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Reinvent your Pricing - 3 New Year's Resolutions Every Retailer Should Make

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In this webcast featuring Sucharita Mulpuru of Forrester Research and Niral Vora of Sears Canada, and price intelligence experts from 360pi, we discuss how retailers can fight back against showrooming …

In this webcast featuring Sucharita Mulpuru of Forrester Research and Niral Vora of Sears Canada, and price intelligence experts from 360pi, we discuss how retailers can fight back against showrooming and technologically sophisticated retailers like Amazon.

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  • SM to update
  • Antitrust covers x y and z; history of it and government pov, what it means for you
  • Price volatility, price monitoring, pricing vigilance, price matching
  • Transcript

    • 1. Reinvent Your Pricing:3 New Year’s ResolutionsEvery Retailer Should Make
    • 2. Speakers Sucharita Mulpuru VP, Principal Analyst Forrester Research Niral Vora Sr. Analyst, Pricing & Analytics Sears Canada Drew Williams VP, Marketing 360pi Mark Emond President Demand SpringReinvent Your Pricing #reinventpricing
    • 3. Join the Conversation #ReinventPricing
    • 4. Reinvent Your Pricing: WhatRetailers Need to KnowSucharita Mulpuru, VP & Principal AnalystJanuary 2013
    • 5. Agenda › The state of retail pricing now › The role of showrooming and the consumer perspective › What is legal (or not)? › The future of pricing© 2013 Forrester Research, Inc. Reproduction Prohibited 5
    • 6. Agenda › The state of retail pricing now › The role of showrooming and the consumer perspective › What is legal (or not)? › The future of pricing© 2013 Forrester Research, Inc. Reproduction Prohibited 6
    • 7. This is the state of pricing right now© 2013 Forrester Research, Inc. Reproduction Prohibited 7
    • 8. At any given moment, Amazon wins onprice Other specialty big Amazon Walmart.com box Electronics $2,371 $2,546 $2,849 Sports and outdoor $1,614 $1,769 $1,901 products Pet, lawn and garden $1,226 $1,328 $1,498 products Home furnishings $1,092 $1,226 $1,340 Computers and office $869 $951 $1,049 products Entertainment $687 $724 $728 Toys, kids and baby $461 $454 $529 Automotive $319 $342 $347 Tools and home $268 $364 $309 improvement Grocery, health and $135 $ 133 $171 beauty Source: Wells Fargo: The Sputnik Moment for Retail and Forrester Analysis
    • 9. This was the innovation that put thewind in Amazon’s sails
    • 10. Amazon’s marketplace revenue dwarfsits profitability Global net income Estimated marketplace revenue $4,172 US$MM $467 $631 $359 2005 2011 Source: Forrester estimates; GMV=gross merchandise value, the total value paid by shoppers in a transaction
    • 11. Agenda › The state of retail pricing now › The role of showrooming and the consumer perspective › What is legal (or not)? › The future of pricing© 2013 Forrester Research, Inc. Reproduction Prohibited 11
    • 12. Consumers with smartphones often research prices while shopping Population with Shoppers (within last 6 Price shoppers smartphones months) Not sure 1% Non-buyers 15%Other (including no- Smartphone Non- “Showroomers”device consumers) owners “Showroomers” 52% 54% 46% 47% Recent buyers 85% Base: 2,025 online consumers Base: 942 smartphone owners Base: 804 recent buyers with smartphones Q: Which of the following types Q: Have you purchased products Q: In the last 6 months, have you used of mobile devices do you own in a physical store in the last 6 your smartphone to find or research prices and use? months? online for products you were considering buying while shopping in a physical store (e.g. shopping mall, grocery store, car Source: Forrester-Aprimo Showrooming Research, October 2012 dealership)?© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 13. Many consumers say they will use their phones more to research prices in the future Intent among men 18-34 Less Future “showrooming” intention 4% Less About the same More 4% 49% 47% More 37% About the same 59% Base: 187 male smartphone owners Intent among women 18-34 Less 2% More 31% About the same Base: 942 smartphone owners 67% Q: Do you think you will use your smartphone to research prices more or less in the future? Source: Forrester-Aprimo Showrooming Research, October 2012 Base: 209 female smartphone owners© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 14. Those shoppers who don’t research on mobile devices often just don’t think about it (yet) Q: Which of the following best describes why you have not used your smartphone to research prices in stores? I have no interest in using my smartphone for this purpose 32% I havent thought about it 31% I dont usually buy anything that needs to be researched 16% The web connection in stores is usually poor 6% I dont have time 3% I didnt know you could research prices in stores 3% Other 7% Base: 390 smartphone owners who have not researched prices in stores Source: Forrester-Aprimo Showrooming Research, October 2012© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 15. Consumers research prices on their mobile devices for many categories Q: In which categories were the products you were researching or checking prices on your smartphone while shopping in a physical store? Please select all that apply. Consumer electronics (e.g. Home improvement (e.g. digital cameras, TVs) 39% 23% lumber, tools) Grocery (e.g. Sporting goods (e.g. food, diapers, grooming) 37% 20% equipment) Apparel, accessories, footwea Music/videos (including r 33% digital) 19% Housewares/small appliances Furniture (including 31% 18% (e.g. vacuum… mattresses) Movie/event tickets 30% Toys 17% Large appliances (e.g. Video games 27% dishwashers) 14% Books (including eBooks) Office products 14% 25% Baby care (e.g. Cars or auto parts (including 11% tires) 25% strollers, feeding bottles) Computers (including tablets) Other 9% and peripherals 24% Base: 415 smartphone owners who recently researched prices in stores Source: Forrester-Aprimo Showrooming Research, October 2012© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 16. Consumers who research prices on mobile devices find it easy Q: Which of the following statements describe how you feel about researching prices online while shopping in a physical store. Please select all that apply. It is easy to research prices online in a physical store 47% I type the name of the product in a search engine when researching 40% I often research prices online when I am shopping in a physical store 38% I find it easiest to scan a barcode or other image to compare prices 33% The Internet connectivity in stores is often bad so I cannot research prices as much as 16% Id like to It is difficult to research prices online in a physical store 6% Base: 415 smartphone owners that researched prices in stores Source: Forrester-Aprimo Showrooming Research, October 2012© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 17. Switching retailers or channels is common after researching prices on mobile devices Q: In general, which of the following best I purchased the describes the prices that you have found online product/brand I was when researching on your smartphone while researching in the store 40% shopping in a physical store? where I was shopping Higher than in I purchased the a store product/brand online from the website of the retailer 18% 8% where I was shopping I purchased the product/brand I was Same as in the store researching later at 18% Lower than in a store another store 37% Switchers 55% I purchased the product/brand online from 15% another website I did not purchase the product 9% Base: 415 smartphone owners that researched prices in stores© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 18. Search engines and Amazon typically are the most common destinations for in-store mobile price research Q: Which of the following sources do you use to research prices on your smartphone when shopping in a physical store? Please select all that apply. A general search engine (e.g. Google) 69% Amazon.com 57% The site or app of the retailers where I am shopping at 41% the time A price comparison or barcode scanning app (e.g. 35% Red Laser) Another retailers site or app 27% ebay.com 21% Other 2% Base: 415 smartphone owners that researched prices in stores Source: Forrester-Aprimo Showrooming Research, October 2012© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 19. Price matches and personalized offers are opportunities retain shoppers Q: Which of the following might have persuaded you to have purchased the product/brand you were researching on a smartphone while shopping in a physical store from the store or from its website. Please select all that apply. . A price match for the item 57% A personalized coupon to purchase at that time in the store 36% Loyalty points for purchasing from the retailer 30% Better customer service in the store 29% The opportunity to have the item shipped to my home directly 23% A more generous return policy 19% Base: 153 smartphone owners who purchased products at other stores or did not purchase Source: Forrester-Aprimo Showrooming Research, October 2012© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 20. Agenda › The state of retail pricing now › The role of showrooming and the consumer perspective › What is legal (or not)? › The future of pricing© 2013 Forrester Research, Inc. Reproduction Prohibited 20
    • 21. Pricing issues tread on antitrust territory Explanation Price fixing Colluding to set prices; can be a criminal offense Reseller price Coercing sellers to maintain a fixed maintenance price; more manufacturer flexibility following the 2007 Leegin case Explicitly pricing below cost in order to Predatory pricing drive out competition; often a manufacturer issue Price Charging different costs in seemingly discrimination similar circumstances to different consumers© 2013 Forrester Research, Inc. Reproduction Prohibited 21
    • 22. Timeline of key milestones in the US 1911 precedent; Dr. Miles Medical cannot enforce reseller prices Fair Trade law allows some state Dr. Miles ruling overruled in Leegin enforcement of predatory pricing to case; “rule of reason” applies limit retailer cutthroat pricing Early 20th Depression- 60s and 70s 80s Present century era Continued legal support of bans on vertical price fixing, and manufacturers setting prices “Colgate Doctrine” also say that Congress repeals Fair under certain terms, manufacturers Trade law, only allows can choose who they sell to and MSRP but debate under what terms continues Source: Wall Street Journal, “Price Fixing Makes a Comeback After Supreme Court Ruling,” August 18, 2008; Forrester analysis© 2013 Forrester Research, Inc. Reproduction Prohibited 22
    • 23. UPP is now allowed© 2013 Forrester Research, Inc. Reproduction Prohibited 23
    • 24. Agenda › The state of retail pricing now › The role of showrooming and the consumer perspective › The legal landscape (at least in the US) › The future of pricing© 2013 Forrester Research, Inc. Reproduction Prohibited 24
    • 25. The long (long) term view › More private label merchandise › More differentiated store experiences › New retailer-manufacturer relationships › Greater legal restrictions around web pricing© 2013 Forrester Research, Inc. Reproduction Prohibited 25
    • 26. Manufacturers will likely bifurcate in a competitive, transparent market “Commoditized” brands “Protected” brands Mattel Calphalon Apple Examples Panasonic Dyson Nike Logitech Britax Nespresso Rubbermaid Neat Company Louis Vuitton Characteristics Brands are substitutable Brands are not substitutable Retailer private label competition Heavy IP protection Channel conflict fears DTC bricks-and-mortar presence Physical store presence is weak UPP adherence Implications Heavy price competition and broad These brands will have stronger product product distribution will drive retailers to innovation pipelines (or powerful and change contracts; expect these broad patents) which enable them to manufacturers to bear more inventory preserve their brand equity and command costs and potentially lease space in stores distribution power in the marketplace© 2012 Forrester Research, Inc. Reproduction Prohibited
    • 27. Three types of products will be in stores in the future Traditional big Type of product Characteristics Examples Amazon New paradigm box Exclusive items and brands, private label Loss leader assortment; Kirkland, Michael Loss leader Private label Profit center (modest profit at competitive Graves (Kindle) best) pricing supported by profit pools Protected brands Apple, Dyson, Stand-alone Modest profit (or with UPP power Britax, NA Modest profit brands NA) Nespresso Ownership of inventory is pushed to manufacturer; Commoditized or low cost of Magnavox, Break even, loss substitutable ownership for Profit centers Profit centers Graco, Hoover leaders brands retailer; high margins from leased space, or marketplace-type arrangements© 2012 Forrester Research, Inc. Reproduction Prohibited 27
    • 28. In the interim… › The law favors the ability of a retailer to set price; the most aggressive retailer(s) will therefore set the bar in a world with price transparency/perfect information › This is a new phenomenon; manufacturers are just now thinking through their actions › Price variability is a reality for the next several years; price matching is table stakes© 2013 Forrester Research, Inc. Reproduction Prohibited 28
    • 29. Thank youSucharita Mulpurusmulpuru@forrester.com
    • 30. Webinar: Reinvent Your Pricing3 New Year’s Resolutions Every Retailer Should MakeNiral VoraJanuary 30th, 2013 30
    • 31. 3 New Year’s Resolutions Every Retailer Should Make by Niral Vora Context• The retail marketplace in North America significantly more competitive than in the past: - JCpenney’s shop-in-shop concept; - Walmart’s controversial commercials citing price comparison information of products at competitors; - Target’s price-match policy for online; - Best Buy, Toys-R-Us all-around changes.• Traditional brick-and-mortars utilizing e-commerce, m-commerce and couch-commerce for future growth So, what does this mean for the retail shopper?• Consumers see an increased availability of goods through multichannel marketing, and in turn a transparency in product promotions and pricing. Word- of- mouth Tablet Flyers Consumer Pricing Information touchpoints Retail Mobile Store PC / Laptop 31
    • 32. 3 New Year’s Resolutions Every Retailer Should Make by Niral Vora • A public opinion poll conducted on interactive polling website votetrends.com reveals: What one factor would make you purchase online rather than purchase in store? • Categories most impacted at Sears are: Electronics, Toys, and Small Appliances.Source: www.votetrends.com 32
    • 33. 3 New Year’s Resolutions Every Retailer Should Make by Niral VoraHow are merchants reacting?• This change in landscape has forced retailers, now more than ever, to revisit age-old pricing mechanisms from the top all the way to the bottom.How can we adapt?• Detailed pricing intelligence data provides a candid look into the pricing performance of a particular commodity, brand, or category, across retailers over time.• Based on observations, there are three things that can help improve their pricing initiatives to win over customers, improve returns and tackle lost market share: 1. Maintain a centralized pricing intellligence authority as the gatekeepers of information, but decentralize decision-making; 2. Align to make quick-win pricing decisions based on real-time data. 3. Leverage price transparency in the long-term as an benefit rather than a burden; 1. 2. 3. Long-term Short-term Special Initiatives 33
    • 34. 3 New Year’s Resolutions Every Retailer Should Make by Niral VoraResolution #1Pricing & Analytics should not be an island; it should be connected 34
    • 35. 3 New Year’s Resolutions Every Retailer Should Make by Niral Vora1. Pricing & Analytics should not be an island; it should be connected• Currently, a “Pricing” Team controls due dilligence across the organization; acting as an information Quaterback. However, actionnable insights are bridged across the organization and shared vertically.• Result: Various sources of pricing information come together, and results in a more robust decision-making process with checks-and-balances across the organization.• Example: Last year, Sears reduced prices on over 5000 key value products across the company, pricing analytics was a key component to the decision-making process. 35
    • 36. 3 New Year’s Resolutions Every Retailer Should Make by Niral VoraResolution #2Develop an agile process that can react favorably to price changes in themarket 36
    • 37. 3 New Year’s Resolutions Every Retailer Should Make by Niral Vora2. Become agile in making quick win pricing decisionsHaving access to a largely consistent and high-quality source of pricing analytics data helps provide short-term direction. 37
    • 38. 3 New Year’s Resolutions Every Retailer Should Make by Niral Vora 2. Become agile in making quick win pricing decisions• Different categories = different needs.• Develop an action plan / process within the team: Identify KVIs Measure Measure Results Performance Implement Select Changes products Validate Trends Who needs to be involved: Buyers Analytics Marketing Channel Integration 38
    • 39. 3 New Year’s Resolutions Every Retailer Should Make by Niral VoraResolution #3Don’t treat Price Transparency like a foe, but more like a frenemy 39
    • 40. 3 New Year’s Resolutions Every Retailer Should Make by Niral Vora3. Don’t look at Price Transparency as a foe, but more like a frenemy • Research shows that the majority of our MA customers have purchased either online or in-store after having shopped at sears.ca. • Demonstrating product value beyond pricing by being “honest” and embracing showrooming, through greater price transparency, will help boost conversion. 40
    • 41. Webinar:3 New Year’s Resolutions Every Retailer Should Make by Niral VoraHow Sears Canada has embraced price transparency & price sensitive shoppers• A Price Compasion Tool is available across several hundreds Major Appliance PIPs across the website• Provides real-time customer insight into how a specific product is priced across select retailers• Information is updated throughout the day, to maintain the most accurate pricing information across the board• Provides an opportunity to deliver incremental messages / highlight a value proposition beyond pricing 41
    • 42. Webinar:3 New Year’s Resolutions Every Retailer Should Make by Niral VoraHow Sears Canada has embraced price transparency & price sensitive shoppersShopper behavior towards the price comparison tool is generally positive. The following demonstrate some early results: • Shoppers Convert Better Under-indexed • Why: No need to research elsewhere; showrooming products potential is limited. Customers also see added- value (loyalty programs) to purchase. • Shoppers convert (to some extent) Better Equally-priced • Why: with the price sensitivity issue nullifed by products greater transparency, customers can focus on the value-add services offered by Sears. • No significant change in shopper conversion Over-indexed • Why: price-sensitive customers are aware of price products disadvantage gap (no need to shop elsewhere). They are presented with price-match opportunity. 42
    • 43. Webinar:3 New Year’s Resolutions Every Retailer Should Make by Niral VoraOther ways Sears Canada is working to counter-act showrooming  Creating value out of Loyalty programs / Points and credit card financing;  Enhancing the value of private labels and unique brands (I.e.: Look! Report);  Better in-store customer service, and return-policy;  Short-term pricing & promotion opportunities (online flash sales). 43
    • 44. 3 New Year’s Resolutions Every Retailer Should Make by Niral VoraThank You!For further Information on votetrends:www.votetrends.com | niral@votetrends.com 44
    • 45. Reinvent Your Pricing: 3 New Year’s ResolutionsEvery Retailer Should Make Drew Williams VP, Marketing 360pi
    • 46. What do we do? Retail price intelligence solutions for complete visibility and smarter price decisions.Reinvent Your Pricing #ReinventPricing
    • 47. Multi-Faceted View of PriceReinvent Your Pricing #ReinventPricing
    • 48. Role of competitive pricing intelligence in pricing decisions Reinvent Your Pricing #ReinventPricing
    • 49. How do you get this information? Manual Automated • Slow • Fast • Untimely • Near Real-time • Inaccurate • Extremely accurate • Time Consuming • No time requiredReinvent Your Pricing #ReinventPricing
    • 50. How do we get it?Reinvent Your Pricing #ReinventPricing
    • 51. Where do we fit into the Ecosystem? Competitive Pricing Data Price Intelligence Solution Price Optimization SolutionReinvent Your Pricing #ReinventPricing
    • 52. At-A-Glance View of PricesReinvent Your Pricing #ReinventPricing
    • 53. Product-Level View of PricesReinvent Your Pricing #ReinventPricing
    • 54. Customizable Alerts • Get alerted if your competitors outprice you on key products • Receive notifications if competitors commit MAP violationsReinvent Your Pricing #ReinventPricing
    • 55. 3 New Year’s Resolutions Stop wasting time manually pulling competitive price data. Gain near real-time insights into pricing/merchandising opportunities. Better understand your competition.Reinvent Your Pricing #ReinventPricing
    • 56. Next Steps Best practices and thought leadership content to help you on your price intelligence journey. 360pi.com/resources/discovery-center Modern Retail Pricing is our blog and covers new trends and insights into retail pricing. Subscribe today! blog.360pi.com See our product in-action and discover what it can do for your business. Request a free demo! 360pi.com/free-demo Meet with us at eTail West. February 25-28 in Palm Springs, California. Request a meeting.Reinvent Your Pricing #ReinventPricing
    • 57. Contact Me Drew Williams VP, Marketing 360pi d.williams@360pi.com (416) 300-0543 @360_piReinvent Your Pricing #ReinventPricing
    • 58. Q&A Sucharita Mulpuru VP, Principal Analyst Forrester Research Niral Vora Sr. Analyst, Pricing & Analytics Sears Canada Drew Williams VP, Marketing 360pi Mark Emond President Demand SpringReinvent Your Pricing #ReinventPricing
    • 59. Thank-You! Questions? Email d.williams@360pi.comReinvent Your Pricing #ReinventPricing

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