BIG Y, H-E-B PLAN PRICE OPTIMIZATION SOFTWARE

SARAH MULHOLLAND

SPRINGFIELD, Mass. -- Big Y Foods here and H.E. Butt Grocery Co., San Antonio, are planning to employ price optimization software, suggesting that the technology, which helps retailers determine pricing based on demand, is beginning to pick up steam in the grocery segment.

Big Y will begin piloting a price optimization application at 10 stores next month. Phill Schneider, vice president, center store, said he expects to see a positive gain to the bottom line "almost immediately."

The chain is using the Retail Revenue Management Application Suite from KhiMetrics, Scottsdale, Ariz. KhiMetrics will be hosting the solution during the trial. If the program is expanded, Big Y will bring it in-house, Schneider said.

Meanwhile, H.E. Butt plans to implement price optimization software from DemandTec, San Carlos, Calif., in its food drug division in the second quarter of this year, according to an announcement made by DemandTec this month. H-E-B officials could not be reached for comment. DemandTec and H-E-B performed an evaluation of the system, called DemandTec Price, last summer to measure the product's ability to execute strategy and meet business objectives, the vendor said. DemandTec generates base prices and forecasts.

Like other systems, the KhiMetrics suite crunches data culled at the point of sale to determine the optimal price a retailer should be charging for a given item at the individual store level. But the best price is not necessarily the highest one, Schneider noted. As often as not, it may be in the retailer's best interest to decrease the price to increase volume.

Big Y had been looking at pricing packages for close to two years, Schneider said.

The first categories to be tested will be cereal, analgesics, and cleaners, cleansers and sponges. Sales goals and gross profit goals have been set to quantify the program's effectiveness.