Through a special arrangement, presented here for discussion is a summary of an article from Retail Paradox, Retail Systems Research's weekly analysis on emerging issues facing retailers.
Early analysis of RSR Research's Pricing Benchmark reveals continued uncertain economic conditions and increasing consumer price sensitivity has shifted industry focus dramatically. Retailers seem far more apt to ignore the wealth of customer data available to them and look instead to competitors' prices to make pricing decisions than they were just a year ago.
For example, last year, 63 percent of retail respondents reported customer purchase history as a very valuable input to help set prices. This year, that number dropped to 37 percent. Those highlighting the importance of competitors' prices rose slightly, from 61 percent to 63 percent. We would intuitively assume this is driven by price transparency and the consumerization of IT, but the data tells a different tale.
It's true that the number of retailers feeling the effects of price transparency have doubled from 10 to 20 percent, but retailers seem to believe consumers are just responding to the barrage of promotions thrown at them. After all, 38 percent of retail respondents continue to significantly increase the volume of price changes they send to stores and other channels.
It's interesting to note that even as the number of price changes continues to rise, the percentage of retailers who are able to understand the impact of their pricing decisions has declined quite a bit. Last year, 50 percent of respondents cited this as a top-three operational challenge. This year it rose to 64 percent.
Another issue appears to be lack of internal education. Past research has shown adoption of pricing technologies rising. Now many respondents seem to have the tools available, but don't quite know what to do with them (figure below).
This has moved to center stage as the most frequently cited organizational barrier to setting better and more compelling prices. It trumps organizational resistance to change, technology infrastructure issues and even data cleanliness.
We wonder whether budgetary concerns have led retailers to scrimp on training expenses and spend more capital on implementation. Perhaps users go in believing that commercial applications are now as easy to use as those found on our tablet computers and smartphones.
Overall, I must say I've been really surprised by these results. We've heard a lot of talk about "Big Data," but apparently not a lot of us are actually doing anything with it. We know the explosion of channels has everyone spinning, and door busters are an evil that get bigger and "badder" every year. Have we returned to old fashioned "Markdown Chicken," where consumers and retailers stare each other in the eye until one blinks? Only this time, it's with a front end of really low prices to set the bar.