23 Jan 2018
NRF 2018 VR

NRF 2018: Retail’s Biggest Show Did Not Disappoint

I had the pleasure of attending NRF 2018 in New York City, and I must say that the self-proclaimed “Retail’s Biggest Show” did not disappoint. AI, big data, voice, and augmented reality companies were out in full force.

After attending a good number of the tracks, three main ideas about how to win in the next year seemed to rise above the fray: focus on pricing, deliver value to your customers, and enhance your user experience.

It was also clear that some of the big retailers are starting to position themselves as technology companies.

Kroger showcased their product called Kroger Edge, a shelf-based digital display that not only shows dynamic product prices, but also rotates to show advertisements and products’ nutritional information. Think rotating digital billboard ads like those you see at your local gas pump. The plan is to have this new technology installed in 200 Kroger stores nationwide by the end of 2018. You’ll see them first at the end-caps, and then at the regular aisles.

Below is a short video I recorded:

I spoke to Kevin Fessenden, Manager of Research and Development for Kroger Technology, who said that they plan on selling their solutions to non-Kroger retailers. This capability would allow stores to seamlessly adjust their prices and even offer personalized experiences to shoppers right where they make their purchase decision.

Doug McMillion, CEO of Walmart
Doug McMillion
CEO of Walmart

Walmart CEO Doug McMillan called his company a technology company after being named The Visionary at the NRF Foundation Gala on Sunday. Walmart’s $3B acquisition of Jet.com followed by other acquisitions of ShoeBuy, Moosejaw, and Bonobos  signals its serious commitment to eCommerce and enabling technologies. But wait, there’s more. Walmart also started its own technology startup incubator, Store No. 8, in Silicon Valley.

From robots scanning your store shelves, software systems that use lights and mirrors to provide shelf location of items, to store-traffic counting software, NRF 2018 was dripping in mind-blowing retail tech.

With more than 35,000 attendees and 3,400 retail companies represented, getting through the show could be overwhelming. At the “Brick and Mortar Store Strikes Back” discussion panel, Jason Breazeale, Senior Manager of Innovation at Ahold Delhaize, had a tip for attendees. “I usually visit the vendors in the perimeter of the expo halls, because those are the true innovators. I don’t spend much time in the center-hall. Those small companies will have the latest technology that just might get you your competitive advantage,” he said.

22 Jan 2018

The 7 Challenges of Modern Competitive Pricing

Strategic pricing is at the heart of retail competition. It has famously driven the business decisions of Amazon, Walmart, Lidl and Aldi that we see all over the news. But in order to develop more effective pricing strategies, retailers need a different approach to competitive pricing, one that addresses the historical challenges of competitive shop programs:

Problem 1: Low Completion and High Data Error Rates in Competitive Pricing Shops

Data capture has always been a labor-intensive, error-prone process. Price checkers match wrong items, capture the wrong price points (e.g. promotional vs. everyday retail) and encounter a variety of other issues. With quality assurance happening on the back end of the price-checking process, incorrect matches have the potential to pass through the system downstream to the retailer.

Problem 2: Like-product Comparison

Different assortment sizes and formulations pose challenges to price checkers who work from static comparison lists. With Amazon’s rapidly expanding penetration of the food retail market, center-store items are becoming more and more commoditized with price having a greater impact on consumer decisions. At the same time, specialty formats like Trader Joe’s and deep discounters such as Aldi and Lidl continue to execute on delivering cost-effective differentiated private label programs. The fresh side of the store is becoming the battleground where stores need to differentiate themselves. In order to do so, accurate competitive pricing programs that take into account size, quantity, formulations, and other attributes.

Problem 3: Lack of an Integrated Omni-channel Approach

As traditional retailers move further into e-commerce and online advertising, their approach to competitive pricing has, for the most part, remained a manual process, limited by the amount of labor resources to physically shop competitor markets. By using technology to automate competitive shops, they can deploy more labor to focus on unique assortments and integrate online and in-store activities. This creates a more comprehensive picture of competitor pricing strategies.

Problem 4: Static Lists, a One-Size-Fits-All Approach

Often, retail companies rely on lists of Key Value Items (KVI’s) to drive both their competitive shop programs and their pricing strategies. These lists are usually static and don’t take into account differences across competitors and their diverse locations. This approach can be extremely inefficient as auditors go to stores looking for items that may not be part of that specific store’s assortment. When this happens month after month, it quickly becomes costly.

Problem 5: Tactical, Not Strategic

It’s easy to fall into the trap of using competitive pricing programs to fill tactical rather than strategy needs. Competitive pricing programs should be used to understand not just the competitor’s price on individual SKUs but also their total pricing strategy across their footprint. With consistent, accurate and real-time data, a retailer has the ability to look at trends within the marketplace, understand the actions of competitors, and use predictive analytics to ensure that their value proposition remains relevant to the customer.

Problem 6: Expensive: Throwing Money Away on Full Book Shops

In order to gain a comprehensive view of a competitor’s pricing, competitive shop programs often focus on a large number of items and numerous stores. This is due in part to the challenges mentioned above regarding data accuracy and reliability of the manual process. To increase reliability, retailers often increase labor by checking more items in more stores or increasing the frequency of checks. This is expensive. The top 10% of products sold typically represent 50% of the total sales dollars. Therefore, full book programs that invest as much in competitive shopping slow-moving items as in fast-moving products are not cost-effective.

Problem 7: Wrong Measures and Incentives

A major internal challenge for the retailer can be its organizational design and HR support. People are fundamentally motivated based on how they are rewarded. However, merchants and pricing departments may be measured against completely different success criteria that but also work against each other. For example, when Pricing strives to maintain a company’s value proposition by driving towards a CPI index, this may run counter to the gross profit targets set by merchants. Progressive merchant leaders, with the support of HR, need to bring these departments together with aligned KPIs and metrics. Driving EBITDA should be everyone’s goal. Organizational structures and compensation schemes should encourage productive and aligned behaviors.

Coming Soon

We’ll show you what to look for in a competitive pricing platform in our next blog. Stay tuned!

28 Dec 2017

5 Big Predictions for the Retail Industry

On December 14, 2017, I met with our CEO, Ken Ouimet, in front of the beautiful Mondavi Center in Davis. With big changes at Amazon and Walmart this past year, I asked him to describe the future that he sees for the retail industry.

Gartner identified Ken as one of the pioneers in the retail pricing optimization space. In this video, he shares his insights and enthusiasm for what’s ahead.

 

 

10 Oct 2017

"After months of getting beaten up, they lowered their prices to be 1% below their primary competitor. With time, after conducting consumer surveys, they were still perceived to be higher. The retailer wondered 'What do I have to do? Dim the lights and throw dirt on my floor?' but that's the reality of the challenge."

Ken Ouimet, Founder & CEO, The Art & Science of Managing Your Price Image

Engage3 Presents at Imperial Distributors’ Spring & Summer 2018 Seasonal Show

Imperial Distributors, a long time Engage3 customer & partner, is recognized throughout the Northeast, South Atlantic and Midwest states as a leader in both distribution and merchandising of supermarket non-foods. The Spring & Summer 2018 Seasonal show provided retailers with an opportunity to complement their food business with non-food offerings to drive sales & improve customer experience.

Ken Ouimet, Engage3 Founder & CEO, was a keynote speaker at Imperial Distributors’ seasonal show this year and discussed The Art & Science of Managing Your Price Image with attending merchandising & marketing executives.

Reach out to info@engage3.com to request information on the session and if you are interested in learning how to leverage competitive data and advanced analytics to compete more profitably.

Other presenters included Tom’s of Maine and Tebo Store Fixtures.
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Left to Right – (1) Ken, (2) Jack Wisniewski, Managing Director – Tebo and (3) Seamus Conlin, Food, Drug & Mass Agency Manager – Tom’s of Maine.
Left to Right – (1) Ken, (2) Jack Wisniewski, Managing Director – Tebo and (3) Seamus Conlin, Food, Drug & Mass Agency Manager – Tom’s of Maine.
12 May 2017

Lokesh Sikaria: On the Keys to Achieving Success as a Start-Up

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Moneta Ventures is an investor in Engage3’s Series B round of financing. Their mission is to identify and accelerate the growth of the most innovative companies in California’s capital region. 

Lokesh Sikaria, managing partner at Moneta Ventures, commented in a recent press release, “Engage3’s management team has a great record in the retail space. Their demonstrated domain expertise combined with current customer traction, the technology platform they have already built, and the product roadmap makes a very compelling investment thesis.”

Prior to his work with Moneta, he was the Founder and CEO of Sparta Consulting, a global IT consulting firm, and grew Sparta to more than $100 million in revenue in just five years. A Berkeley graduate with an Electrical Engineering and Computer Science degree, Sikaria was sent to work on a project at Intel by his first job with PricewaterhouseCoopers.

He greatly enjoyed working in Folsom and the ecosystem he found there, so he decided to stay and cultivate his industry within the region. We decided to sit down with him and understand his personal and professional motivations and what he believes are keys to success when starting a business.

What does it take for a company like Sparta Consulting to grow from 0 to 125 million in revenue?

Well, a lot of money. That’s when we realized that the ecosystem for that kind of growth just wasn’t here, in the greater Sacramento area. We knew we wanted to be the ones to start a fund here and focus on investing because we knew that there were other companies just like us, who were doing well in their business plan and growth but didn’t have the necessary funding. So I think the secret to building up a business is to have access to capital, a reasonable space and strong teams. I like to quote Ben Franklin, who said that “we must all hang together or we will all hang separately.” And I think the mindset of a team should be that we’re all in this together.

What traits do you look for when you hire someone for a team?

Evaluating how people react in adversity is the key. How do your team members react when things aren’t going according to plan? As a start-up you can almost be certain that things will not go according to plan, and when that happens, do your partners quit? That to me, is the defining criteria of the team.

In what ways, other than revenue, did Sparta see a lot of success and growth?

The key thing with Sparta was to let our employees participate in our success or failure. We let our employees invest in the company at the same price that we invested at, so by the time Sparta was sold, I held 20% of the company and the remaining 80% was owned by other employees. What’s really special is that when Sparta sold, for every 1 dollar invested we made $4.93 with around a 65% return per year. And I think we made 15 millionaires out of the process. For a lot of the families and employees with us, this was very special.

Do you have a thesis for how to make your investments or a criterion for choosing companies to invest in?

We have three filters that companies that are pitched to us must go through. From the onset, we knew we wanted to deploy at least 70% of capital in the greater Sacramento region. We all came from a tech background, so we wanted to invest in tech companies first and then slowly expand to other areas of investment such as healthcare or Ag-tech. We also focus on companies that are within half a million in revenue to 5 million in revenue. And we do this because when you focus on companies when they’re in the initial stages, it’s a lot more fun and interactive and rewarding to participate with them rather than when they become big corporations.

How have you persevered through some of your most difficult challenges while running Sparta Consulting?

As an entrepreneur, you have to be mentally prepared for the challenges and have the ability to withstand them. I was fortunate to have a very supportive management team around me and that made all the difference at Sparta. Not only I but several of my management team mortgaged their homes to keep the company going from an investment standpoint.
 
How do you spot companies that have promise of success?
Good management teams; growing revenue (at least $500K revenue run-rate annually); In sectors and areas that are seeing increasing demand; Founders with significant skin in the game;

What’s the best way for a start-up or a growing company to get your attention?

I suggest that the first step is to have your ducks in a row. Make sure you know who you’re selling to from a customer standpoint. You should ideally have a few customers already, have some beta customers, and at least a minimum viable product. Then the best way to approach Moneta Ventures is to reach out to Sabya Das, Associate Partner at Moneta, or apply on our website.

One of our challenges when assessing companies is that since there are 4 of us the business, the volume becomes very significant. We looked at 440 companies total to get to the 20 companies that were selected in Fund 1 and Fund 2 over a three and half year period. So it is competitive and it is challenging, but it doesn’t mean that just because we aren’t interested, that you’re not going to be successful.

Do you have advice for start-ups who are just entering the world of planning and creating their vision on what the process looks like?

There needs to be a balance between the planning and the execution. We want entrepreneurs to focus only on one or two things out of the 50 million ideas they might have, and then pursue them wholeheartedly. You’ve got to plan your actions and decide which idea you will pursue. In general, if you spread yourself too thin, it’s a problem. There will be obstacles and offsets. But you have to continue and give it it’s due before deciding to call it quits. That balance is key.

There’s an analogy in marketing that I think really captures the idea. What you want do is fire bullets, and then where you succeed, you want to fire cannons there. That’s the right mindset. Get to the ideas that hit, and when you know this is the right place, go at it with cannons.

What do you enjoy about being a VC?

I really enjoy the cyclical nature of it and seeing the successes come out of our investments and coming right back to us. We’ve created this foundation of providing each other value and working with each other as a team by sharing successes. The fun part is to be able to see the success come out and how that success feeds right back. What you do comes right back to you.

Sikaria spoke at the Startup Grind Sacramento event this month and shared these insights and experiences with the attendees of the event. Watch his full presentation here!

28 Apr 2017

“Surviving the Emerging Price War” Insights

Industry-expert and Chief Architect of Brick Meets Click, Bill Bishop, hosted a highly-anticipated webinar session with Engage3 CEO Ken Ouimet and COO Edris Bemanian. “Surviving the Emerging Price War” provides in-depth insights, tangible examples and tips and tricks on how to compete effectively in the face of a brutal and imminent price war among retailer powerhouses. The webinar supplies all of the key ingredients in making up a retailer’s survival toolkit.

“When elephants start to dance, mice get trampled.” Ouimet began the webinar with an analogy that accurately reflects the current state of affairs in the retail industry prior to highlighting Amazon, Aldi, Lidl, and Walmart’s price commitments in the emerging price war. As these giants begin investing in their pricing, the “mice” that are forced to follow but fail to react strategically remain in the elephants’ path.

Ouimet continues with a five-step plan on how to survive in the face of a price war and be met with some form of success or resilience. His ideas center around the notion that “the best offense is a good defense.”

Understand your customer’s perspective.

Using competitive intelligence data shouldn’t be the only tool retailers leverage. Retailers must identify which items are most important to their local customers and understand what items they are comparing against at their competitors’ stores. It’s essential to utilize accurate product linking practices to compare products in the way that customers do with attributes.

By understanding the way customers value their products and perceive the changes retailers make to their pricing, retailers will unlock opportunities to move their customers up the loyalty ladder. Engage3 is collaborating with customers to bridge sales, market share, customer survey, and competitive intelligence data to identify the items that are most relevant to their customers in each market and refine retailers’ KVI lists to reflect this.

Gain visibility into your local competition.

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If retailers don’t have visibility into local competition, then they simply can’t compete. Convenience stores have a high level of what Engage3 calls “localization” (geo-specific pricing), and drug stores have a lower level of localization. However, as a time-series analysis shows, localization scores have been increasing, and retailers like Safeway, Kroger, and Publix are developing higher levels of localization. Kroger, especially, has been met with a high level of success with localized assortments.

If competitors are not very localized, it provides an opportunity to strike hard and fast without any visibility. Engage3’s platform, in particular, takes price change frequency and competitor assortment localization into account when improving competitive intelligence programs over time.

Fly under the radar and attack where they aren’t looking.

Slide2.JPGOne suggested tactic could be moving away from larger competitive zones and instead into micro-zones. A regional grocery retailer that scores very highly with consumers in regard to their price reputation was able to maintain their positive reputation by leveraging their smaller zones to take advantage of their competitors’ blind spots through a mix of lower prices to earn price reputation points while taking higher margin on other items by allocating across zones. Engage3’s Competitor Strategy Analytics reverse-engineers retailers’ pricing and assortment strategies to identify margin opportunities and competitors’ price zones.

Strike hard and fast.

It’s not enough for retailers to Slide1.JPGattack from hidden angles, but they must also have an element of speed behind them. Amazon has a high price change frequency on several items found in conventional grocery stores, and the juggernaut’s price change algorithms are highly responsive. Retailers are taking notice of Amazon’s practices and efficient strategies and are beginning to follow suit.

Retailers need to minimize the time it takes to respond to margin opportunities or price reputation risks by getting data that is as fresh as possible to maintain visibility. Engage3 has helped customers identify when retailers can confidently leverage online data to provide a faster signal to increase visibility and proactively identify opportunities.

Reinvest benefits to defend your turf.

The environment of a price war is pressing and inevitable, so the first step to surviving is determining how to invest optimally in your respective markets by efficiently monitoring the local competition. Once retailers can establish a robust process in a program, they should be able to reinvest those savings to identify additional margin or price opportunities.

Personalization

The segment concluded with a last, but certainly important, strategic lever in fighting a price war: personalization. Ouimet believes that the future is personal and that personalization is unique in the way that it’s a highly desirable tool for consumers that also helps create a tighter relationship within retail communities. It provides more loyalty and more convenience for the consumer, and when applied to pricing, it becomes the ultimate segmentation and the most powerful means to “fly under the radar.”

The five-step plan is heavily reliant on updating competitive shop programs and price optimization strategies. According to Ouimet, those retailers seeking to constantly improve will be well prepared if there is a price war.

To register to watch the full webinar and find out more invaluable insights, click here.

17 Apr 2017

Data Discoveries: Store Brand vs. National Brand Part I

Milk: it does a body good, but what does it do to your finances? Conventional wisdom has it that prices always rise, and milk is one of the most consistently expensive items in its aisle – everyone needs it for something, from breakfast to baking, so of course the price of milk is going to go up over time, right?

Well, kind of. In the first round of our Store Brand vs. National Brand Analyses, we examined promotional and regular pricing trends for Organic and Conventional milk, and while a few of these analyses turned up what we might expect – regular price trends for conventional milk are both positive, with nationally branded items showing a significantly steeper increase over the past year than store brands — we found several surprising results as well.

SB vs. NB Milk

Let’s start with the major one: compared to store brands, the average price of nationally branded organic milk is plummeting, dropping by nearly a quarter per gallon over the past year. Store brand pricing has held steady at around $6.00 per gallon; but where nationally branded items once averaged close to $6.15, that average has fallen to $5.87 in the span of 14 months, now beating store brands. Promotional prices on organic milks are also dropping steadily, though store brands are outpacing national brands there.

The choice seems clear in one regard: if you’re an organic milk drinker, don’t just default to the store brand. It’s a good bet a gallon of Horizon might be easier on your wallet.

30 Mar 2017

Engage3 and Brick Meets Click to Host Joint Webinar: “Surviving the Emerging Price War”

thumbnail_Joint Co LogosOn April 5th, Engage3 executives Ken Ouimet and Edris Bemanian will co-host a webinar with Brick Meets Click Co-Founder Bill Bishop to unveil a new layer of competitive intelligence insights in the fast-moving consumables space. In this session, participants will gain an understanding of how retailers are managing the complexity of pricing in today’s marketplace and see examples of how more dynamic approaches can drive profitable sales.

In the hyper-competitive world of retail today, the importance of understanding competitive pricing is paramount to executing successful long-term sustainable strategies. A great deal of recent progress has been made in applying the power of advanced analytics to pricing strategy; from improving the speed and accuracy of competitive price checks to reverse engineering the competition’s pricing strategy. As this progress ushers in new pricing rules, retailers are in position to take advantage and compete more effectively. The webinar will focus on this premise and highlight new work from Engage3.

Long-time industry advisor Bill Bishop, Chief Architect of Brick Meets Click, will moderate the session. Bill brings 20+ years of experience helping retailers strengthen their price reputations.

Click here to register for the session today!

16 Mar 2017
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Data Discoveries: Is Organic Produce Really More Expensive than Conventional?

Market trends continually bear out the basic intuition that consumers prefer organic produce to conventional. More than ever, consumers are making conscious and active choices in selecting what type of produce goes into their bodies. Restaurants and fast food chains have begun to consider the preferences of their customers by introducing more organic, all-natural, gluten-free or GMO-free products into their menus.

But for the smart shopper, trying to be both health conscious and money conscious, there’s a worry associated with organics: higher prices. Generally, organic produce is more expensive than conventional produce, but recent trends indicate that gap may be closing. Price difference is highly impacted by region, availability, and a variety of other invisible factors.

We took it upon ourselves to analyze the marketplace over the past year for organic and conventional produce and noticed interesting movement in specific regions that reaffirm trends that are reflective of the widespread availability and increasing demand for organic produce. In the regions where prices for organic produce saw a sharp increase, conventional produce followed suit. In both the Midwest and the Southeast, prices for organic produce averaged around $2.60 and conventional prices averaged around $2.00 by the end of the 2016. Conventional prices rose in the same movement as the organic prices, a possible indication that there wasn’t a strong overall preference for either in these regions.

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The most notable results came from the mid-Atlantic, which saw a sharp increase in organic prices and steady movement of conventional prices. The gap between organic and conventional produce is the largest among the regions studied, nearing almost a full dollar. Mid-Atlantic shoppers are eagerly gravitating towards organic chicken breasts and largely ditching conventional options.

Florida and the South didn’t see an incredible change in prices of either organic or conventional products, as the market trends show steady movement. The South’s organic prices stayed around $2.00 and its conventional stayed around $1.40; the award for most expensive organic prices goes to Florida, which showed little movement in the gap between conventional and organic. Florida’s organic prices were averaging around a little more than $2.60 by the end of the year.

In the five regions where organic produce prices saw a slight decrease (Southwest, Pacific Northwest, Rockies, New England and Northern California), the markets for conventional prices held steady. The only region that saw both a decrease in organic and conventional prices was Northern California, a region widely recognized for their health conscious and active consumers. It’s possible that, to keep sales of conventional produce from incurring too drastic of a loss, conventional producers may have lowered prices to match the movement of organics. The Rockies stand out for having the lowest prices in both organic and conventional produce. Both produce types can be found within an average range of $1.20 to $1.60.

Every consumer’s preference is different when it comes to organics. Taste, price and environmental impact all play roles in affecting the mindset of the consumer, who is, on average, becoming more conscious about the price and quality of the food they are buying. With an overall market gravitation towards organic produce, prices for produce in general have seen an increase. However, when compared with conventional produce, we see this market in essence rolling up its sleeves and preparing to fight to keep their prices steady or matched with organics.