In the good old days of retailers having a single channel with a steady and relatively well forecasted demand, pricing was the forte of the merchandising managers.
Ability to negotiate with CPG majors or wholesalers, retailing based on shelf space and target segment was very helpful.
The basket analysis can be used very effectively - having Key Value items and anchor items to be able to optimize product mix and margins as well. This ensures we have a good rein on retail operations and also contributing to both the top line and the bottom line.
KVI, KVC and Anchor Items
For the uninitiated, a key value item (KVI) is a set of products that is used as a sample set by my typical customer to compare prices and understand if my store is competitive. For example if my typical customer compares say the price of milk, bread and onions and finds that they are the lowest or below a benchmark price, they will perceive the store to be offering a lot of savings.
It is also some times referred to as KVC or Key Value category.
Key value items are typically based on the typical user segment that my store wants to target and may vary based on the location and period of the year. Typically stores used to update key value items 3-4 times an year.
In contrast, an anchor item is an item that helps the store understand what items does the shopper look for when he wants to shop at my store. Even if that might not have a good velocity or might not contribute much to my bottom line, My store would stock it since it is an anchor item that can be used to sell other products. For example, if my shopper looks for Hershey’s chocolate syrup and would shop in a store that sells that,then I would stock it since when the shopper picks up the chocolate syrup, they also pick up all other groceries they need like milk and bread.
Anchor items are also based on the type of retail I am in - and typically more effective in non-grocery retail., typically apparel or electronics.
Personalized Pricing
With omni-chanel retail with more frequent refreshes of product mix and fashion styles, it is no longer sufficient to just use KVI and anchor item pricing to drive demand.
The other are that has been becoming more attractive is personal pricing. The question that retailers amercing to answer is how personalized can a price be.
You could personalize price for a product by the channel, the user segment, the time/date of purchase, the basket composition or even the specific user.
With enough user information, retailers now have enough information to perform real-time data analysis to target customers. For example, if my store can know that my shopper typically purchases milk every 3 days and is now in my store, I can push a personalized price for milk or other basket items bought with milk using a coupon that could expire in the next 90 minutes - hence making sure that the visit can be leveraged. Additionally, I could also push any store special pricing or could shift demand to another day if supply is low by giving a coupon that , say, is valid for tomorrow instead of today.
While all the examples above are for grocery retail, they could also wok for electronics - typically since the refresh cycles of most electronics from mobile phones to tablets to even modems being fairly public. Retailers could use available information to either pre-sell new models for users who are expected to buy , gauge interest and have a supply accordingly.
A lot of retailers already use the same for apparel - k-mart is pretty popular with its christmass layaway program. It is also a very smart way of simulating demand and more programs are being tweaked to target it to the right users.
How does it affect manufacturers / suppliers
With a single channel and a direct retailer relationship, Manufacturers or suppliers had a simple enforcement of Minimum advertised price. However, with the advent of omni-channel commerce, market place models and the concepts of refurbished, the minimum advertised price enforcement is becoming very difficult.
With various tools like checking for any deviations of MAP in all channels and tracking third party sellers, it is becoming very convoluted for manufacturers / suppliers to manage prices. With personal pricing, targeted promotions and other pricing mechanisms, manufacturers / suppliers are also innovating.
Some of the key innovations are around product mix based on target user segments, new local variants, limited editions and bundles - hence making it easy for the manufacturer / retailer to avoid any major price competition. They can also work together with the retailer to handle demand and come up with the right mix.
Conclusion - A more personalized shopping experience
With the electronic commerce transforming into a digital commerce - a convergence of digital, retail operations and also having an amount-channel experience, the personalized experience that used to only be on the online commerce is following the user through all their channels - both offline and online.
For a retailer and the manufacturer, it also provides them with tools to have a more engaged and loyal shopper and also with tools to shift demand and optimism operations.
Ability to negotiate with CPG majors or wholesalers, retailing based on shelf space and target segment was very helpful.
The basket analysis can be used very effectively - having Key Value items and anchor items to be able to optimize product mix and margins as well. This ensures we have a good rein on retail operations and also contributing to both the top line and the bottom line.
KVI, KVC and Anchor Items
For the uninitiated, a key value item (KVI) is a set of products that is used as a sample set by my typical customer to compare prices and understand if my store is competitive. For example if my typical customer compares say the price of milk, bread and onions and finds that they are the lowest or below a benchmark price, they will perceive the store to be offering a lot of savings.
It is also some times referred to as KVC or Key Value category.
Key value items are typically based on the typical user segment that my store wants to target and may vary based on the location and period of the year. Typically stores used to update key value items 3-4 times an year.
In contrast, an anchor item is an item that helps the store understand what items does the shopper look for when he wants to shop at my store. Even if that might not have a good velocity or might not contribute much to my bottom line, My store would stock it since it is an anchor item that can be used to sell other products. For example, if my shopper looks for Hershey’s chocolate syrup and would shop in a store that sells that,then I would stock it since when the shopper picks up the chocolate syrup, they also pick up all other groceries they need like milk and bread.
Anchor items are also based on the type of retail I am in - and typically more effective in non-grocery retail., typically apparel or electronics.
Personalized Pricing
With omni-chanel retail with more frequent refreshes of product mix and fashion styles, it is no longer sufficient to just use KVI and anchor item pricing to drive demand.
The other are that has been becoming more attractive is personal pricing. The question that retailers amercing to answer is how personalized can a price be.
You could personalize price for a product by the channel, the user segment, the time/date of purchase, the basket composition or even the specific user.
With enough user information, retailers now have enough information to perform real-time data analysis to target customers. For example, if my store can know that my shopper typically purchases milk every 3 days and is now in my store, I can push a personalized price for milk or other basket items bought with milk using a coupon that could expire in the next 90 minutes - hence making sure that the visit can be leveraged. Additionally, I could also push any store special pricing or could shift demand to another day if supply is low by giving a coupon that , say, is valid for tomorrow instead of today.
While all the examples above are for grocery retail, they could also wok for electronics - typically since the refresh cycles of most electronics from mobile phones to tablets to even modems being fairly public. Retailers could use available information to either pre-sell new models for users who are expected to buy , gauge interest and have a supply accordingly.
A lot of retailers already use the same for apparel - k-mart is pretty popular with its christmass layaway program. It is also a very smart way of simulating demand and more programs are being tweaked to target it to the right users.
How does it affect manufacturers / suppliers
With a single channel and a direct retailer relationship, Manufacturers or suppliers had a simple enforcement of Minimum advertised price. However, with the advent of omni-channel commerce, market place models and the concepts of refurbished, the minimum advertised price enforcement is becoming very difficult.
With various tools like checking for any deviations of MAP in all channels and tracking third party sellers, it is becoming very convoluted for manufacturers / suppliers to manage prices. With personal pricing, targeted promotions and other pricing mechanisms, manufacturers / suppliers are also innovating.
Some of the key innovations are around product mix based on target user segments, new local variants, limited editions and bundles - hence making it easy for the manufacturer / retailer to avoid any major price competition. They can also work together with the retailer to handle demand and come up with the right mix.
Conclusion - A more personalized shopping experience
With the electronic commerce transforming into a digital commerce - a convergence of digital, retail operations and also having an amount-channel experience, the personalized experience that used to only be on the online commerce is following the user through all their channels - both offline and online.
For a retailer and the manufacturer, it also provides them with tools to have a more engaged and loyal shopper and also with tools to shift demand and optimism operations.
Comments
Post a Comment