Navigating Stormy Waters: Science-Based Pricing Proves Critical
The already chaotic world of retail has been shaken to its very core in the recent COVID-19 pandemic. Demand is surging for grocers, but not in the same categories and items as in the past. Shoppers are leveraging online apps and buy-online-pick-up-in-store options at unprecedented speeds as the training wheels come off omnichannel adoption once and for all. Meanwhile, other retailers deemed nonessential during lockdowns are seeing demand plummet.
Even post-COVID, retail won't return to its pre-pandemic patterns. Fortunately, retailers with artificial intelligence-based pricing have the means to better weather stormy seas. Compared to their peers, they gain earlier insights into demand signal changes and more accurate forecasting, enabling them to rapidly make supply chain and pricing adjustments to both better engage shoppers and deliver sustainable business results.
Three notable patterns have emerged during the COVID-19 era:
- Social distancing has driven even reluctant e-commerce adopters to fundamentally change their behaviors, and many will never return to their pre-COVID patterns. Science-driven grocers have been able to respond with more agility and much sooner than their peers, which are relying on manual, human-based processes.
- The unprecedented severity of recent economic shocks has left shoppers reeling. Pantry-loading and stock-outs have made the shopping experience unpredictable at best, yet shoppers are acutely sensitive to any whiff of unfair pricing from retailers they think are placing short-term opportunism ahead of long-term integrity. Retailers must delicately balance volatile costs with the need to present shoppers with fair prices. Science-based price optimization gives retailers rapid, highly granular insights into shifting shopper price sensitivities down to the item level, enabling retailers to price with surgical precision where it matters most while still protecting the bottom line.
- Today, market baskets and demand signals change rapidly and unpredictably. Many shoppers who used to eat out frequently are cooking at home exclusively, so their grocery choices look nothing like those of the past. The abrupt change in demand for cleaning supplies, sanitizers and personal hygiene items reflect the reality that homes, which once were empty every weekday, now burst with work-from-home or furloughed parents and kids no longer able to attend daycare, school or even universities. The result has been supply chain havoc with unprecedented stock-outs and forced rationing. Retailers with AI-based science get much more rapid and accurate insights into demand signals. They can also use rapid, sophisticated what-if forecast modelling to navigate these challenges more successfully than other retailers.
The environment is every bit as stormy for shoppers as for retailers, and their perceptions of which retailers are proving trustworthy and sensitive today will influence their shopping choices for years to come. Science-based pricing gives retailers a confident path to execute fair, targeted prices; better manage the supply chain; and structure for long-term business stability. In the pandemic and post-pandemic environments, science-based pricing has moved firmly into the must-have column for retailers.
Cheryl Sullivan is president of DemandTec by Acoustic, a marketing solutions platform purpose-built for the modern marketing workflow.