Inflation may have cooled down, but deals remain hot. 68% of US shoppers use apps in-store to compare prices with other retailers, look up coupons, and read product reviews, making sure they’re getting the best buys. As a result, Walmart and Target have some of the best ecommerce websites, with price matches, promotions, and product recommendations. Smaller outfits are increasingly challenged to compete and keep costs low. But where do they start?
While larger stores can take advantage of economies of scale, negotiating prices for regular or higher volume purchases, smaller retailers need help gaining this level of control.
Here are some top tips for smaller stores to gain competitive advantage and flexibility in their pricing strategy:
1. To attract the customer, think like the customer
It’s important to understand product value and consumers’ willingness to pay. To do so, retailers must know the drivers behind purchasing items and their product’s comparative value versus competitor’s goods.
It starts with the sales data. What products are customers buying? Which brands are they trading down? Once grocers know their customers’ favorite items and the products that bring the best returns, it’s time for some competitor research. Bear in mind the region will also have an impact on customer preferences, too.
Retailers can identify five to ten retailers in the area and review their key items to gauge average prices, the same way a customer would. Focusing on a specific unique selling point (USP) limits the number of items to compare.
This also works the other way around. Grocers can look up competitors’ top buys and compare the prices with their own alternatives. Although internet data is widely available, this type of research is not easily aggregated. Making sense of it takes a lot of manual analytics work. Take a look at the comparison apps customers are using to help save some time.
2. Change prices where you have control
Changing prices should be easy. Except, sometimes, it isn’t. Say you have a great batch of oranges, but you need to move it today before they perish. Yet, your third-party delivery site takes control of the online price and is unable to get that action fulfilled. You need control over ecommerce so you can react to the market condition more easily and adapt more quickly.
Owning an online shopping website means retailers can update prices throughout the day, use built-in reports to follow favorite items, and set alerts when stock is running low. This way, they have the choice to increase prices, to reduce the number of purchases, or move the item to a "best buys" page to encourage additional sales.
The frequency of pricing updates will also depend on the scale and operations of the store. With weekly deliveries pretty standard across supply chains, reviewing the pricing strategy alongside the stock count is helpful.
3. Always honor online deals
Increasingly, shoppers are finding variations in online and in-store retail-owned prices. Raising in-store prices may seem like a short-term strategy to gain extra from the ones who haven’t done their research. However, it’s more likely customers will clock on and take their business elsewhere.
Retailers that ensure online pricing updates are honored in-store see increased customer loyalty in return. And the best scenario for this is to have integrated point-of-sale (POS) systems. This way, even if the shopper didn’t realize the price discount, they would be surprised and delighted at checkout.
In the crate of oranges case that we mentioned earlier, where in-store sales are more urgently needed, print out signage to make in-store customers aware.
4. Automate the safety stock buffer
Product availability (or lack of) is one of grocers' biggest customer complaints, with 46% of US shoppers reporting out-of-stock items as a reason to buy less or shop elsewhere. This significantly impacts customer satisfaction and loyalty, and is trickiest to manage when promotional offers fly off the shelves.
Usually, store associates do a visual walk-through to check stock, roughly every hour. That means if ten minutes later someone sees a big discount and buys in bulk, the back office might have no idea. They lose out on customers by not replenishing goods and upset those who missed out by having to end the promotion.
But they don’t have to miss out. Shelf cameras and artificial intelligence (AI) allows retailers to count inventory 24/7. This data can be automatically sent to warehouses for restocking purposes too.
Alternatively, in the same way an online store can trigger alerts when stock is running low, so can a POS system by counting the number of sales and deducting it from the initial inventory. Integrating on and offline sales data with the store managers app can help them keep track of stock in real-time. Alerts can also be automatically sent to regional warehouse software, informing them when the store hits the safety stock and can make sure they get more of those items on the next delivery. This helps them manage inventory, avoid product unavailability and increase customer satisfaction.
5. Get the most out of your perishables
Food waste is the fifth-highest contributor to greenhouse gas emissions and a drain on retailers' budgets. But what if grocers could prevent customers from reaching to the back of the shelf for products with a longer sell-by date?
Dynamically pricing goods based on perishability can encourage sales of shorter shelf-life products and minimize waste. All the while, bringing in extra cash for the store. What this means is, as a product is approaching its sell-by date, store managers can give the product a lower price while keeping new versions of the goods at the existing cost.
Retailers may introduce a data manager or a third-party data team to identify products that perish quickly, products that can be consumed in a day, and larger packaged goods that are most likely to need a few days to finish. This will help direct the number of price changes for the product period.
6. Smart shelf tag materials for cheaper (or minimal) print
Stores need to be more adaptable to dynamic pricing and optimize profit margins—they need to look where they can increase flexibility.
Amazon updates its pricing within the day as a profit margin optimization technique. For instance, they can sell an umbrella for a dollar extra during a single hour of rain and then return the item to its usual price. The retail giant uses paper labels for their cheap, disposable properties so that it can change prices more frequently without enormous printing costs.
Similarly, digitally labeling shelf tags means retailers can automatically update prices according to the POS. This way, every customer is aware of the latest pricing changes, reducing discrepancies and disputes at the checkout counter. In addition, this technology is much more mainstream and reducing in cost to around $60-$100k to fulfill entire 1,000sqm stores, thanks to digital transformation. Retailers looking to save further can also opt for wirelessly connected kindle LED versions as they are cheaper than color.
Stores today might not be fully automatic—unless you’re the fully autonomous grocer Nourish + Bloom Market—but AI is taking on more mainstream responsibility. It helps to monitor stock and price, analyze customer behavior, and keep customers happy.
Through automated stock counts with shelf cameras, integrated sales systems, and regular walk-throughs, grocers will be increasingly up-to-date and in control of their inventory. At the same time, online shopping sites, disposable labels and digital shelf tags will enable flexible pricing. Safety stock and data are all key ingredients to grappling with pricing volatility, saving money, and improving customer satisfaction in smaller stores.
Bagrat Safaryan is the CEO of Local Express.
(Courtesy photo)
(Courtesy photo)
