Lessons From Walmart and Target's Earnings Misfire: 3 Capabilities Retailers Need Now

By Anis Hadj-Taieb, General Manager, DemandTec

Two of the nation’s three largest retailers experienced an awful week. The market’s reaction to their earnings was partly about inflation and the downstream impact of supply chain management that curtailed their profits. Wall Street assessed that these problems were something that could impact everybody else.

The result? Investors pummeled both Walmart and Target stocks, and other retailers were implicated. The retailers were “caught off guard by a rapid retrenchment among consumers at a time when they were carrying a higher than usual level of inventories,” noted Bloomberg.?

According to the report, Walmart carried one-third more inventory, while Target had 43% more than one year ago. In response to this oversupply of goods, such as discretionary items like TVs, Target cut prices and trimmed its profit margins in those categories.

Could better product and category price optimization have made a meaningful difference?

Yes —?and here’s why. For many retailers, severe inflation is uncharted territory. Adjusting to inflation and learning to achieve “rapid retrenchment” requires new tools and a shift in strategy. Here are three price optimization capabilities that can become difference makers for retailers of any size:

Listening to the customer With analytics

When consumers began tightening their belts, retailers needed to sense and respond accordingly. Which stores are harbingers of demand? Which categories are most impacted? If customers won’t accept price increases for essentials, will they tolerate an incremental rise in discretionary items? Are customers feeling more pain in Store A or B? Are digital customers more tolerant of small price increases? That type of listening requires analytics.?

Changing the margin mix

Walmart reported that some of its customers are shifting to less expensive private-label brands. Private brands generally offer higher margins, so it’s a win-win for retailers and consumers. Retailers need to determine where they can make up for lost margin. The trick is balancing the portfolio by not over-indexing on price increases or decreases. Most customers still prize quality even in an inflationary environment. Retailers tell us that finding skilled workers who can strike this balance is tricky in this labor market. There is a severe shortage of qualified data scientists.

Scaling and price optimization?

Timeliness is an under appreciated capability. Many retailers encounter labor and technology constraints that prevent them from making timely price changes. For these retailers, it’s easier to reprice an entire category rather than specific items in certain stores. Under these constraints, pricing is a matter of triage and prioritization. But speed is essential when dealing with supply chain and inflationary issues.?

Today, more than two in five retailers use price optimization tools, but most cannot sense and predict demand.

Many retailers still use spreadsheets to make pricing decisions, making it difficult to make rapid or iterative adjustments — particularly in multiple locations.?

Walmart and Target are well resourced and nothing if not resilient. They will learn from this experience. Will other retailers gain the capabilities to become more resilient to enormous swings in consumer sentiment, consumer preferences, and consumer demand?

DemandTec Autonomous Pricing on Demand offers retailers of all sizes access to AI-powered, enterprise-grade pricing optimization technology without the cost, internal resources, and hefty implementation traditionally required. Visit demandtec.com to learn more!??

About Anis Hadj-Taieb, DemandTec General Manager

Anis Hadj-Taieb is General Manager at DemandTec by Acoustic. Anis brings a unique understanding of the retail landscape, along with extensive experience leading sales team for AI-enabled pricing and optimization solutions to DemandTec. With over twenty years of leadership experience in client management, revenue generation, and team management, Anis has specialized expertise in deploying analytics and optimization into the retail and FMCG industries.

Anis joined DemandTec from GreyOrange, where he served as Global Vice President of Sales, responsible for nearly doubling the global sales team while exceeding sales targets. Prior to GreyOrange, he was Senior Vice President of Sales at Revionics and Senior Vice President of Retail and Customer Success at Eversight. Anis also held executive-level roles at software companies including PRGX, Infor Global and Oracle. He earned a master’s degree in Applied Mathematics and Computer Science from the National Institute of Applied Sciences in France.

About DemandTec:

A pioneering leader in retail pricing, promotion, and markdown technology for decades, DemandTec is ushering in the new era of unified autonomous merchandising. With Unify by DemandTec -- the industry’s first -- retailers can unite their data, systems, internal teams, and collaborate with suppliers to generate profitable revenue growth with the power of AI.

From food to fashion, DemandTec partners with more than 700 customers around the globe. To learn more, please visit us at www.demandtec.com.