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Winning with Price Intelligence: A Merchandiser’s Guide, Part 3

Former Buyer, Francesco Fotia talks about how to intelligently lose sales and make better merchandising decisions.

Intelligent Merchandising Decisions:

Recently major retailers such as Best Buy and Target announced that they will be battling head-to-head with mega pricing and analytical forces like Amazon. In Stephan Liozu’s recent blog post, he discusses the various price match guarantees that retailers are offering to keep customers happy as well as how integral it is for retailers to equip themselves with the right technology to implement these price guarantees.

I would like to look at the other side of the coin and observe the merchandising implications of a price intelligence solution. I will outline some key points that buyers/merchandisers should be cognizant of when making merchandising decisions.

Product Selection and Implementation

A price intelligence solution can help paint a clear picture of the competitive landscape during the product selection and implementation phase. There are three major points to consider:

1)     Ensure that you are getting the best prices from your supplier. With competition heating up and offering price guarantees, you can no longer afford to stock items that are not highly competitive. This bodes especially true for “market model” items. These are items that contain no differentiating factors from those carried by your competitors.

2)     Setting Initial Price – In my last post, I spoke about culture and how price is one of the most valuable metrics merchandisers need to nurture this culture. With the increased penetration of technology and tools that allow consumers to become instant pricing analysts, there is no time for a retailer to get back into the game. It is important to set the right “pricing tone” from a product’s inception. It does not take long to lose consumer trust and it is much more economical to preserve your current customer base rather than to lose them and fight to bring them back. Launch items at the right price!

3)     Ensure that carrying this item will be ultimately profitable for your organization, allowing you to avoid unnecessary markdowns. It’s important to have the right price out of the gate. A lot of merchants set initial prices that are based on little or no founded base knowledge. It becomes extremely costly for retailers to set an initial price, only to find out it is not a viable one. This leads to markdowns and ultimately starts eroding department/category margin.


“Price is what you pay. Value is what you get.” 
This is yet another one of my favourite Warren Buffet quotes and it is an appropriate one for the next point I will be discussing.

There are situations, especially for smaller independent retailers, where it becomes extremely difficult to compete on price. Retailers have varying levels of buying power, some retailers may have virtual exclusivity on an item or category and some retailers employ unique marketing strategies for certain items or categories (i.e. they elect to sell some items at extremely low margin to capture sales and create extra foot traffic). These are just some examples, but the crux is that retailers need to look at creative ways of driving their value message to their customer base. A price intelligence solution can reveal these types of insights and it is important for retailers to critically review the information extracted from a price intelligence solution.

One way for retailers to fight this battle is to add value to their current assortment. Bundling is a great example of this. Bundling can take many forms. One might be from a product perspective where a television is bundled with a Blu-ray player. Although the price of the bundle may be higher than the television itself, this strategy may work as long as you are able to show value in keeping the bundle price lower than that of the sum of the individual components. Another example is to create a service bundle that is unique to your organization. An example could be to offer personalized in-home service, an extra year warranty or after care technical support. Bundling services could allow you to keep the item ticket prices a little higher, offering superior value to your customer.

Intelligent Loss of Sales

Intelligent loss of sales is a term that I believe all retailers should live by. Sol Price, founder of mega-warehouse and discount retailer Price Club (which merged in 1993 with Costco) talked frequently about intelligent loss of sales as the secret to good merchandising. He spoke about this term in relation to keeping overhead costs low and preparing yourself for sales you can live without. You may be wondering what this has to do with price intelligence. In my opinion, the answer is a lot.

A price intelligence solutioncan reveal that the causes of your slow sales are due to the non-competitive nature of your prices. It can also reveal that it is time to combat this declining sales trend by getting out of the item or category altogether. This is especially important for perpetually declining sales on an item or category. The best decision is often to mark down an item and get rid of it in order to make room for other items that will drive more sales and profit for your organization. This is especially crucial for bricks and mortar enterprises where floor space is valuable and sales are often measured on a square foot basis.

I am very passionate about price intelligence because it offers so many valuable insights. A price intelligence solution is a powerful analytical tool that allows merchandisers to assess the internal state of their business and allows them to create programs that are continuously creating value for their customers while maximizing sales potential. An aligned pricing and merchandising strategy is a potent formula for success.

Intelligent Merchandising Decisions is part 3 of a multi-part series. To catch up on the rest go to: 
Part 1: A Buyer’s Tale about Price Intelligence
Part 2: Make Three Huge Saves with a Price Intelligence Solution


About the Author
Francesco is a former consumer electronics (CE) buyer, with years of experience at a successful multi-billion dollar retailer. He offers first-hand knowledge on how to convert price intelligence into practical and value- added merchandising strategies and concepts. Currently, Francesco is 360pi’s retail industry lead, and is an ongoing contributor to Profitable Insights, focusing on the various ways to leverage price intelligence to help increase margins, sales and market share.