How Data Analysis Keeps Retail Prices CompetitiveFebruary 14, 2019 No Comments
Featured article by Eugene Sazonov, Head of Competitive Data Products at Competera
Maintaining competitive prices is a tough job. Ever since competition appeared in retail, businesses have been dreaming of a way not to sell at too high or too low a price against the market.
Eventually, retailers have figured out that knowing what’s going on on the market in real time can help them set more balanced prices. For the past decades, retail companies have grown into technological hubs with in-house pricing systems setting prices automatically. Businesses choose a pool of competitors, monitor their prices and promotions, integrate market data with their internal ERP systems, and manage pricing accordingly.
Everything seems smooth and yet, even armed with powerful pricing software, many retailers still struggle to keep prices competitive. Tracing back to the root of the problem, one can see: first and foremost, it’s all about the data.
The trick is being able to collect exactly the data you need and when you need it.
Internal vs. external data collection systems
“If you do not collect and analyze high-quality competitive data, and you offer a big number of SKUs, your price will be completely off the market,” says Bogdan Nesterenko, Head of Cross-border Projects at Northern European omnichannel retailer RD Electronics. There are many ways to gather data.
One solution is to build an in-house price monitoring system. Retailers usually engage their IT departments in architecting a data collection solution. But everyone is traditionally overwhelmed with their KPIs and other tasks, and this additional job to develop a whole new product in the field they know little about can only make things worse. Not only engaging IT teams can be expensive and eventually not feasible, but the solutions such teams put forward can push the retailer back. For example, using a “homemade” data collection system can lead to all or some of the company’s IP addresses being blocked on competitors’ or price comparison websites for weeks. This would mean distorted data, imbalanced prices and lost revenue. Besides, the retailer will need to spend extra money to keep the system from falling apart and make it adaptable to constant changes on the websites to monitor.
Another solution is to cooperate with an external data provider that delivers turnkey competitive data and decreases spendings on data validation. “We have saved 70% from the IT budget for the data scraping and validation with Competera’s price scraping software which helps us get reliable, timely and accurate competitive data,” says Bogdan Nesterenko of RD Electronics.
The trick is to find a reliable company which is flexible enough, can provide data in any format compatible with the retailer’s inner system and at the right time, and keep things confidential. Stumbling upon a good contractor can save money to keep the system up and running and time to actually collect data. What the retailer’s managers would have to do in such a scenario is to feed competitive data into an in-house pricing system and focus on building a sophisticated pricing or promotional strategy.
Regardless of the means, companies use to gather data, it’s important to be sure that the data is fresh, complete, and accurate. Otherwise, it’s useless.
What’s great about analyzing competitive data?
Here are some opportunities to keep prices optimal by using competitive data and in-house pricing systems.
Competitive prices everywhere
Different markets and selling channels require different marketing and pricing strategies. Some markets are more brand sensitive, while others believe the price of a product is the only thing that matters. When entering a new market, it’s hard to anticipate what prices to set from the start. To understand what to sell and what prices to offer, businesses usually play detectives and scientists at the same time. They collect data regarding their competitors and customer preferences. Once the data is analyzed, businesses can calibrate their pricing and promotional strategies.
Special offerswithout sacrificing the profit margin
What products to push? Is it ok to sell at a lower price? Will it eat up the profit margin? Is it possible to sell at the best price for the retailer and yet make it seem a compelling offer to customers? When collecting and analyzing competitive data, retailers identify which ones of their products have the most optimal prices in the market and advertise them without losing the profit margin.
Enhanced product managers
Wouldn’t it be just nice to make someone else do mundane routine tasks for you? Automated pricing systems use competitive data to craft prices based on rules without engaging humans. For example, to set prices which are by 0.5% lower than the prices of particular competitors. With that part (data collection and analysis, as well as price setting) automated, retail managers can switch to more strategic tasks, like crafting a competitive pricing strategy, providing better customer services, as well as ensuring effective delivery and procurement.
Better negotiations with manufacturers
Negotiating deals with vendors can be difficult. One example of a tricky question which vendors often ask is “Why are your prices higher (or lower) than we agreed?” Retailers usually have little to answer if, as of manufacturers, they failed to calibrate the recommended retail price (RRP) properly. However, businesses that collect and analyse competitive data can always use it as a reference to justify their pricing decisions as their data-driven prices objectively reflect the situation on the market.
About the Author
Eugene Sazonov is Head of Competitive Data Product at Competera. IT professional with more than 17 years of relevant experience in building IT systems for retail enterprises and HoReCa. Focus: the implementation of complex IT solutions (CRM, ERP, etc.) in the retailer’s business operations.
DATA and ANALYTICS , SECURITY