Retail price optimization is becoming an essential tool for achieving success in the e-commerce industry. Retailers are finally realizing that it is the chief driver of profits. So why is price optimization in retail that important? Let’s understand it with a few examples.
Recently, an article published on Bloomberg has shown that bigger brands like Michael Kors and Ralph Lauren reported booming profits by managing their inventory better and offering fewer markdowns. It just confirms that ‘Price right, discount less and manage your inventory tight’ is the new formula for achieving the ‘magic price’ that would drive more customers to your online stores. That is price optimization in retail for you!
3 Important Factors that Affect Price Optimization in Retail
- Price Elasticity
- Product life cycle for different retail segments
Keeping these in mind, the optimizers use smart price analysis solutions to harness user data from the internet, mainly review websites and social networks, and turn it into valuable inputs. These insights help retailers determine an optimal price for their products or services and the time when it should be introduced in the market to attain higher sales and better profits.
Bigger Brands have already adopted it: Have You?
Retailers follow different strategies to recapture the revenues that they have been leaving on the table earlier. For instance, Michael Kors and Ralph Lauren have made their products more exclusive by relying less on department-stores and closing storefronts to avoid aggressive markdowns.
JCPenney has balanced their inventory and minimized discounts to improve their pricing strategy. Meanwhile, Zara has incorporated other factors like planning, designing, merchandising and manufacturing in their pricing strategy to attain flexibility. This way, they were able to respond to their customers in a better manner.
Likewise, Kohl produced less fall and winter stock that helped their margin rates because fewer promos and discounts were required to sell off their old merchandise before the spring season.
How do you know what strategy is good for your brand? That’s where web scraping and price optimizing professionals help you. They determine an optimum price range that works for you. Therefore, you must avoid jumping on the price trend bandwagon and get professional help to overcome challenges.