The Current, delivered daily.
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.
Trending in Operations
Conversational tools are set to help create campaigns, and product images.
Do you wish there was a way to take content from a website and automatically turn it into an ad?
It may sound like magic to a marketer, but Google is harnessing generative AI to do just that.
New tools from the search giant announced at Google Marketing Live this week are set to provide conversational experiences for creating campaigns and generating high-quality images. This comes as Google is getting ready to roll out Merchant Center Next, a new platform offering marketers a central place to manage campaigns.
The product launch is one of the more compelling examples we’ve seen of ChatGPT-like tools being put to work for commerce.
Let’s take a closer look:
Conversational campaign creation
Generative AI is set to help advertisers create new search campaigns. Here’s how it works, according to Google:
Simply add a preferred landing page from your website and Google AI will summarize the page. Then, it will generate relevant and effective keywords, headlines, descriptions, images and other assets for your campaign. You can review and easily edit these suggestions before deploying. Now, you can chat your way into better performance — ask Google AI for ideas, just like you might ask a colleague.
This feature will leverage automatically created assets, which generate content from landing pages and existing ads. Generative AI will help to adapt search ads to content. For the search “skin care for dry sensitive skin,” Google could create the ad “Soothe Your Dry, Sensitive Skin.”
In Performance Max ads, AI will take content from a website, and generate text, new images and other assets.
AI-created images with Product Studio
Google is rolling out Product Studio, a new tool that helps marketers to create product imagery using generative AI. Located within Merchant Center Next, it’s designed to help bring high-quality images to ads, and not just one. When two or more images are included with ads, Google said there is a 76% improvement in impressions and 32% increase in clicks. But creating these images can be expensive and time-consuming, especially when photoshoots are involved.
With Product Studio, marketers can:
Create custom product scenes that can change based on needs, whether that’s due to seasonal, campaign-based or experimental needs. “For example, a skincare company could highlight a special seasonal version of a product by requesting an image of the product ‘surrounded by peaches, with tropical plants in the background.’”
Remove a product background when it proves distracting to opt for a plain white background.
Increase resolution, providing a way to improve quality without taking a new photo.
Simplifying product feed setup
Within Merchant Center Next, Google is also aiming to make it easier for merchants to set up a product feed. Instead of manually adding all of the elements required for a listing, Merchant Center Next will automatically populate the product feed with elements that can be detected from a brand’s website.
Google will also add all insights reports to the performance tab of Merchant Center Next. That means there will be one place to view the best-sellers, across both Google channels and brick-and-mortar stores.
These features are set to start rolling out as Merchant Center Next is expanded to more businesses in the coming months.
Generative AI in search
Generative AI won't just reshape how search ads are created. It is also poised to change search itself.
Some of the first signs of the latter are arriving via Search Labs, a program with early experiments that Google is starting to open this week.
"The new generative AI powered Search experience will help you take some of the work out of searching, so you can understand a topic faster, uncover new viewpoints and insights and get things done more easily," Google wrote. "So instead of asking a series of questions and piecing together that information yourself, Search now can do some of that heavy lifting for you."
Google outlined areas that it is testing in three areas, including commerce:
Product discovery while shopping: AI will help to provide details on specific attributes of products, such as “Peel and stick wallpaper for kitchen," or specific settings it can be used, such as “Bluetooth speaker for a pool party." In response to these questions, Google will provide a range of product options. It is also providing space to ask a follow-up question.
Complex topics: AI can help get users up to speed on specific binary choices such as “Learning ukulele vs guitar," or multistep processes like “Benefits of incorporating your business before freelancing.” Typically, these types of searches would need to be broken down into smaller parts.
Quick tips: AI will provide answers to questions that you want to answer for every day life, such as “How to get an old coffee stain out of a wool sweater?” or “How can I renew my passport quickly?”