Market inflationary pressures are impacting the cost of goods, so creating an airtight price architecture is crucial to support your brand in maintaining and improving margin. In 2022, average order values were $7 more on average than they were the year prior, reflecting the continued impact of inflation on recommended retail prices. Without easy access to discovering the most profitable or greatest potential products in your business and understanding price fluctuations in the market, it is harder to maximize opportunities within your assortment.
Once you have the right product, it’s then crucial to identify the right price and assess its impact on your margins. Retailers face this challenge every day. Over pricing reduces full price sell-through and increases markdown spend, while under pricing product and disproportionate discount depths reduce margin and profitability.
In a recent Business of Fashion article, it is stated that “Too conservative of an approach to inventory means missing lucrative full-price sales and risking shopper disappointment — an opportunity cost that most brands are reluctant to bear, especially if they answer to public shareholders every quarter. More often, retailers overestimate demand, and are stuck with excess goods with no other option than to mark down prices.”
Retailers need to have complete visibility on both assortment and pricing strategies in the market, with a connected view into profitability, product performance and your customers.
What if there was a way to do it all? Increase selling prices across key categories, improve full price sell-through, and increase gross margin all by getting your product and pricing right from the start. How exactly can you do it all? By leveraging both competitive data and internal business data to optimize the price of every product in your assortment, no matter where it is sold. Using this type of merchandising intelligence helps to connect every data point, giving your team the tools to super-charge your pricing strategy.
Use Competitive Data to Accurate Benchmarking for Profitable Pricing Strategy
Creating a profitable pricing strategy is challenging. Merchandising, planning, pricing and strategy teams all need visibility on the price increases taking place (or not) across their own markets, categories and SKUs. Benchmarking your own market regularly is one way to ensure you’re consistently recalibrating your price points in the right direction. Aggregated data that provides views of your market can support in pinpointing where you can grow, maintain, or potentially lower price to drive more volume or move more in line with the competition.
If we look at various categories across the market, many are being impacted by inflationary pressures. For example, 2022 witnessed soaring cotton prices thanks to several contributing factors, such as rising fuel and logistical costs. Across the market, several denim retailers raised the price of selected jeans. Lee has the highest proportion of products in stock that have seen a price increase, particularly in the UK at 38%. Looking closer, the retailer has implemented different price increases across its women’s Scarlett high jeans, with elevations of £5-£10 depending on the wash. For example, the price of its black rinse wash remains flat at £85 with only 61% cotton content.
Retailers who can react quickly to market changes can better position themselves for success. By analyzing what pricing shifts are taking place within your market on a regular basis, you can react to those changes with ease and enable your teams to make better decisions based on real-time information. Consolidating your views by region and channel also means you’ll be better positioned to enter new markets, grow existing ones and refine pricing strategies based on currency fluctuations.
Unleashing the Power of Internal Data: AI-Based Pricing Optimization for Retailers
Once your teams have a good read on what’s happening in the market, it’s critical to compare that to what’s happening inside your business – looking at your top or poor performers, your pricing and markdown strategy and your customers. Consumers want stability and consistency when it comes to pricing no matter where they shop. They have access to more pricing information across all channels and hone in on the inconsistencies more than ever before.
Gartner recommends that retailers should “Evaluate and deploy AI-based pricing optimization applications to support a pricing strategy to improve speed and scale of decision making through smarter and faster analytics and optimize customer data to target the right customer with the right pricing and promotions.”
Investing in this type of AI gives retailers the ability to find gaps in their own strategies and pinpoint opportunities to optimize pricing, whether that be adjusting pricing based on stock cover, pinpointing underpriced items or where markdowns can be reduced. It’s important to get a holistic view of your digital channel and stores and prioritize the most impactful changes based on predicted profit gain and margin protection.
Your Complete Pricing Toolkit: Achieving Profitability with EDITED’s Merchandising Experience Platform
No matter the stage in the retail life cycle, looking at data brings focus to where action is required. In pre-season hindsighting and planning, you can pair internal data for last season’s performance and the top performing products and categories alongside full competitor and market analysis. From here your team can nail your assortment plan, price architecture, marketing strategy and promotional plan by backing the right products and trends at the right time. By looking at this data even further in season, your team can respond quickly to new, high performing trends, make any price adjustments, activate new promotions to clear slow moving stock and determine which products require more exposure or replenishment.
That’s why the world’s most successful retailers use EDITED. More than just data, EDITED’s merchandising experience platform supports established workflows, driving faster, smarter decision-making with indispensable data and insights.
EDITED’s suite of pricing tools designed specifically for retail pricing teams augments your ability to understand and identify value-driving opportunities in minutes. Monitor pricing across all your markets, make strategic changes to your price architecture and maximize margin across all categories. Understand macro industry pricing and discounting trends to focus your analysis in the most relevant areas and uncover areas of interest that you might not have considered. Monitor the impact of pricing and discounting decisions at a more granular level in a scalable way.
Wherever your product is sold, optimize your pricing strategy accordingly. See what opportunities you can discover here.