Getting Prices Right in 2021
Progressive Grocer|February 2021
NEW TECHNOLOGY ISN’T THE ONLY THING FOOD RETAILERS NEED FOR BETTER OPTIMIZATION.
Thad Rueter

Key Takeaways

A pandemic that threw the grocery sector into a tailspin has made it clear that price optimization is an imperative.

Retailers should strategically consider the role of private label in their overall product mix, and price accordingly, using optimization for speed and efficiency.

Keeping up with consumer demand for e-commerce services, and keeping ahead of competitors, will require more food retailers to invest in software-as-a-service solutions or other forms of optimization technology.

Few things are as important as price when it comes to grocery shopping — but how to optimize those prices is undergoing significant change in 2021, and retailers that don’t get on board could face problems sooner rather than later.

Thanks in large part to the pandemic — but also cheaper technology — price and promotional optimization efforts are moving from manual processes to automation, which is often powered by machine learning or artificial intelligence (AI).

Even when the pandemic subsides and food retail gets back to normal — or as normal as will be possible after months of supply-chain hiccups, pantry loading and e-commerce growth — merchants that intelligently embrace price and promotional optimization will have an edge when it comes to dealing with new consumer habits.

Cheryl Sullivan, president of San Mateo, Calif.-based pricing and promotional data and technology company DemandTec, sums up the situation and stakes better than most.

“Even in early 2018, many retailers considered science-driven price optimization as a nice-to-have,” she says. “By 2020, it was no longer viewed as a nice-to-have, yet retailers struggled to understand it. Fast-forward as we move into 2021, and retailers have begun not only to understand it, but to embrace it. With the onset of a pandemic that threw grocery into a tailspin, it’s clear that optimization is an absolute imperative.”

A recent study cited by Sullivan helps to illustrate her points. In mid-2020, 60% of retailers said that they were focused on putting AI-powered pricing in place. In 2021, that technology will stand as a top priority for retailers that haven’t already progressed on the optimization journey, she notes.

“About the only thing that didn’t change was the importance of price — shoppers continue to rank it as the single most important factor in choosing where to shop, which it has consistently been for many years,” Sullivan adds. “It won’t come as a surprise that I see 2021 as a critical year for price optimization to take center stage for retailers.”

Private Label Pricing

A change that took place during the pandemic — a change still playing out, in fact — shows the importance of better food retail price optimization efforts, and how grocery store operators can use the technology to gain ground over rivals.

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