Retailers Still Missing the Mark on Consumer Pricing and Technology Preferences
Senior retail executives are too quick to dismiss the impact that pricing and new technologies are having on consumer purchase decisions according to a new report, The Pricing Disconnect Between Senior Retail Executives and Consumers. The report surveyed consumers and senior retail executives about consumer shopping habits, purchase behavior and influences driving purchase decisions.
With rapid changes occurring in the industry and many challenges plaguing businesses when it comes to people, product and technology, the disconnect isn’t surprising. However, being out of sync with consumers could prove to be fatal over time for many retailers, particularly in this volatile environment of economic uncertainty.
Here are the key takeaways from the report:
Consumers Still Want Lower Prices
According to the report, while retailers and brands have rightly been focusing on offering quality products (which still rank highest with consumers when it comes to purchase decisions), they may not be focusing enough on the importance of pricing. Just 20 percent of senior retail executives felt low pricing ranked as most important, compared to nearly 40 percent of consumers surveyed.
Consumers Believe Prices Are Increasing Everywhere
Senior retail leaders proved to be out of step on consumer pricing perceptions online and in-store. Only 20 percent of senior retail executives felt that consumers believed prices were increasing online vs. more than half (51 percent) of consumers who reported feeling they were. The same percentage (20 percent) of senior retail executives also felt consumers believed that prices were increasing in-store, compared to 60 percent of consumers.
Given the current trade environment, perceptions that prices are increasing could be a self-fulfilling prophecy, particularly as the U.S. implements steeper tariffs, which will likely result in pricing increases for years to come.
Consumers Expect Discounts and Lower Pricing In-Store
Retailers are also undervaluing the importance of in-store pricing and discounts. Although 36 percent of consumers ranked price promotions, coupon availability or better pricing as one of the top three factors making them want to shop in physical stores vs. buying products online, the survey found that only 12 percent of retail executives ranked these factors as important to consumers.
Mobile Was Just the Beginning
While retailers have done a good job adopting mobile and omnichannel strategies, new technologies are still driving change. Consider consumer adoption of various technologies such as smart speakers, which could indicate a growing technology divide. Almost no senior retail executives acknowledged the impact of smart speakers on their business, even as adoption of this emerging technology is skyrocketing. The number of consumer respondents who said they own smart speakers was up 75 percent to 42 percent when compared to a similar First Insight survey from last December. Importantly, the majority of consumer respondents who own smart speakers say they're using them to research prices (59 percent), a significant increase from last December (49 percent).
While retailers and brands that have significant brand recognition are already likely benefitting from these smart speaker searches, other emerging or lesser-known brands could soon find themselves at a significant disadvantage.
Fueled by technology, consumer preferences driving purchase decisions can shift on a dime. Retailers that are able to stay connected, develop a dialogue and listen to their customers will be able to keep pace with changing consumer preferences. The survey found that many senior retail leaders are already looking to invest in voice-of-consumer analytics in the coming year. Fifty-nine percent of retail leaders name voice-of-consumer analytics as the most transformative technology to their business, and 46 percent plan to invest in it in the next year. However, while technology can help, retailers able to remove silos internally to encourage transparency and information flow between departments will be the most nimble and responsive, and most likely to thrive in today’s retail environment — and beyond.
Greg Petro is CEO and founder of First Insight, a technology company transforming how leading retailers make product investment and pricing decisions.
Related story: Product Quality Trumps Price for Consumers, Study Finds
Greg has a 25-year history in the retail industry with a career spanning merchandising, sales and management. But while at one of the world’s leading supply chain technology firms, he saw a need for retailers and brands to re-engage with consumers to determine which products would be top sellers well before costly investments are made to bring them to market. In 2007, Greg Petro founded First Insight Inc., a technology company that delivers what is now the world’s leading predictive analytics platform for consumer-testing new products. Through engaging consumers online and mining social data, the First Insight platform empowers retailers and brands to introduce the right products at the right price, and target them to the right customers. Today, he serves as its Chief Executive Officer and President. Greg is a member of the Board of Advisors of the Fashion Institute of Technology, as well as a frequent speaker at the graduate business schools of Columbia University and the University of Pittsburgh. Greg also speaks and at a number of industry conferences, where he educates his listeners on how retailers can use technology to identify and deliver what their customers really want. Mr. Petro holds both MBA and Bachelor’s Degrees from the University of Pittsburgh.