It is well known that the British are bargain hunters and we’re willing to put the time into finding the best price. Increasingly consumers are turning towards technology to get the best deal and make their hard earned cash go as far as possible. With technology comes greater transparency through the ability to compare brand prices with one quick internet search. Pricing is a core strategic component of brands’ profitability, so this has significant implications for both ecommerce and high street stores. Now more than ever, brands need to ensure they get their pricing right.
According to a recent survey by Blue Yonder, 85 percent of shoppers in the UK try to find some sort of bargain when they are out shopping and will spend on average 29 minutes looking for the best price. In the ultra competitive world of retail marketing, this is just one of the areas in which consumer behaviour is rapidly changing. Relying on limited methods of cost plus pricing; odd pricing and time-based discounting will no longer be sufficient. It is critical for both bricks and mortar and eCommerce to keep ahead of competition with the best pricing, especially as the survey found that half of shoppers use price comparison websites.
Back to the future of bartering
Interestingly though, the much promoted and advertised price-match guarantees have received surprisingly little traction with only 1 in 9 using the guarantees in-store. In fact shoppers are more likely to barter or haggle (14% of respondents) to get a better price than use a price guarantee. This signals that we’re going back to the future with consumer-led pricing.
Pricing that is influenced by what customers are willing to pay is as old as trading itself. Once, customers haggled for everything. One hundred years ago, pricing was based on the individual bartering for an individual item, at a specific time. Pricing was based on the price that could be achieved at that time and how much a customer was willing to pay – consumers had the control. Then Frank W. Woolworth founder of F.W. Woolworth Company and ‘Five-and-Dimes’ started buying directly from manufacturers and fixing prices. This practice has been the status quo for a century, but new technology advances are disrupting this and bringing us back to the future of shopping.
Beyond fixed pricing and bartering - The rise of show rooming
However, technology is making it possible to get the right price without the need for human engagement and bartering. This is the most dangerous for retail: The survey revealed that show-rooming is becoming common practice across all age brackets, with over two thirds of shoppers admitting they use bricks-and-mortar shops to look at and try on items, only to return home and buy the item cheaper online. Furthermore, 9% admitted to making this purchase while they were still in the store, on their mobiles devices, rising to almost a quarter of 16-24 year olds. The latest report from the IMRG Capgemini e-Retail Sales Index revealed that online shopping is up 18 per cent in 2015 with smartphones taking the lions’ share – but it is also revolutionising the way that online products are priced.
This is not the only statistic to highlight a new age of shopping habits and the millennial’s talent for silent bargain hunting that marketer’s should pay attention to. Those who have grown into adulthood surrounded by the technology are also revealed as the demographic most likely to use vouchers online (60%), use a price comparison website (55%) and will even use a barcode scanning app (10%) in-store to ensure they get the best price. Furthermore, they divulge that they think they have the most to gain, with 1 in 4 believing they could save over 30% on a purchase price by shopping around.
Technology disruption – not just a buzzword
This is proof that mobile phones and ubiquitous internet access is truly changing the shopping experience with brands’ sales literally being taken from under their noses. It also demonstrates that millennials are far from frivolous with their money, they are careful to seek out the best deal, and they prefer to be less confrontational in their retail experience, making their savings online rather than through a physical conversation with a retailer. This is a burgeoning trend.
It shows that the younger generations – growing up in the age of Ebay and Amazon, are more strategic in how they shop than previous generations. It highlights the importance of optimising your pricing strategy and continuously analysing your customer behaviour and the competition to remain a player in the market. As consumer’s become more accepting of price changes, technology is shifting consumers’ behaviour, handing control back to them.
For marketers, price and promotions will become key, and the rise of show-rooming will significantly impact the way they interact with customers. The risk that they could lose out on a sale to a competitor even while a customer is still in their store means that a relook at pricing strategies – drawing on data available not only from their own past sales and price points, but also data from external sources such as competitor pricing - is critical to the survival of brands. There are technology options open to marketers to ensure retailers get their pricing strategy right in an age where prices must be dynamic to stay relevant, enabling the optimum price for individual items at a specific time to be found. Those that take their lead from their customers and harness the power of digital are sure to thrive.
By Rakesh Harji, UK MD of Blue Yonder.
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