The current economic climate has created an unsteady pricing scenario for retailers. Commodity costs rose and manufacturers passed on the increases to retailers. With pressure from consumers to maintain product prices, retailers are faced with a constant struggle to pay the bills while keeping customers happy.
Noting the retailers’ struggles, software service providers are responding with updates that help to handle multiple costs and better predict pricing changes. For example, “Grocery retailers can now do what-if analysis on anticipated costs in anticipation of negotiating with manufacturers,” says Marc Dietz, VP of marketing at DemandTec. “Having the ability to set up a forecast for a certain time period allows retailers to create a more accurate margin forecast.”
In its most recent quarterly software update, DemandTec responded to customers’ requests for help analyzing future cost changes and improving promotion planning. Retailers currently using DemandTec’s services include Best Buy, Advance Auto Parts, Safeway and Toys R Us. Most recently Price Chopper selected DemandTec’s price optimization solution.
Bringing Categories and Customers Together
With customer-centricity top-of-mind for most retailers today, software solutions can help better match consumers’ desires with product offerings in specific stores. “We are bringing the category and customer perspective together,” says Dietz, “to help plan more effective promotions.”
This approach can improve price optimization as well as assortment optimization. “You can now prioritize how you’re pricing in different markets based on consumer segments,” Dietz notes. And with more localized assortments, retailers will be able to drive more sales to the right customers.
Using these advanced optimization solutions, retailers can expect to see 3-5% margin gains while also growing volume in sales, according to Dietz.
Promoting Retailer-Supplier Collaboration
More and more retailers and suppliers are realizing the benefits of working together to create effective promotions and construct better trade deals. In the last few years DemandTec has facilitated collaborative work between companies like Safeway and Kraft as well as Food Lion and Cadbury-Schweppes. DemandTec connects retailers and suppliers through its TradePoint Network, where its customers have collaborated online with nearly 2.2 million trade deals.
But the retailer-supplier relationship is just a part of the bigger picture of end-to-end promotion management, a process that leverages collaboration and analytics and combines the efforts of many business units including merchandising, marketing and advertising. With end-to-end promotion management, retailers have complete visibility and control over the promotion process, from planning and deal management through in-store execution and post-event analysis.
“End-to-end promotion management helps retailers work with suppliers and manufacturers to plan promotions and execute them across channels,” says Dietz. “The system then follows the process into the store to ensure that the product is available when the customer wants to buy it.”
Having more visibility and control over business processes, including pricing, assortment and promotion management, will help retailers and suppliers survive during recessionary times and thrive when the economy recovers.