A new report from RELEX and Incisiv is urging shift to advanced pricing and promotions strategies. The report ‘From Fragmented to Unified: Why Retailers Need to Integrate Their Pricing & Promotions Capabilities‘ provides an in-depth look into the current state of pricing and promotions in the retail sector across the US, the UK, France, and Germany. It highlights the increasing importance of strategic pricing and promotional strategies as both retailers and shoppers navigate challenging landscapes.
The research was based on a survey of 179 retail executives. It underscores the growing pressure on retailers to adapt to heightened price sensitivity among consumers. The report suggests that 93% of shoppers now demand more value from their spending. 84% say that price is a crucial factor in their purchasing decisions. In response 87% of retailers used more aggressive discounting strategies to maintain sales volumes and customer loyalty.
Key findings from the report include:
Promotions drove $1 trillion in sales in 2023:
With economic uncertainty, rising inflation, and shifts in shopper behaviour, promotions became an essential tool for retailers to attract and retain shoppers in 2023. 87% of retailers anticipate maintaining or increasing promotional efforts in 2024.
Only 12% of retailers are using advanced analytics:
Only a small percentage of retailers use advanced, data-driven approaches (real-time data, advanced algorithms, and AI) to power their pricing and promotions. The lack of adoption impacts retailer agility in responding to market changes and changes in shopper behaviour.
#1 challenge impeding maturity is data quality and integration:
Without accurate, unified data, retailers cannot effectively optimise their promotional strategies. Cultural resistance is the #2 challenge in improving maturity.
37% of retailers use spreadsheets to manage promotions:
Retailers are using spreadsheets and legacy systems to drive execution. This leads to a lack of the agility and integration needed to respond to changing market dynamics with speed and precision.
The report suggests that an effective technology stack that integrates pricing and promotional optimisation can significantly boost retail sales. This is achieved by making business processes more strategic and efficient.
Optimisation tools leverage advanced analytics, AI and ML to refine pricing and promotions in real-time. This ensures that retailers can react swiftly to market changes, competitor actions, and shifting consumer preferences. This precision minimises guesswork allowing retailers to set the right price or offer the right promotion at the right time. This enhances profitability while maintaining customer satisfaction.
Breaking down silos
The study emphasises the need for retailers to break down silos and integrate their pricing and promotional capabilities. Unifying pricing and promotions and moving to an effective technology stack, the report estimates that retailers could achieve an additional $450 billion in incremental sales.
“Consumers today are more aware of and motivated by prices than ever before. Retailers must evolve their pricing strategies. To respond to this demand with tools that are faster, smarter, and more integrated across their entire operation,” said Jeff Bulger, Strategic Principal, RELEX Solutions. “Effective pricing is no longer just an option. It is a critical driver of both customer loyalty and profitability in today’s retail landscape,” Bulger added.
“What got retailers here won’t get them much further. Driving $1 trillion in sales on the back of outdated analytics and technology platforms highlights the immense growth potential that’s possible,” says Gaurav Pant, Chief Insights Officer at Incisiv. “The path forward isn’t just about technology; retailers also need to overcome cultural inertia and unlearn years of legacy behaviour.”
Enterprise Times: What this means for businesses.
The retail sector is experiencing a series of disruptions. Price-conscious consumers drive retailers to sharpen their focus on pricing and promotions. With economic uncertainty looming, 84% of shoppers cite price as a critical factor in their purchasing decisions.
This ‘value reset’ is forcing retailers to adapt their strategies. They are now offering more aggressive discounts to align with consumer demand for better value. Promotions have become essential, driving an estimated $1 trillion in sales in 2023. They account for about 20% of total retail sales in both the US and EMEA.
The key lesson learned from the report is that pricing and promotions are becoming more critical in today’s market. As a result, the outdated approaches could be costing retailers as value-seeking shoppers fuel $1T in promotional sales.
When pricing and promotional strategies are optimised, retailers benefit from a cohesive approach that maximises the effectiveness of both. Siloed management of these areas can lead to conflicting strategies. This includes discounts that erode margins or pricing that undermines promotional efforts.