Harnessing the Power of Competitive Pricing: Part Two

Now that we have addressed question #1, let’s move onto the next key question grocers should address relative to their pricing: How Can I Improve?  (Price-Setting)

Best practice supermarket operators (those enjoying a strong price-value image and profitable sales growth) are known to harness the power of category management structures to help set and manage everyday base prices.

Within these structures, retailers set prices based on:

· Total store targets (competitive price index target vs. key competitor combined with gross margin target)

· Department-level targets (competitive price index targets combined with gross margin targets)

· Category-level targets (competitive price index targets combined with gross margin targets) by:

· Defined category role

· Item type (KVI or background items)

Category Roles can include, but not be limited to:

Consequently, it’s essential to have access to up-to-date competitive pricing data to effectively set prices based, in part, on targeted price indices for each category role.

Competitive Price Collection

Capturing and using robust, relevant, and timely competitive pricing data is “table stakes” for all independent supermarkets across the country. Collecting competitor prices used to be extremely costly and difficult. Retailers would have to send team members (or contract with third parties) to visit competitor stores where they’d write down prices for individual items. It was quite common for competitors to kick people out of their stores who were collecting prices, thereby making the process even more challenging.

However, over the past few years, traditional supermarkets have been selling groceries online with orders picked from the store, with online prices typically the same as in-store prices. Now competitor prices can be captured much more quickly and efficiently online via “web scraping”. Competitor pricing data has never been more accessible for independent retailers.

The winners among independent supermarket operators will be those that harness the power of competitive data to make the best pricing decisions, and ensure their prices stay “on strategy” on an ongoing basis.

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