. Formally defined, competitive intelligence is the act of defining, gathering, analyzing and distributing intelligence about products, customers and competitors in order to make strategic decisions.
But what this really sounds like is a socially and legally acceptable form of spying. Companies that use competitive intelligence methods are putting on their black ski masks and waiting in stakeout vans with binoculars, ready to observe and analyze their competitors every movement.
This kind of “spying” is actually one of the oldest forms of ensuring market competition and drives the system of exchange that our livelihoods depend on. A basic study of economics tells us that markets are sustained by simple supply and demand models. When the demand for new Legend of Zelda video game increases, Nintendo is smart enough to increase their prices and the quantity that they supply to legions of insatiable gamers.
Profitable choices and strategic pricing is dependent on looking at external factors and the ecosystem of markets around you. Companies who want to thrive in a competitive environment know that they have to study two major areas: their customers and their competition. The two share a magnetic-like attraction, linking them together and linking the success of the company with their push and pull.
But to simplify things even more, let’s take a look at the classic lemonade stand example. Sally spends her summer vacations selling lemonade for 2 dollars a cup and expects about 15 sympathetic parents to visit her stand and buy a daily cup. When another lemonade stand opens up across the street, Sally notices her customers waning.
Infuriated, she grabs a recording device, her binoculars and heat-resistant trench coat and hovers around her competitor’s stand only to discover that the other lemonade stand sells lemonade for 75 cents a cup.
Now armed with this information, Sally can re-re-price her lemonade at 75 cents or less and make an informed and strategic move to stay the queen of lemonade sales.
Retailers like Sally want information about the prices that their competitors are charging, so they’ll be able to assess their own prices and make adjustments accordingly. By expanding the scope of our lemonade example to include the millions of industries and retailers with a diverse range of products and services, it’s safe to say that we’re getting a little closer to the heart of competitive intelligence as it exists in the real-world marketplace today.
The (C)ompetitive (I)ntelligence spy tool kit can be broken down into a strategic four-step method:
- Plan. Companies need to crack open their laptops and begin their Google stalking. In other words, retailers need to have a plan for what information they feel will benefit them. If retailers are asking the right questions, they’re asking about their competitor’s mission and history or their competitor’s target customers. They’re asking about which products are being priced at what cost and what special feature of that product attracts customers. They’re asking about promotions and advertisements.
- Collect Data. Retailers accumulate information by utilizing competitive intelligence programs or platforms. CI tools like MissionControl address the largest questions retailers might have about how to be successfully competitive with their pricing strategies and promotions. MissionControl is just one of the many innovative technologies out there that retailers are latching onto. There are hundreds of free and private programs that help companies analyze features of their competitors such as Quantcast, Knowledge360 or CIRADAR.
- Analyze the Data. Put your smartest and brightest to work extracting information that can be beneficial to understanding your own business in relation to the other markets. Alternatively, there are companies out there like Engage3 that collect the data and help set strategy with advanced analytics and insights. For Sally, it was figuring out that 75 cents would steal the neighborhood moms away from her stand.
- Make Changes. Implementing new pricing strategies, promotional programs or re-evaluating inventory are some of the many ways retailers then act on the data they’ve acquired. Sally quickly made the change and started pricing her lemonade at 50 cents. It worked like a charm.
Using competitive intelligence is like being the Sherlock Holmes of retail, and it is amongst one of the fastest growing business strategies of the 21st century. As long as there are Sally’s in the world competing against other lemonade stands, competitive intelligence will continue to play an important role in the social and economic foundations of the retail industry.
Chief Operating Officer Bob Ramsey has had over thirty years of experience working in the retail industry. He currently manages pricing strategy and operations at Bailey’s, an internet retailer based in Woodland, CA that specializes in a unique assortment of professional outdoor work gear and equipment. Bailey’s pricing strategy isn’t to charge customers at the cheapest price, but rather to create a relationship between the consumer, product and price that eliminates price as being the decision-making factor for purchases. Bob says Bailey’s “will be profitable and will make money, regardless of the prices it charges.”
Bailey’s has a dynamic relationship with competitive intelligence, as the retailer’s niche marketplace doesn’t have as much access to competitive data as larger grocery retailers. Bailey’s collects most of their customer data through their shipping procedures and by accessing and watching their Amazon sales. The internet retailer thrives on being able to differentiate from Amazon by printing in-mail ads and having convenient shipping processes. Bailey’s will also be the first customer of Engage3’s new “personalized promotions” platform, and Bob hopes to work with Engage3 to expand customer relationships.
To learn more about Bailey’s online platform, Bob’s experiences in pricing strategy, and Bailey’s relationship with Engage3, check out Bob’s full interview.
Traditional Comp Shop Programs Don’t Account for Omni-Channel
Omni-Channel is no longer just a buzz word. Millennials now represent over 50% of retail spending. Both they and your traditional shoppers expect retailers to meet them wherever they like to go and however they prefer to interact. As a result, retailers are increasingly testing and rolling out click-and-collect and delivery programs. According to IBISWorld, online grocery sales are expected to increase 9.5% annually to become a $9.4 billion industry in 2017.
With all this in mind, retailers are beginning to realize that they can’t just look at the in-store data anymore—in fact now it’s much more cost-effective to use online data and augment with directed in-store checks. It becomes even more critical that retailers leverage solutions that help them understand where they can responsibly leverage online data (because sometimes the assortments don’t fully match) and where to use in-store data. Retailers’ online vs. in-store strategies are constantly changing, and so a hybrid approach becomes even more critical to maintain complete visibility.
Engage3 market data demonstrates that while many categories and departments are still being priced at a national level, there is a strong trend towards increasingly localized pricing. It’s these location-specific products and categories that can be detrimental to a retailer seeking true visibility, because KVI lists and comp shop budget dollars are not allocated and reallocated appropriately. Far too often we see that many retailers’ competitive intelligence programs still leverage static, banner-level lists by which margin opportunities are missed and price reputation is threatened. It’s imperative that competitive intelligence programs be able to respond to market changes and leverage real-time analytics to maximize ROI.
Tactical, Rather Than Strategic Focus
Most retailers today put too much emphasis on the competition’s prices as they change, rather than the strategies that are being employed at the root of those changes. The comp shop processes of old produced data that was far too old and stale by the time it was received, and thus it has historically been much more difficult to discern the competition’s pricing and assortment strategies. Retailers need the ability to take a step back, see the bigger picture, and truly understand the competitive landscape and strategies that are being deployed around them.
We’ve seen that most pricing departments are responsible for managing a budget, however, oftentimes they aren’t responsible for measuring the quality or exact value that the program returns. How does your team measure the effectiveness or value of your competitive intelligence program today? We’ve seen over time the incredible value of appropriate Key Performance Indicators (KPI’s), or measurements, being defined and maintained to evaluate the program. KPI’s may include find rates, accuracy, competitive price visibility, completion rates, Return on Investment, and more.
As the in-store and digital customer experiences rapidly converge, retail sales are being attacked from all directions. Powerhouses like Amazon, Walmart, and other online retailers have developed aggressive pricing algorithms with the power to change a price multiple times in a single day. Sophisticated players are even changing the prices on 10-20% of their online assortment daily (and prices on their top items as frequently as 3-4x per day). Other threats to retailers’ price image include the continued growth of hard-discounters and dollar stores and the proliferation of private label products.
Hi All, my name is Kevin Johnson and I work in Product Marketing for Engage3. I’ve spent the better part of four years in the competitive intelligence industry and I’ve spoken with hundreds of different retailers in the space about pain points and inefficiencies as they persist today in so many organizations. This article is meant to be a two-part culmination of what I’ve learned about the evolution of retail technology and comp shops. I’ll spend time reviewing some of the key challenges facing those operating in the “Old World” of competitive intelligence and why it is absolutely critical to have a dynamic solution to combat these challenges. Please don’t hesitate to reach out here if you think there’s something I may have missed – my “door” is always open.
Typical regional comp shop programs today leak up to 65 basis points* of margin largely due to inaccurate data and pronounced gaps in ability to respond to these dynamic price changes quickly. However, new technologies and data-driven processes are emerging to help traditional retailers adjust in this new world of price transparency, hyper-competitiveness, and shifting consumer behaviors. At Engage3, we see more often than not that retailers don’t always have the visibility they need to make informed pricing decisions such that both profit is maximized and price image is maintained. It’s become apparent that traditional, static approaches are not suitable anymore. The problems that we’re constantly seeing are as follows:
Poor Visibility, High Error Rates, and Low Find Rates
Due to the combination of slow competitive product and price check cycles, expensive and error-prone data collection processes, product linking complexities, departmental resource constraints, and the ever-shifting competitive landscape, it is increasingly difficult to achieve the right level of competitive visibility. The “Old World” of competitive intelligence does not allow for intelligent ways to match products across retail chains, which results in low find rates and leaves the door wide open for natural human error.
Retailers working within this “Old World” of competitive intelligence are exceedingly at the mercy of the labor collecting the data. When we begin working with a new client, we on average see error rates between 20%-40%, find rates between 50-80% and low overall visibility. Whether you use a price optimization system for execution or have a more manual approach to pricing, these challenges contribute significantly to the aforementioned 65 basis point leakage.
Comparing Apples to Oranges
Retailers are flying blind in an age where private label products are becoming increasingly commonplace. According to Nielsen, private label products share of retail sales grew from 16.2% to 17.4% between 2009 and 2011, with year-over-year sales growth outpacing national brands by a significant margin. The trend highlights the importance of quality product linking methods as store brands continue to consume market share. Without accuracy in like-for-like products, retailers are getting little or no value for the money they spend on competitive intelligence. How can they, when their auditors are unknowingly collecting data for apples instead of oranges?
More to follow…