tough love: an in depth look at retail pricing practices

TOUGH LOVE: An In Depth Look at Retail

Pricing Prac=ces

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Panelists

Nikki Baird Managing Partner

RSR Research

Debbie Hauss Editor-in-Chief

Retail TouchPoints

MODERATOR

Jenn Markey VP, Marketing

360pi

Tough Love: An In Depth Look at Retailers’ Pricing Practices: Benchmark 2013 NIKKI BAIRD

MANAGING PARTNER

MAY 2013

What Is RSR?

•  Market Intelligence, focused on retail

•  Context: the business challenges & opportunities that drive technology investments

•  Pragmatic insights

•  Powered by extensive retail experience •  Fueled by a deep bed of research data

•  We help retailers keep their IT strategies aligned with corporate objectives

•  We help solution providers align their products and messages with retailers’ needs

7 Tough Love: An In Depth View at Retail Pricing Practices

Our BOOT Methodology

8

They sell more “stuff” but… they also think and act differently than their competitors.

Retail Winners: Year-over-year comparable store sales outperform inflation.

Business Challenges Opportunities Organizational

Inhibitors

Technology Enablers

Tough Love: An In Depth View at Retail Pricing Practices

Respondent Profiles (Pricing 2013) Responses received from 134 respondents, January-April 2013

•  Revenue •  37% Tier 4 (Less than $50m/year) •  19% Tier 3 ($51m - $249m/year) •  11% Tier 2 ($250m-$999m/year •  15% Lower Tier 1 ($1b - $5b/year) •  18% Upper Tier 1 (More than $5b/year)

•  Performance •  20% Below average •  45% Average •  35% Above average

•  HQ •  66% North America •  16% Europe •  2% UK •  9% Asia Pacific •  2% Latin America •  5% Middle East/Africa

9 Tough Love: An In Depth View at Retail Pricing Practices

Respondent Profiles (cont.)

•  Retail Presence •  94% North America •  26% Europe •  15% UK •  20% Asia Pacific •  15% Latin America •  22% Middle East/Africa

•  Products Sold •  31% Fashion, Short Lifecycle or Seasonal •  27% Durable Goods or Consumer Electronics •  27% Basics or Replenishment Goods •  15% Perishables

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The Top 5 Things RSR Learned About Price Intelligence

1.  Price sensitivity of consumers continues to drive retailers’ priorities when it comes to pricing practices

2.  Competitive response is still fierce

3.  A large number of retailers continue to believe they can win on price alone

4.  Retailers are starting to figure out showrooming – the best response? To “be competitive”

5.  Lack of clean data is inhibiting retailers’ pricing capabilities

Bonus Learning:

As pricing matures, retailers intend to more deeply integrate all kinds of data elements into price decisions

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Price Sensitivity & Aggressiveness

18%

9%

27%

22%

47%

42%

51%

67%

13%

21%

25%

25%

33%

34%

40%

41%

57%

Respond to segment blurring (competition coming from unexpected places)

Need to provide more localized pricing

Need to provide consistency in price across channels

Increased promotional intensity of competitors

Increased price transparency – the impact of comparative price shopping

Need to protect our brand’s price image

Need to get better return on our inventory investment through pricing

Increased pricing aggressiveness from competitors

Increased price sensitivity of consumers

Top Three (3) Strategic Pricing Business Challenges

2013 2012

N/A

12

Source: RSR Research, April 2013 Tough Love: An In Depth View at Retail Pricing Practices

Winners Seek Brand Protection Laggards Look Over their Shoulders

13 28%

39%

56%

11%

17%

13%

39%

45%

29%

29%

6%

22%

25%

28%

47%

Respond to segment blurring (competition coming from unexpected places)

Increased price transparency – the impact of comparative price shopping

Increased pricing aggressiveness from competitors

Need to provide consistency in price across channels


Business Challenges - Differing by Performance

Retail Winners Average Performers Laggards


Competitive Vulnerability Tops the Chart in all Categories

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64%

44%

67%

53%

24%

56%

38% 40%

48%

24% 29%

40%

Fashion/Seasonal Basics/Replenishment Durable Goods & Consumer Electronics

Perishable goods

Top Three (3) Difference by Sub-vertical

Increased price sensitivity of consumers Increased pricing aggressiveness from competitors


Source: RSR Research, April 2013

When asked about their position on commoditization and margin erosion, 55% report “We have to operate within an extremely price competitive environment” – far more

than any other issue – including the impact of price transparency. Tough Love: An In Depth View at Retail Pricing Practices

Laggards Hope to Lead with Price

15

65%

36%

28%

59% 56%

66%

Laggards Average Winners

Top-3 Pricing Opportunities: The Winner's Perspective

Improve top-line sales Improve margins


Figuring Out Showrooming As more and more retailers encounter showrooming, their confidence in what to do about it seems to increase. Biggest differences:

•  Laggards drive the "Ignore it" category: 18% vs. 9% of Winners. Laggards are also more likely to price match - 24% vs. 16% of Winners.

•  Average performers are most likely to be competitive - 42% vs. 38% of Winners and 29% of laggards.

•  Winners are most likely to say they haven't seen any showrooming yet - 34% vs. 18% of average performers and 29% of laggards.

•  Average performers appear to be getting squeezed - they aren’t necessarily positioning themselves against laggards as low price competitors, but they don't necessarily have the service or message elements that help them justify not price matching.

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9% 11%

43%

26%

7%

12%

39% 39%

14% 17%

27%

38%

Ignore it Price match We haven't seen it yet

Be "competitive"

Mobile Price Comparison Policies

2011 2012 2013


What’s Getting in the Way?

17

29%

31%

31%

34%

34%

40%

42%

42%

The possibility of negative customer reaction to changes in our pricing strategy

Resistance to change from Merchandising

We can’t execute at the level of granularity that pricing solutions provide

Lack of coordination with Marketing

Channel organizational structure makes it difficult to coordinate pricing strategies across channels

Lack of the right skill sets

Resistance to change from Stores or other channels

Lack of clean price, competitor and purchase data

Top Three (3) Organizational Barriers Impacting Ability to Implement More Effective Pricing Practices


Pricing is No Longer An Island

18 15%

21%

26%

33%

23%

28%

41%

44%

33%

14%

19%

24%

28%

32%

35%

42%

44%

51%

Best practices for managing channel conflict of prices

Line of business leaders to help change our business processes

Pilot programs in specific stores or regions

Better communication and education of resistant parties or organizations

Better training to improve pricing skill sets

Tailor a technology solution to my business process and needs

Business process analysis for pricing process improvement

Build up progressively more sophisticated pricing capabilities over time

Improved integration technology tools

Top Three (3) Ways to Overcome These Barriers

2013 2012


Nikki Baird: [email protected]

1-303-683-6613 Denver, CO, USA

19

Thank You!

www.rsrresearch.com


<#>

PLACEHOLDER"

Polling Question"


<#>

Achieving Omni-Channel Success with

Price Intelligence "

Jenn MarkeyVP, Marketing

360pi"

<#>

Pricing Enters the C-Suite"

Tough Love: An In Depth Look at Retail Pricing Practices"19#

Double dip recession

Amazon

Technology disruption

Omni-Channel#

<#>

Price needs to reflect brand"

Tough Love: An In Depth View at Retail Pricing Practices"

Everyday Low Prices Premium Pricing

Price + Customer Experience = Brand

Brand consistency = Omni-‐Channel

20#

<#>

Consumer Electronics – Hit Hardest by Showrooming"

Source: Placed - Aisle to Amazon Study

Tough Love: An In Depth View at Retail Pricing Practices"21#

<#>

Consumer Electronics: Price Sensitivity & Volatility"

Product: Samsung UN55EH6000 55-‐Inch LED HDTV Timeline: Q4, 2012 (Oct 1-‐Dec 31) Compe=tors: •  Best Buy Canada •  Best Buy US •  Future Shop •  Amazon US •  Amazon US Marketplace •  Sears Canada •  Sears US •  Frys Electronics

22#

Black FridayFull Competitive Pricing#Report Available at:#www.360pi.com#

<#>

Dealing with Price Sensitivity & Volatility"

Tough Love: An In Depth Look at Retail Pricing Practices"

Need accurate real ]me view into compe]tors’ pricing

23#

<#>

Easier said than done"


<#>

Manual efforts prone to error & delay"

58%

52%

54%

36%

13%

0%

4%

7%

Fashion/Seasonal

Basics/Replenishment

Durable Goods & Consumer Electronics

Perishable goods

Gathering Competitive Price Intelligence Data

Not currently using it It's a manual process

Tough Love: An In Depth View at Retail Pricing Practices"

Good candidates for 360pi’s Automated

Price Intelligence

25#

<#>

How do we get it?"


360pi Retailer Advantage"

Product

Price

Purchase


360comparables

360price

360mobile

27#

<#>

Multi-Faceted View of Price"


<#>

Don’t get left behind"

Tough Love: An In Depth View at Retail Pricing Practices 29#

<#>

Next Steps"

Best practices and thought leadership content to help you on your price intelligence journey.360pi.com/resources/discovery-center "

Modern Retail Pricing is our blog and covers new trends and insights into retail pricing. Subscribe today!blog.360pi.com"

See our product in-action and discover what it can do for your business. Request a free demo!360pi.com/free-demo"


<#>

Contact Me"

Jenn Markey VP, Marke]ng 360pi [email protected] 1.855.360.0075 (toll-‐free) @360_pi


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Type ques=on here

Q&A // Submit Your Ques]ons

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Q&A // Panelists

Nikki Baird Managing Partner

RSR Research

Debbie Hauss Editor-in-Chief

Retail TouchPoints

MODERATOR

Jenn Markey VP, Marketing

360pi

#360pricing

Thank you for a8ending!

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tough love: an in depth look at retail pricing practices

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