Thad Rueter of Progressive Grocer, in an article published on February 16, 2021 titled Getting Pricing Right in 2021, writes that price optimization will be undergoing significant changes in 2021 – and that retailers who don’t get on board will face problems sooner than later.
The pandemic, cheaper technology, changes in consumer habits, and automation powered by ML and AI are the main drivers of these changes which he predicts, after speaking to Engage3 and three other top price optimization companies, will stay post-COVID.
“In 2020, consumers took fewer trips, went to fewer retailers and spent more per trip,” notes Edris Bemanian, CEO of Engage3. “During this period, prices skyrocketed due to lack of supply, and a significant reduction in promotions driven by the lack of supply. At the same time, a greater percentage of sales than ever before shifted to e-commerce, and retailers had to be more sensitive to pricing actions that would be perceived as unethical or unfair.”Edris Bemanian, Engage3 CEO
Rueter cited a survey last year that found 60% of retailers were focused on putting AI-powered pricing in place. He added that in 2021, that technology will remain as a top priority for retailers that have not started their optimization journey. Before COVID, there was already a 37% increase in purchases of private label products. This increased to 44% during the pandemic, and that is expected go even higher in 2021 and after the COVID-19 outbreak fades.
Two examples of newer trends for 2021 that Rueter identified in his talks with leaders in the space are grocery deliveries and curbside pickup. Keeping up with consumer demand for those services in 2021 will require more food retailers to invest in software as a service (SaaS) or other forms of optimization technology, as businesses become ever more digital.
Not Just AI
There’s always talk about some new form of artificial intelligence, and this is true especially when it comes to pricing and promotional optimization. But other technologies and processes also matter significantly, according to Maia Brenner, a data scientist for Tryolabs, a San Francisco-based data science consulting firm.
In Rueter’s article, Brenner suggests that machine learning — the less sophisticated but useful older cousin of AI, will be very important. Brenner says that learning more about price optimization in 2021 requires food retailer tech departments to either master machine-learning techniques or find a partner that can. While grocery operators proved they could go full force with e-commerce in 2020, they now have to employ that same attitude for better price optimization.
“Historical price optimization models of increasing price to drive profit won’t work. Retailers will need to focus on the items that drive their Price Image to keep traffic up.”Edris Bemanian, Engage3 CEO
In 2021, according to Bemanian, ongoing economic constraints promise to place an even higher focus on price. “Price optimization will need to shift to be able to deal with smaller trip sizes, households with less money to spend on each trip, shifts to private label, and smaller pack sizes,” he predicts. “Historical price optimization models of increasing price to drive profit won’t work. Retailers will need to focus on the items that drive their Price Image to keep traffic up.”
In other words, Rueter concludes, the future is pretty much now when it comes to better pricing and promotions. He adds: “The race toward better optimization could even prove more important in the longer term than the fight to win over online shoppers.”
To read the Progressive Grocer article, go HERE. To schedule a 15-minute chat with a Price Image expert, click below: