The Perils of the Price – A Race to the Bottom?

70% of shoppers are still concerned with rising prices at the grocery store.?

But that isn’t a recommendation to drop prices across your KVIs...?

In retail, a "race to the bottom" refers to a situation where competitors repeatedly lower prices to undercut each other. This creates some (negative) consequences:?

• Continuous price reductions can erode profit margins, making it challenging for you to sustain business operations and invest in strategic improvements.?
• To maintain low prices, you may end up compromising on product quality, which can lead to a decline in overall customer satisfaction/loyalty.?
• Serious discounting can damage brand perception, as shoppers begin to perceive the products or services as low quality or low value.?
• The intense competition can make it difficult to differentiate and attract customers.?
• Price pressures can strain supplier relationships, generating issues such as reduced product availability or quality.?

Price Wars Aren't Sustainable?

Intense price competition among major retailers like Walmart, Kroger, Amazon, and others has led to thin profit margins for many grocery players. Slashing prices probably isn’t your strategy. But can you optimize prices to balance profitability and customer perception??

How do you do that? The secret weapon = accurate competitive intelligence + a reliable price engine.?

Price Optimization Doesn’t Mean a Race to the Bottom!?

Price optimization is often confused with lowering prices because there’s an association with competitive price matching. In fact, retailers like Amazon and Walmart built their empires on being priced lower than everyone else. However, retail price optimization is about finding the right price point that maximizes profitability while also considering factors like assortment, elasticity, competitor prices, and your business goals.?

To do this effectively and efficiently, grocers need the operational boost that comes with the right pricing engine. Here are 5 ways grocery retailers can benefit from a price engine:?

1. Competitive Pricing: Monitor competitors' prices and adjust your own prices accordingly. Stay competitive in the market and avoid losing customers just because someone else has lower prices.?

1. Optimized Pricing: Analyze pricing data and market trends for automated recommendations that are in line with your pricing strategies. Maximize profits while remaining competitive.?

1. Increased Sales: Attract more customers and increase sales. A price engine helps you identify pricing opportunities or risks that can lead to increased revenue.?

1. Data-Driven Decision Making: Inform your pricing decisions with complete data and insights. Make more informed decisions based on data rather than intuition or guesswork.?

Focus on value to differentiate yourself from competitors. A price engine can help you improve your business’s pricing strategies, increase competitiveness, and ultimately drive more revenue and profit.?

What Are Common Grocery Pricing Strategies??

Most US grocers adhere to one of these pricing strategies…?

• Everyday Low Pricing (EDLP): This strategy involves offering consistently low prices on products without the need for frequent sales or discounts. The goal is to build customer loyalty and trust by providing value and predictability.?
• High-Low Pricing: This strategy involves alternating between high prices and low prices through sales promotions. Retailers use this strategy to create a sense of urgency and encourage customers to make purchases during the low-price periods.?
• Loss-Leader Pricing: This strategy involves selling a product below its cost to attract customers with the hope they’ll buy other, more profitable items.??
• Promotional Pricing: This strategy involves temporarily reducing the price of a product to stimulate demand and increase sales. It’s part of a larger strategy to attract customers, promote products, and/or drive sales during a specific period.?
• Bundle Pricing: This strategy involves offering discounts or special prices when customers purchase multiple items together as a bundle. This can encourage customers to buy more items and increase the overall purchase value.?

…and regardless of which one your business operates under; you can still benefit from price optimization.?

For example...?

• A high-low grocer can use price optimization software to monitor competitive prices and determine when and what the best discount/promotional plan is.??
• A grocer using a loss-leader strategy can use price optimization software to optimize product prices outside the items being sold for a loss.?

Is It Time for Your Team to Use Price Optimization??

Switching to Bungee Tech’s grocery-specific price optimization solution provides you with:

• Automated advanced analytics. We’ll give you major insights into your category and/or product pricing. This will help you focus on decisions that drive profitability.?
• Grocery-industry customizations. We understand the ins and outs of the grocery industry which means our price optimization solution does too. Price decisions take into account assortment gaps, price zones, customer segments, competitors, and pricing rules.?
• Integrations. We’ve built seamless integrations for your existing systems so that you can easily implement the technology without disrupting your operations. We’ve even created downstream integrations so that you can automatically send price changes to your label printer, ESLs, and POS system.?

If you’re ready to automate growth, let’s talk!?