What is in this article?:
- Roundy’s Sees ROI in Price Optimization
- Low-Hanging Fruit
“It was important to have a strong pricing strategy to combat supercenters and conventional grocers.”
— Jason Benish, VP of pricing and strategic initiatives, Roundy’s
NEW YORK — Roundy’s Supermarkets has found “significant ROI” in the corporate price optimization system it has employed over the past two years for base price changes at its 165 stores, said Jason Benish, vice president of pricing and strategic initiatives for Milwaukee-based Roundy’s Supermarkets.
In a study of price optimization’s effect on 10 categories at test and control stores, the chain found “the [trend] lines diverged” for year-over-year gross profit dollars, said Benish at a session here last week at the National Retail Federation’s Annual Convention. “If I could make that kind of return on my [personal] money, I would probably not be here right now.”
In particular, the candy category was able to achieve a “trifecta” in which the system boosted gross margin, dollar sales and unit sales.
Roundy’s applies the system — provided on a software-as-a-service basis by Revionics, Roseville, Calif. — to all categories, except for perishables. It does not require investment in servers that the retailer would have to host itself, something that appealed to Roundy’s. “We wanted speed to benefit,” he said, adding that the system is easy to integrate, use and understand. It required three months for set up and yielded results in the first year, he added.
But the system requires retailers to establish an up-front strategy that identifies which categories should drive profits and which should drive traffic, for example. The price optimization system is “only as good as the pricing strategy behind it,” he cautioned.
Roundy’s receives price recommendations from Revionics on a weekly basis, enabling it to remain current with changes in consumers and the business climate. The retailer does reviews of categories at least twice a year.
Roundy’s decision to employ price optimization was influenced by its competition with Wal-Mart Stores. “It was important to have a strong pricing strategy to combat supercenters and conventional grocers,” said Benish.
Previously, Roundy’s used a spreadsheet loaded with costs and competitive data to come up with pricing changes on an item-by-item basis. “It was not efficient and we were not using science or customer insights,” said Benish. “We wanted to make more fact-based decisions about prices that we did in the past.”
Those decisions are supported by the system’s ability to forecast the effect of price changes on customer demand. “We had not done a good job with that,” he said.
Benish noted that Roundy’s chief executive officer, Robert Mariano, is strongly behind the use of price optimization, which helps him persuade skeptical merchandisers to buy into it.





