Price Transparency & Retailers

By now, most of us have used our mobile phones to compare prices on planned purchases. We may not check the price of every can of peas we buy, but we certainly do our personal due diligence on any item over a certain price point. As consumers, we appreciate the opportunity, but as independent retailers, perhaps not so much. In fact, in RSR’s recent benchmark research report, Optimizing Price in a Transparent World, 40 percent of respondents highlighted increased price transparency and the impact of comparative price shopping as a top three business challenge.

This new price transparency would be a threat all by itself, but combined with increased consumer price sensitivity and increased pricing aggressiveness from larger competitors, it can be dangerous to the health of your business. However, all is not lost. Savvy pricing strategies can act as a lever to improve top line sales and nudge gross margin up, rather than down. In fact, 58 percent of small and mid-sized retailers saw an opportunity to improve their business in this area. The answer is certainly not in trying to under-price mega retailers. Instead, it lies in staying competitive on price and, “hugging your customers,” to quote author, Jack Mitchell. No one knows their customers like independent retailers, which allows these small businesses to survive and thrive.

RSR proposes five recommendations to navigate the new world of price transparency:

1) Targeted promotions are a must. The only real answer to transparency that we have seen so far has been a response through targeted promotions: “Your price,” instead of, “the price.” Regulatory requirements around prices have not quite caught up with what the technology is capable of, particularly with the rise of consumer adoption of smartphones, enabling personalized delivery of promotions. So target those promotions, but tread carefully in communicating them to customers. For example, free shipping is a promotion that works very well online, but has little relevance to the store. Thinking about the customer instead of the selling vehicle is very important. Think of targeted promotions as customer-targeted promotions that are channel aware.

2) Pricing is no longer an island. The initial days of pricing technologies were about establishing capabilities. But as promotions become more targeted and execution becomes more complex, more player involvement is needed in making pricing decisions, including everyone from procurement to marketing to supply chain. If your pricing capability is still a departmental “island,” then it is time to reevaluate.

3) A data plan for pricing. Hand in hand with the need for more people to be involved in pricing decisions, you also need more data. To that end, the time has come for a data plan for pricing, particularly for promotions that tend to rely on customer data rather than product sales data. A plan also should be developed for the data elements you want and need (versus what you think you have) for more than just the inputs to optimization. Where the data is really lacking is around both pricing decision-making and analytics. When you can’t measure the impact of pricing decisions, then you can’t improve the pricing decision you make.

4) Policies and Procedures for price-matching. In 2010, Amazon reported that it had transacted $1 billion in mobile sales in 2009. Think about that; these mobile sales were not made by consumers sitting on their couches, and can’t possibly be made up solely of individuals waiting in doctors’ offices or as passengers (hopefully) in cars. Some portion of that $1 billion came from consumers’ price comparing in the store. It is becoming the anecdote du jour at conferences, and when a store employee gets stumped by a savvy consumer with a smartphone. It’s important to have policies and procedures in place for front-line employees, so they know how to deal with price transparency when it impacts them directly.

You don’t necessarily have to price match the lowest online price to win the shopper over. Consumers are also savvy enough to know when they may have to pay shipping, and in some cases may place significant value on collecting the item immediately instead of waiting several days for something to be delivered to their home. All of this needs to be taken into account when dealing with bargaining customers.

5) Reevaluate promotional communications channels. Finally, social media has run headlong into the communications channels that retailers use specifically for promotions. With Twitter revamping the ways that retailers can communicate, alongside the tweaks that Facebook always seems to be making to its platform and Googles’s latest announcements around YouTube premium channels, it is more important than ever to reevaluate how we communicate offers to consumers, to rebalance activities across communications channels. Social media like Facebook offer a somewhat stunning return on investment for local retailers to interact with consumers and make early announcements of special offers in the store.

Following these steps may not completely solve the price transparency problem, but will go a long way towards generating more customer intimacy, a must for today’s independent retailer.

Paula Rosenblum is widely recognized as one of the top analysts in the retail industry, working as part of the team at Retail Systems Research, LLC. Paula spent over 20 years as a retail technology executive and CIO, and received her MBA in 1991 from Northeastern University, with a major in management of High Technology firms. To learn more about RSR, visit