What is in this article?:
- Roundyâ€™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
Among its other benefits, price optimization helps Benish navigate’s Roundy’s 50,000 SKUs to identify “low-hanging fruit” that could easily yield margin improvements but would otherwise be hard to identify. “If you move the retail price of those items five to 20 cents, even though they don’t do a huge volume, it just goes to your gross margin,” he said.
At the same time, the system allows Roundy’s to do KVI (key value item) analysis and to set prices by individual store clusters that have similar customers, based on two years of store data.
“We had historically priced by geography, so all 20 stores in Milwaukee would have the same prices,” Benish said. “But we want stores to be clustered by ‘like customers’ vs. simply geography.” Clustering – one of the system’s “more rewarding pieces,” he said – has reduced the number of pricing zones by 30%.
The system’s more accurate treatment of prices has eliminated situations in which a larger size is more expensive than a smaller size on a unit basis – something that would prompt angry calls from customers, Benish noted.
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Next up for price optimization are perishable categories, starting with produce items that have relatively steady costs such as bagged salads, dressings, mushrooms, apples, lemons and limes. Revionics is also helping Roundy’s look at the price elasticity of promoted items in order to maximize sales lifts.”We want to make fact-based decisions on promotions,” Benish said.
Some products, like bananas, milk and eggs, Roundy’s will not subject to price optimization. Those “uber KVIs” are micromanaged on a market-by-market basis to ensure they are priced right vs. the competition, Benish said.
Asked whether Roundy’s would consider installing electronic shelf labels as a way of expediting price changes suggested by the Revionics system, Benish replied that he couldn’t justify the cost of an ESL system. “The labor to make tags and the printing costs don’t come close to the cost of outfitting a store with ESLs,” he said.
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