GUEST BLOG: In this contributed blog post, Anastasia Laska, vice president partner alliances and business development, Revionics, an Aptos company, explains how employing tech that helps them roll with the punches will be key for retailers in 2021 as the current crises leads to upheaval.
Just over a quarter of all food supplied to the UK comes from EU states according to DEFRA so some disruption to business as usual is inevitable. And this comes at a time when Covid-19 has already changed the way grocers operate and the way their customers behave in terms of basket make-up, size and ordering. This has all led to higher costs for the grocers, at the same time as competition from discounters and digital channels grows and shoppers become more price-sensitive than ever.
Deal or no deal, Brexit, even allowing for a business as usual transitional period, makes the chances of retail getting back to normal quickly very unlikely, particularly for those businesses that have not seen the Christmas sales boost they were expecting as lockdowns were eased.
When rising Brexit-driven costs begin to make their way through the supply chain, along with an unsustainable squeeze on margins and profits, how can grocers implement a more strategic approach to pricing that keeps the focus on value and customer loyalty while delivering sustainable results?
There are predictions that Brexit might bring more long-term damage and losses to UK retailers than Covid-19, so how can they prepare to keep pace with these changes, both seen and unforeseen?
Firstly, retailers must be agile in their response to market developments. Grocers in particular need to start monitoring competitive price changes and shopper buying behaviours in real time, making sure they have automated pricing workflows to enable them to adapt strategy and execute price changes with speed, precision, confidence AND without margin leakage. Prices set incorrectly at the beginning of a month, will see revenue and margin erosion as soon as the products hit the shelves and last right through the month.
Secondly, by setting performance based on key value item (KVI) and price elasticity analysis can give retailers insight into the items where price truly matters to shoppers, as opposed to items that can help recover margins. Understanding the respective roles of own-label and branded items in price image also sharpens focus. Market basket analysis can pinpoint item affinities so grocers can craft promotions that increase shopper traffic and drive top and bottom-line results.
Rising costs may create pressure to raise prices at the same time that competitive actions cause a kneejerk, cost-cutting response. Progressive retailers conduct on-demand what-if scenario analysis to understand the impact a potential price change will have on units, margins and profits before implementing any changes.
Finally, retailers have to be willing to adapt and evolve their pricing strategy. The value of more sophisticated, AI and data-driven pricing approaches and workflows is to bring price strategy to life at the shelf. Retailers should continually assess the need to adjust the relative emphasis on revenues vs margins vs competitiveness at the item, category, department, location or banner level.
The demand is out there; it is just a question of knowing how to tap into it. UK shoppers have changed their behaviours dramatically, in terms of how much more they will pay for certain items that bring them cheer during lockdowns. At the same time, worried about their jobs and finances, they will search doggedly the find the very best deals for staple items. The result is that they may change these behaviours short-term or possibly even permanently.
Being able to respond to these changes and further impacts after Brexit is the key to all retailers’ KPIs on revenue, margin, market share and brand equity with their customers.