What is the number one driver of pricing change during the holiday season?
FOMO – The fear of missing out.
There is not another time where retailers are so quick to ditch their pricing strategy than during the holidays when shoppers are actively buying and searching for discounts.
Ironically, the number one question that retailers will ask after the holidays was did our pricing strategy work?
To prevent retailer regret based on your choice to lead the race to the bottom, we have identified 4 data-driven drivers that you need to consider when considering pricing decisions for this holiday season and beyond.
1. Availability vs. Price Discount
Your pricing strategy either has you positioned as a leader or follower when it comes to competitive pricing. As a result, when a competitor changes pricing there is a decision to be made. However, before you jump to react, ask yourself the same question that many of your shoppers are wondering: Is this too good to be true?
To answer this question we must also be able to answer some other questions:
– Is the product available today?
– When is the expected delivery date?
– Is there limited availability?
More often than we would like to admit, we see retailers dropping prices when a product is out of stock, can’t meet the holiday delivery timeline or is in limited supply to create an artificial pricing bottom.
And retailers blindly give into this profit compromising temptation..
The only way to avoid the unnecessary pricing dip is to collect frequent competitive data that cross references the price with the availability. These data points need to go beyond simply in stock or not and include answers to the questions posed above.
2. Delivery Options & Pricing Impact
Especially with the known delays in the supply chain, retailers have been keen to offer different prices and even promotional incentives for different delivery timelines. (See more at: Are Delivery Options Drowning Out Price Differentiation in E-commerce?)
Retailers deciding on whether to match a competitive price need visibility into the delivery method and timeline to make sure that the competitive price is a 1:1 match not just in product features but also delivery timeline.
Failure to both collect and consider this data in your pricing decisions can leave you uncompetitive from both a pricing and deliverability perspective in the eyes of your shoppers.
3. Local / Regional / National Pricing
Not all pricing strategies are created the same. We hear often from our customers that they do not look at pricing the same as their competition. Whether it is localized store level pricing, regional or zone pricing, or national pricing strategy across your portfolio, there is benefit to looking at your competitor’s pricing at various granularities.
For example, it may not seem relevant to view store-level pricing if you cannot make store-level pricing changes. However, this local store specific pricing may be indicative of a shift in consumer expectation that may benefit your broader strategy.
Gathering pricing data at multiple hierarchies gives you the flexibility to look at your business from a variety of perspectives to optimize your pricing portfolio across your business and at the point of purchase.
4. New & Temporary Competition
The market emergence of local delivery services like GoPuff and national delivery services like Instacart and Shipt have already put additional pricing considerations in the hands of retailers. During the holiday season, shoppers will continue to rely on these providers to aid in their shopping experience which means that retailers need to be sensitive to the pricing and promotional offerings available.
Furthermore, seasonal product assortment creates temporary competitors that retailers may not monitor year-round.
Without visibility into these competitors’ price points, retailers risk costly blind spots and cannot make an educated decision as to whether their pricing strategy needs to adjust to include these new/temporary competitors.
While fear of missing out on potential holiday sales will continue to be a significant driver of pricing decisions for retailers, expanding the influences of price changes to consider more strategic and actionable data points will allow retailers to protect their profitability and meet their customers’ needs.