The Pricing Blog by Omnia Retail
21.10.2024
Developing a pricing strategy: From 'Pricing by feel' to data-driven decisions
Pricing is one of the most important, and often misunderstood, topics in retail and e-commerce. The pricing 'iceberg' goes deeper than most expect. It starts with a single question: what company aims are you trying to...
Pricing is one of the most important, and often misunderstood, topics in retail and e-commerce. The pricing 'iceberg' goes deeper than most expect. It starts with a single question: what company aims are you trying to achieve within pricing? Data-driven pricing strategies impact more than just revenue generation. They also play a vital role in shaping customer perceptions, and market competitiveness. Businesses can leverage a wealth of information to fine-tune their pricing strategies. In this blogpost, we dive deeper into the importance of data and automation and how they affect shaping your pricing strategy. The challenge of pricing In the dynamic world of retail and e-commerce, pricing is both an art and a science. Many industry professionals have developed an intuitive sense for what works in pricing, relying on experience and market knowledge to make decisions. However, this intuitive approach, while valuable, often falls short of a comprehensive, developed strategy. The pitfalls of intuitive pricing Companies frequently operate with loosely defined pricing rules that have evolved over time. This approach, sometimes referred to as "pricing by feel," may seem effective in the early stages of a business. However, as companies grow and markets become more complex, several challenges emerge: 1) Overwhelming assortment growth As product catalogues expand, manually managing prices for each item becomes increasingly time-consuming and prone to errors. What once was a manageable task for a small team or even an individual becomes an overwhelming endeavour. 2) Rapid shifts in competitive pricing The digital marketplace is characterised by its volatility. Competitors can adjust their prices multiple times a day, responding to market demands, inventory levels, or promotional strategies. Keeping up with these changes manually is virtually impossible. 3) Expanding market dynamics As companies grow, they often enter new markets or face increased competition. Each market may have its own pricing norms, consumer behaviours, and competitive landscapes, further complicating the pricing process. 4) Inconsistent pricing decisions Without a structured strategy, pricing decisions can become inconsistent across products or over time, potentially damaging brand perception or profit margins. Find out how your team can benefit from Dynamic Pricing. Download free whitepaper The need for a structured approach Recognizing these challenges, it becomes clear that transitioning from 'pricing by feel' to a codified, explicit pricing strategy is crucial for sustained success, especially as you expand either the number of products or number of markets. However, this transition can be daunting. It requires a shift in mindset, the adoption of new technologies, and often a restructuring of some internal processes. This article aims to demystify this process, breaking down the first steps in developing a robust pricing strategy. Our goal is to guide retailers through the transition from intuitive pricing to making objective, data-driven decisions with increased speed and accuracy. By embracing a structured approach to pricing, businesses can: Respond more quickly to market changes Maintain consistency across large product assortments Optimize prices for different market segments Automate routine pricing decisions, freeing up time for strategic thinking Make more informed decisions based on data rather than gut feeling In the following sections, we'll explore how to begin this journey, starting with understanding your current position and defining your pricing goals. We'll then delve into practical steps for implementing a data-driven pricing strategy that can grow and evolve with your business. The importance of data and automation In the modern retail landscape, pricing excellence is closely linked to the quality and accessibility of data. High quality, trusted data is the foundation upon which effective pricing strategies are built. This data includes not only your own sales and inventory information, but also competitive intelligence and market trends. The role of data in pricing 1) Competitive Intelligence: Accurate data on competitor pricing allows you to position your products strategically in the market. 2) Historical Performance: Past sales data helps predict future trends and identify seasonal patterns. 3) Customer Behaviour: Data on how customers respond to different price points can inform segmentation and personalisation strategies. 4) Market Trends: Broader market data can help you anticipate shifts in demand or supply that might affect pricing. The power of automation While data is crucial, its true power is unlocked through automation. Pricing automation tools, like those provided by companies such as Omnia, offer several key benefits: 1) Speed and efficiency: Automated systems can adjust prices across thousands of SKUs in real-time, a task impossible to manage manually. 2) Consistency: Automated rules ensure that your pricing strategy is applied consistently across your entire product range. 3) Complex decision making: Advanced algorithms can consider multiple factors simultaneously, optimising prices based on a complex set of rules and goals. 4) Freeing up human resources: By automating routine pricing tasks, your team can focus on strategic decision-making and long-term planning. Building trust in automated systems The transition to automated pricing requires trust and reliability. To build this trust: 1) Start with a pilot program on a subset of products 2) Regularly audit and validate the system's decisions 3) Ensure transparency in how the system makes decisions 4) Provide ongoing training to your team on how to work with and interpret the system's outputs By leveraging high-quality data and reliable automation, retailers can transform their existing strategies into flexible, integrated workflows that adapt to market changes in real-time. Starting your pricing strategy 1) Self-Assessment: Understanding your current position Before looking outward, it's essential to have a clear picture of your internal situation: Analyze your current pricing methods and their effectiveness Evaluate your product portfolio and its price sensitivity Assess your cost structure and profit margins Review your brand positioning and target customer segments 2) Define your strategic objectives Consider key questions that will shape your strategy: Market position: What position do we need to achieve or maintain in the market? Brand perception: How do we want to be perceived through our pricing? Growth targets: What does ideal market growth through pricing look like? Operational efficiency: Where are our current pricing processes inefficient? Competitive strategy: How do we want to position ourselves relative to competitors? Customer value: How can our pricing reflect and enhance the value we provide to customers? 3) From abstract to concrete: Developing actionable steps Transform your strategic objectives into practical steps: Set specific, measurable goals (e.g., "Increase profit margin by 2% over the next quarter") Identify key products or categories for initial focus Determine the data and tools needed to support your strategy Outline the decision-making process for price changes 4) Align with business goals and resources Ensure your pricing strategy supports overall business objectives: Coordinate with other departments (sales, marketing, finance) to ensure alignment Assess the resources (human, technological, financial) required to implement the strategy Develop a timeline for implementation, including milestones and checkpoints 5) Create a feedback loop Build mechanisms to continuously improve your strategy: Establish KPIs to measure the effectiveness of your pricing decisions Set up regular review periods to assess and adjust the strategy Encourage feedback from sales teams and customers Talk to one of our consultants about dynamic pricing. Schedule demo here Anticipating market reactions In the fast-paced world of e-commerce, where prices can change multiple times daily, anticipating and responding to market reactions is crucial. When implementing a new automated pricing strategy, consider not just your actions, but how competitors and customers might respond. Understanding competitor behaviour 1) Analyse historical patterns: Look at how competitors have reacted to price changes in the past. 2) Identify key competitors: Not all competitors are equal. Focus on those who have the most impact on your market. 3) Monitor frequency of changes: Some competitors may adjust prices hourly, others weekly. Understanding these patterns can inform your strategy. Price monitoring software helps you with this crucial step. Mitigating Risks To avoid detrimental outcomes like price wars, it's essential to adopt a strategic approach. One effective strategy is selective price matching, where you only follow the prices of key competitors and set clear boundaries on how low you're willing to go. This approach allows you to consider matching prices on key value items (KVIs) while maintaining margins on other products. Additionally, implementing safety rules such as setting minimum profit margins, establishing maximum discount percentages, and using dynamic floor prices based on cost and desired profitability can help safeguard your business. Another important strategy is to manage your repricing frequency strategically. Balancing responsiveness with stability is crucial, and you might consider time-based rules, such as not changing prices more than once per day. Different product categories may require different repricing frequencies. Beyond price, differentiation can be achieved by enhancing your value proposition through service, warranty, or bundling. Using dynamic pricing on unique product combinations that are harder for competitors to match can also be beneficial. Lastly, maintaining a consistent price position, such as always being 5% below a key competitor, and adjusting the index based on product category or lifecycle stage can help you stay competitive without engaging in harmful price wars. Monitoring and adjusting Implement a system to continuously monitor the effects of your pricing strategy: Track key metrics like sales volume, revenue, and profit margin Set up alerts for unusual competitor behaviour or market shifts Regularly review and adjust your rules and thresholds By anticipating market reactions and implementing a flexible, rule-based strategy, you can navigate the complex e-commerce landscape more effectively, balancing competitiveness with profitability. Conclusion: Embracing the future of pricing in E-commerce As we've explored throughout this article, the landscape of pricing in retail and e-commerce is undergoing a dramatic transformation. The shift from intuitive, "feel-based" pricing to data-driven, strategic approaches is not just a trend—it's becoming a necessity for businesses looking to thrive in an increasingly competitive and dynamic marketplace. Key takeaways 1) The power of strategy: A well-developed pricing strategy is crucial for optimising sales, margins, and market position. It provides a framework for consistent decision-making and helps align pricing with broader business goals. 2) Data as the foundation: High-quality, trustworthy data is the bedrock of effective pricing. It provides insights into market trends, competitor behaviour, and customer preferences, enabling more informed and precise pricing decisions. 3) Automation as a game-changer: Pricing automation tools allow businesses to respond rapidly to market changes, maintain consistency across large product assortments, and free up valuable time for strategic thinking. 4) Anticipating market reactions: In the fast-paced world of e-commerce, it's crucial to not only set prices but also anticipate and plan for how competitors and customers might react. 5) Continuous Improvement: A successful pricing strategy is not static. It requires ongoing monitoring, analysis, and adjustment to remain effective in a changing market. The road ahead As we look to the future, several trends are likely to shape the evolution of pricing strategies: 1) Artificial intelligence and machine learning: These technologies will play an increasingly important role in predictive pricing and real-time optimization. 2) Personalisation: As data becomes more granular, we may see a move towards more individualised pricing based on customer behaviour and preferences. 3) Ethical considerations: With greater pricing power comes greater responsibility. Businesses will need to navigate the ethical implications of dynamic and personalised pricing. 4) Integration with other business functions: Pricing strategies will become more tightly integrated with other aspects of business operations, from supply chain management to customer relationship management. Final thoughts The journey from "pricing by feel" to implementing a sophisticated, data-driven pricing strategy may seem daunting, but it's a journey well worth taking. The benefits—increased profitability, improved market positioning, and enhanced competitiveness—far outweigh the initial challenges. Remember, you don't have to transform your pricing approach overnight. Start with small steps: gather data, experiment with automation on a subset of products, and gradually refine your strategy. As you gain confidence and see results, you can expand your approach across your entire product range. Pricing is more than just a number—it's a strategic tool that can drive your business forward. By embracing data, leveraging automation, and continuously refining your approach, you can turn pricing into a powerful competitive advantage. The future of retail belongs to those who can price smartly, react quickly, and adapt continuously. With the right strategy and tools, your business can be at the forefront of this pricing revolution. The time to start is now. Learn more about our revolutionary and intuitive approach to Dynamic Pricing here. Read more about interesting pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What are the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Developing a pricing strategy: From 'Pricing by feel' to data-driven decisions15.10.2024
Understanding the impact of early preparation for Black Friday
Preparing early for Black Friday is essential for retailers looking to maximise sales and stay competitive in a dynamic market. By planning ahead, retailers can strategically adjust pricing, manage inventory and...
Preparing early for Black Friday is essential for retailers looking to maximise sales and stay competitive in a dynamic market. By planning ahead, retailers can strategically adjust pricing, manage inventory and fine-tune marketing campaigns to attract more customers. This proactive approach enables the identification of key product and market trends, ensuring that promotions are both timely and effective. In addition, early preparation helps to mitigate potential logistical challenges, such as stock shortages or delivery delays, which can negatively impact customer satisfaction. Finally, preparation enables retailers to navigate the complexities of dynamic pricing and price monitoring, ensuring that they can capitalise on increased consumer activity during this peak shopping period. In our recent research, we looked at data from the sports fashion and electronics industries in the Dutch and German markets from 2018 to 2023. The analysis focused on products with price deviations and consistent data streams, providing insights into dynamic pricing, price monitoring and pricing strategies during the Black Friday period. Key findings 1) Early start of Black Friday promotions Our research shows that Black Friday promotions start 10 days before the actual event. This early start continues through the weekend, creating a highly competitive environment. Retailers start lowering prices as early as mid-October, with the biggest discounts occurring on Black Friday and continuing through the weekend. Chart 1: Timeline before, during and after Black Friday. Retailers begin lowering prices as early as mid-October, with the most significant discounts occurring on Black Friday and continuing through the weekend. 2) Post-Black Friday price trends Prices tend to return to pre-Black Friday levels, but gradually decline towards Christmas and beyond. This trend indicates a continuous price decline, influenced by the dynamic pricing strategies employed during the festive season. 3) Impact of the Omnibus ruling The European Union's omnibus ruling in 2022 significantly changed promotional strategies. By 2023, the impact of the ruling was evident as retailers adjusted their pricing tactics to comply with the new regulations. This change disrupted the typical product lifecycle, particularly during the Black Friday period. Talk to one of our consultants about dynamic pricing. Schedule a demo Prepare with 3 key actions to gain a competitive advantage on Black Friday To maximise your competitive advantage this Black Friday, focus on three essential actions before you start your strategies: Identify key players, analyse key products and evaluate key areas. By mastering these three areas, you can create a robust strategy that leverages your competitive advantage and drives success during the Black Friday period. 1) Identifying Key Players One of the first steps is to identify the key players in your market. This process is critical to understanding competitive dynamics and ensuring that your pricing strategies are effective. Questions to ask: Which retailers are price competitive? How often do the key players change their prices? How do the promotional strategies of key players differ from ours? How often should we review and update our blacklist of unreliable offers? In addition to the data available and the overview provided by our dashboards, Omnia's price monitoring software offers two indicators to measure the strength of the key players and quickly identify them. The Price Ratio Variance benchmark allows you to measure the consistency of offers against your current selling price. You can use this metric to assess which key players you should - or should not - focus on in your Black Friday pricing rules. A higher variance indicates greater inconsistency and less uniformity in offers. To ensure the accuracy of our analysis , a recently released new feature that blacklists offers identified as outliers or those with unreliable stock information helps to maintain a more normalised view of the market, especially during the Black Friday period. 2) Analysing Key Products The next step in your preparation is to analyse key products. This is essential to identify significant price variation and understand how competitors are pricing similar items. Identify products with significant price variation per area by analysing the Price Stability Score: Assess how closely your competitors' prices match your own. A score of 100 indicates identical pricing, while a score of 0 means there are significant price differences. By monitoring these scores on a daily basis, you can see which products are moving within their promotions. Top 10 Performers (Slice 1): The Price Stability Score helps you to find out at a glance to what extent your prices for products overlap with those of your relevant competitors. When preparing for Black Friday, it’s important to focus on products with significant price deviations. By filtering dashboards based on the lowest price stability scores, you can identify the most volatile items and plan your promotions accordingly. 3) Evaluating Key Domains When preparing for Black Friday, it’s important to focus on products with significant price deviations. By filtering dashboards based on the lowest price stability scores, you can identify the most volatile items and plan your promotions accordingly. Finally, evaluating key domains is crucial for determining where to focus your marketing spend and promotional efforts. This involves analysing the lowest unit prices across different markets and making informed decisions about where to allocate resources. Within the Omnia software, you can analyse relevant marketplaces and domains by examining the lowest unit price. By identifying the cheapest unit price, we can determine the most effective domain for promotions. If the goal is to offer the product for €20, it makes sense to focus on Kieskeurig, where the price aligns with this target. Conversely, it would be less effective to promote on Tweakers, where the price is significantly lower at €14.79. By combining various dashboards in your price monitoring software, you can gain a comprehensive understanding of market dynamics and better prepare for Black Friday. This holistic approach allows you to navigate the complexities of dynamic pricing and develop effective pricing strategies that enhance your competitive edge. Top 4 strategy ideas to make a success of Black Friday Once the market is understood and you know how you are positioned in the market, the next step is to see what kind of strategies you can implement in your Pricing Strategy Tree in Omnia during Black Friday. 1) Follow the Price Movement in the Market As Black Friday approaches, retailers have begun lowering their prices 10 days in advance. This early discounting is part of a dynamic promotion strategy across different assortments. To effectively track market movements ahead of Black Friday, it's important to include promotional products during the Black Friday period itself. You can still follow market prices to be competitive while ensuring that the cheapest price will be the promotional price during the promotional period. This allows for a comprehensive understanding of price trends and competitive positioning. Several conditions can be used in combination: Stock age: Adjust prices based on how long products have been in stock. Selected competitors: Monitor and compare prices with only selected competitors. Sales Through Rate: Consider the rate at which products are sold to adjust prices accordingly. 2) Promotional price for X units only We often see that in the lead up to Black Friday, companies tend to send out brochures, newsletters and promote some products with special prices on their various marketing channels. These are usually products that are popular in the market, some bestsellers or high runners that have good demand and will attract people to come to your websites when you have good deals on them and hopefully also drive sales of the other complementary products that are on the websites. Sometimes you also have a limit to this especially good price and hence, only want this price to be for X number of units sold. This can be translated into the following pricing rule: Special price only for X units sold, after which it will follow the market prices with assigned safety rules. Pricing Strategy Tree: On the 29th of November (Black Friday 2024), only the first 100 units of the products with assigned special/ promotional prices, will have the promotional price and once it reaches 100, the next price will follow the lowest price of the selected competitors with a minimum boundary of the promotional price/ special price + 5% and a maximum boundary of the MSRP/RRP 3) Avoid Price War Rather than always following the cheapest, identify the situations in which you want to follow the market down. During promotional periods such as Black Friday, it may be strategic to adjust prices temporarily to remain competitive. For example, you may only lower your prices and follow the market down (with respect to a minimum price boundary) under certain conditions, such as when stock reaches a certain age or when there are a defined number of competitors in the market. Pricing Strategy Tree: From 19th of November, for the Electronics products, depending on their stock age, the price is following the cheapest price amongst the selected competitors with minimum safety price and maximum price ONLY IF there are at least 2 of these selected competitors with prices lower than your current selling price. 4) Strategic Price Adjustments post Black Friday The price decrease and increase before and after black friday have bigger scale than the other normal period. Follow the market as retailers start increasing their prices post Black Friday but at a steady rate to avoid too big of price fluctuations. By adjusting prices with a stabilised increase, retailers can ensure a smoother transition to post-Black Friday pricing, maintaining customer confidence and business stability. Example of how this can be translated into a pricing rule: From 30th November until the end of Cyber Monday, follow the average price in the market among selected competitors, but in case of sharp price increases, limit the increase to max. 5% with a maximum of MSRP/RRP and a minimum of either promotional price or minimum margin. Conclusion: Optimise your Black Friday strategy and save time with Omnia's pricing software At Omnia, we aim to empower you with the ability to gather and analyse these insights independently. Our new tool allows you to slice and dice the data using different benchmarks, giving you a comprehensive view of how dynamic pricing and price monitoring can be applied in your industry. Benchmark against competitors: Compare your pricing strategies with competitors to identify areas for improvement. Analyse seasonal trends: Understand how seasonal events such as Black Friday impact your pricing and adjust your strategies accordingly. Regulatory compliance: Ensure that your pricing strategies comply with regulations such as the Omnibus Directive. With these insights and more, you can navigate the complexities of dynamic pricing and develop effective pricing strategies that increase your competitive advantage. Read more about interesting pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Understanding the impact of early preparation for Black Friday01.10.2024
Top 7 strategies for successful digital pricing transformation
7 Strategies for Successful Digital Pricing Transformation Pricing transformation means completely changing the way a company sets its prices, using new digital tools and technologies to make better pricing decisions....
7 Strategies for Successful Digital Pricing Transformation Pricing transformation means completely changing the way a company sets its prices, using new digital tools and technologies to make better pricing decisions. This process aims to set prices that accurately reflect the perceived value of products or services, dynamically respond to market competition, and maximize profitability. Leveraging software solutions, businesses can ensure they are setting optimal prices for each transaction, considering factors such as customer demand, market trends, and competitive landscapes. In today's rapidly evolving business landscape, pricing transformation has become a critical priority for organizations seeking to stay competitive and maximize profitability. As market dynamics shift and customer expectations evolve over time, companies must adapt their pricing strategies to keep pace. Pricing platform provider Omnia Retail has joined forces with Horvath, the international management consultancy with a focus on transformation and digitization, to share insights on the key elements of success we observe in businesses that have successfully undergone a pricing transformation. Drawing on our combined expertise in pricing software and strategies, we've identified seven key pillars that can help businesses successfully navigate this crucial process: 1. Secure Full C-Level Sponsorship The foundation of any successful pricing transformation lies in obtaining full support from top management. Our experience shows that pricing transformation needs to be a top priority for sales and marketing, product management, finance, and IT departments. Without strong backing from the C-suite, pricing initiatives often struggle to gain traction, especially because they impact many teams and may fail to deliver the desired results. With C-level sponsorship, the right KPIs (profit/revenue) can be prioritized effectively within each team. To achieve C-level sponsorship, we suggest: - Articulate the potential value and impact of pricing transformation on the company's top line - Develop a compelling business case that outlines both short-term wins and long-term strategic benefits - Quantify benefits by running a proof of concept (POC) where you A/B test the effectiveness of your pricing strategies - Ensure that pricing objectives are aligned with overall business goals and strategy By making pricing transformation a C-level priority, companies can ensure that the necessary resources, attention, and support are allocated to drive meaningful change. 2. Foster Collaboration Between Business and Technology Teams Successful pricing transformations are not solely a business initiative or an IT project; they require seamless collaboration between both domains. Our experience shows that when both the business and IT sides feel ownership, a well-developed pricing strategy will take shape and can be effectively implemented. We suggest to consider the following: - Establish cross-functional teams that bring together business expertise and technical knowledge - Ensure clear communication channels between business stakeholders and IT professionals - Develop a shared understanding of pricing goals, challenges, and potential pitfalls - Leverage technology as an enabler of pricing strategies, not just as a tool for implementation Remember, introducing pricing software alone does not solve pricing problems. It's the synergy between business acumen and technological capabilities that drives true transformations. 3. Focus on Big Wins and Quick Victories While pricing transformation is often a long-term journey, it's essential to maintain momentum by focusing on major achievements and celebrating quick wins along the way. To do so, we suggest the following: - Build confidence in the transformation process - Demonstrate tangible value to stakeholders early and fast (e.g. the aforementioned POC) - Generate enthusiasm and buy-in across the organization - Secure ongoing support and resources for the initiative To achieve this: - Start with an isolated part of the business. E.g. one category or 1 geographical location. This allows for a quicker ROI and lower time investment. Successful pilots then typically serve as boosters for global roll-out. - Identify high-impact areas where pricing improvements can yield significant results such as focussing on highly dynamic product groups, Key Value Items (KVIs), and high runners. - Use available technology in steps. First automate the more tedious tasks to free up time, then use that time to focus on developing commercial strategy in more depth. - Celebrate and communicate successes internally to maintain motivation and engagement as a transformation needs to be sold internally as well in its early stages. Any improvement in pricing should pay for itself. By delivering on quick wins, you can cross-finance the journey and support fast achievements, creating a positive cycle of improvement and success. 4. Internalize Pricing Know-How External consultants and software partners can kick-off a pricing transformation. They will generate value quickly but it’s crucial to internalize pricing know-how within your organization. Both for adoption and continuity, dedicated resources are critical. This ensures long-term success. We suggest following steps to internalize pricing knowledge: - Invest in training and development for your team - Document how you develop and execute your pricing strategy - Encourage knowledge sharing and best practice dissemination across departments/teams/countries - Use a proper pricing platform that enables collaboration & knowledge sharing within your organization - Develop a pipeline of pricing talent within your organization By making a pricing transformation program truly yours, you build internal capabilities that will drive continuous improvement and adaptation to market changes. 5. Include Local Teams in the Process Pricing transformation should not be an "ivory tower" exercise conducted solely at headquarters. To ensure success, it's crucial to involve local teams and incorporate diverse perspectives from across your organization. We suggest the following to include local teams: - Engage sales representatives in target markets to gather on-the-ground insights - Seek feedback on conceptual and design ideas from front-line employees - Involve top performers from various regions in the transformation program - Conduct pilot programs in select markets to test and refine pricing strategies By going out and involving sales reps in markets, you can get valuable feedback, test ideas, and create a more robust and effective pricing transformation program. 6. Embrace Continuous Iteration and Adaptation In today's fast-paced business environment, a static pricing strategy is a recipe for obsolescence. Your competitors are constantly evolving their approaches, and your pricing strategy must do the same to remain effective and competitive. Following key reasons to prioritize continuous iteration: - Market dynamics change rapidly, affecting demand patterns and customer preferences - Competitors adjust their strategies, potentially eroding your competitive advantage - New technologies emerge, offering opportunities for more sophisticated pricing approaches - New competitors might pop-up or existing competitors might fundamentally change their commercial strategies in certain categories/geographies - Economic conditions fluctuate, impacting customer purchasing power and behaviour To implement an iterative approach to pricing: - Establish a regular review cycle for your pricing strategy, considering both short-term adjustments and long-term strategic shifts - Leverage data analytics to monitor market trends, competitor actions, and the impact of your pricing decisions in real-time - Create a feedback loop that incorporates insights from sales teams, customer service, and market research - Develop scenario planning capabilities to anticipate and prepare for potential market shifts - Foster a culture of experimentation, where testing new pricing approaches is encouraged and learnings are quickly incorporated By committing to continuous iteration and adaptation, you ensure that your pricing strategy remains agile, responsive, and ahead of the curve. This iterative mindset will help you stay one step ahead of competitors and maintain a strong market position in an ever-changing business landscape. 7. Ensure Transparency and Organization-Wide Understanding A successful pricing transformation goes beyond just implementing new strategies and technologies. It's crucial that the entire organization understands and embraces the new approach. Transparency in both the strategy and the tools used to execute it is key to preventing resistance and fostering widespread adoption. Following key reasons why transparency is critical: - Builds trust across departments and hierarchical levels - Increases buy-in and commitment from all stakeholders - Facilitates better decision-making at all levels of the organization - Prevents the "black box" syndrome where pricing decisions seem arbitrary or unexplainable Steps to promote transparency and understanding: - Clearly communicate the rationale behind the pricing strategy to all employees, not just those directly involved in pricing decisions - Provide comprehensive training on the new pricing approach and any associated software or tools - Ensure that the pricing software used is user-friendly and provides clear explanations for its recommendations - Provide access to relevant pricing dashboarding broadly in the organisation - Create accessible documentation that outlines the principles, rules, and logic behind the pricing strategy - Establish open channels for questions, feedback, and suggestions from employees at all levels - Regularly share success stories and case studies that demonstrate the positive impact of the new pricing approach If a pricing strategy is not understood, it is unlikely to be effectively implemented. By prioritizing transparency and fostering organization-wide understanding, you create an environment where everyone from sales representatives to C-suite executives can confidently explain and support the pricing decisions being made. A pricing transformation is a complex yet critical process for retailers aiming to thrive in today's dynamic market. By implementing these seven key strategies, organizations can set themselves up for long-term success. As market dynamics shift, customer expectations evolve, and competitors adjust their strategies, your pricing approach must remain flexible and responsive. By internalizing expertise, leveraging technology wisely, and fostering a culture of pricing excellence throughout your organization, you can create a pricing strategy that is both robust and adaptable. At Omnia Retail and Horvath, we're dedicated to helping businesses navigate the complexities of pricing transformation. By leveraging our combined expertise in retail pricing strategies and management consulting, we provide comprehensive solutions that drive sustainable growth and profitability. As you embark on your own pricing transformation journey, keep these seven key strategies in mind. With the right approach, commitment to transparency, and a willingness to iterate and adapt, you can unlock the full potential of your pricing capabilities. This will not only lead to improved financial performance but also position your organization to swiftly respond to market changes and maintain a significant competitive advantage in your industry. Read more about pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Top 7 strategies for successful digital pricing transformation17.09.2024
17 Winning Pricing Strategies in e-Commerce
Setting the right price for your e-commerce products is like playing a game with extremely high stakes, no clear rules and ultra-intense competition. Choose the right price over time and you can win over your target...
Setting the right price for your e-commerce products is like playing a game with extremely high stakes, no clear rules and ultra-intense competition. Choose the right price over time and you can win over your target customers, creating loyal buyers who keep your business growing for years to come. Choose the wrong price and everything could go south, quick. So, how can e-commerce merchants choose the right pricing strategy or combination of strategies? In this comprehensive guide, Omnia covers 17 common pricing strategies in e-commerce and offers some advice for finding the right action plan for your business. What are e-commerce pricing strategies? E-commerce pricing strategies are approaches used by online businesses to determine, adjust and maintain the prices of their products or services over time. Strategies should take into account the company’s revenue goals, production costs, and other KPIs like customer lifetime value (CLV) and average order value (AOV). What is the difference between a pricing strategy and pricing rule? A pricing strategy is the high-level concept behind pricing decisions and policies, while a pricing rule is goal-oriented and about the actual execution of that strategy. Perhaps a retailer chooses a premium pricing strategy, where they price a product higher than market average, in order to increase the perceived value; for example, pricing a black chair higher than the average of all black chairs. The pricing rule in this case is the concrete translation of a price formula for a product or product group. In the Omnia platform, this would mean: New price = Market average price x 1.2 So, the price will be calculated and set to be 20% higher than the market average that day. With Omnia, this can be also combined with conditions, filters and more. The complexity of a rule is limitless. All your Pricing Strategies in one overview with Omnia's Pricing Software Request a free demo Top pricing strategies for retail and e-commerce There are endless examples of pricing strategies in e-commerce, so we compiled a list of 17 common types of pricing strategies below: 1. Dynamic pricing Dynamic pricing is a pricing strategy where companies or stores continuously adjust prices during the day to optimise margins and increase sales. The strategy applies variable prices rather than fixed prices, meaning they don’t have to decide on a set price for a season, but can instead adapt to the ever-changing market. It is important to note that although the two strategies are often confused, dynamic pricing differs significantly from personalised pricing, which focuses on the behaviours of an individual consumer and adjusts product pricing based on their past shopping experience. 2. Premium pricing Businesses using a premium pricing strategy want to keep their pricing levels higher than the competition. This can be paired with messaging and branding that shows customers why the higher price is justified. For a premium pricing strategy to work, sellers usually have to have some combination of a strong brand image, unique offerings or innovative product attributes. Examples of companies with a premium pricing strategy include Rolex, Apple and luxury fashion brands like Louis Vuitton and Chanel. 3. Competitive pricing One of the more common pricing strategies in e-commerce is competitive pricing, where sellers set their prices based on the prices of competitors. Competitive pricing is most often used by businesses operating in competitive markets or one with fairly similar products and little differentiation, as all sellers are then trying to win over the same customers. A competitive pricing strategy does not always indicate undercutting the competition, but rather setting prices in relation to competitors; this could mean setting product prices lower, higher or the same as competing sellers. Running a competitive pricing strategy with manual research can take a significant amount of time and is challenging in today’s fast-paced e-commerce environment. To make price adjustments for listings in real time, most companies use some type of Dynamic Pricing software. 4. Value-based pricing Value-based pricing, sometimes called value-added pricing or perceived value pricing, is a powerful strategy that requires a deep understanding of the market and of the value your products offer to potential customers. Sellers can use value-based pricing to shape how consumers perceive your product. Want to position yourself as a luxury brand, or to be the best value-for-money option? Price accordingly. Implementing value-based pricing demands extensive research into your target market and what the competition is doing, as well as reflection on and alignment with your business objectives. It will require collaborative effort across the organisation, but can create a very cohesive and effective pricing strategy. 5. Price discrimination Price discrimination, also called price differentiation or differential pricing, is a strategy employed by e-commerce companies to maximise profits by charging different prices to different customers for the same product or service, based on characteristics of the customer. The objective is to extract the maximum amount of consumer surplus and capture additional revenue based on individual customers' willingness to pay. To use this strategy, sellers make use of their vast amounts of customer data, including browsing history, purchase patterns, demographic information and geographic location. This data is leveraged to segment customers into different groups based on their preferences, behaviour and purchasing power. Once customer segments are identified, prices can be tailored to each segment's characteristics. For example, customers who have shown a higher willingness to pay in the past may be charged a higher price, while price-sensitive customers may be offered discounts or promotions to encourage purchases. The success of price discrimination in e-commerce relies heavily on sophisticated data analysis and algorithmic pricing systems. By leveraging customer data and market conditions, companies can optimise their pricing strategies to increase revenue and overall profitability. However, it is important to note that price discrimination can also raise concerns about fairness, privacy and potential consumer backlash if implemented in a way that is perceived as discriminatory or exploitative. 6. Odd-even pricing Odd-even pricing falls under the category of psychological pricing strategies and taps into the psychology of numbers to influence consumer behaviour. Odd prices, like €5.99, are commonly used, but even prices, like €6.00, have their own psychological impact. This strategy can be employed in various ways, from offering strategic discounts to trying to create a memorable price point. For example, take a look at the difference between how luxury jewellery brand Tiffany & Co uses even pricing and more affordable brand Kay Jewellers uses odd pricing. Customers coming to Tiffany & Co. are looking for luxury items and are likely less price sensitive, so the company uses even pricing. Shoppers on the Kay Jewellers website may be more interested in finding a deal, so many of their prices use odd pricing and end in .99 or .95. 7. Charm pricing Charm pricing, also called psychological pricing, is similar to odd-even pricing, as it leverages pricing to evoke an emotional response and prompt action. This strategy is often observed in late-night infomercials, where potential buyers can be swayed by a price ending in “.99” or “.95” to make an impulse purchase. But infomercials aren’t the only place charm pricing is seen; many retailers use elements of this pricing strategy. There are a number of theories for why charm pricing is so effective: A perception of loss: This is when consumers value a product based on the loss they feel without it rather than the gain. In the Western world, most consumers read prices from left to right, so there is a high likelihood of grasping the first number as an anchor. Under this theory, that’s why €599 would feel so different from €600, even though there is only a separation of €1. A perception of gain: On the other side, perhaps consumers feel they have gained something, i.e. saved money, when they see an example of charm pricing. If the higher price of €600 is the anchor, then the lower price of €599 means you gained something and saved €1. This theory pairs well with the .99 or .95 pricing, which may make a consumer think they’re getting a discount. Specificity: With a charm pricing strategy, the price of an item is so specific that it can trigger a psychological response of customers believing it must be priced at the correct value. This is especially relevant if pricing is fractional, meaning it ends in a cent value. Example: Uniqlo Although the apparel brand rarely has sales, they signify to customers that they are getting a good deal by ending almost every price in “-9.90” or “-4.90”. 8. Bundle pricing Bundle pricing, also called product bundle pricing, is a strategy companies use to sell more items with higher margins while giving customers a discount for increasing the size of their order. Products are “bundled” so customers receive several different products as a package deal, costing them less than it would have if they made separate purchases of the included products. This incentivises purchases by creating higher perceived value and cost savings. E-commerce companies typically select complementary or related products and combine them into bundles to encourage larger purchases, increase average order value and enhance customer satisfaction. By offering discounted bundle prices, companies can attract price-sensitive customers, drive sales of slower-moving products and create a competitive advantage in the market. 9. Promotional pricing A promotional pricing strategy in e-commerce involves offering temporary price reductions or discounts on products or services to create urgency, stimulate sales and attract customers. The primary goals are usually to increase sales volume, clear out excess inventory, introduce new products or gain a competitive advantage. Promotional pricing can take various forms, such as percentage discounts, buy-one-get-one (BOGO) offers, limited-time sales, flash sales, coupon codes or free shipping. These promotions can be advertised or offered through any channel, from email marketing and social media to online ads or on-site banners. 10. Predatory pricing A predatory pricing strategy in e-commerce refers to a practice where a company deliberately sets extremely low prices for its products or services with the intention of driving competitors out of the market or deterring new entrants. By selling products at a loss or below cost for an extended period, the predatory pricer aims to eliminate competition and subsequently raise prices once competitors have been forced out. Predatory pricing is often considered anticompetitive and is illegal in many jurisdictions as it violates antitrust laws created for consumer protection and to ensure market competition is fair. 11. Penetration pricing A penetration pricing strategy is often employed by online sellers and business owners to attract customers to new products being brought to market. It involves offering an initial lower price than competitors to entice more buyers to purchase. The goal is to secure market share, undercut established sellers in the market and attract new customers who will remain loyal, even after prices are adjusted back up. For this e-commerce pricing strategy to succeed, however, there must be a high demand for the product. Without a significant market, penetration pricing becomes less effective. It's also important to make the price increases gradually to avoid competitors implementing their own penetration pricing tactics and stealing customers. Businesses employing a penetration pricing strategy will need price monitoring software to track and analyse average market prices over a set time period, then use the data to calculate introductory pricing. 12. Price skimming With a price skimming strategy, the product is initially priced high and then reduced later on, rather than starting with a low price like penetration pricing strategies. This approach aims to maximise short-term profits and segment customers based on how much they are willing to pay, and is often used for innovative products and products with high demand. The top level of customers, the most loyal ones, will buy at high prices. The seller can then continue accommodating new levels of potential customers by gradually lowering (“skimming”) the price. This practice continues until it reaches the base price. Price skimming can be a great way to quickly generate revenue and even break even with a lower number of sales, but companies must be able to rationalise the high price point, especially if the market is saturated and customers have other low-priced alternatives to choose from. One real-world example of a price skimming strategy is Samsung. When a new mobile phone release is planned and demand is high, the price is set higher to bring in more revenue and capture market share and attention from competitors like Apple. The newest model above, for example, retails for as much as €1.819,00 to start. After the demand and hype lessens, the company skims the price back down to reach more customers. Samsung Galaxy phones, for example, are priced to capture share from the iPhone. 13. Price optimisation Price optimisation is a practice used in most e-commerce businesses that involves analysing data from customers and the market to calculate and set the optimal price for a product. The objective is to find the ideal price point to attract customers and maximise sales and profits. The types of data used can range from demographics and survey data to historic sales and inventory. Pricing optimisation is similar to dynamic pricing, but while the former can be more of a long-term process, the latter is built more for rapid change and adjusts pricing based on real-time data. 14. Surge pricing Surge pricing is a pricing strategy that temporarily increases prices in response to high demand and limited supply. It is used in many industries, from hospitality and tourism to entertainment and retail. Here are three common types of surge pricing: Time-based: Adjusts prices based on the time of day or during special events and expected or real-time high demand periods. For example, online retailers raise prices between 9 AM and 5 PM when customers shop online during office hours, as well as during large, industry-relevant events, like the Olympics for sporting goods sellers. Weather-based: Incorporates weather forecasts to determine pricing decisions. When favourable weather conditions are expected, prices are increased. For instance, if the weather forecast promises good conditions for the summer, prices for beach goods, summer apparel and BBQs can be raised in anticipation of higher demand. Location-based: Adjusts prices based on the geographical location of the buyer. It is often observed in crowded cities or areas with high-income populations, where customers have a higher willingness to pay. Additionally, surge pricing may be used in places with above-average shipping costs, resulting in higher prices. 15. Loss-leader pricing Loss leader pricing, often used as part of a penetration pricing strategy, involves intentionally selling certain products at a loss to attract customers and stimulate additional sales of other higher-margin products. The purpose is to entice customers with attractive prices on popular or essential items, with the hope or expectation that they will make additional purchases of complementary or higher-priced items. While the initial product may be sold at a loss, the strategy aims to generate profits through the sale of accompanying products or services. Effective implementation requires careful product selection, pricing analysis and understanding of customer behaviour to ensure the overall profitability of the business. 16. Honeymoon pricing Like penetration pricing, honeymoon pricing sets the initial product price low during launch to attract customers. This strategy is common in subscription models, where a low-priced starter offer entices customers who must then be retained. Retaining customers in this model can be achievable, however, since switching providers may be expensive or require too high a level of customer effort. 17. Yield pricing Yield pricing is a pricing strategy most often seen in the aviation and hotel industries. It involves pricing differently depending on when the customer makes the purchase. Airline seats, for example, are priced based on where you are in the booking period: Booking earlier gets customers a lower price, while late bookings are at a higher price point. This enables those airlines to avoid empty seats and lost profits. How to find the right pricing strategy for your e-commerce business Choosing the right e-commerce pricing strategy requires careful analysis and consideration, and it’s worth noting that most sellers use some combination of strategies. Here are five key steps to guide your research and discussions as you build your pricing strategy: Understand your market and customers: Conduct research to gain insights into customer preferences and market dynamics. Analyse costs and profit margins: Evaluate expenses and calculate desired profit margins to assess feasibility. Consider your business goals and value proposition: Align pricing with your objectives and unique value proposition. Test, monitor, and adapt your strategy: Implement and continuously evaluate your pricing approach to optimise results. Stay agile and regularly evaluate pricing against competitors: Keep an eye on the market and adjust pricing as needed to remain competitive. Over time, pricing strategies must adapt and evolve, both to keep up in the market and to meet the needs of the brand and product assortment. As you build, implement and execute your pricing strategies, Omnia Retail can seamlessly automate any strategy you choose, blending any combination of rules with advanced Machine Learning and AI algorithms. Learn more about our revolutionary and intuitive approach to Dynamic Pricing here. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments.
17 Winning Pricing Strategies in e-Commerce13.08.2024
The Ultimate Guide to Dynamic Pricing
Dynamic pricing is when a company or store continuously adjusts its prices throughout the day. The goal of these price changes is two fold: on one hand, companies want to optimize for margins, and on the other they want...
Dynamic pricing is when a company or store continuously adjusts its prices throughout the day. The goal of these price changes is two fold: on one hand, companies want to optimize for margins, and on the other they want to increase their chances of sales. Dynamic pricing is a pricing strategy that applies variable prices instead of fixed prices. Instead of deciding on a set price for a season, retailers can update their prices multiple times per day to capitalize on the ever-changing market. Dynamic pricing often gets confused with personalized pricing. But these two different types of pricing are extremely different from one another. To put it simply, dynamic pricing looks at your products and and their relative value in relation to the rest of the market. Personalized pricing, on the other hand, looks at individual consumer behaviors and gauges (and changes) a product’s value based on past shopping experience. How to get started with Dynamic Pricing? Download free whitepaper Personalized pricing is controversial because it uses individual data and shopping experiences information that many consumers consider private and personal. It’s also somewhat risky in an age where consumers can interact with and talk to each other like never before. If Consumer A finds out they paid more for the exact same product than their best friend, their trust in a company will erode. Dynamic pricing, on the other hand, allows you to capture extra sales and take advantage of a changing market without invading consumer privacy or trust. Dynamic pricing in e-commerce Dynamic pricing and e-commerce co-evolved together. As the internet became more sophisticated and online shopping grew, so has the need for dynamic pricing. Consumer electronics was one of the forerunners in the retail landscape in terms of the trend towards online. As a category of elastic products that are sensitive to price changes, it makes sense. Retailers need dynamic pricing to stay on top of the market and continue to offer competitive prices. But as consumer spending rises in this category (and with it the online market share), two developments that affect dynamic pricing have emerged: Increased price transparency: As more people shop for consumer electronics online, the amount of comparison shopping also increased. Consumers are now far more likely to evaluate a retailer’s prices against the company’s competition. This shines a spotlight on your product price and makes it the most important part of each sale. Since consumer electronics are typically highly elastic, a 5%-10% difference between your price and your competitors could be the deciding factor for a consumer. More frequent price changes: Because of this increased demand for price transparency and matching, the number of prices changes every day has increased dramatically since the dawn of e-commerce. Traditionally, the supplier or the manufacturer would determine the price of a product with a consumer advised price (CAP). However, this CAP quickly became irrelevant with the growth of comparison shopping online. Today, prices are determined by the retailer instead of a supplier, and are based on a variety of variables, including general market trends, competition prices, and stock levels. A variety of other categories, such as Toys and Games, for example, follow the same pattern: when online spending rises, so does the demand for price transparency. This, in turn, leads to an increased frequency of price changes and the use of dynamic prices. This trend often also attracts new players on the market without physical stores, which makes it difficult for traditional retailers. Although the traditional retailers have the first mover advantage, they are generally less flexible in adapting their (pricing) strategy. However, the retailers that do capitalize on their omnichannel advantage can move ahead of the pack. Dynamic pricing software Most retailers practice a most basic form of dynamic pricing by discounting items at the end of a season or using a clearance sale to get rid of extra stock. However, dynamic pricing can go much further than a discount at the end of a season. When you use a dynamic pricing software, you can wield the power of data to capture more sales and take control of your assortment. Today, almost all major retailers will use some sort of dynamic pricing software. Dynamic pricing online Dynamic pricing has obvious benefits online: you can follow the competition, adjust prices instantly, and easily capture quantitative metrics about your store to improve your performance. Dynamic pricing offline Dynamic Pricing is also useful offline. Through the use of electronic shelf labels (ESLs), you can easily apply dynamic pricing practices to your physical store. This helps you keep your prices up-to-date with what you present online, and makes pricing management easier. What are some dynamic pricing strategies? Traditionally, there are three basic ways retailers set their prices: the cost-plus method, the competitor-based method, and the value based method. The cost-plus method is the most simple out of all three. All you need to do is take the cost of your product and add the desired margin on top of that cost. The main advantage of cost-plus pricing is that it’s easy to understand and implement. However, its main disadvantage is that it only considers internal factors, ignoring external market conditions. To determine the margin or 'markup' percentage, use this simple formula: subtract the product's cost from its selling price, then divide that difference by the cost. Finally, multiply the result by 100 to get the markup percentage. The competitor-based method follows your competition. If your competitor changes their price, you’ll change your price as a result, whether that’s to be lower or higher than your competition. The main advantage of this pricing approach is that it considers external factors like competitor pricing. However, its downside is that it assumes competitors have accurately set their prices. The value-based pricing method follows the price elasticity of a product. Different consumers value items differently, so everyone has a certain threshold that they are willing to pay for a product. A value-based pricing method capitalizes on the public’s perception of the value of a product and charge accordingly. The main advantage of this pricing method is that it integrates both external and internal data, providing a balanced approach. However, its main drawback is its complexity, making it the most difficult pricing method to implement. Dynamic pricing software allows you to combine different pricing methods at the same time. Some softwares also allow you to incorporate other useful information, such as your stock levels, popularity score, and even the weather forecast. Talk to one of our consultants about dynamic pricing. Schedule a demo How to implement dynamic pricing Implementing dynamic pricing is a journey, one that has a lot of twists and turns. And it does create a big change in your organization. That’s why you should view the adoption of dynamic pricing as an opportunity to improve your overall pricing strategy and internal systems, as well as your overall margin. Is it hard to get started with dynamic pricing? After hundreds of implementation projects, we’ve come up with a five-step process to successfully implement dynamic pricing: Define your commercial objective: Your commercial objective is like your company’s compass: it’ll help you navigate any institutional changes and keep you heading in the right direction. The commercial objective applies to more than just pricing and marketing, but it’s the first step for a successful dynamic pricing strategy. Learn more about how to define your commercial objective here. Build a pricing strategy: Your pricing strategy takes your commercial objective, then translates it into strategy that your team will use to sell products. An example? Say your overall commercial objective is to be known as the cheapest retailer on the market. Your pricing strategy would then be to make sure every product in your store is cheaper than the competition’s offering. To develop an effective pricing strategy, follow a three-step approach. Learn how to build a pricing strategy here: Assess Your Place in the Market Start by evaluating your current pricing model—this is known as the "As-Is Situation." Gather stakeholders to review your existing approach and answer key questions: What is your current pricing model, and what are its strengths and weaknesses? Are you a market leader or a challenger? Is your focus on maximizing sales volume or overall profitability? This reflection helps you understand where you stand before making any changes. Build Your Pricing Strategy Framework Next, engage stakeholders in solution sessions to establish a shared understanding of the As-Is analysis. Many assume this step is unnecessary, but it's crucial to ensure everyone is on the same page about existing pricing strategies. Use these sessions to review findings and create a draft framework. This involves leveraging expertise from sales, segment managers, and pricing specialists to craft a strategy that aligns with your business goals and customer needs. Set Business Rules for the Future With a clear framework in place, the next step is defining the "To-Be Situation"—how you want your pricing to function going forward. Establish the levers and rules that will guide your pricing and calibrate them based on your analysis. After aligning internally, begin testing and iterating these rules using tools like Omnia to see what adjustments yield the best results. Choose your pricing method(s): Your pricing strategy tells you what you want to do. Your methods are how you’ll achieve those pricing goals. Your pricing methods are more specific than your pricing strategy. Establish pricing rules: Pricing rules tell your dynamic pricing software what to do. You should set a rule for every product that the software needs to track and change. Test and monitor: The final step for getting started with dynamic pricing is to test and monitor your software’s changes. Learn more about testing the effectiveness of your online pricing. Read more about interesting pricing strategies here: What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
The Ultimate Guide to Dynamic Pricing19.04.2024
Reflecting on Price Points Live: Lessons for e-commerce in 2024
It’s been a few weeks since Europe’s e-commerce and pricing event of the year, produced and hosted by Omnia Retail, took Amsterdam by storm at the modern Capital C building in early March. Our invited guests were on the...
It’s been a few weeks since Europe’s e-commerce and pricing event of the year, produced and hosted by Omnia Retail, took Amsterdam by storm at the modern Capital C building in early March. Our invited guests were on the receiving end of the knowledge and expertise of some of the e-commerce world’s greatest minds and leaders, making for a successful annual rendition of Price Points Live. On this year’s stage was Prof. Hermann Simon, the co-founder and chairman of Simon-Kucher, who was a returning speaker at Price Points Live. He is known as the world’s leading expert on pricing and growth consulting. Also on the stage was Natalie Berg, an analyst, author and podcast host; Dr Doug Mattheus, a business executive and consultant in marketing, retail and branding; Gerrie Smits, a business consultant, speaker and author, and lastly, Cor Verhoeven, Group Product Manager at Bol, specialising in pricing and assortment insights. To conclude, the warm and confident Suyin Aerts returned as our host. Whether it be transparency in pricing, marketing or e-commerce practices, our panel of speakers bring more than a century of collective knowledge and experience to the table. So, what did our guests learn and take away from each of our speakers? What can brands and retailers understand about pricing, consumer behaviour and branding? Omnia shares the insights and knowledge pertinent to e-commerce success in 2024. Natalie Berg: E-commerce author and analyst “We are living in a perpetual state of disruption, and retail is no stranger to this, but the past few years have seen unprecedented levels of volatility and uncertainty,” shared Natalie. Whether we want to call it disruption, a seismic shift or a geopolitical and socio-economic tsunami, the one mitigating force to today’s ecommerce landscape was - and still is - Covid-19. “Covid has digitised our world - the way we live, the way we shop, or the way we exercise. And when it comes to shopping, most of it is still done in a brick-and-mortar store, but the majority of these sales are digitally influenced,” shares Natalie. This has brought brands and retailers to the popular omnichannel strategy, which has become more and more common and necessary. However, Natalie predicts that retail will start moving from omnichannel to ‘unified commerce’ which is “not just about being present in those channels but centralising those operations and connecting everything in real-time,”.. We see this already taking place with the partnership that shocked the e-commerce world in 2023 when Meta and Amazon announced that Meta users can shop Amazon products without even having to exit their Instagram or Facebook apps, creating a centralised and synonymous experience for social commerce and marketplaces’ shoppers. She goes on to speak about the customer’s time and how much more precious it is going to become for e-commerce and retail leaders. “28% of Amazon purchases take place in three minutes or less,” she stated,” so if you’re not saving a customer’s time, you have to be enhancing it.” A customer’s tolerance for mediocrity or for average service or experiences is getting lower and lower, which is how the customer experience has become the new currency. “It’s about really wowing your customers. Going beyond! Disrupting the status quo.” She shares that a new phenomenon is taking place because of this refreshed focus on the customer experience: The democratisation of white-glove service. “It’s a technology that is helping brands and retailers give this level of service,”.. This includes Walmart, in the US, which will go into your home to stock your kitchen with your newly purchased groceries while other retailers will collect your returns from your house when they make delivery, allowing the customer to kill two birds with one stone. Adidas in London has installed a system called “Bring it To Me” in change rooms where, if you want an item that’s in a different colour or size, a store assistant can collect it for you without you having to leave the change room. “Tech-enabled human touch - that’s what will separate the retailer winners from the retail losers,” Natalie argues. To conclude, Natalie speaks on how the use of AI will empower both e-commerce players and customers when shopping. “In the future, we won’t know where the physical world ends and the digital one begins,” giving an eerie yet exciting conclusion. “As a brand or retailer, standing still is the most dangerous thing you can do.” Dr Doug Mattheus: Consultant and branding expert Hailing from South Africa and living in the UK is Dr Doug Mattheus whose presentation focused on the art and science of brand building. So, what makes a brand long-lasting? “It is a mix of tangible and intangible features that, if properly managed, creates influence and generates value,” says Doug. But, as we’ve seen brands rise and fall over the last few decades, what are some of the factors that have created the most valuable brands in the world, from Apple to Mercedes Benz to Walmart? Creating a brand hook The ways in which a customer can get hooked on a brand are limitless: Reflecting back to the time he received his first pair of Nike shoes in high school, the one item Doug cared about keeping just as much as the shoes themselves was the box they came in. “It wasn’t just a box - it was a Nike box.” Fast-forward to adulthood, he visited a Harrods store and witnessed customers buy empty single-use packets and bags with the Harrods logo on them. In a more recent case, the fragrance of bath bombs and body scrubs in the air at a mall or airport has become one that is synonymous with LUSH. “Just follow your nose,” says Doug. “So, what is your brand hook?” On the contrary, we see brands like The Body Shop that have struggled to keep up with digitally-native challenger brands like Drunk Elephant, Glossier and Paula’s Choice in the personal care market and is undergoing mass closures across the US and EU. Doug’s advice to brands is to create a unique hook - whether it be in the sights, smells, sounds or physical world. What’s your differentiator from competitors? A small player in the award-winning wine industry in South Africa is a vineyard called Vergenoegd Wine Estate. By a large stretch, it is not the most well-known or award-winning brand. However, this boutique vineyard did not refrain from harnessing the commercial value of organic farming. The winemakers introduced runner ducks to the vineyard, which roamed around eating worms, snails, and bugs that could be detrimental to the vines. In addition, these ducks became a tonic for families and couples with kids wanting to experience the vineyard while having something fun for children. The ducks have become a unique feature to Vergenoegd Wine Estate and a key driver of foot traffic and revenue. “This is a great example of how a small player is not being defined by its smallness and not being intimidated by bigger players.” Multiple touchpoints for customers Stemming from Natalie’s thoughts on brands having to go the extra mile to impress customers, Doug shares that there are moments of magic around us at all times, and it is up to business leaders to find and develop those moments. However, where there is ease and innovation between brands and customers (like at Nordstrom in Seattle, USA who did not want to lose their “eyeball moments” with customers from rapid digitalisation, began offering curbside pick-up so they can still have face-to-face interactions with shoppers), there are also moments of friction and time-wasting that cause frustration for customers. It’s about fine-tuning interactions and creating moments that make a brand memorable. Relevance: Do you reinvent like a butterfly or a bull? As the title suggests, brands in many verticals, but especially in fashion, personal care, sporting goods, fitness, and electronics, are faced with the rapid rise of digitally-native brands that exist to challenge the status quo. In fact, these brands, which have only known a digital world, are, in fact called “challenger brands” because of the innovative approach to design, production, supply chains, customer interactions, marketing, and everything under the e-commerce sun. According to Doug, brands who reinvent like a butterfly are those who can go with the changes and challenges in front of them with agility and resilience while those who face reinvention like a bull may be stubborn and ignorant and may face their own downfall. Cor Verhoeven: Group Product Manager at Bol. Coming from one of Europe’s largest and most successful marketplaces, Bol., Cor Verhoeven delved into pricing, specifically how Bol. tackles bad prices on the platform and what the negatives are for a marketplace or e-commerce brand. “We have 38 million items for sale, 13 million active customers, and 50,000 unique selling partners. That means almost every home in the Netherlands and Belgium has bought something from Bol.,” says Cor. With numbers like that, it’s more than possible that a marketplace would run into pricing issues. “Part of our strategy is to make Bol. an equal playing field. Our sellers must be able to make a living off what they sell on Bol. - it’s not just us that needs to do well.” So, how does a customer-centric pricing strategy fall into this? “We all work hard to make sure that the price of an item is not the reason someone doesn’t buy something on Bol.,” says Cor. “Pricing is important because it positions you in a competitive market, it establishes customer trust, and it establishes customer lifetime value. Our success is caused by growth, monetising and retaining in a loop,” explained Cor. “Our three main beliefs when it comes to pricing are High-quality deals, trustworthy and reliable prices, and competitive prices in line with the market.” The balancing act between insult pricing and best-in-market pricing is tricky and precarious, which is why Bol. judges their products on their prices. “If a product’s price is above an allowable price, we take it offline to product the customer,” Cor stated. How does Bol. decide on what is an allowable price? “We source benchmarks. If a product has a benchmark, it’s given a classification - an insult price or an allowable price - and business rules are set,” explained Cor. “When we don’t have a price benchmark, that’s when we have little control.” When Bol. doesn’t have a price benchmark for a product, they utilise their data science model to predict a price while, daily, the model is manually looking for prices to benchmark those products.” The result is a price for a product that is more aligned with the market and within the boundaries of what a customer will accept. “Of course, taking insult prices offline decreases revenue, but what we get back in return is way bigger. The seller sees increased conversion,” said Cor. Sander Roose: CEO and Founder of Omnia Retail Joining the panel was our very own CEO Sander Roose who started his keynote speech by making good on a promise. “At the last Price Points Live event, I promised that Omnia would release a new platform sometime in 2023, and the whole Omnia team is proud to have achieved that.” As a veteran in the dynamic pricing industry, with 12 years at the helm of Omnia Retail, Sander brought to the stage what he believes are the pricing elements and design principles of successful dynamic pricing. According to Sander, there are three factors to successful dynamic pricing implementations: Clearly defined objectives; securing engagement and support; and the spirit of continuous learning. “Without clear objectives, you can have a strong pricing platform, but you won’t know how to harness it,” he said. “And as the market changes, you need to be able to change your objectives.” For the second factor, pricing managers and teams need to be fully on board: “If they don’t understand how prices are calculated, they will reject the implementation as a whole.” Then, the third factor speaks to a dynamic pricing user's ability to be agile and curious: “We see that customers that used the system most intensively to make iterations with their prices get the best results.” As a result, Omnia found that two key design principles for dynamic pricing success are necessary: flexibility and transparency. “Being able to automate any pricing strategy you can think of, to facilitate all the objectives, to keep control while the system is on autopilot, and finally, making sure the users are adopting the system.” Flexibility and Transparency A pricing platform needs to be able to support a vast array of pricing objectives and strategies. “A platform needs to be able to endure various high-level objectives. Perhaps on a global level, you have a profit maximisation objective while the strategy on lower levels, such as on a per country basis, may be different,” explained Sander. “For example, if your global brand has just launched in the Netherlands, you may want to maximise market share. Then, even further down, depending on your various verticals, you may want a stock-based strategy.” Flexibility must also be present not just in pricing strategies but in data collection and the recalculation process. Using the example of a Tesla self-driving car with a blacked-out windscreen, Sander makes the point that customers of dynamic pricing still need to be able to see and understand what’s going on - even if the system is on autopilot: “If you create transparency while the system is on autopilot, you can create buy-in from internal stakeholders and facilitate learning loops.” How flexibility and transparency exist in Omnia 2.0 The culmination of these two values resulted in the Pricing Strategy Tree, developed specifically for Omnia 2.0, making strategy building and interpretation easier and faster. “The copy-and-paste feature means a large D2C brand that wants to launch in a new country can simply execute their entire pricing strategy with just a few clicks by copying the strategy in the tree from another country. This is huge for an international customer to be able to do this.” Another feature called Path Tracking allows you to visually see how your strategy came to be, step by step. “This feature helps to validate if you set up the tree how you intended to,” explained Sander. Another feature that elevates transparency is Strategy Branch Statistics which works to answer burning questions from pricing managers: ‘Which part of my strategy is most impactful? The Strategy Branch Statistics feature works to show you which business rules are doing the work to give your prices.’ An additional feature highlighting transparency is the ability to name branches within the tree. The names not only help coworkers understand what you’ve built, but they differentiate the various strategies that are at play at the same time. Strategy Branch Statistics feature works to show you which business rules are doing the work to give your prices.’ An additional feature highlighting transparency is the ability to name branches within the tree. The names not only help coworkers understand what you’ve built, but they differentiate the various strategies that are at play at the same time. AI in pricing “From private label matching, creating automated weekly reports to send to category managers, to automated insights, AI is a powerful technology that has the potential to contribute to the superpowers we offer customers,” says Sander. However, as of today, Sander believes that AI is one part of the machine and should not be considered the holy grail of price setting. “The true need is goal-based pricing,” Sander says.”AI is a means and not an end.” Sander's vision for AI in Omnia’s pricing platform sees a move from granular pricing strategies that affect the business’s objectives to a scenario where the customer sets the objective, and the Omnia platform automates and optimises prices. “We want to move more and more towards goal-based pricing in our platform. We believe the end game for price automation will be rules and AI, not just AI, and the Pricing Strategy Tree allows for a rules and AI combination.” Prof. Hermann Simon: Founder of Simon-Kucher, author As a world-renowned expert in pricing and consulting, Prof. Hermann Simon joins the panel to share what he thinks are the hidden champions in e-commerce and retail and what their successful strategies are. Specifically, the small and midsized global market leaders with a market share of above 50% and that are little known to the public. “In China, which is by the largest global exporter, 68% of the exports come from small and midsized companies, and behind this number are the hidden champions,” says Hermann. “Inside super export performance requires large companies plus a very strong mid sector. Hidden champions, not large corporations, determine whether a country really excels in global competition. Hidden champions are an untapped treasure to learn about business success.” Focus and Globalisation What characterises these companies? “The three pillars of the hidden champion’s strategy are ambition, focus, and globalisation fueled with the tools of innovation, value and price,” shares Hermann. Focusing on your product makes your market small. How does hidden champions enlarge their market? An example of successful globalisation is Karcher, the global leader in high-pressure water hoses, which began internationalisation in the 1970s slowly and then accelerated in the 90s to become the global market share leader at 70%. Other examples include Deichmann, the largest shoe retailer in Europe, which sits in 31 countries across Europe, Africa, the Middle East and the US. “The lesson here is that if you have a good product, multiply it by regional expansion,” says Hermann. Value and Price For successful companies, value comes from innovation and a closeness to the customer. But what drives innovation? The answer is different for hidden champions and the average company. Below is a pie chart where we can see how little an average company prioritises customer needs: What is the most important aspect of pricing? “It’s customer-perceived value. The willingness to pay is a mirror of perceived value, and therefore, value equals price,” explains Hermann. “Understanding, creating and communicating values are the key challenges in pricing.” Using the example of the iPhone, the cost has always been above the market average for a smartphone, yet the success of the product indicates it must obviously bring value to the customer. “Value drives price,” concludes Hermann. According to internal studies at Simon Kucher, only one-third of companies can say they have real pricing power. So, two-thirds are exposed to the sensitivities of the customer. “The result is that value-to-customer and pricing power is created by differentiating your product, changing the way customers perceive your products and your price, and changing the mindset and confidence of your own people in your company,” says Hermann. Closeness to customer “88% of hidden champions say that closeness to the customer is their biggest strength, even more than technology,” says Hermann. Simon-Kucher found that 38% of employees at hidden champion companies had regular contact with customers, while large corporations only had 8%. In retail, it is difficult to understand value perception because there are many competitors selling the same thing. This makes retail’s soft parameters, such as the store layout, service and friendliness, more helpful in understanding value perception. The challenge then becomes how do enterprises effectively communicate their value offering. “Hidden champions are true value leaders with their intense closeness to customers. They achieve a more profound understanding of a customer's needs; their continuous innovations create higher value, and they integrate customer needs and technology much better than the average company.” Gerrie Smits: Speaker and author Gerrie believes we’re getting customer-centricity all wrong. From his 25-plus years of experience in helping companies prioritise customers as well as how to deal with the changing digital world, he has found a common thread of issues: “Technology is getting in the way, companies are seeing customers as a target, and teams are siloing their responsibilities and not wanting to take on other responsibilities,” says Gerrie. “Companies are getting tech just for the sake of it, not because there is any use for it. If you’re going to invest in tech, make sure you have a competitive edge.” According to US business leaders, the number one skill a company needs to have to succeed in the digital world is empathy. “Technology is fantastic if you know what to do with it. My clients are driven by technology, and that’s not customer-centric.” When it comes to companies seeing customers as a target. “I’ve never met a company that doesn’t say they’re customer-centric - obviously,” says Gerrie. But there is a large difference between intent and action. “For example, Amazon has always said they are obsessed with understanding the customer. Yet still, they got it wrong when, in 2022, they reportedly lost $10 billion from dismal sales for their voice-activated Echo. “What brands need to understand is that there is only a small part of me that is your customer. The rest is me as a human being,” says Gerrie. “Seeing your audience as buyers, you are not fulfilling the whole potential.” Concluding Price Points Live 2024 In closing, our panel speakers joined Suyin on stage to answer a round of interesting questions and to share their final thoughts. “To drive loyalty, one must understand what your customers value,” said Natalie, while Doug shared that although pricing is vital to brand loyalty, it is not the only factor. Answering a question about how smaller players in e-commerce can grow and succeed against large enterprises, Natalie says, “It’s like Prof. Hermann said: It’s about focus. You have to know what your strengths are, and then you have to execute really well.” The world of e-commerce is set to make $6.3 billion in global sales in 2024, which is expected to increase to $8 billion in 2027. However, what’s more interesting is the amount of e-commerce users which is set to increase to 3.2 billion by 2029 - a third of the current world population. More shoppers don’t necessarily mean more revenue and sales, so it is safe to say that brands and retailers need to focus their efforts on pricing, innovation, unique marketing and frictionless experiences if they want a segment of the ever-growing pool of e-commerce users. With these insights and go-to strategies for elevating the success of brands and enterprises, Omnia is excited to see what the e-commerce landscape will be for our customers and other growing e-commerce companies. We’d like to thank all of our speakers - Natalie Berg, Dr Doug Mattheus, Prof. Hermann Simon, Gerrie Smit, Cor Verhoeven and our own Sander Roose - and our host, Suyin Aerts, for their knowledge and time spent at Price Points Live 2024. Watch keynote presentations here.
Reflecting on Price Points Live: Lessons for e-commerce in 202405.03.2024
Transparency in e-commerce: Leading the conversation at Price Points Live 2024
Europe’s e-commerce and pricing event of the year is returning in 2024, as Omnia Retail gears up for another exciting edition of Price Points Live. As leaders in e-commerce pricing across Europe, Omnia Retail is...
Europe’s e-commerce and pricing event of the year is returning in 2024, as Omnia Retail gears up for another exciting edition of Price Points Live. As leaders in e-commerce pricing across Europe, Omnia Retail is perfectly positioned to bring together experts and leaders in retail, pricing, marketing and branding to share insights and knowledge. Taking place at the modern Capital C building in Amsterdam on 7 March 2024, the building’s majestic glass dome ceiling sets the tone fittingly for this year’s main topic: Transparency. Whether it be transparency in pricing, marketing or e-commerce practices, our panel of speakers bring more than a century of collective knowledge and experience to the table. Joining us is Prof. Hermann Simon, the co-founder and chairman of Simon-Kucher who is returning to Price Points Live for a second visit. Known as the world’s leading expert on pricing and growth consulting, Prof. Simon is an award-winning author. Also on this year’s stage is Natalie Berg - an analyst, author and podcast host - who will add value to the conversation on all things global retail. Dr Doug Mattheus, a business executive and consultant, will be bringing his 35-years of knowledge and experience in marketing, retail and branding. Lastly, Cor Verhoeven is a Group Product Manager at one of Europe's largest marketplaces, Bol.com, specialising in pricing and assortment insights. He’ll be bringing his entrepreneurial spirit and his 10-plus years of e-commerce, product management and marketplace experience to Price Points Live. Our speakers will be brought together by the charming Suyin Aerts, who is also a returning panel member. Challenges in today’s world of e-commerce What are brands and enterprises facing in e-commerce in 2024? From branding to pricing to consumer behaviour, the e-commerce arena has experienced more phases and changes in the last four years that it did in the previous decade. Let’s discuss some of the industry’s key trends and issues as of today. Growing competition and price-war strategies As e-commerce grows and oversaturates each vertical, consumers have more choice and power. This is not necessarily a bad thing, however, it does mean that brands and retailers start employing more competitive pricing strategies that ultimately lead to price wars between competitors and a race to the bottom. This undercuts the value of products and only results in losses for each business involved. This has been evident with smartphone brands like Samsung and Huawei who competitively lower the prices of their smartphones to achieve higher market share. It’s also common between wholesale retailers like CostCo and IKEA or large online marketplaces like Amazon that employ tactics to get their vendors to sell their products lower than on any other marketplace. Increased customer expectations For decades, the relationship between retailers and consumers had been dominated by the former. Customers had only a few options for where they trusted to purchase their groceries, shoes, school supplies, winter essentials and everything in between. Today, that relationship has been flipped on its head as consumers enjoy the pick of the litter in just about every retail vertical. As this trend has developed, consumers have come to expect faster shipping, better prices, higher quality, and more benefits for their loyalty. This will naturally affect a brand or retailer’s pricing strategies as they try to maintain customer retention and even attract new customers with promotions, benefits from loyalty programs and clubs, and bundles that appeal to shoppers. Changing customer loyalty What makes a customer loyal to a brand? At what point does a customer’s loyalty erode? And, what are the factors that could cause this to happen? For most customers, it’s a balancing act between quality and cost. However, in 2024, brands and enterprises must face other factors that could affect customer loyalty: Sustainability efforts. A 2023 McKinsey and NielsenIQ study found that products with ESG claims (environmental, social or governance) accounted for 56% of the total sales growth during the five-year period of the study, from 2017 - mid-2022, showing, for the first time, that brands with some kind of sustainability mention are growing faster than those without. This is all due to changing customer loyalty and the very parameters that shape and shift that loyalty. Social changes may be another factor. For example, in the sporting goods vertical, participation in social sports like pickleball and paddle tennis have increased by 159% while lacrosse, skiing and track declined by 11%, 14% and 11% respectively. Stubborn inflation The issue that has plagued global e-commerce since 2021 is still having its ripple effects on the industry in 2024. In the first quarter of 2024, the EU has already cut GDP growth expectations for the year from 1.3% to 0.9% as interest rates remain high while consumers still grapple with a 40% increase in gas and food prices that peaked in 2023. With this reality, pricing has never been more important nor more sensitive to the consumer. McKinsey’s latest ConsumerWatch report shows that shoppers were buying less items at the end of 2023 compared to the previous year’s period, with personal care dropping 3%, household items dropping 3% and pet care dropping 5% which results in AOV (average order value) loss. The importance of transparency in pricing software The use of dynamic pricing in e-commerce has grown exponentially in the last decade, however, that does not mean every software provider offers the best-in-class platform. Not every pricing tool is made equally. Transparency is something that has not been prioritised as a core tenet of pricing software, which has often allowed for a murky relationship between a brand or enterprise and their own pricing strategies. For a user of pricing software to experience the full potential of a pricing tool, they need to be able to build, test and edit each pricing strategy with clarity and ease. They need to be able to understand how and why a pricing recommendation has been made. They should be physically able to see every pricing strategy simultaneously at play without convolution or confusing coding jargon. While this may seem obvious, some pricing platforms have found that withholding pricing knowledge from a customer is the way to go. How is Omnia enhancing transparency? When Omnia set out to build its new pricing tool, named Omnia 2.0, its main goal was to create a next-generation platform that would enhance a user’s flexibility, user experience and transparency. Why was this necessary? The reason is two-fold: Pricing for SMBs and enterprises can be overwhelming, time-consuming and confusing. For enterprises, as assortments become larger and competitors thicken the competition, pricing may become more complicated. “As the ability to run detailed and complex pricing strategies has become mainstream, it has snowballed into the next level of challenges: Complexity overload,” says Omnia’s CEO Sander Roose. By developing our one-of-a-kind Pricing Strategy Tree™ coupled with information dashboards that give a God-like view of the market and every strategy you have at play, pricing becomes what it should always be: Transparent, flexible and simple. “Omnia 2.0 successfully cuts through the clutter,” says Sander. Another development that enhances transparency for users of Omnia 2.0 is the “Explain Price Recommendation” feature which provides a full explanation of how the price advice of a particular product came to be. This not only enables full control over how and why prices may change but it increases the customer’s pricing maturity. “The ‘Price Explanation’ visually tracks the path through the Tree to show the logic and how the price advice came about,” explains Sander. Join us at Price Points Live 2024 “Although at Omnia we believe it’s still day one in terms of building the ultimate pricing platform we are building towards in the long-term, we are very proud of how the Omnia 2.0 next-generation pricing platform gives our users of and customers ever growing superpowers,” says Sander. Join our exclusive annual event by reserving your seats on our Events page or simply email your dedicated Customer Success Manager who will assist you. We’ll be seeing you in Amsterdam!
Transparency in e-commerce: Leading the conversation at Price Points Live 202415.02.2024
Unleashing Superpowers in Pricing: How Omnia's Visual Decision Tree Approach Revolutionises Dynamic Pricing
Omnia Retail’s origin and purpose In 2012, my co-founder and I had conversations with category managers from established online retailers in mature e-commerce categories, such as consumer electronics, and learned that...
Omnia Retail’s origin and purpose In 2012, my co-founder and I had conversations with category managers from established online retailers in mature e-commerce categories, such as consumer electronics, and learned that they were spending a lot of time each week manually looking up prices of their competitors on comparison shopping engines and were still running behind with repricing the products in their assortment. Propelled by e-commerce, product ranges were increasing in scope, and the heightened transparency of online pricing resulted in frequent price fluctuations. It became increasingly laborious and time-intensive to maintain competitive pricing as it required manual gathering of pricing data, calculation of optimal price points, and implementation of adjustments. This challenge led us to founding Omnia Retail. Over the years, we saw that as other retail categories matured online, they struggled with the same problem. Similarly, over the last few years, brands have become more serious about their direct-to-consumer (D2C) channels. Brands selling a product against the initial Recommended Selling Price (RSP) for the whole product life cycle leads to insult pricing and the need to change their prices, yet again, to align with the market. As a result, we now see that brands are starting to struggle with the same problem that retailers experienced over a decade ago. Simply being passionate about the challenge and using our prior retail and e-commerce knowledge, we applied our engineering expertise to solve this problem for retailers and brands. It was only later - when our company had grown to a size where everyone couldn’t fit on the same lunch table anymore - that we started reflecting on why we were so invested about solving this challenge. This very reflection led us to establishing Omnia’s purpose explicitly: “We give retailers, brands and their teams superpowers by unleashing the full potential of pricing through market data, insights and automation.” The most central concept here is the word “superpowers”. On a basic level, it refers to automating the tedious and time-intensive tasks that thousands of our users at retailers and brands had to manually do before: looking up prices of competitors, making calculations, and implementing changes. This already removes a lot of tedious work and frees up time to focus on more strategic and creative work. However, that is only one of the basic layers of “superpowers”. Another more exciting element is that we enable our users to do things that were never possible before, even if they would have all the time in the world to spend on pricing. In terms of insights, an example is providing dashboards that provide our users with a “God-view” of the market: fully understanding their own price positioning and understanding what their key competitors (or resellers) are doing. Regarding pricing automation, it’s about having nuanced and advanced strategies, understanding how they are set, impacting results in terms of price positioning and ultimately sales, and contribution margins. Elements of success for dynamic pricing software implementations Through the more than a decade of serving retailers and brands with pricing software, we have seen that certain elements lead to success and ensure the best returns on dynamic pricing implementations: Clearly defined pricing objectives: Begin by setting clear pricing objectives, emphasising the importance of starting with a clear end-goal in mind. Without clearly defined objectives one can have the greatest pricing platform in the world, but there is no guidance on how to use it, and how to measure success. It's essential to recognise that pricing objectives may vary across different parts and levels of the business and are likely to change in response to external factors. Therefore, the pricing platform must accommodate for these varying objectives to remain effective. Securing engagement and support: Securing the engagement and support of team members with direct involvement in pricing is crucial whether it’s as their core responsibility, such as dedicated pricing managers, or as part of their wider role like category managers and buyers. If these individuals struggle to implement the pricing strategies they aim for in the system, or if they cannot explain the prices suggested by the system, they may resist adopting the dynamic pricing software or, at the very least, lack the motivation to leverage the platform's potential fully. Continuous improvement: Rapid cycles of learning and enhancement drive ongoing improvement. This process is supported by ensuring all operations occur in the software's front-end. Any hardcoded rules established by a pricing software vendor in the back-end will hinder such a learning cycle. Moreover, maintaining transparency about the operational logic and performance metrics is essential. From these elements of success we have learned at Omnia, we derived two essential design principles for developing our price management platform: flexibility and transparency. Flexibility to remove barriers to adoption, improving results and ensuring control. Transparency to keep control while on auto-pilot, create buy-in from internal stakeholders and facilitate learning loops. As the ability to run detailed and complex pricing strategies has become mainstream, it has created the next level of challenges: complexity overload. Omnia 2.0 successfully cuts through the clutter with its revolutionary visual pricing logic with the Pricing Strategy Tree™. It gives complete pricing flexibility and control, coupled with transparency. The power of flexibility: Removing barriers to adoption, improving results and ensuring control Flexibility is a core principle in our design philosophy, enabling our clients' users to execute any desired pricing strategy across all parts of their business. We have seen a vast array of pricing strategies being used and broadly speaking, they are driven by differences in objectives at the highest level, the need to differentiate on objectives on lower levels, and differences in definitions. On the highest level, the main differentiation we see is between maximising revenues - with the constraint that a minimum contribution margin needs to be reached - and maximising contribution margin. Traditionally, we saw pure e-commerce players being primarily focused on the former, while more traditional omnichannel retailers were more focused on the latter. With the changing economy and higher interest rates, the importance of being profitable in the present, we now see pure e-commerce players also shifting more towards margin maximisation strategies. While on the highest level, a retailer or brand might have a margin maximisation strategy, virtually, they will always need to differentiate on the lower level as well. Take for example a racket sports retailer. Although overall profit maximisation might be the main objective, the retailer might be focused on penetration (maximisation of sales, given a minimum margin constraint) in a market where they recently launched, as well as that being the main objective to establish itself in a nascent category like padel rackets. Finally, we have learned that retailers and brands have differences of definitions and that their chosen software should support that, rather than enforcing a rigid rule or definition. Take the example of a stock-based strategy, where a company wants to automatically become more aggressive when stock coverage becomes too high or take the opportunity to steer toward margin when stock coverage becomes too low. The definitions of what’s too high and too low differ not only between companies, verticals and markets but also within a company and on different parts of its assortment. It’s crucial for pricing software to be able to provide that flexibility and give the power to the user, not only to ensure that the retailer or brand can reach its objectives but also to ensure that there are no barriers in the adoption of the pricing software. If business users - like category managers - are not able to implement the strategies, they will be inclined to resist the implementation, putting the dynamic pricing implementation project at risk. Pricing software must be able to support flexibility, but it’s even more crucial that everything is fully supported in the front-end of the user-interface (“the portal”). If there are rules or constraints hardcoded within the back-end, a common practice of some pricing software vendors in today's market, it leads to a lack of transparency and limits the pace of learning (testing with strategies). At Omnia, we’re proud to have this flexibility in our software, with not one line of customer-specific code while serving hundreds of retailers and brands since 2012. The examples previously mentioned demonstrate how the principle of flexibility is integrated into the pricing automation part of the Omnia platform. However, our commitment to flexibility extends throughout the entire platform. For instance, we don't confine our customers to predetermined calculation schedules. Instead, they have full autonomy to set the timing for pricing data collection and dynamic pricing calculations. Additionally, they have the capability to initiate calculation runs manually at any moment from the front-end, such as when assessing the impact of strategy modifications. These calculations are efficiently completed within minutes, even for extensive product assortments. Transparency to keep control while on auto-pilot, create buy-in from internal stakeholders and facilitate learning loops Automation has the potential to save time and improve results. However, when implemented poorly, automation may lead to a lack of control. From the early years, this has been our belief, and preventing our dynamic pricing software from becoming a black-box has been a core design principle. Even in our earlier years, the Omnia software had a “Show me why™” button that took the user by the hand in terms of how the software arrived at a particular price advice. Transparency in pricing software ensures control while being on auto-pilot. An element of this transparency is how your strategies will affect the prices for all products such as the number of products that received “price advice”: prices up, down, equal, price difference vs various benchmarks, and so on. One level deeper is the need for dynamic pricing users to understand the impact of every element of their pricing strategy. For example, one could have a very elaborate pricing strategy, but if anywhere in the strategy there would be a pricing rule “always adjust to the lowest price in the market”, there would be a high chance that the rule will set the prices for the majority of your assortment, and most likely down. Understanding how elements of your strategy impact the eventual prices set links to another significant benefit of transparency: improving results by enabling learning loops. When implementing dynamic pricing you can achieve surprisingly strong results by implementing a pricing strategy once, and then never touching the system again. However, we see that customers who use our software more continuously and are evaluating and testing new approaches achieve the best results. This is only achievable with a pricing tool that creates maximum transparency, facilitating those learning loops. The Pricing Strategy Tree™ as embodiment of flexibility and transparency Our previous pricing platform, Omnia 1.0, was very flexible. However, our most advanced enterprise customers using complex pricing strategies could end up with a long list of pricing strategies. Although relatively easy to build up incrementally, this could make it hard to grasp the strategies running and the logic behind them. In numerous instances, consultants specializing in pricing strategy assisted our customers by creating decision trees to map out and advise on their clients' strategies. This inspired us to use a decision tree as the main interface when building pricing strategies. Although we already had the idea of a Pricing Strategy Tree on our roadmap, acquiring German pricing strategy company Patagona GmbH at the end of 2021 gave us an unfair advantage. Patagona had developed a Pricing Decision Tree to build strategies in their Pricemonitor product. We evaluated this concept with our customers and based on their invaluable feedback, we developed the Pricing Strategy Tree as one of the core elements of our next-generation platform, Omnia 2.0. The new platform was launched in the Summer of 2023, with new product features being added monthly. Not only does the Pricing Strategy Tree lead to more transparency in terms of letting our users understand what’s running, we see that in practice it also makes it easier and simpler to create strategies. That is because it’s a visual drag-and-drop interface, but also because we embedded functionality; such as copy-and-pasting of selected branches within the tree (typically set-up for one market or format) and copy-and-pasting of entire trees across countries or formats. The latter is particularly relevant for our global customers to be able to roll out pricing strategies to additional markets with just a few clicks. To drive transparency even further, the Pricing Strategy Tree proved the ideal canvas for additional functionality: path tracking through the strategy tree, strategy branch statistics of the tree, and naming of tree branches. The path tracking is an evolution of the “Show Me Why™” in Omnia 1.0 called “Explain Price Recommendation” in the Omnia 2.0 platform and provides a full explanation of how the price advice of a particular product came about. This is a typical question for a business user as a category manager or buyer. The “Price Explanation” visually tracks the path through the tree to show the logic and how the price advice came about. “Strategy Branch Statistics” covers another use case, one that was never possible in our previous Omna 1.0 platform: It highlights how elements of the overall pricing strategy impact the eventual prices set. It does this by showing how many products are repriced by each branch in the tree, the average price difference and percentage difference of the price advice vs current price points, as well as the number of products priced up and down. One important benefit of this is that it gives our users insight into which branches are most dominant in setting the eventual prices. Remember the example of having an elaborate pricing strategy with a rule somewhere to “always adjust to the lowest price in the market” in the transparency section above. However, the value of Strategy Branch Statistics goes beyond that. It also provides users insights into the performance of a particular strategy branch, thereby facilitating the important learning loops discussed above. Another functionality we have added to the Pricing Strategy Tree™ canvas is the naming of branches of the tree. Although the tree already makes it easy to show the logic applied, the naming of branches makes it even more practical for users and co-workers to understand what happens in a particular branch by describing it in natural language, for example “Follow the lowest price point of key competitors when stock coverage is too high”. The naming of tree branches also lays the foundation for the steps we plan to take providing more insights in the performance or effectiveness of branches. “We have seen several pricing tools, but the pricing strategy tree plus “show me why” is a super unique selling point and best implementation of dynamic pricing we have seen so far.” International enterprise office supplies retailer. AI is a means, not an end: A case for blending rules, AI, and goal-based pricing We believe that AI as a powerful technology can greatly contribute to the “superpowers” in our purpose. Think about automated import mapping, creating reports based on natural language, surfacing conclusions from data and charts, and so forth. We are also convinced that AI will provide more and more value in the future core area of price setting. However, given the importance of transparency and flexibility, we firmly believe that the future of pricing setting won’t be AI only - on 100% of the products in 100% of the cases - but rather a combination of pricing rules and AI. In terms of intelligence in price setting, AI is a means not an end itself. The core need that we see at the retailers and brands across our customer base is more focused on moving away from setting granular business rules - with the aim of reaching specific objectives - to rather focus on setting the objectives themselves at a higher level and letting our Omnia pricing platform optimise for that. As a company focused on and committed to delivering value to our customers, we naturally plan for this need with more and more goal-based “nodes” (blocks) in the Omnia Pricing Strategy Tree™. Goal-based nodes can have a combination of complex AI running under the hood, for other goal-based nodes less complex statistical rules, depending on the need. The first example of such a goal-based node with AI under the hood is our Amazon Buy Box AI block whereby our user sets the Amazon Buy Box win probability certainty and the AI - based on large amounts of historical data - tries to land exactly at the right price point to reach maximum margin while keeping the win probability as a constraint. This is very different from the previous approach in our software and, to our knowledge, the current state of Buy Box optimisers in most channel management software which has usually been going step-by-step down until you win the Buy Box and then up again to increase margin. That approach is simply too slow and there are too many variables with influence that have changed in the meantime. Although we envision that larger and larger parts of the assortment will be priced by such goal-based nodes in the future, we believe they will always be combined with business rules on part of the assortment (again, it will be rules and AI). For example, our users may want to apply hard constraints (such as upper and lower boundaries) which can differ on different parts of the assortment. For promotions, retailers and brands will want to set hard price points during a certain time frame. Those are just some examples of why the goal-based nodes need to be combined with business rules. The crucial thing is that the principles of flexibility and transparency continue to be crucial when combining rules and AI. You need one single interface where rules and AI can be seamlessly combined, applied by business users, and it remains transparent how and why prices were set. Again, the Pricing Strategy Tree is the ideal concept that automatically ensures this. While this may seem to be a trivial design prerequisite, we see that other pricing software vendors that have begun making first steps with AI in their platforms often are violating this principle. There are vendors that offer “AI-only” with no capability to combine it with rules. We have seen vendors with a separate “AI-version” of their product, next to the old rule-based version of their product to let customers choose one of the products. Then, finally, there are vendors that perhaps are actually more of a team of pricing consultants, as they have to hardcode rules in the back-end, as well as requiring a lot of manual intervention from the team of the vendor for the algorithms to at least provide decent results. The latter case also leads to very long implementation times and learning loops that are too slow, as we learned when taking over customers of these vendors. “With that pricing tree, the flexibility is almost endless.” Pricing Team Manager of the largest beauty pure e-commerce player in Europe. Unleashing superpowers with Omnia 2.0 At Omnia, we believe we are still in the early stages of developing the ultimate pricing platform we aim for in the long term. Yet, we're immensely proud of how the Omnia 2.0 platform is already giving our customers superpowers by enhancing their capabilities more and more. We have made huge leaps in terms of dashboarding, and are constantly evolving those dashboards on a weekly basis thanks to the great feedback from our customers, and the way we have decoupled the visualisation layer from the data layer, enabling us to make fast interactions with little development time. We are clearly on the path of having that “God-view” of the market from the introduction above. Perhaps an even bigger leap has been the core topic of this article: the introduction of the Pricing Strategy Tree in Omnia 2.0, which combines ultimate flexibility and transparency, and we believe is the ideal concept to combine business rules with (partially AI-driven) goal-based pricing. We couldn’t be more proud of the feedback we have received from our customers, and the market as a whole, since the launch of Omnia 2.0 in the Summer of 2023. And we are very excited about further growing the superpower of our users by adding more intelligence to the Pricing Strategy Tree and the entire Omnia 2.0 pricing platform.
Unleashing Superpowers in Pricing: How Omnia's Visual Decision Tree Approach Revolutionises Dynamic Pricing14.02.2024
How to use markdowns to manage stock throughout the Product Life Cycle
Any e-commerce seller knows how tricky markdowns can be. You don’t want to markdown stock too early when it could be selling at a higher price, but you also don’t want to markdown too late and end up with old stock you...
Any e-commerce seller knows how tricky markdowns can be. You don’t want to markdown stock too early when it could be selling at a higher price, but you also don’t want to markdown too late and end up with old stock you can’t sell. There’s no one-size-fits-all solution for this challenge, but aligning markdowns with your life cycle strategy is a great way to maximise sales and minimise leftover inventory, all without sacrificing margin. Here’s Omnia’s recommendation for how to do it. An overview of life cycle strategy The Product Life Cycle (PLC) refers to the stages that a product typically goes through, from its initial introduction to the consumer market to its eventual decline. These stages help e-commerce businesses understand how to manage a product's marketing, pricing and inventory strategies over this cycle. The PLC is usually broken down into four stages: 1) Introduction Characteristics: This stage begins when a new product is introduced to the market. Marketing Focus: The primary focus is on creating awareness and generating initial interest in the product. Marketing efforts may include online advertising, social media campaigns and influencer marketing. Pricing: Prices are often set competitively to attract early adopters and build a customer base. Inventory: Inventory levels are usually low to test the market's response and prevent overstocking. 2) Growth Characteristics: In this stage, the product gains popularity, and sales begin to increase rapidly. Marketing Focus: The emphasis shifts to expanding market share and customer acquisition. Marketing efforts may involve scaling advertising campaigns and targeting a broader audience. Pricing: Prices may remain stable or even increase if demand is strong. Inventory: Inventory levels may need to be increased to meet growing demand, but careful management is essential to avoid overstocking. 3) Maturity Characteristics: Sales growth stabilises, and the product reaches a saturation point in the market. Marketing Focus: Marketing efforts aim to maintain market share, differentiate the product from competitors and retain loyal customers; for example, product updates, loyalty programs and customer engagement. Pricing: Prices may become more competitive as the market matures and more alternatives become available. Inventory: Inventory management becomes critical to prevent overstocking. 4) Decline Characteristics: Sales start to decline, often due to market saturation, changing customer preferences or the introduction of newer products. Marketing Focus: The focus shifts to clearing out inventory, possibly through stock markdowns, promotions or bundle deals. Discontinued products may be phased out. Pricing: Prices are typically reduced to encourage remaining inventory to sell. Inventory: Careful inventory management is essential to avoid excessive carrying costs for unsold products. It's important to note that not all products follow this linear path through the entire product life cycle. Some products may skip certain stages, experience shorter or longer cycles or even go through cycles repeatedly due to updates and rebranding. Think of a product like Coca-Cola, which has been around since 1886. The product has gone through many iterations and experienced a close call with the decline stage and product death when the company rebranded and changed the formula to “New Coke” in 1985 – this only lasted 110 days before reverting to the original formula. As professor Hermann Simon points out: '' And the real art of pricing is not so much in determining whether a price is high or low but to differentiate pricing across customers across value across space and time. That will be a big challenge for software and for everybody involved in this area.'' Effective product life cycle management involves continuously monitoring market dynamics, being agile in responding to changing customer needs and competitive pressures and adjusting strategies accordingly – for instance, by aligning markdown strategy with where a product is in the PLC. Folding stock markdowns into the PLC Markdown: A reduction in the original selling price of a product to stimulate sales, optimise inventory levels, attract customers or respond to competitive pressures. Markdowns typically involve lowering prices temporarily, either through percentage discounts, fixed amount reductions, or promotional offers. Markup: An increase in the price of a product above its cost in order to cover the cost of goods sold (COGS), expenses, overhead and to generate higher profit. This is typically expressed as a percentage or a fixed amount. Many retailers and brands think of markdowns as a loss centre that can’t be avoided. But while poor planning and product failures can certainly force markdowns, they can also be planned for in advance and used in combination with PLC strategy to manage assortment levels through their lifetime. The goal of this strategy has two parts: To ensure the site does not sell out of specific products too early and to avoid being left with a lot of overstock. This strategy is relevant for all e-commerce sellers who hold inventory, but it’s especially important for D2C customers. What do PLC markdowns look like in practice? Here’s a hypothetical scenario to illustrate this idea. The Fashion Store has a sweater for the spring collection, which they will stop selling in August. There are a few ways they can combine markdowns with the PLC strategy here: Tag the product based on its life cycle stage (introduction, growth, maturity, decline or simply new, regular, old) and markdown based on this tag Connect the age of the item in days to the life cycle stage and markdown based on this age Use the stock level as an additional variable next to PLC in a markdown strategy Add Sell Through Rate as a variable to steer price increases Add average margin calculations to steer price decreases; for example, when pricing competitively Let’s say The Fashion Store defines its markdown strategies based on the life cycle stage. When the product is new and has a lot of stock left, they can keep the following position 3 in the market. If it is new and low on stock, they can continue pricing at the recommended retail price (RRP), as it’s better to price less competitively to achieve more margin and avoid selling out. As the product hits the next life cycles, The Fashion Store can slowly decrease the price based on current stock levels of the sweater. In the last stage (decline), a competitive price (match, undercut or follow cheapest market price) should be set – particularly if the product still has high stock at the end of its life cycle. Using additional variables in the strategy like margin calculations, Sell Through Rate and stock gives them the ability to dynamically switch between higher and lower prices, between highly competitive and minor discounted prices. Results: This strategy helps The Fashion Store avoid having high stock leftover by the end of the product’s lifetime. Because of this, they also can avoid a situation where they must significantly decrease the price all at once, by perhaps 50 – 70%, and instead have marginal, healthier decreases over time. Strategic markdowns can actually increase profitability Research from US retail think tank Coresight and inventory optimisation firm Celect found that retailers were missing out on significant revenues – 12% of total sales – due to markdowns. The “senior retail decision makers” who were surveyed blamed more than half (53%) of those unplanned markdowns on “inventory misjudgments.” But when sellers have proper inventory management and plan ahead to use markdowns as part of the PLC, it positively impacts sales and profitability. Let’s go back to The Fashion Store example and consider hypothetical prices: If the sweater we discussed has a cost of goods sold (COGS) of €25 and a retail price of €50, and the company has ten of them, then they would need to sell at least five at full price to break even. However, if The Fashion Store was able to choose the right level of markdown and sell all ten at the lower price, then they would achieve three objectives: Reach break even point Increase profits with each item sold Avoid unsold stock In this example, the right markdown price would be €40, as this would lead to a profit of €110. How to implement markdowns using Omnia This example is just one of the countless ways markdowns can be used to optimise stock at each stage of the PLC. But it doesn’t stop there – along with stock levels, a number of other data points can be used in Omnia to determine pricing throughout a product’s life cycle: Below are some use case examples of how Omnia customers have combined the PLC with metrics like time since launch, stock levels, seasonality and promotional dates to set pricing rules. To learn more about how you can incorporate markdowns as a part of your pricing strategy, click here.
How to use markdowns to manage stock throughout the Product Life Cycle14.02.2024
Omnichannel dynamic pricing: Competition, comparison and consumer behaviour
Think back to the last expensive product you purchased. Maybe it was a wearable like the newest Apple Watch, a pair of running shoes, or a new TV. How did you go about making your purchase? Did you just buy the item in...
Think back to the last expensive product you purchased. Maybe it was a wearable like the newest Apple Watch, a pair of running shoes, or a new TV. How did you go about making your purchase? Did you just buy the item in one click? Did you see it in-store and immediately hand over your debit card? Or did you first research online via social media and comparison sites, then experience the physical product in-store, then research prices online to decide where to buy? As consumer behaviour evolves and the younger, more tech-savvy generation gains more experience in maximising their value for money, brands and retailers must evolve to meet these shoppers where they are and win the sale. These changes, amidst a wider shift toward omnichannel selling, call for a more thoughtful approach to the interaction and synchronisation of online and offline pricing. Businesses are spending more time and resources on building omnichannel pricing strategies that can succeed – and be implemented – across all points of sale. In this article, Omnia explores the evolution in consumer behaviour and price comparison and how omnichannel brands and retailers can use dynamic pricing to bridge the gap. How does a consumer make their decision to buy? Today’s consumer is investing more time and effort in the research stage before making a decision about if they should buy, and if so, when they should buy and from whom. 44% of consumers say they are spending more time planning their shopping trips to brick-and-mortar stores, while about half say they’re spending less time just browsing in physical stores. The retail analyst, Natalie Berg explains: "There's just so many different ways to shop today. And as shoppers, we don't think in channels. We just want to shop and we want a seamless experience across the many touchpoints that exist today. But we're channel agnostic and we're device agnostic. Retailers have had to work really hard behind the scenes to make this a seamless experience." Google Trends has found some compelling insights on these omnichannel consumer behaviours since 2023: About one-third of consumers are spending more time on their decision-making, considering more brands, stores and retailers in the process 65% of consumers are more likely to research a product online, even if they plan to buy in the store And vice versa: 59% are more likely to go to stores to physically see or touch a product, even if they intend to buy online The trend is even stronger around the holidays: Consumers used online search before 96% of in-store holiday shopping trip It’s clear that online and offline are colliding, and as the data above shows, the buying journey can take many paths. Some consumers might research online first – watching unboxing videos from their favourite influencers, searching the product on social media or comparison sites – then go in-store to experience the physical product. Even after all that, they might conduct more price research online to decide whether to buy online or in-store, or whether to buy from a different seller altogether. Others might browse in-store first to get a feel for what they like, then research reviews, prices and other factors online before deciding if or where to buy. There are countless paths to purchase, and shopping behaviour is influenced by a number of factors: Price: The higher the investment, the more likely it is that the consumer will invest more effort and take the time to research Complexity: If a product is more complex, it is more challenging to get a full picture. A technical description does not always reflect the experience; for example, do you know offhand how loud 48 dB will sound in a pair of headphones? Experience: The five senses contribute to emotions, which can lead to consumers making a purchase. Experiencing a product and all its sensory information first hand can be a significant factor in the shopping journey. Returns: How easy is it to return a product? For example, consumers might be more likely to research items that are fragile or those cannot be returned due to hygiene reasons, versus something like a sweater that can easily be sent back. Brand: If the experience and association with the brand is exceptional – for example, the in-store service – a number of shopping behaviours could be impacted. The consumer might be more likely to want to shop in person and to go through with the purchase, and they are likely to be willing to pay a bit more. Competing in the price comparison stage Once a decision is made to purchase the product, the modern consumer is savvy enough to compare prices online. This means sellers across channels are competing on price, and if you’re an omnichannel brand or retailer, you’re essentially competing with everyone. In these highly competitive environments, dynamic pricing is an effective strategy to capture more sales and take control of your assortment. Omnichannel brands and retailers benefit from dynamic pricing in a number of ways, including: Competitive pricing advantage: Dynamic pricing adjusts prices in real time based on market conditions, competitor pricing and predetermined pricing rules. This ensures that prices remain attractive to consumers compared to other options in the market, which is particularly important when a shopper starts researching prices online. Maximising revenue: By dynamically adjusting prices at a higher frequency, retailers can set prices that reflect current demand, customer behaviour and other market variables, boosting revenue over time. Inventory management: By adjusting prices based on inventory levels, retailers can promote products that need to be cleared quickly or maximise profits on high-demand items. This is especially helpful when managing stock for both brick-and-mortar stores and online sales. Seasonal and promotional pricing: As mentioned previously, merging online research with brick-and-mortar shopping is even more relevant during holiday events, with consumers using online search before 96% of in-store holiday shopping trips. Dynamic pricing gives omnichannel retailers and brands the flexibility to respond to seasonal trends, demand fluctuations and promotional events. Real-time market changes: External factors, such as changes in the economy, weather conditions or geopolitical events, can impact consumer behaviour and market dynamics; changes that retailers can more quickly adapt to using dynamic pricing. Agility and flexibility: As online and offline become more intertwined, omnichannel sellers need to adapt and respond quickly to new information and competitor pricing updates. Bridging the pricing gap in omnichannel Omnichannel brands without a cohesive dynamic pricing strategy can face unnecessary losses and fractured pricing between channels. The challenge is this: How do you match your offline store to your online store while still competing with your key competitors? Consistency across online and offline channels is crucial. Omnichannel sellers have to find ways to synchronise both pricing strategies in order to provide a seamless experience for consumers and avoid losing sales or loyalty if a consumer or price comparison site spots a discrepancy. This is a common challenge. Many retailers struggle to align pricing: Their online prices change frequently, while their offline products are far more static. It’s easy to change an online price any time, but the retailer doesn’t want to change in-store prices every time if they are simply printed on signs, tags or stickers. There are a few ways to mitigate this challenge with the help of Omnia Retail dynamic pricing software. Electronic shelf labels (ESLs) This is the easiest way to match online and offline pricing. It requires more financial investment and IT infrastructure, but saves on costs by decreasing the labour and time needed to update prices. Image source If the cost of purchasing ESLs is too high, retailers can rent them (which tends to be far cheaper than buying), either for the whole assortment or just high sellers. One thing to consider with ESLs is timing. You don’t want a price to change on an ESL if a customer is standing right next to it. Imagine you’re shopping in a store, and the price on a product suddenly jumps from €100 to €110. The product hasn’t changed in the last five seconds, so it’s unlikely you’ll think it’s fair that the price has suddenly increased by 10%. To mitigate this, retailers might choose specific hours to change prices, either when the store is closed or during slower hours for foot traffic. Other retailers offer a discount if a customer comes to them after having found a cheaper price online compared to in-store. Fixed price adjustment days Another option is to decide on fixed days when you will align online and offline pricing, and adjust your repricing frequency to match. Compared to the ESL option, this is suboptimal, but it will allow you to synchronise prices at a level that does not exceed your shop floor staff capacity. This option will also decrease the chance of consumers walking out after checking online and discovering that either 1) your prices don’t match your own website or 2) your competition sells it for far cheaper. While providing great in-store service and experience adds value that consumers may be willing to pay more for, they are still likely to leave if the price difference is too large. Gaining clarity first on the following questions will help retailers to set this process up: Which key assortments are your revenue/margin drivers? How can you segment the online competition toward this assortment? Is there a pattern of which days the segmented competition is repricing their products? Answering these questions will tell you which assortments to prioritise, as well as which days your segmented competition is adjusting prices so you can do the same. Dynamic pricing made simpler with Omnia As consumers become more research savvy and the lines between online and offline shopping continue to blur, retailers and brands – especially those operating in an omnichannel environment – will need to adjust pricing strategies to win over the competition. If shoppers are researching on multiple channels, then those retailers and brands must be consistent and competitive across all points of sale. Omnia’s dynamic pricing software enables retailers and brands to bridge the pricing gap in omnichannel. Our customers who utilise ESLs use Omnia’s dynamic pricing software in a number of ways to make this strategy more effective: Understanding which products are more competitive in the market and which are not. For brick-and-mortar sales, only the competitive product prices need to be changed more frequently. Setting up the frequency at which Omnia sends data for their brick-and-mortar products, according to their ESL pricing strategies. This can be done in three different formats: CSV, XML and JSON. Omnia's output can be placed automatically to an (s)ftp location from where your ESL system can pick up the latest pricing data. Using Omnia’s filtering capabilities to decide which parts of the assortments you want to include in the reports used to change the products' prices on the ESL. This means that you can make a differentiation between the fixed-price products and the products that you want to change dynamically. Aligning online and offline pricing (where relevant). Omnia data enables customers to remove discrepancies. For example, one Omni customer used to do their offline repricing manually – a tedious and time-consuming process. Now, they use ESL software connected to the Omnia output, making it faster, easier and more accurate.
Omnichannel dynamic pricing: Competition, comparison and consumer behaviour08.02.2024
Omnia’s work on company culture takes centre stage in Frankfurt, Germany
“Even if you don't manage company culture, a specific culture will emerge. Although it probably won't be the culture you envisioned,” says Omnia Retail’s COO Vanessa Verlaan who presented on the topic of building a...
“Even if you don't manage company culture, a specific culture will emerge. Although it probably won't be the culture you envisioned,” says Omnia Retail’s COO Vanessa Verlaan who presented on the topic of building a strong and healthy workplace culture at the annual World Class Workforce Transformation conference in Frankfurt, Germany in January. In sharing Omnia’s experiences, failures and successes in building a healthy company culture, Verlaan shared that it is not something that can be achieved if only one part of the company is actively trying to enforce it: “I am convinced everyone in the company should be responsible of company culture. Not just HR. It starts with the leadership team and then it can be scaled.” Covid-19 has upended how leaders interact with employees and how coworkers connect with each other," a Harvard Business Review article by Denise Lee Yohn says. "Culture has become a strategic priority with an impact on the bottom line. It can’t just be delegated and compartmentalised anymore,” says Yohn. In many cases, a company’s core values are used to attract and hire top talent and remain a calling card on a company’s website. But what happens when the experience does not match the initial expectation? “People have certain expectations when they start at a company and then when faced with the reality, they are disappointed, and then leave. That’s when companies have to rehire for the same positions. This is why core values need to be implemented from the leadership team and throughout each department,” shares Vanessa. Using this simple yet effective system, Verlaan explains how the expectation-reality gap can be closed if culture plays an unconditional role in every step of the employee life cycle: Professionals from DHL Express, Siemens, Allianz Global Investors and Celltrion Healthcare also shared presentations on upskilling, digital transformation in the workplace, employee engagement, and other interesting topics that affect teams across the continent, making this one of the most innovative and forward-thinking events dedicated to the employee experience. In addition to the case study presentation, Verlaan also participated in a roundtable discussion with professionals from other private companies which further unpacked the topic for employees at corporations, scale-ups and start-ups. In talking to one of the fellow speakers who experienced that her previous leadership team was not supportive of implementing a specific workplace culture throughout the company, Vanessa believes that there are further opportunities regarding the practices for companies that want to achieve a strong and positive corporate culture. “Culture persists only because people act in ways that uphold its principles and codes,” says a Stanford Social Innovation Review paper, echoing the sentiment that Vanessa shared in her presentation. As Omnia has grown over the years, expanded in locations and developed each department, one thing has stayed the same - its core values. “We don’t update our core values because they are the foundation. However, they have become more clear and implemented in various steps,” says Vanessa. Omnia Retail's COO Vanessa Verlaan enjoyed snapping some photos at the event with fellow speakers in between interesting discussions on company culture.
Omnia’s work on company culture takes centre stage in Frankfurt, Germany18.01.2024
The Future of Retail: Navigating E-commerce Trends and Innovations in 2024
E-commerce had a volatile 2023. From declining sales in luxury to behemoth partnerships to the resurgence of influencer marketing, the last 12 months experienced several changes and surprises that even the analysts were...
E-commerce had a volatile 2023. From declining sales in luxury to behemoth partnerships to the resurgence of influencer marketing, the last 12 months experienced several changes and surprises that even the analysts were not expecting. Reflecting on the performance and strategies of social commerce platforms, brands and marketplaces in 2023 has set the scene for a fast-moving and competitive market for 2024. Omnia looks at how the previous year ended within e-commerce and what industry players and shoppers may expect in 2024, in addition to the innovation that might change the future of retail. Social commerce will show its teeth Within the e-commerce landscape, it was the expansion of social commerce that made the largest leaps and bounds, proving once again how it has become the largest growing sub-industry within retail and e-commerce with an expected value of $2 trillion in 2025. Forbes predicted that social commerce is growing three times faster than e-commerce while the moves and counter-moves made in 2023 mirrored why: Meta and TikTok are not interested in your lunch selfies anymore. They’re interested in your likelihood to shop. With Meta’s new partnership with Amazon, allowing Facebook and Instagram users to shop Amazon ads directly in the app, a new era of e-commerce is forming that further increases Amazon’s control of the market and further drives Meta’s plans to create shopping-first platforms. Other social commerce companies such as TikTok, which is owned by Tencent in China, will also be focusing on establishing itself as a legitimate e-commerce and influencer marketing platform in the West. TikTok Shop’s launch in the US in September is set to disrupt both the social commerce and marketplace arenas for 2024. TikTok and Instagram are each other’s biggest competitors, thickening the hunt for consumer attention and loyalty. Instagram and Facebook are still the world’s top choices over TikTok for buying products, however, the difference is incremental: In Germany, 46% of shoppers use Instagram while 42% use TikTok. In the US, it’s 42% and 40% respectively, and in the UK, TikTok surpasses Instagram as the platform of choice (39% vs 35%). Despite TikTok’s incredible growth and influence, Omnia predicts that Meta’s new Amazon deal will keep them out of the top position for the foreseeable future. The Implications of TikTok's Ban on E-commerce Retailers The potential ban of TikTok in the United States carries significant ramifications for e-commerce retailers, who have increasingly leveraged the platform for marketing, sales, and customer engagement. TikTok, known for its highly engaging short-form videos and robust algorithm, has become a powerful tool for brands seeking to reach a young, tech-savvy audience. Here’s an exploration of the key implications: Loss of a Major Marketing Channel TikTok as a Marketing Powerhouse: With over 1 billion monthly active users worldwide, TikTok has emerged as a crucial marketing channel for e-commerce brands. The platform's unique algorithm promotes content virally, often reaching millions of users organically. For many retailers, TikTok has been instrumental in driving brand awareness and engagement through influencer partnerships, user-generated content, and creative campaigns. Impact of the Ban: If TikTok were to be banned, e-commerce retailers would lose access to this vast audience. Brands that have heavily invested in building a presence on TikTok would need to shift their strategies quickly. This disruption could lead to a temporary decline in visibility and engagement, impacting sales and customer acquisition efforts. Shift to Alternative Platforms Exploring New Avenues: E-commerce retailers would likely diversify and redirect their marketing efforts to other social media platforms such as Instagram Reels, and YouTube Shorts. These platforms offer similar short-form video features, which can help brands maintain some continuity in their marketing strategies. Challenges and Opportunities: Transitioning to new platforms may require additional resources and time to build a comparable follower base and engagement level. However, this shift could also present an opportunity for brands to diversify their social media strategies and reduce dependency on a single platform. Impacts on Sales and Revenue Sales Generation via TikTok: TikTok's "Shop Now" buttons and seamless integration with e-commerce platforms have enabled direct purchases within the app, boosting sales for many retailers. Revenue Risks: The ban would disrupt the revenue stream, especially for brands that have seen substantial sales through TikTok. Retailers would need to find alternative methods to drive direct sales, such as enhancing their websites' shopping experiences or investing in other social commerce tools. Influence on Consumer Behaviour Consumer Habits: TikTok has influenced consumer behaviour by making shopping more interactive and engaging. The platform's algorithm personalises content based on user preferences, making it easier for brands to target potential customers effectively. Behavioural Shifts: Without TikTok, consumers might shift their attention to other platforms, altering the dynamics of online shopping. Brands will need to adapt their strategies to align with changing consumer behaviours and preferences. Talk to one of our consultants about dynamic pricing. Contact us AI and E-commerce in 2024 Artificial Intelligence (AI) is transforming e-commerce in various ways, and many technologies that retailers use daily are AI-driven, even if not immediately apparent. Here are six of the most common AI applications in e-commerce: Personalised Product Recommendations: Collecting and processing customer data about their online shopping habits is now easier than ever. Retailers rely on machine learning to capture data, analyse it, and use it to deliver personalised experiences, implement marketing campaigns, optimise pricing, and generate customer insights. Over time, machine learning will require less involvement from data scientists for everyday applications in e-commerce companies. Retail analyst Natalie Berg shares: ‘’AI is going to make retailers smarter leaner more efficient. And it's going to make our experience as customers as you can tell. It's going to make it more personalized more relevant’’ Customer Segmentation Access to more business and customer data, along with increased processing power, enables e-commerce operators to better understand their customers and identify new trends. Smart Logistics Machine learning's predictive powers shine in logistics, helping to forecast transit times, demand levels, and shipment delays. Smart logistics use real-time information from sensors, RFID tags, and similar technologies for inventory management and better demand forecasting. Over time, machine learning systems become smarter, building better predictions for supply chain and logistics functions. Sales and Demand Forecasting Especially in times after COVID-19, planning inventory based on real-time and historical data is crucial. AI can help with this. A recent McKinsey report suggests that investment in real-time customer analytics will continue to be important for monitoring and reacting to shifts in consumer demand, which can be harnessed for price optimisation or targeted marketing. These applications highlight how AI is revolutionising e-commerce, providing enhanced personalisation, operational efficiency, and smarter business strategies. Marketplaces will face stiffer competition with less market share Niche marketplaces within luxury such as Yoox Net-A-Porter (YNAP), Farfetch and Matches almost ended in collapse in 2023, however, Farfetch was saved by South Korea’s e-commerce giant Coupang in a last-minute sale, Matches has been purchased by UK retailer Frasers for €60 million, while YNAP is still searching for a saviour to bring them into the black since the sale to Farfetch fell through. According to Vogue Business, Amazon or Alibaba could potentially purchase YNAP, two of the world’s biggest e-commerce platforms, further strengthening their grasp on the marketplace landscape. As mentioned above, Amazon has continued its growth and consolidation by entering the social commerce space with Meta, which was announced in November, and the results of this deal will play out interestingly throughout 2024. How will this affect other marketplaces? In 2024, marketplaces will feel the pinch of the Meta-Amazon coalition as an increasing number of lucrative vendors will turn toward Meta platforms to make sales and grow their brands. As a result, consumers will go where there is variety with a competitive price and an easier shopping experience. However, if more shoppers will be heading toward Meta platforms, marketplaces may be able to take advantage of the increased traffic with new advertising, sales and pricing strategies. Marketplaces other than Amazon will need to incentivise shoppers to choose their platform - whether it is via social media or not - to remain profitable. Although Zalando ended off 2023 with declined quarterly sales, their new partnership with Highsnobiety has led Omnia to believe that they too have noticed the e-commerce success that lies within content. Europe’s largest marketplace has realised that many customers, especially Gen Z and millennial shoppers, buy into content and not products. The new platform, entitled Stories, creates fashion-related video content and provides news of collaborations and interviews with designers. “We know that customers are looking for inspiration and with Stories on Zalando we are doing exactly that: crafting highly engaging formats to show what’s new and what’s next in fashion,” says Zalando’s Senior Vice-President of Product Design Anne Pascual. Brands will restrategise marketing and sales strategies to regain sales Brands in multiple categories, especially in fashion, beauty and luxury, experienced a cooling period in 2023 that lasted longer than expected. For some, this will extend into 2024: Burberry’s shares have dropped 15% after they reduced their profit outlook thanks to a quieter-than-expected sales period over Christmas. Nike is cutting jobs and is set to reduce $2 billion in costs over the next three years amid dwindling sales. Gucci’s brand equity dropped 31% from 2022 to 2023, while L’Oréal and Lancome list 20% and 19% respectively. Overall, the annual Kantar BrandZ report concluded that the world’s top 100 brands lost 20% of their value in 2023, leaving them on the back foot as 2024 gets underway which will see brands moving and shaking to get into a profitable, growthful place again. Despite the overall lookout, other brands in some verticals including sports apparel and performance footwear did well such as Swiss-owned running shoe maker On which saw third-quarter sales increase by 44% and HOKA, which consistently saw growth throughout 2023 and gained in market share. In 2024, On is focusing on building its D2C channel which will cut into market share controlled by Adidas and Nike which have seen declining market share at Dick’s Sporting Goods, one of the US’s largest shoe retailers, while On and HOKA increase. Source: Reuters 2024 trends in sports apparel include a transition from logo-heavy designs, which we saw gain prevalence within “quiet luxury”, to “quiet outdoors”. Brands like North Face and Arc'teryx will be focusing on gaining the attention of luxury buyers who want in on sportswear with a high-end feel. Conclusion As we move into the second half of 2024, the e-commerce landscape is set to become even more dynamic and competitive. The developments in 2023, including the rapid expansion of social commerce, strategic partnerships, and the resurgence of influencer marketing, have laid a robust foundation for the coming months. Social commerce, driven by giants like Meta and TikTok, will continue to evolve, with new features and integrations aimed at enhancing the shopping experience. Meta's partnership with Amazon and TikTok's efforts to solidify its position as a key e-commerce player will significantly shape consumer behaviour and market dynamics. However, the potential ban of TikTok in the US could disrupt these trends, forcing brands to adapt quickly. Marketplaces will face increased competition as the Meta-Amazon coalition draws more vendors and consumers to their platforms. This shift will compel other marketplaces to innovate and offer unique incentives to retain their market share. Strategic partnerships, such as Zalando's collaboration with Highsnobiety, highlight the importance of content-driven commerce in attracting and engaging younger audiences. Brands, particularly those in fashion, beauty, and luxury, will need to re-strategise their marketing and sales approaches to recover from the prolonged cooling period of 2023. While some brands face continued challenges, others in niches like sports apparel are poised for growth, leveraging direct-to-consumer channels and tapping into emerging trends like "quiet outdoors." In summary, e-commerce in the second half of 2024 will be characterised by rapid adaptation, and a focus on personalised, content-rich consumer experiences. Brands will need to leverage strategic partnerships with influential platforms and content creators to stay relevant. The successful players will be those who can seamlessly integrate innovative technologies and data-driven insights to create engaging, tailored shopping journeys for their customers.
The Future of Retail: Navigating E-commerce Trends and Innovations in 202426.12.2023
Sustainability: Footwear gains traction in creating a circular economy
Reincarnating the shoe - that’s what some global brands in footwear are attempting to do with sustainability’s latest solution to a mounting climate change problem. A circular economy refers to an ecosystem where...
Reincarnating the shoe - that’s what some global brands in footwear are attempting to do with sustainability’s latest solution to a mounting climate change problem. A circular economy refers to an ecosystem where fashion is designed with its end-of-life state being top-of-mind. Circular fashion and footwear are designed specifically to be recycled into new items made from the old. From the individual fibres of a t-shirt to the type of glue that binds shoe parts together, circular fashion is dedicated to reimagining how garments are made to avoid deeper damage to the planet and its resources. Up to 92 million tonnes of clothing and footwear end up in landfills around the globe each year, making the fashion industry one of the most significant contributors to waste and carbon dioxide emissions. “Circular fashion is a closed-loop system that aims to design out waste,” states the Sustainable Fashion Forum. Europe’s share of footwear consumption in 2022 sat at 14.9% of the global total, equaling 3.58 billion shoe purchases across the continent, and of those shoe purchases, how many can we say once had a life in another home on another foot as another shoe? As circularity initiatives grow for clothing and accessories through resale marketplaces and brand-run programs, shoes have been largely left behind. However, 2023 saw a positive uptick in footwear brands who want to see their shoes live several lives. Omnia delves into why it’s so difficult for shoe brands to create circularity and who’s doing it right. Why it’s harder for shoe brands to create circularity vs clothing It may be harder, but it’s still possible, and brands are proving it. Footwear is generally made to last longer than clothing, especially in the sports and outdoor aisle, with plastic, rubber and leather used for most shoe products. National Geographic reports that 47% of all footwear is made of plastic and rubber, making the 23.9 billion shoes produced globally in 2022 one of the most sustainably challenged products in retail and textile production. Clothing, on the other hand, is a much simpler item to create a circular ecosystem with, as items usually involve one to two materials. “Footwear has up to 200 different parts that go into one shoe,” says Adidas’ Senior Director of Sustainability Viviane Gut. Because of this, some global fashion companies have made concerted efforts to install circularity initiatives including H&M’s goal to become completely circular by 2030 by utilising 100% recycled and sustainability-sourced materials. There’s Farfetch, the UK-based marketplace for pre-owned luxury fashion and accessories, whose second-quarter results for 2023 showed 4.1 million active shoppers and a 40% year-on-year increase in supply growth. In essence, creating a more sustainable t-shirt or reselling a used blazer is less expensive and more seamless than going back to the drawing board of recreating how the shoe is made. However, this doesn’t mean it isn’t being done: In November, the Business of Fashion reported that eight global brands including New Balance, Crocs, Target, Brooks Running, Reformation, Ecco, Vibram and On are banding together under the name The Footwear Collective to share knowledge and resources to expand the circular shoe economy, which is the first of its kind within the shoe market. In addition, Nike debuted its first circular shoe in August 2023 entitled ISPA Link Axis. As the world’s largest sneaker producer, Nike calculated their carbon footprint to be over 11.7 million metric tonnes of CO2 in 2020 alone, equating this impact to what the entire city of Amsterdam, Netherlands may offset in the same period, further proving how necessary it is for global brands to create circularity and end-to-end sustainability. Each component of the shoe is made from recycled materials and no glue, making it the ideal shoe to be disassembled and reinvented once more. Assembling the Link Axis is also more energy efficient, as it does not require time and resources to glue the sole to the upper parts of the sneaker. Nike ISPA Link Axis Talk to one of our consultants about dynamic pricing. Contact us Where does the circular economy begin? Creating a closed-loop ecosystem where garments essentially never become waste is central to a circular economy. However, at the heart of the conversation, the first question brand leaders and retail entrepreneurs can ask themselves is, if we can’t rely on consumers to resell our garments or take part in branded circular initiatives, how do we kickstart circularity from the inside out? How do we at least guarantee that our manufacturing and production practices are low-impact? Allbirds, the shoe brand that’s made a name for itself for its innovation in sustainability and carbon offsetting, has already done more than most to create a greener product when they launched a sneaker in 2015 made out of Merino wool from sustainable farming and recycling. The sneaker’s fame came from the fact that it only had a small carbon footprint of 9.9 kilograms, however, this success only motivated Allbirds to go further. In mid-2023, the brand launched a new sneaker at the Global Fashion Summit in Copenhagen that offsets 0.0 kilograms of carbon dioxide, making it one of the first sneakers to be carbon neutral. For Allbirds, this is all part of their long-term goal of reaching a 50% reduction in their carbon footprint by 2025, culminating in a 0% carbon footprint by 2030. Allbirds The Moonshot In essence, circularity needs to start at the root including materials, manufacturing, transportation, product use, and end-of-life which may include the resale market, return initiatives, brand-run programs, and recycling. New rules for the new world The very first shoe, created approximately 9,000 years ago and discovered in California, USA, was made out of sagebrush bark that simply covered the toes and the sole. Today, the sophistication and variety of footwear are evident from Prada to Nike to Timberland and everything in between. As fashion and footwear brands continue to release new items in the coming decades and centuries, one thing is for certain: The rules for producing, manufacturing and discarding will change. Policy, public scrutiny and changing consumer behaviour will edge and direct brands to revisit their production, distribution and end-of-life methods time and time again to ensure greener products are the end result. Creating and taking part in a circular economy for shoes and fashion is one of the best solutions for brands and consumers to lower their carbon footprint, reduce landfill accumulation and make full use of the materials used. “When you use materials seven, eight, or 10 times over, then the footprint goes down dramatically,” said On’s co-founder Caspar Coppetti to the Business of Fashion, the Swiss shoe brand that’s been backed by Roger Federer. “You have to really go to the source and develop new processes, new technologies, scale them … and then there’s a lot more investment needed.”
Sustainability: Footwear gains traction in creating a circular economy21.12.2023
Product bundling: The psychology for consumers and benefits for sellers
Brands and retailers have long used the strategy of bundling, combining two or more products into a separate product bundle, to boost sales and profits. Whether it’s brands choosing to bundle products, such as socks and...
Brands and retailers have long used the strategy of bundling, combining two or more products into a separate product bundle, to boost sales and profits. Whether it’s brands choosing to bundle products, such as socks and underwear for men; or food retailers bundling vegetable staples like potatoes, tomatoes and onions; this age-old tactic has often proved successful for sellers while also benefiting the end consumer. In this blog post, Omnia delves into the intricacies of bundling, exploring its benefits for sellers, impact on consumer spending and the psychology behind its effectiveness. Why do brands and retailers bundle products? Bundling two or more products together can have a number of benefits for e-commerce sellers, helping to capture the attention of both the casual browser and the ready-to-buy shopper. 1) Increase sales and AOV Selling a bundle to a customer rather than a single product is an instant boost to both sales and average order value, or AOV. If a brand uses a bundle to cross-sell related or complementary products, that will increase the total value of the sale, so long as the bundle was priced in a beneficial way. Example: A sporting goods retailer typically sells one rugby jersey at a price of €75, but bundles that rugby jersey with a t-shirt and a hoodie from the same team for €140, increasing the value of each individual sale and pulling up the AOV. 2) Optimise inventory management No merchant wants to deal with deadstock and unnecessary inventory costs, and it’s estimated that 20 to 30 percent of inventory is deadstock for the average e-commerce seller. Bundling allows brands and retailers to efficiently move excess stock by combining it with other items, which minimises losses associated with unsold individual products while also creating perceived value for the customer. Example: A D2C makeup brand might combine a slower-selling makeup brush with a best-selling makeup palette, ensuring the products will move quickly to free up the warehouse and reduce waste. 3) Decrease marketing and shipping costs Selling items in a bundle means you can promote a set of products as one product, paring down marketing costs, and also ship them as a bundle, which leads to less packaging and overall shipping costs. Example: Rather than selling and shipping every accessory for a phone separately as the consumer realises they want it, promoting all accessories, such as phone cases, headphones or extra chargers in a bundle at the time of purchase means they can be shipped in one box. 4) Take advantage of seasonal peaks Product bundling can also be used to capitalise on peak shopping times for certain items, such as during the holidays or over the Summer. Example: Bundling outdoor toys and games, such as water guns, pool floats or inflatable pools, as the summer approaches allows a retailer to capitalise on the fact that families will typically spend more time outdoors and in their gardens and pools in warmer weather. Discover how dynamic product bundles can optimise your pricing strategy and increase your revenue. Schedule a demo Consumer psychology: Why is bundling effective? Although bundling can seem like a simple concept – combining multiple products into one set, perhaps at a slight discount – there are more subtle factors at play that influence consumers on a psychological level, leading to increased spending and the other benefits for the seller listed previously. First, bundling can enhance the perceived value of the bundled products to the customer: When the shopper sees two or more items bundled at a discounted price, their perception tends to be that the total value of the bundle is higher than the sum of the individual items’ values. This point is amplified even more when a seller makes it clear how much money is being saved by buying the bundle rather than each product separately, as this example from beauty retailer LOOKFANTASTIC shows: “Worth over £150, yours for just £50!” The perceived quality can also be adjusted up or down depending on the actual items included in the bundle. A study titled “The effects of price bundling on consumer evaluations of product offerings'' from researchers at the University of Michigan Business School, Johannes Gutenberg Universität and Universität Mannheim discussed the phenomena of averaging, anchoring and adjusting: Averaging – Consumers look at a bundle of products and their “ratings” of each component are averaged or balanced into an overall evaluation (Gaeth et al., 1991) Anchoring and adjusting – Buyers tend to anchor on the most important product in the bundle, then adjust their evaluation by taking the less important items into account (Yadav, 1994) Athletic Greens, a D2C nutrition and supplement brand, uses these tools in their bundles. For anyone who signs up to subscribe for monthly deliveries of their AG1 powder, rather than making a one-time purchase, they receive as part of the bundle a “starter kit” with a premium jar and branded shaker bottle, as well as a discount on the monthly price. The jar and shaker likely don’t cost the company much even if they are labelled as premium, especially as a one-time bonus, but it gives a boost to the perceived quality of the whole offering. It’s worth noting that, especially when selling high-value items, these phenomena can actually bring down the perceived quality of a product, so sellers need to be careful which items they choose to bundle. This is referred to as the “presenter’s paradox”, where adding more items that are perceived as lower quality will bring down the perceived average value and therefore overall value of the bundle. Source: CXL.com A commonly used example of the presenter’s paradox is with an expensive bottle of wine. Let’s say you buy two of these $5000 bottles to give to two different work clients. To one, you give the bottle by itself, while you give the other the bottle in addition to a set of plastic cups. Although the actual monetary value of the second gift is higher, the perceived quality is lower. Bundling can also impact consumer behaviour by lessening the number of choices a shopper has to make. The paradox of choice, sometimes called choice overload, suggests that having a large number of options requires more effort from the decision-maker, and can actually leave us feeling unsatisfied with our choice. The phenomenon of FOMO (fear of missing out) is also at play here, as consumers might have a fear that there may have been a better option than the product they chose. When a bundle is offered to the consumer, it simplifies the decision-making process down to choosing whether the bundle meets their needs, rather than evaluating each individual product. This is more convenient and decreases the cognitive effort required to make a purchase. Amazon, as the biggest marketplace in the world, is notorious for having seemingly endless choices, with a catalogue currently consisting of more than twelve million products. As one way to combat the paradox of choice, Amazon includes a section on most product pages that either recommends other products to pair with the item, such as “Buy it with”, or suggests items based on the behaviour of other shoppers like “Frequently bought with”. The interesting thing about this Amazon example is that the bundle doesn’t have to include a discount. In the screenshot below, you can see that Amazon suggests another hat and a scarf to pair with the Tommy Hilfiger hat. None of the items are offered at a discount, but the cognitive effort required is lower if the buyer simply wants to allow Amazon, or the behaviour of past shoppers, to make the decision for them. Is bundling worth it? Bundling is a common promotional tactic for e-commerce businesses, and tends to be effective because it’s usually built around price, the most important “P” in the marketing mix. There are many use cases where bundling is worthwhile for sellers: When you want to group more products together to boost overall sales and AOV When you want to move inventory quickly, whether to clear out deadstock or just make room for new products When you want to offer a great value to customers, to reward and encourage loyalty When you want to decrease the potential for choice overload and help your customers easily find and purchase complementary products However, as with any promotional tactic, there are downsides to consider. When done incorrectly, bundling can weaken a brand’s reputation, or pull down the perceived quality of a high-value product, as with the presenter’s paradox. It often involves discounting, which cuts into margins. If customers only buy bundles and never individual products, it can have a long-term impact on profits and will require businesses to be very strategic about how they price. Ultimately, the success of bundling comes down to each individual e-commerce seller. The question you must answer is this: Can you build a bundling strategy that delivers value to your business and your customers without hurting your image or long-term profits? If so, bundling can be a great way to move inventory quickly, boost sales and AOV and deliver more value to customers. Read about more interesting blogposts here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Product bundling: The psychology for consumers and benefits for sellers14.12.2023
Black Friday sales increase, but holiday spending looks shaky
Consumers showed their resilience once more for Black Friday 2023 amid global economic turmoil as sales increased across multiple channels, categories and markets. Shopify and Adobe all shared positive year-on-year...
Consumers showed their resilience once more for Black Friday 2023 amid global economic turmoil as sales increased across multiple channels, categories and markets. Shopify and Adobe all shared positive year-on-year increases: Shopify reported a 22% increase in sales from brands using its platform while Adobe Analytics shared a 7.7% increase in e-commerce sales over the total Black Friday weekend. In addition, year-on-year foot traffic for brick-and-mortar stores also saw an increase, albeit a small one, of 1.5% on Black Friday weekend. Adobe’s annual report, which covers 100 million SKUs in 18 retail categories, found five categories to be the largest contributors to this year’s sales - clothing, electronics, furniture, toys and groceries. These contributed to 60% of the €101 billion in sales from 1 - 27 November, which includes pre-Black Friday discounts during the month. By the end of the shopping weekend, discounts climaxed at 31% for electronics, 27% for toys, 23% on apparel and 21% on furniture. Small appliances and electronics like TVs and smartwatches also did particularly well while beauty and personal care saw Black Friday and Cyber Monday sales for beauty saw a 13.3% increase in year-on-year sales, as reported by RetailNext. Performance footwear’s discounts led to high sales Brooks Running was one of the performance shoe brands that reported a highly successful Black Friday/Cyber Monday period, enjoying a 14% record boost in sales on Cyber Monday alone. Omnia researched Dutch pricing data for running shoes to see what could have caused the increase in sales. Black Friday and Cyber Monday offers already began the Friday beforehand but the number of offers increased over time with the peak on Black Friday. Discount offers remain over the weekend and return to lower levels two days after Cyber Monday. Compared to the month before, Black Friday and Cyber Monday are seen as highly competitive days. On selected items, there is an average discount of 18.5%. Where some retailers and brands even go up to a discount of 28.7% on average. During this period we see different strategies of different retailers coming to life. Where some retailers and brands rely more on heavily promoted products, others that maintain their competitive strategies aren't able to discount that much. A trend we detect in the running shoe business is that brands, on average, have higher discounts, showcasing that a D2C strategy could be highly lucrative over this period. What can retailers expect about festive season spending? The state of consumer spending over Black Friday weekend should not fool retail leaders. Stubborn inflation and high food and gas prices are very much a constant monkey on the shoulders of household budgets and, even for wealthier consumers, have eaten into expendable income. Adobe reported a 14% increase in buy-now-pay-later services compared to this period last year. Cyber Monday saw a massive 42% increase in the use of these services as consumers moved to act resourcefully to make purchases. In addition, US credit card debt exceeded $1 trillion in November. Overall, although Black Friday spending was better than expected, a booming holiday shopping season will likely not be on the cards. Retailers and brands expect to see year-on-year increases, but it won’t be because of the usual holiday shopping explosion: Inflation has resulted in all-round price increases, making everything more expensive than last year, resulting in consumers spending more money for the same or less. Single-digit increases in spending of 3 - 4% are predicted, according to the US National Retail Federation, in comparison to 2021’s 12.7%. Average selling price across all categories: 2022 vs 2023: Source: Salesforce data published by Forbes Consumers expect to spend, but this will be largely due to the fact that consumers feel obliged to buy gifts over this period, and not because they want to go all-out on multiple gifts, holidays and treats for themselves. “They’ve been very resilient. They will shop. They have obligations to family and other loved ones that they’re going to fulfil the gift list for," says Michael Brown, a partner at Kearney. In the UK, festive season shopping, which encompasses both November and December, has not started as strong as in previous years: The British Retail Consortium and KPMG report that retail sales in November totalled 2.7% compared to 4.5% in 2022 while non-food items experienced a decline altogether. Moreso, PwC predicts a 13% decline in festive season shopping in the UK market, as reported by the Business of Fashion. As a result, UK retailers are expected to discount heavily in January 2024 to offset sitting stock that should’ve sold during this year’s fourth quarter. How can retailers make the most of December deals? McKinsey suggests that providing value will likely be the best strategy for retailers and brands to get consumers to shop which could mean offering same-day delivery, free shipping, product bundles, or sharper discounts. “People are heading into the new year thinking inflation is bad, interest rates are tough, there’s geopolitical conflict in the world, and that’s why consumers are so negative. They’re in betwixt, and their uncertainty is what’s keeping them from splurging,” said Kelsey Robinson, senior partner at McKinsey. In terms of sales channels, smartphone shopping for e-commerce sales accounted for a 54% majority, meaning an advertising restructure targeting smartphones via social commerce may result in higher sales. Targeting social commerce buyers may also lead to an entirely new stream of customers for future purchases.
Black Friday sales increase, but holiday spending looks shaky24.11.2023
Amazon and Meta's 2023 partnership share a common end-goal
Jeff Bezos and Mark Zuckerberg are smiling a little more as the fourth quarter of 2023 plays out, thanks to a striking new deal between Amazon and Meta: Instagram and Facebook users can now shop products directly from...
Jeff Bezos and Mark Zuckerberg are smiling a little more as the fourth quarter of 2023 plays out, thanks to a striking new deal between Amazon and Meta: Instagram and Facebook users can now shop products directly from Amazon ads in their feed without having to exit the app. Shoppers will have the ability to link their two Amazon and Meta accounts “for a more seamless shopping experience,” says Meta in a statement in November. “For the first time, customers will be able to shop Amazon’s Facebook and Instagram ads and check out with Amazon,” said the company too in a statement. Source: Maurice Rahmey, Co-Founder and Co-CEO at Disruptive Digital As retail and e-commerce experience decreasing sales, small businesses and enterprises will be looking at this new partnership intently to see how it may affect their sales strategy. Despite the possibility of some good news for brands and retailers, who may be eager about the news of this collaboration, Omnia sees other factors that may be at play: Is it more about increasing ad sales and consolidating advertising market power, or is it about the end seller? Setting the stage for the Amazon-Meta partnership Over the years, social commerce has matured to rival e-commerce in its sales and reach. The line between a successful e-commerce marketplace or retailer and an in-app storefront on social media is blurring, and no other example than TikTok Shop’s launch in the US in September displays this phenomenon so well. However, despite social commerce’s rise to success with a valuation of $1.2 trillion by 2025, the industry’s largest player, Meta, has still struggled to rebound after Apple’s iOS privacy updates in 2021 largely cut off its ability to mass target customers and collect data from them. Forbes wrote in 2022 that Facebook took a $12 billion knock to ad revenue after the change. As a response, Facebook and Instagram simultaneously increased advertising costs for brands and retailers and squeezed their reach and engagement levels to initiate more ad spending, which created an unprecedented scenario for themselves where advertisers chose other platforms to advertise on. When it comes to Amazon, as it has grown bigger and more brands have chosen to sell their products on the behemoth marketplace, the more saturated each category has become. And as brands - big and small - obviously want to be seen by shoppers on Amazon’s apps, the competition for attention thickens, making for a ripe scene for Amazon to take advantage of this competition. Getting vendors to advertise their products has been the e-commerce giant’s strategy for some time now, with the push to lure in ad expenditure from sellers accruing $12.06 billion at the end of the third quarter. That’s a 26% increase compared to the same time in 2022. Looking ahead, Amazon has ramped up their agenda to boost ad sales, offering enterprise ad agencies the chance to advertise via Amazon Prime Video in 2024, asking for between $50 - 100 million. It may seem out of left field for a retail company to focus so much on building an advertising department, however, this is how Amazon plans to consolidate growth and power in the industry. Talk to one of our consultants about dynamic pricing. Contact us How will this affect brands, enterprises and other marketplaces? There are pros and cons to this deal that will have ripple effects. For brands who already sell on Amazon wanting to increase sales volume, being able to advertise and convert directly within Facebook and Instagram will be largely beneficial to them. The ease of the process will also be improve the customer’s shopping experience and, in turn, will build a network of return customers. For enterprises, the pros are quite similar, however, a glaring con is that larger enterprises also want to direct traffic to and sales from their own websites using their own pricing strategies that aren’t dictated by Amazon. The Amazon-Meta partnership may send enterprises down a path where they see less sales from their own platforms and find themselves relying more on in-app sales from their Amazon stock. If this takes place, Amazon will be able to indirectly control the price of an enterprise’s product. For marketplaces, especially those in niche categories, this partnership may leave them out in the cold. As the Amazon-Meta coalition grows, more and more vendors will turn toward it to make sales and grow their brand. In turn, more shoppers will go where there is variety with a competitive price and an easier shopping experience. As a result, other marketplaces may feel the effects of consolidation by losing vendors, shoppers and overall sales. A new era within e-commerce This is a surprising partnership for the e-commerce industry and is being described as “the most significant ad product of the year” by Founder and CEO of Disruptive Digital marketing agency Maurice Rahmey. When speaking to CNBC, Rahmey said the partnership shows “these two-walled gardens are kind of coming together.” According to a Duetche Bank report quoted by Fast Company, 75% of Facebook’s billions in revenue comes from small businesses, making Facebook (and Google) the chosen place for small-to-medium businesses to advertise and sell. If Meta has done such a good job in cornering the SMB market, it’s no surprise that Amazon would want in. And if Amazon has done well to expand profits through ad sales, it’s no wonder Meta would want a chance to recover from their $12 billion knock from Apple’s iOS privacy changes. However, these may be short-term goals for the two companies, and it’s all about the long game for both of them: For Meta, this unlikely partnership is a giant leap towards increased ad sales and market penetration through social commerce. For Meta, this collaboration means forging towards a commerce-first platform, beyond the early years of selfies and poking. Combining their resources on tracking, data and user experience, a new era of shopping and marketplace expansion is upon us.
Amazon and Meta's 2023 partnership share a common end-goal21.11.2023
How to optimise product listings to win the marketplace Buy Box
Marketplaces are one of the best channels for brands and vendors to create a successful e-commerce business. However, considering how many vendors are listed on the many marketplaces, not everyone can be highly...
Marketplaces are one of the best channels for brands and vendors to create a successful e-commerce business. However, considering how many vendors are listed on the many marketplaces, not everyone can be highly successful at making sales. How do some find success and others don’t? A lot of it comes down to the quality of a vendor’s product listings, and whether or not they win the ultra-important Buy Box. In this article, Omnia breaks down the unique aspects of product listings on marketplaces and offers some best practices to win the Buy Box. Why product listings on marketplaces are a special case E-commerce businesses should be treating their marketplace product listings differently than listings on D2C or retail channels. Because there are so many sellers competing for sales on marketplaces – for example, Amazon has 9.7 million sellers globally, with about 2 million active sellers – the listings on these sites must be optimised if the vendor wants to stand a chance against other sellers. The fiercest competition is around who wins the Buy Box, where one listing will be shown with the “Add to Basket” or “Buy Now” button, while offers from other sellers are shown in a secondary position. The example below shows the Buy Box for a Cerave skincare product on Amazon. In a majority of cases, the vendor who wins the Buy Box will win the sale. On Amazon, 82% of sales go through the Buy Box, and the figure is even higher for purchases made on mobile. Some vendors, such as Zalando, claim not to have a Buy Box, likely to avoid consumers seeing their platform as one where prices can change within minutes due to high competition. “We do not want to enable a price war. Therefore, only one vendor offers a product. If more vendors offer the same product, convenience decides who is listed on the platform. This is calculated by an algorithm on the basis of factors such as shipment speed, trustworthiness and return speed. There is no pressure on price to win any kind of Buy Box.” Zalando’s VP of Direct to Consumer Carsten Keller Regardless of how a specific marketplace chooses to word their offerings, for the sake of simplicity, we will refer to the existence of a Buy Box if there is competition among third-party sellers and the marketplace must make decisions about which offer is shown to the end consumer. Best practices to optimise product listings and win the Buy Box In order to even be in the running to win the Buy Box, sellers must have optimised product listings that check all the key boxes. Let’s first run through some best practices for improving product listings for marketplaces in general, then go over some tips for specific marketplaces. General product listing best practices Optimise product titles: Marketplaces may have slightly varied requirements for certain aspects of product titles like character count, but a few things are consistent across sites. Product titles should include relevant keywords and provide the necessary product information without sounding like spam. Keep them concise and descriptive, covering attributes like brand, make, model, size, material or colour (where relevant). Also consider including nouns that customers often search for: “Adidas Stan Smith sneakers” versus “Adidas Stan Smith”. Use high-quality, eye-catching visuals: Each product listing should include high-resolution images from multiple angles to showcase your product. Clear, well-lit photos help build trust and provide customers with a better understanding of what they're purchasing. Videos showcasing the product are an added bonus here. Write detailed product descriptions: Write informative and engaging product descriptions. Highlight key features, benefits and any unique selling points to help potential buyers make informed decisions. Make consistent updates: Product listings shouldn’t be stagnant; continue to update the information and visuals to keep them fresh and ensure they are optimised for current trends. Analyse what’s working and what’s not so you can make changes to improve performance. You’ll also need to keep an eye on marketplace rules; if they change which types of media are allowed, for example, you’ll want to optimise for that. Localise content: If the marketplace services multiple countries or regions with different languages, make sure content is localised. That means listings are translated into the necessary languages, but also that the correct currencies are displayed and the audience you’re speaking to is reflected in the copy. Automate where possible: Especially when selling a high volume of products, it’s important to auto-populate listings when possible, whether for language translation, promotion, or something else. Manual updates will be much trickier as the volume grows, and if a product listing ends up being outdated, it can hurt your chances at the Buy Box. Use dynamic pricing: Price is one of the major factors that decides if you win the buy box. In some marketplaces, like Amazon, you will have to be priced within the top sellers to stand a chance of winning. For other marketplaces, price is a little less dominant, but you still need to be within a certain range of your competitors. As competitor prices are continuously changing, having the ability to dynamically reprice will ensure you are always still within the range. Dynamic pricing software like Omnia can help with this. There are other factors that have less to do with product listings, but are still known to impact who is shown in the Buy Box. These include: Shipping speed: Offering fast shipping will help in two ways: 1) it’s rewarded by the marketplace itself, and 2) it increases likelihood of positive customer reviews, which also boosts Buy Box prospects. Stock availability: If a seller runs out of inventory, the Buy Box will go to someone else. These levels also need to be consistent. Customer service: Both the marketplace and the customers will take note of sellers that respond quickly to customer questions and issues. Marketplace-specific best practices for product listings Whether they call it a Buy Box or not, marketplaces with third-party vendors selling the same products will have an algorithm to decide which offer is shown. Some marketplaces are clear about what it takes to win their Buy Box, but for most marketplaces, the “secret sauce” of the algorithm is unconfirmed. Many in the industry have studied the Buy Box on different sites to understand what makes a winning product listing. Amazon There is unfortunately no easy shortcut to win the Buy Box on Amazon. However, there are a number of factors that have been shown to impact which offer is shown, and BigCommerce even put together a cheat sheet ranking metrics by their impact on the Buy Box: eBay eBay has its own search engine called Cassini, which prioritises showing products with the highest conversion rates. To convert more searches and win higher placement, keyword choice is crucial, and sellers can use Cassini’s internal keyword research tool to find the right primary and secondary keywords. These should be used in every field in the product listing for best results. Bol.com Bol refers to their Buy Box as the “Buying Block”. Industry experts at Omnia have found that the battle for the Buying Block is won by the seller that has the best offer in terms of price, delivery time, inventory levels and customer service. Service and ratings are used more as a threshold, meaning that if a seller reaches a certain level, their other factors like price determine the Buying Block win. Zalando Omnia ran a pricing analysis on Zalando before, during and after Black Friday 2022. The results indicated that, historically, price was likely not the main driver for winning the Zalando Buy Box; however, during the Black Friday period, pricing became a top factor, sparking lower prices and tougher competition. With Omnia’s data, a price-change ratio of 0% means the price never changes. A ratio of 100% means the price always changed at every 15-minute observation time stamp. A ratio of 1.5% would indicate a price change once per day. As you can see in the chart above, the price-change ratio on Zalando grew to an average of 7% during the Black Friday period, indicating that the price would change once every five hours. Outside of competition scenarios like Black Friday, Omnia found two other factors that influenced the Buy Box: Shipping speed: Omnia data suggests that to win the Buy Box, a seller must have a maximum delivery period of four days; but this goes even lower if there is more vendor competition for a specific product. Stock availability: As the chart below indicates, the Buy Box changes at a rate of 2.1% when all products are available. When products are unavailable for up to 24 hours, however, the rate doubles to 4.09%, indicating the importance of stock availability as a seller on Zalando. Conclusion While much of the industry conversation around Buy Boxes often focuses on price, Omnia data and the other studies quoted above show that product listings and other convenience factors like stock availability, delivery times and even customer response times can also impact who wins the Buy Box. Especially during times of high competition like Black Friday, or when selling products with many competing vendors, each marketplace seller must craft high-quality and compelling product listings, and find the right competitive pricing strategy to set their offers apart.
How to optimise product listings to win the marketplace Buy Box14.11.2023
TikTok Shop: What’s in store for marketplaces with the new e-commerce platform?
The end of the third quarter of 2023 saw TikTok launch its new Shop tab in the US market, adding to an already unpredictable and fast-moving marketplace arena. While it may be too early to place its seat in the market,...
The end of the third quarter of 2023 saw TikTok launch its new Shop tab in the US market, adding to an already unpredictable and fast-moving marketplace arena. While it may be too early to place its seat in the market, TikTok Shop brings all kinds of possible scenarios and questions: How will this affect Amazon and other large marketplaces? How will consumers approach shopping on this new platform? How will this impact the current social commerce playground? Social commerce is set to grow faster than e-commerce in the coming years, with an expected annual growth rate of 32% from 2023 - 2030, creating a landscape that increases the competition for marketplaces such as Amazon, eBay and bol.com. Omnia unfolds how TikTok Shop will play out for brands and retailers looking to focus their energy and budgets on social media. Consumers will buy into content, not products, on TikTok Shop The virality of TikTok content has shown how the intertwining of content and shopping results in sales, profit and brand awareness. TikTok Shop’s marketplace will be relying heavily on a content-first strategy to influence buying behaviour, which will essentially replicate its already highly successful and addictive video content section that saw unexpected brands, especially in beauty, reach new heights when influencers, bloggers or ordinary app users include a shop link to a product. What TikTok seems to get right is that it centers shareability more than its rival social commerce platforms, making app users (and potential shoppers) more likely to want to get in on the trend - whatever that trend may be at any given time. According to HubSpot, 77% of TikTok users prefer it when a brand creates content around challenges, trends or memes, encouraging people to join. But more than that, brands with little to no advertising presence on TikTok are finding success simply because creators are using, posting and tagging product links. As the Business of Fashion states, “TikTok has become a beauty shopper’s playground.” For example, the hashtag #snailmucin has 776 million views (at the time of writing), which has helped COSRX’s snail mucin serum reach global corners. Content will be king in TikTok Shop’s success, however, in the short term, we do not see them overtaking as e-commerce’s new behemoth. This does not mean that marketplaces should not be wary of the growth trajectory of social commerce platforms: Social commerce will account for 50% of US e-commerce sales by 2027. TikTok Shop may replace Instagram as the leading social commerce platform The age of influencers on social media reached a stale point, in the last three years, since the height of the Covid-19 pandemic in 2020, as consumers faced loss and tragedy on a grand scale. However, as cycles go, consumers have rebounded from contemplating the meaning of life and the urge to shop, travel and look their best has returned with gusto in 2023, despite inflation. For brands and retailers, this is good news: The age of influencers is back, and this time it’s not on Instagram. Source: IMF World Economic Outlook 2023. In the above graph we see how influencer marketing drastically dipped from 2021 - 2023 but plans to rebound in 2024 and onwards. The more interesting observation is how influencer marketing plans to remain stronger than social ad spending, which bodes well for TikTok Shop influencers going forward. Moreover, TikTok Shop’s e-commerce viability is even stronger than some may think: Although Meta platforms have been at it for longer, Instagram’s removal of their Shop tab in January as well as the withdrawal of in-app product links for influencers means that editorialised product virality has moved away from Instagram and more towards TikTok Shop’s corner. In addition to Instagram removing its Shop tab, the platform is also much stricter on - if not altogether against - independent vendors that may fall into the grey market. On TikTok Shop, however, independent sellers and influencers can revel in a much more lenient, open-air system that focuses more on sales than it does on legitimacy. Additionally, with adult social media users spending more time, on average, on TikTok (54 minutes per day) than Instagram (33 minutes), Omnia is curious to witness how consumers and social media users will approach each platform, especially considering the differences in how each platform tackles shopping. According to Insider Intelligence, TikTok Shop will have just over 33 million buyers in the US in 2023 alone just after its September launch. Even though this is lower than Facebook (65 million in 2023), the percentage of shoppers on each platform is equal at 37%, making TikTok the faster-growing e-commerce choice for shoppers. Talk to one of our consultants about dynamic pricing. Contact us Early hiccups include fake products and an unrefined algorithm However, it is not all sunshine and roses for TikTok Shop, as a large number of products on the platform seem to be low-quality goods from China. Bloomberg News, through a look at the Shop tab’s listings, found that many of the goods that are “recommended” by the app are outdated and irrelevant such as waist trainer vests, or simply a random choice of items from mini clay statues to budget planners, akin to what shoppers would see at a garage sale. Other issues include products that are counterfeited such as fake Nike sweaters and skincare products from Korean brand COSRX that are heavily and suspiciously underpriced and labelled as being made in China while the brand is well known for being produced in Korea. In this early stage of the marketplace’s launch in the US market, it is crucial for the algorithm that creates a user’s particular interests to impress and lead to conversions, especially since TikTok’s parent company, ByteDance, has set its eyes on selling $20 billion worth of merchandise in the next year. This rivals Amazon’s target for the US market too, however, what TikTok should try to avoid with their new shopping platform is the disorganised and unvetted flea market style that this early version of TikTok Shop is currently presenting to some users which is reminiscent of eBay’s and Amazon’s earlier days of jam-packed categories and sub-categories of vendors. In addition, some luxury and established brands within fashion and beauty are hesitant to jump into the TikTok tide, fearing brand depreciation due to the association of possible counterfeiters, leaving TikTok on the outskirts of a lucrative revenue stream. A volatile start with pros and cons In 2022, as a content-creating-specific platform, TikTok still outweighed Instagram (16.4%) and YouTube (17%) as the number one destination for shopping on social commerce, with 21% of consumers who use social media to shop selecting TikTok. As the platform improves and bolsters its shopping features, that number is only set to rise. Regarding the platform’s algorithm issues and reliability as a trusted marketplace with vetted sellers, ByteDance may experience setbacks in the US market. Policymakers remain concerned that consumer data is at risk of being misappropriated via Chinese vendors. TikTok Shop will have to work harder to onboard American vendors located within the US to avoid legal ramifications as well as a deterioration of trust among shoppers. Marketplace market share still resides in the hands of the larger marketplaces, but this we already know - what we don’t know and will anticipate learning is how consumers react to this developing channel of shopping, and what the long-term arc of TikTok Shop will be as e-commerce leaders fight for growth and market share.
TikTok Shop: What’s in store for marketplaces with the new e-commerce platform?09.11.2023
E-commerce Shipping: A Guide on Costs, Speed and Environmental Impact
There are pros and cons to every method of shipping, whether international or local, and there’s also no “right” answer. Every e-commerce business is different, and the right shipping strategy depends on factors like...
There are pros and cons to every method of shipping, whether international or local, and there’s also no “right” answer. Every e-commerce business is different, and the right shipping strategy depends on factors like budget, product assortment, who your customers are, where the business is based geographically and more. Rather than giving tips for which shipping methods are best or which ones a business should use, we’re breaking down some of the most common methods in three key areas: cost, speed and environmental impact. Cost: How much does it cost the seller to ship the product to the buyer? Costs to consider include carrier costs like shipping labels, packaging, fulfilment, insurance and overhead. Speed: How much time does the shipping method take? How long between the customer making the order and receiving their package? Environmental impact: What effect does the speed and method of shipping have on the environment, from carbon emissions to water pollution and more? Delivery methods for e-commerce: Cost, speed and environmental impact Same-day delivery Same-day delivery is becoming more popular and is the fastest-growing segment in the last-mile shipping environment, growing at 36% annually. In Europe, same-day delivery accounts for about 5% of total deliveries. E-commerce giants with large-scale supply chains tend to cover this especially well; Amazon already delivers to nearly three in four customers within 24 hours. The same-day delivery market is forecasted to reach $26.4 billion (USD) by 2027. The term “same-day delivery” can mean different things depending on the seller; in some cases, orders placed by a certain time will arrive by the end of the same calendar day, while others may just mean delivery within 24 hours. Typically, for same-day delivery to work, sellers need to have distance limits or cut-off times for when the order must be placed by to qualify. It’s also worth noting that same-day delivery is not always possible; it’s more likely to see it as an option in large cities or in more populated areas of Europe, for example, compared to the US, Canada or rural regions in other countries. The cost of same-day delivery, both monetarily and to the environment, depends on the carrier and the region. With traditional carriers such as FedEx, UPS or DHL, same-day delivery can be quite expensive and have a higher environmental cost. As Earth.org points out, “when dealing with a one- or two-day shipping window, [carriers] are often forced to send out trucks that are filled at half their capacity, generating more traffic and thus emissions.” However, especially in larger cities across the globe, there are many carbon-neutral alternatives available. For example, there are newer carriers like Budbee from Stockholm whose offer from the start was same-day delivery, with electric vans that are cheaper and carbon-neutral. There are also bike couriers in some markets, like Stuart in London or Cycloon in the Netherlands, that offer same-day delivery directly from stores. In these cases, same-day delivery is fast, carbon-neutral and not necessarily more expensive than slower shipping options. Overnight, two-day and expedited shipping The environmental impact of overnight and other speedy shipping methods like two-day and expedited is highly dependent on the area. Within regions like France and Germany, for example, overnight or two-day shipping may be the cheapest option at many carriers, and the environmental impact is mostly based on context, such as the type of parcel, location and other factors. However, overnight or expedited shipping in regions like North America, Australia and APAC can be expensive, especially when transported by air versus sea or ground shipping. A study performed in China on the carbon footprint of shipping options found that emissions from air shipping were 65 times higher than sea shipping. (Note that sea shipping is simply not an option in certain regions like North America and Australia.) Higher speed can also mean higher costs, in some cases. Air cargo typically costs more because of the need for faster delivery times and high fuel costs. Ocean freight, however, uses larger vessels that can transport more goods for longer distances, which is why it tends to be 12 to 16 times cheaper than air freight. In general, retailers who want to use overnight and speedy shipping options without high cost or environmental impact certainly can do so, as long as they find the right carriers to partner with and take into consideration 1) the region they are operating from and 2) the regions of their shoppers. Two- to three-day shipping Two- or three-day shipping, sometimes called priority shipping, is one of the more common types in e-commerce. It is slower than overnight, same-day and expedited options, but can still get items to customers faster than standard economy shipping in some markets. In European countries, the cultural differences between countries and delivery networks create discrepancies in what is considered “priority shipping”. For example, in urban areas like Stockholm or Oslo, it’s considered normal to offer overnight delivery, while in other parts of Sweden and Norway, shipping times are far longer due to the large distances – hence the offering of priority shipping options in these specific regions. In general, consumers are more likely to complete a purchase when it’s delivered faster than usual: In North America, up to 85% of shoppers are more likely to buy when two-day delivery is offered. The cost of two-day shipping is highly dependent on how far the item is being transported. For shorter distances, ground shipping can be used; this is why sellers with fulfilment centres or warehouses in different regions are more likely to be able to use this option. For longer distances, air cargo is used to guarantee the two-day turnaround; however, this has a higher cost and a larger environmental impact. In some cases, “fast delivery” – which encompasses all shipping options where orders are delivered within one to three days – will require some air transportation, meaning sellers can’t take advantage of full truck load capacities. This results in the need to dispatch more frequently and increases the total cost of transportation and environmental impact. A simulation model run by a team of MIT researchers in Mexico, for example, showed that “fast shipping produces significantly higher CO2 emissions since it imposes a challenge for cargo consolidation.” Their findings indicated that fast shipping increases both total CO2 emissions and costs by up to 15% and 68%, respectively. In Europe and other large metropolitan areas around the world, fast delivery does not necessarily cost more or require air transportation, decreasing the environmental cost. Standard shipping This may be called economy, regular, basic or ground shipping depending on the country or region, but it’s simply the cheapest shipping option available from the courier. Items sent by standard shipping typically use ground transportation and take longer to arrive. Here are some examples of how long standard shipping takes for domestic orders in Europe, the US and UK: Netherlands: 1-2 working days Germany: 1-2 working days France: 1-2 working days UK: 2-5 working days United States: 3-5 working days Costs to use standard shipping vary by country and courier. As for the environment, the typical saying is that “slower is greener.” According to research by Josue Velazquez, a research Scientist at the MIT Center for Transportation and Logistics, e-commerce customers who wait up to five days for home delivery “could help decrease carbon dioxide emissions by about 30% in the last mile of a delivery.” However, as with other types of shipping, this is all dependent on location. International shipping Shipping packages internationally can vary widely in terms of cost. While domestic shipping often has a flat fee, shipping to other countries may lead to additional costs in areas like customs and customs brokerage, as well as ground, maritime or air transportation. Speed also varies with international delivery. Shipping from the US to Europe, for example, can take anywhere from 10-16 business days with economy delivery services, or as few as one to three business days with an expedited courier. All European countries have their local domestic “postal” networks that are now used for delivering parcels. These networks stop at the country borders and therefore companies need international line haul transportation networks to "inject" parcels into the local networks of their neighbouring countries. This may lead to one or two additional delivery days. On the environmental side, international shipping of any speed can have a high environmental impact, as it typically requires multiple legs of transport and at least some involvement of air or ocean cargo. Eco-friendly shipping “Eco-friendly” is not a clearly definable term, and it means different things depending on the e-commerce seller. Generally eco-friendly shipping can involve any of the following: Recyclable or compostable packaging Carbon offset options Smaller packaging size Ground-based shipping versus air or sea Slower shipping An e-commerce sustainability survey by Sifted found that consumers are interested in these options. 91% wanted an eco-friendly shipping option when they checkout, and 57% are willing to pay an additional 10% for eco-friendly packaging and shipping. While the cost of using eco-friendly packaging can be higher, using less harmful shipping methods like ground and standard shipping can actually be cheaper for the seller and the shopper. Alternative delivery (parcel lockers, click and collect) Many e-commerce sellers are choosing to offer additional delivery options. A global survey of supply chain executives found that 44% offer click-and-collect (including products that are not shipped and sold directly from stores) and 11% offer collection points. These options can decrease costs for shippers if they are able to group packages, and may increase the speed of delivery in some cases. Whether delivering to a parcel locker or collection point makes a significant difference to the environment depends on what one considers “significant”. During the last-mile delivery stages, the previously mentioned study in China found that total emissions produced for home delivery were 0.012 kg CO2e higher than delivery to a collection point. Source: AZO Cleantech 2021. Talk to one of our consultants about dynamic pricing. Contact us Which shipping method is best? It’s up to the consumer During a talk at Omnia’s annual Price Points Live event in 2022, Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris, spoke about how it’s really up to the consumer to choose delivery options, not the retailer. With the industry standard set at free delivery, most consumers are no longer willing to pay for shipping; they are, however, willing to wait longer or to “click and collect” their purchase. A study she conducted with colleagues in Belgium – with similar results seen in Netherlands, Bolivia, China and Brazil – found that while 81% of consumers would say yes to free next-day delivery, that number only dropped by three percentage points when offering free delivery within three to five days. When a slower shipping method is used, there is a positive impact on the company’s costs as well as the environment. This study could indicate that consumers are willing to make this trade-off, if retailers use the information to properly motivate them toward eco-friendly delivery options. Customer demands may outweigh shipping costs in the end Since 2010, global e-commerce sales have increased by nearly 800%. That’s great news for all the e-commerce sellers out there and for the customers who want to shop online, but there is a fragile balance to maintain. We all saw the strain put on supply chains during the COVID-19 pandemic: An EY of survey supply chain executives across industries found that only 2% of respondents said they were “fully prepared” for the pandemic. 57% said they were affected by serious disruptions, with 72% reporting it had a negative effect on them. While that situation is not a daily occurrence, the growth of fast shipping, combined with the steady uptick in e-commerce sales each year, is putting its own stressors on the logistical capabilities of our global shipping network. In order to keep the global supply chain from collapsing as e-commerce volumes increase, and to boost environmental protections, it may become more necessary over time for customers to make trade-offs and accept slower shipping times. As data from Sifted showed us earlier, nine-in-ten consumers wanted an eco-friendly shipping option when they checkout, and eigh- in-ten would wait at least one extra day for their delivery if that meant it was shipped more sustainably. Increasing the amount of orders that are shipped slower would have significant positive impacts on the environment, while also saving e-commerce businesses on their delivery costs – but not every consumer will be willing to accept slower shipping. It’s a tricky balance, indeed. Retailers and brands who sell online must balance this need for sustainability with a positive customer experience and reliable and flexible delivery, all of which adds up to customer loyalty over time.
E-commerce Shipping: A Guide on Costs, Speed and Environmental Impact17.10.2023
How will stubborn inflation impact e-commerce’s 2023 festive season?
If there is anything 2023 has taught retail and e-commerce leaders, is how resilient the consumer can be. As inflation predictions for the year remained lower than real-world inflation, and as food and gas prices...
If there is anything 2023 has taught retail and e-commerce leaders, is how resilient the consumer can be. As inflation predictions for the year remained lower than real-world inflation, and as food and gas prices continued double-digit increases around the globe, consumers still found ways to spend - albeit more consciously and strategically. In the July report of the International Monetary Fund’s (IMF) World Economic Outlook projected that global headline inflation will fall from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024. However, in the US, groceries are up 4.9%, electricity is up 3% and rent has increased by 7.7% as of September, creating the stirrings of a lackluster season of spending as the final quarter of 2023 begins. Despite mixed feedback on factors creating roadblocks for consumer spending, there are some positives that reveal to Omnia that, as the final quarter of 2023 begins, consumers will prove their robustness once more: Stronger spending in the US over the Summer and higher consumer confidence throughout Europe’s biggest economies. Let’s delve into the nitty gritty to find out if e-commerce and retail can expect a prosperous festive season. Festive season 2023: Consumer spending predictions At the start of the fourth quarter of 2023, Mastercard’s SpendingPulse Report found that consumer spending for the festive season will result in a 3.7% year-on-year increase in retail sales - a result that has not been adjusted for inflation. The report, which monitors online and offline payments in retail, gives a nod to continued consumer resilience, despite the aforementioned staggered disinflation and economic growth. Compared to 2022, in which the festive season performed better than expected due to pent-up demand and left-over stock, a rebalancing effect will likely take place in 2023, as brands and retailers do not have built-up inventory and consumer demand to rely on to make additional sales. Steve Sadove, senior advisor for Mastercard predicts that “With numerous choices and tightening budgets, you can anticipate shoppers to be increasingly selective and value-focused.” He adds that “the most effective holiday strategy will be to meet consumers where they are - personalised promotions to in-store experiences will be key in doing so.” E-commerce will see larger growth from consumers than brick-and-mortar The report found that omnichannel shopping with continue to grow, however, e-commerce purchases will experience greater support with a 6.7% increase while in-store shopping will see a 2.9% increase year-on-year. On the verticals side, electronics will see the greatest increase at 6%, groceries at 3.9% and apparel at only 1% increase compared to 2022’s season. Global economic overview: Disinflation slower than expected, advanced economies stagnate on growth “Global economic activity has proven resilient in the first quarter of this year, leading to a modest upward revision for global growth in 2023,” Pierre-Olivier Gourinchas, the International Monetary Fund’s (IMF) chief economist, said in a statement. “But global growth remains weak by historical standards.” The July 2023 edition of the IMF’s World Economic Outlook announced it expects global growth to be 3% in both 2023 and 2024. Compared to the projections made in April, this was an increase of 0.2 percentage points for the 2023 estimate, while the 2024 projection remained unchanged. A number of factors have contributed to the more positive economic outlook. The World Health Organisation (WHO) declared that COVID-19 is no longer a global health emergency, economic activity is steadier and supply chains are flowing better. But even with these improvements, the 3% growth projections are still lower than pre-pandemic levels: Annual global economic growth averaged 3.8% from 2000 to 2019. In 2022, global growth was 3.5%. Inflation in key markets impacts overall growth Looking specifically at the markets that pertain to Omnia’s clients - the US, UK, and Euro zone areas - the same IMF report shows that the slowdown in inflation is more concentrated in advanced economies such as these, which are projected to see growth rates fall from 2.7% in 2022 to 1.5% in 2023 and 1.4% in 2024. Source: IMF World Economic Outlook 2023. In the US, growth is projected to be 1.8% in 2023 and just 1.0% in 2024. The country continues to struggle with some of the worst inflation since the 1980s, with the US central bank raising rates from 0.08% to over 5% since March 2022. However, inflation is progressively easing in the US: In July 2023, inflation was at 3.2%, down from the June 2022 peak of 9.1%. Still heavily impacted by the sharp spike in gas prices caused by the start of the Russia-Ukraine war in 2022, growth in the Eurozone area is set to decelerate, projected to achieve only 0.9% growth in 2023 and 1.5% in 2024. From 2021 to 2022, gas prices across Europe increased by 150% as the continent’s largest supplier of gas, Russia, ceased its supply to the continent. Germany, in particular, is struggling to overcome inflation and energy costs, making it the only advanced economy projected to contract in 2023. Growth in the UK is also trudging through: After achieving economic growth of 4.1% in 2022, the second-highest among the advanced economies, the country is projected to grow by only 0.4% in 2023. In July this year, inflation was 6.8%, the lowest it’s been since February 2022. This improvement is desperately needed, as the UK experienced seven months of double-digit inflation between September 2022 and March 2023. Going into festive shopping, how are consumers feeling? As we move farther beyond the end of the COVID-19 emergency and start of geopolitical tensions in Europe, consumer sentiment seems to be improving globally, but is still in the negative range in many regions. Consumer confidence in the Eurozone is still low this Summer but did increase to -15.1 in July 2023, its highest level since February 2022. This has been fuelled by improvements in the consumer’s view on their household’s past and future financial situations, as well as the expected general economic landscape in their respective country. According to McKinsey, consumer confidence around mid-2023 was at its highest in Italy, Spain and Germany, which is surprising considering Germany’s projected growth rate for 2023 is a contraction and not an expansion, which was discussed earlier. Source: McKinsey & Company. Across the Atlantic, consumer confidence in the US hit its highest level in two years in July 2023 and remained consistent throughout their Summer months at the end of the third quarter. This has led to increased consecutive spending, with retail sales rising 0.7% from June to July, and a 3% year-on-year increase for September. At the same time, the impact of inflation can still be felt: In July 2023, the typical American household spent $709 USD more than they spent two years ago to purchase the same goods and services. The good news is that, throughout the third quarter, inflation continued to decrease. Looking ahead to 2024 Consumers worldwide continue to balance the pressure of higher prices with their desire or need to spend, while their governments attempt to rein in inflation and stimulate growth even as macroeconomic tensions continue everywhere. And, while consumer sentiment does seem to be improving since the close of the COVID-19 emergency, levels remain below pre-pandemic norms. As for inflation, the IMF predicts global headline inflation to fall slightly from 6.8% in 2023 to 5.2% in 2024. The organisation projects that underlying core inflation will decline more gradually, showing a slower decrease than what was predicted in 2022. The results of consumer spending for the 2023 festive season will all depend on a country’s labour market, their disinflation rates, as well as the consumer’s ability to access savings or credit. These are the factors that intertwine to create the pool of possibility for consumer spending. With consumer sentiment increasing (ever so incrementally) and a more robust consumer, e-commerce and traditional retail can look forward to an abundant shopping season.
How will stubborn inflation impact e-commerce’s 2023 festive season?10.10.2023
The Shape of D2C in 2023: How Established Brands and DNVBs Are Finding Success in E-Commerce
Is there anything that pairs better than e-commerce and direct-to-consumer (D2C) sales? With e-commerce, companies remove the inconvenience of having to go to a physical store, and products are shipped right to the...
Is there anything that pairs better than e-commerce and direct-to-consumer (D2C) sales? With e-commerce, companies remove the inconvenience of having to go to a physical store, and products are shipped right to the consumer’s doorstep. D2C sales models are the perfect pairing: With all middlemen removed, the seller has total control over the customer experience. In 2023, both established brands and digital native vertical brands (DNVB) are pursuing D2C strategies across a huge range of e-commerce verticals. In this article, we’ll highlight three especially interesting and competitive verticals in e-commerce – Electronics, Sports and Home & Living – and look at the current state of D2C businesses within these categories. Trending Verticals in E-commerce Worldwide e-commerce revenue is projected to reach €3.79 trillion in 2023, with the highest-selling verticals being fashion; electronics; and toys, hobby and DIY. Omnia is especially interested in analysing verticals with multiple retailers selling the same or comparable products that consumers research heavily online. These verticals offer significant dynamic pricing opportunities, since price fluctuations are constant and competition is high. Electronics Consumer electronics continues to be one of the reigning e-commerce champion verticals, with sky-high sales over the last decade and further growth as work from home becomes a more established workplace vision for some professions. It is the second-most popular e-commerce category behind fashion, with expected revenue of €839 billion in 2023, or 22.1% of all online sales. Sports Sporting goods are a fast-growing e-commerce vertical, with 43.7% of sports products being bought online. The sports category is an interesting case because of its high Average First Order Value (AFOV). Businesses with high AFOV need to make a profit on every transaction, because repeat purchases are not as common in other verticals. The AFOV for sports businesses is extremely high, but it has one of the lowest levels of 12-month growth in Customer Lifetime Value (CLV). This is especially stark compared to a category like Pets, which has the highest rate of repeat purchases by far. The sports vertical is continuing to grow in the post-pandemic landscape, with businesses in the US, UK and Europe seeing a boost in revenue and traffic in the first quarter of 2023 compared to the end of 2022: US sports businesses achieved nearly 10% in YoY revenue growth The UK and Europe are both still in negative territory for revenue change; about -20% YoY. However, this is a rebound from Europe being about -35% and the UK being about -30% at the end of 2022. Home & living As displayed above, the home category, like the sports vertical, has a high AFOV and a low rate of repeat purchases, sitting at 1.2 for the average first-purchase value. This puts pressure on businesses to achieve sufficient profit margin on each product. Home goods have faced some post-pandemic challenges, as people spent less time at home and less money on home improvement. This vertical has been slower to bounce back than other categories in terms of year-on-year revenue change, but businesses in the UK and Europe did see an improvement in Q1 2023 compared to the end of 2022. However, “improvement” is a relative term, as the YoY revenue change was still between -15% and -20% for the UK and Europe at the start of Q2 2023. Talk to one of our consultants about dynamic pricing. Contact us Current State and Outlook of D2C in E-commerce Direct-to-consumer (D2C) brands are continuing to grow worldwide, with nearly two-thirds (64%) of consumers making regular purchases directly from brands in 2022. This D2C wave is present in a wide range of markets: in the US, D2C is forecast to grow to $213 billion USD by 2024; in Germany, D2C revenue was already valued at €880 million at the end of 2021; and in India, total D2C sales was $44.6 billion USD in 2021. There are two types of brands that sell D2C: Digital native vertical brands (DNVB): Companies that were born online and have a strong digital presence. These companies often sell niche products directly to consumers through e-commerce platforms and social media, bypassing traditional retail channels. Established, traditional brands: Companies who have built a long-standing presence, reputation and customer base through various channels, including brick-and-mortar retail, advertising and other marketing efforts. These brands may have a strong online presence as well, but their roots are often in traditional manufacturing and distribution. In the US, 40% of established brands are already implementing a D2C growth strategy. It’s a headline-grabbing topic of conversation, but how significant is the role of D2C in the wider e-commerce landscape? D2C sales would account for one in seven e-commerce dollars in 2022. And while DNVBs are often the brands capturing media attention, since they are generally more social media savvy, established brands are projected to account for 75.6% of D2C e-commerce sales in the US in 2023. In fact, the D2C online sales for established brands have had a higher growth rate than DNVBs since 2021, although both types of D2C brands still show strong growth. Challenges for D2C Brands Every operator in the retail space faces its own unique challenges, but D2C brands are a unique case. They retain more control over their customer relationship, products, pricing and supply chain dynamics, but they also hold responsibility for the entire end-to-end experience and whether their product makes it into the hands of consumers. Challenges for D2C brands in e-commerce include: Customer Acquisition Costs: Competition for digital advertising space is high, and as a result, the cost of advertising on social media platforms, search engines and other channels can be quite expensive. This can be especially challenging for D2C startups and small businesses with limited marketing budgets. Supply Chain Management: D2C brands typically manage their own supply chain, which can be complex and time-consuming. From sourcing raw materials to manufacturing and shipping products, there are many moving parts to manage. Delays or disruptions at any point in the supply chain can impact product availability and customer satisfaction. Competition from Established Brands: As mentioned earlier, established brands with existing customer bases and sizable marketing budgets can be formidable competitors for DNVB brands. These brands often have more resources to invest in marketing and customer acquisition, and they may have stronger brand recognition and customer loyalty. Customer Experience and Service: D2C brands are often held to higher standards when it comes to customer experience and service. Customers expect a seamless, personalised experience when shopping online, and any issues with shipping, returns or customer service can lead to negative reviews and damage the brand's reputation. Scaling Operations: As D2C brands grow, they may struggle to scale their operations while maintaining quality and consistency. This can be especially challenging when it comes to managing inventory, production, and shipping logistics. D2C Maturity in Key E-Commerce Categories: Electronics, Sports and Home Let’s return to the three e-commerce verticals we discussed earlier. Each of these has its own level of maturity, as well as successful D2C brands, both established and DNVB. Electronics The consumer electronics vertical is relatively mature when it comes to e-commerce D2C sales. Over the past decade, there has been a significant shift in the way consumers purchase electronics, with many people choosing to buy products directly from brands online rather than through traditional retail channels. Established brand: Apple Apple has long used D2C retail operations to drive customers into its “walled-garden ecosystem”,and has made clear its plans to continue investing in D2C. It’s clearly working: the company was able to triple its market value to $3 trillion between 2018 and 2022. DNVB: Anker Innovations Anker, a Chinese mobile charging brand, is considered a pioneering DNVB. While they also sell via Amazon and other marketplaces, a majority of their sales still come from D2C. Sports The sports vertical has been growing more mature with D2C sales, as has been evidenced by the number of new DNVB brands such as Gymshark as well as established brands taking major steps to ramp up D2C efforts. Nike, for example, announced in 2021 that they would stop selling sneakers at American shoe store chain DSW, another in a long line of breaks with traditional retail. Reports like this are signals that, with Nike as one driver, the sporting goods and apparel sector is developing and maturing quickly, which are changes that retailers will need to adapt to. Established brand: Nike Nike has an established presence in traditional retail channels, but the company’s D2C operation, NIKE Direct, has been extremely successful in both e-commerce and brick-and-mortar. In 2022, it accounted for approximately 42% of the brand’s total revenue. DNVB: Peloton Peloton is one of the most successful examples of sporting DNVBs, having been born online before growing across different distribution channels, customer segments, geographies and categories. Home & Living The home and living vertical, which includes product lines such as furniture, cookware, bedding and more, is a strong D2C market due to its low barriers to entry and lack of strong retail competition. Established brand: Vitra Swiss company Vitra has been operating as a family business for 80 years. The company designs and manufactures designer furniture for use in offices, homes and public spaces. DNVB: Westwing Westwing was founded to be a “curated shoppable magazine”, where consumers could find beautiful home & living products online. The company is now present in 11 European countries and generated €431 million of revenue in 2022. D2C Brands and Dynamic Pricing Aligning prices with retailers for your entire product assortment is no small feat, which is why dynamic pricing software is so essential for brands who utilise a D2C sales channel. As Roger van Engelen, Principal at A.T. Kearney, told Omnia in a 2018 interview: “In my opinion, brands need to have dynamic pricing before they start selling directly to consumers because it will prevent them from agitating their retail customers. This, in turn, protects brands from triggering a price-markdown war, which helps protect brand price perception.” Keep in mind that most major retailers are already using dynamic pricing software for their e-commerce shops and to ensure products are competitively priced. As a brand, your use of Omnia will help you follow a market price even within strict limits.
The Shape of D2C in 2023: How Established Brands and DNVBs Are Finding Success in E-Commerce10.10.2023
Solving the puzzle of e-commerce organisational structures
As any business owner or leader knows, building out the organisational structure of a company or team is one of the trickiest puzzles to solve. Do it right and the organisation will run smoothly and produce ideal...
As any business owner or leader knows, building out the organisational structure of a company or team is one of the trickiest puzzles to solve. Do it right and the organisation will run smoothly and produce ideal outcomes; do it wrong and things can quickly grind to a halt or implode altogether. This is also the case when structuring an e-commerce organisation. With the rapid pace of the retail industry and the constant evolution of online sales, it’s crucial to build a division that can be flexible and effective, no matter what may change. In this article, Omnia explores the nuances of the structure of e-commerce businesses, how organisations should approach the topic and where pricing fits into the larger picture. Structure of the modern e-commerce department In 2023, the structure of e-commerce departments can vary widely depending on the needs of the business. Each member of the team has a crucial role to play in ensuring the organisation runs smoothly and that customers receive the products they’ve purchased online. Typically, an e-commerce organisation will have some combination of the following roles: From the top: E-commerce manager/Director of e-commerce/CEO The captain of the ship oversees all areas of the e-commerce organisation including marketing management, customer service, product management, KPI tracking, analytics and reporting, and partnership management. The marketing team The success of a marketing team can make or break an e-commerce department. Members of this team can include: Marketing manager: This person leads the full marketing team. The Marketing Manager is responsible for spreading the word about the products in your online store by analysing and building strategies based on customer data, trends, competitor insights and market changes. They are also responsible for brand building, creative strategy, and multichannel strategy. Graphic designer: The designer can take care of all the necessary visuals within the corporate identity (CI), from logos and social media graphics to charts and data visualisations for blog posts or sales materials. Content or copy writer: This role is responsible for writing compelling text for product descriptions, website content and marketing campaigns. A successful content writer will also have some level of SEO knowledge to ensure copy is optimised for successful Google search results. Development and IT team The website is the beating heart for every e-commerce seller. All e-commerce companies will need developers to build and maintain the company’s website and software systems. The UI/UX designer can also fall under this department. Copy writers will often work closely with UI/UX designers to ensure that the text used on an e-commerce store falls within the brand’s tone and identity. One of the most important responsibilities for the development and IT team is to optimise the performance of the website across devices, ensuring high availability and uptime so customers aren’t waiting too long for the storefront to load. Another key role is to integrate any chosen third-party services or SaaS solutions, like Shopify or BigCommerce, while ensuring data security and maintaining a structured product catalogue. Operations team The ops team’s job is to keep the actual operation of the online store running smoothly from day to day. Some key roles that may be hired for include: Logistics manager: This role is responsible for the accurate and timely delivery of supplier orders to the company’s warehouses or directly to consumers’ homes. Inventory manager: This team member keeps track of all products being sold by the store, most importantly ensuring that the number of goods displayed as available on the website actually matches the number stored in the warehouse, to avoid any accidental overselling. Fulfilment team: Fulfilment teams ensure all orders coming from the website and other channels are correct and complete, then locate the items, pack them for shipment, add shipping labels and work with carriers to get the orders from point A to B. Supporting departments may include Human resources which plays an important role in growing an e-commerce business, as they recruit, hire and onboard all incoming talent for the business. In addition, a customer care department for shoppers to receive support with questions, complaints and returns. Examples in practice: New Balance and Fenty Beauty A number of brands are finding success with a more modern, agile e-commerce organisational structure. New Balance, for example, made some big changes in 2021. “We’ve introduced agile into the entire organisation. We’ve developed 90-day sprints, which have allowed us to put together several building blocks that have accelerated our growth ambitions,” said CEO Joe Preston. Fenty Beauty, a D2C brand started by singer Rihanna, is another interesting case study. Rather than entering the market on their own like other beauty brands – Kylie Cosmetics, for example – Fenty was created in partnership with LVMH’s Kendo Beauty division. This allowed the brand to launch on a global scale at 1,620 stores in 17 countries almost instantly in 2017, referred to by LVMH as “the first-ever global beauty launch in history.” Having LVMH as a partner gives Fenty access to global distribution through Sephora, one of the largest omnichannel beauty retailers in the world. This gave the brand quality merchandising and product placement both online and offline right from the start. The pricing puzzle: Where does pricing fit into the e-commerce equation? Nothing is written in stone when it comes to pricing, and the “right” answer will be different for every organisation. At Omnia, we have seen pricing sit within a number of departments, depending on the business: Business Analytics, Marketing, Sales or Buying, for example. For more mature organisations, we tend to see pricing within the e-commerce organisation. Within that e-commerce structure, where exactly does pricing fit, and more importantly, who owns responsibility for it? Having pricing ownership clearly assigned to a specific manager or team ensures the business can meet objectives and nothing falls through the cracks. Operating the pricing platform, especially when using dynamic pricing software where rules are set and pricing can change constantly, is a key role and core to the success of the overall business. Below, we’ll cover some observations from the Omnia team: The roles we commonly see owning pricing within our customers’ teams, and an example pricing structure we see frequently within more mature e-commerce organisations. Pricing roles and responsibilities we observe From our observations of the Omnia portfolio, which ranges from large enterprises to small businesses, we see that the pricing role differs per business size and type. Typically we see three roles: Strategic pricing managers or project managers This person is typically responsible for optimising pricing strategies to maximise the bottom line impact of pricing on revenue and margin. For some, pricing may be one of the focus areas of their role, but does not account for 100% of their time. Often, this person is the decision maker for which strategies will be applied now and in the future, meaning they need to take all social, economical and business decisions into account to initiate the right strategy and measure impact. They may be responsible for planning and initiating internal processes that influence pricing, such as the frequency of repricing, involving other departments like purchasing for decisions on stock, and working with marketing to create promotions. This person may manage a team of diverse people who are pricing specialists, category managers or brand managers who manage the day-to-day pricing strategies and alterations. They may also have an analyst available in their team to monitor and manage results. Operational pricing specialist The pricing specialist often reports to or works closely with pricing managers or the project management team to achieve set business goals. Alternatively, they could be the only responsible person for pricing, reporting directly to the budget holder or decision maker with the ROI of pricing. This role often includes a market research component, using this information along with data on actual customer engagement with products to create relevant reports for category managers, who then take action for repricing. Sometimes, these specialists are responsible for repricing over categories in different territories. This makes them the point of contact internally for questions relating to pricing alterations, and they may need to be able to make adjustments upon request, explain pricing logic and tackle issues. Category manager or brand manager The category manager or brand manager is responsible for a certain set of the assortment being sold within an organisation and is generally responsible for the 4 P’s (Price, Product, Promotion and Placement) to maximise sales and profitability of their products. They will generally have revenue and margin targets as well as stock management responsibilities. These managers are specialists in their own categories. They know their specific markets as well as developments related to their assortments, rules and regulations. They also tend to be on top of all price changes, as alterations will immediately affect their targets. Example of mature pricing organisation Members of the Omnia team have pulled together their observations of how a pricing organisation is commonly structured in a mature e-commerce department. There are three main levels to this structure: Commercial policy alignment: Most of the time, in collaboration with management and all stakeholders, there will be some sort of alignment of commercial policy for different categories and products. Pricing project lead: This person leads pricing across all countries and markets and translates commercial policy into specific strategies, which can then be applied to the pricing software and pricing logic and transferred to local teams. This person is responsible for creating all the pricing rules, which local teams can then adjust according to their own markets. Pricing implementation: This level could include a range of roles responsible for actually putting the pricing strategies and rules into place, as well as localising them for different markets. Local pricing specialists, for example, can implement local campaigns and pricing strategies within the boundaries of the global commercial policy with approval of their pricing project lead. Business or pricing analysts may be available to analyse potential new strategies and to improve results, although these roles are typically shared with other areas and not only pricing. In more complex global organisations, a deployment manager can lead and initiate pricing in new territories and markets. Overall, pricing is highly iterative within these teams and tends to work in a cyclical way. The pricing lead sets the pricing rules, which are implemented and localised by a specialist, then someone analyses the results and that information is sent to the pricing lead and specialist to adjust the rules. Just like dynamic pricing itself, the team is never stagnant, and feedback passes through each level in both directions as everyone works to find the right pricing for each product line. As you build out your e-commerce organisational structure for the first time, or revisit and revise an existing structure, understanding the nuances of this function is essential. Any retail business hoping to succeed in e-commerce first needs the proper structure in place to enable all teams to collaborate and thrive. Omnia would love to hear more about your company’s e-commerce and pricing organisation. Let us know: What does your pricing structure look like? What would you change if it was up to you?
Solving the puzzle of e-commerce organisational structures10.10.2023
These are the vertical marketplace champions in Europe's strongest economies
Vertical marketplaces occupy a unique role in e-commerce: While the well-known giants try to encompass all categories, vertical marketplaces cater to specific and often specialised customer needs and interests. Selling...
Vertical marketplaces occupy a unique role in e-commerce: While the well-known giants try to encompass all categories, vertical marketplaces cater to specific and often specialised customer needs and interests. Selling through one of these marketplaces presents a number of opportunities, including: More targeted audience Competitive advantages versus less specialised marketplaces Brand and community building Increased trust and credibility among shoppers More flexibility and reduced competition Higher buyer intent In this article, Omnia explores some of the vertical marketplaces to know in four key European markets across four categories. Leading marketplaces for top e-commerce categories Many of the leading marketplaces in Europe are all-in-one sites where shoppers can find products across many categories; For example, Amazon, eBay and bol.com. In this article, we’d instead like to focus more on the vertical marketplaces that are largely, if not entirely, focused on one particular category. We will explore a selection of marketplace champions for Germany, Netherlands, the UK and France across four categories: Fashion, Home Goods, Beauty & Care and Baby Care. Fashion marketplace champions: Germany Zalando: Fashion retailer that also offers a marketplace for external brands to sell their products through their marketplace. Zalando is the leading online store for fashion in Germany, with global revenues reaching €10.3 billion in 2022. About You: Online fashion retailer with marketplace offering similar to Zalando. Netherlands Zalando: Like Germany, Zalando is also a major fashion marketplace in the Dutch market. Wehkamp.nl: A marketplace headquartered in Zwolle, Netherlands. The site offers a few other categories as well, but is mostly focused on fashion. Wehkamp is not a fully open marketplace, but focuses on a selected number of sellers. United Kingdom ASOS Marketplace: This branch of ASOS, which launched in 2010, gives independent brands and vintage boutiques a chance to sell to women with high-end and unique taste. MatchesFashion: Another online marketplace for luxury fashion lovers, MatchesFashion has been around since the 80's. However, their longstanding existence in fashion retail has served them well, allowing them to create an omnichannel marketplace business model with a thriving online website and three physical locations in London. France SHEIN: An established fast fashion retailer that has been expanding its marketplace offering in 2023, selling its own fashion items alongside products from third-party sellers. BrandAlley: Based in the UK, BrandAlley is a popular members-only flash sale website. High-profile brands can sell their products on the marketplace via multiple sales each day. Home goods marketplace champions: Germany Home24: One of the leading home goods retailers in Germany, the site has also expanded its marketplace for brands and partner sellers in the category. Wayfair: A major home goods marketplace selling more than 14 million items from more than 11,000 global suppliers. Westwing: A leading home brand and marketplace in Europe. The site sells Westwing’s own products alongside products from third-party sellers. Netherlands Leen Bakker: While this company has been around since 1918, its online marketplace opened in 2020. Selling on this site gives brands and retailers access to one of the largest groups of customers in this category in the country. Home24: This marketplace also has a large presence in the Dutch market, with a large range of home goods. United Kingdom Argos: This must be one of the UK's longest-standing furniture retailer-turned-marketplaces, starting in 1973. Today, Argos' online marketplace attracts nearly one billion shoppers per year and stands as the third-most-visited retail website in the UK. ManoMano: With a hard-to-forget name like ManoMano, this marketplace has established itself deep within the UK's home DIY, improvement and gardening vertical. It sells more than 1.5 million products under 5,000 partner sellers. France La Redoute: A well-known French marketplace with a significant online presence. They also offer fashion items but have a wide selection of products in home decor and furniture. Maisons du Monde: A French furniture and decor company founded in 1996, Maisons du Monde also launched a marketplace that makes up a significant portion of French revenues. Beauty & care marketplace champions: Germany Zalando: Beauty is the other main category for Zalando, besides fashion. Through the partner program, brands can sell beauty products across ten markets, with Germany being one of the biggest. Flaconi: An online beauty retailer and marketplace that specialises in cosmetics, fragrances, skincare and hair care products. Netherlands LOOKFANTASTIC: The UK-based e-commerce store is popular in the Dutch market and covers products across all beauty and personal care subcategories. De Bijenkorf: While De Bijenkorf has a line of Dutch department stores, they also have an online marketplace available for brands to sell through. United Kingdom Feelunique: This is another story of an online store that added a marketplace later on; in this case, in 2017. Feelunique operates its marketplace in several markets and was purchased by Sephora in 2021. Boots Marketplace: Boots.com, the head division of Boots Marketplace, earned the top spot for net sales in the beauty and personal care e-commerce market in 2021, earning $597 million. Boots Marketplace is a new branch, launching in 2022, remaining in the beauty and personal care vertical. Harvey Nichols: This marketplace offers products from vendors in multiple categories, from beauty to accessories to food and wine. France Nocibé: A popular French beauty retailer that operates both physical stores and an online platform. They sell products from their own inventory as well as third-party sellers. Zalando: While Zalando is mostly a fashion marketplace, its secondary category is beauty, which was launched on the site in 2018. Baby care marketplace champions: Germany Babymarkt: A popular source for baby and toddler supplies. Started as an online store and later expanded to include a marketplace. Idealo Baby and Child: Idealo is one of the best-known marketplaces in Germany, with brand awareness at 88%. The site’s baby and child category covers a range of products, from strollers and clothes to diapers and high chairs. Netherlands Kleertjes.com: The largest online store and marketplace selling branded clothing and shoes for babies and children in the Netherlands. Babypark: Offers a range of items for babies and children ranging from strollers to full rooms. Along with the online shop and marketplace, there are ten “megastores” across the country as well as one in Germany. United Kingdom Bndle: An online marketplace that connects parents and families with independent baby brands. The marketplace was started by two new parents who wanted “one destination to browse and shop for cool baby brands and access expertise.” Emma’s Diary: This is actually a website for baby and parenting advice, but has expanded to include “The Baby Marketplace”, where shoppers can find products from a range of brands. France Bebeboutik: A baby care company divided into two complementary websites – one focused on flash sales and the other a third-party marketplace. La Redoute: Another of La Redoute’s verticals is baby & kids, covering products for the home as well as clothing and shoes. The popular website represents a solid opportunity for brands selling in France, with over 12 million unique monthly visitors. Talk to one of our consultants about dynamic pricing. Contact us Are vertical marketplaces taking the place of e-retailers in the future? The number of marketplaces continues to expand, and while major players like Amazon, eBay, Rakuten and Alibaba are growing year after year, vertical marketplaces are also increasing in prevalence to cover certain categories or serve specific shopper groups. According to one study from Cross-Border Commerce Europe, the top 100 cross-border marketplaces generate turnover of €128 billion in Europe. They also found that marketplaces grew by 22% during the COVID-19 pandemic – growth that is expected to continue in the next few years. With 59% (€141 billion) of the total cross-border e-commerce market in Europe generated by marketplaces, every stakeholder in e-commerce should be paying attention to the vertical and vertical marketplaces, as they continue to steal market share from the larger players.
These are the vertical marketplace champions in Europe's strongest economies28.09.2023
The Pros and Cons of Free Shipping for E-Commerce Businesses
Think back to the last time you bought something online: did you pay for shipping? These days, it’s becoming increasingly likely that you didn’t, either because the chosen seller offered free shipping or because you...
Think back to the last time you bought something online: did you pay for shipping? These days, it’s becoming increasingly likely that you didn’t, either because the chosen seller offered free shipping or because you purposefully avoided online shops that didn’t offer it. The practice of shipping products for free has become standard in e-commerce. The Digital Commerce 360 Top 1000 Database shows that 74.4% of retailers offer some sort of free shipping: 20.4% unconditional for all orders, 45.1% with a value threshold, and 14.5% requiring membership in a loyalty program. It’s no wonder that many businesses believe they must offer free shipping to remain competitive in the market. In reality, it’s not right for every seller. This article will cover the historical context of free shipping and some pros and cons to help your e-commerce business make the right strategic choice on the topic. Have we always had free shipping? Unsurprisingly, free shipping was popularised by e-commerce giant Amazon in the early 2000s. After two holiday seasons of offering free shipping to customers spending $100 or more, the company was considering making free shipping available to everyone, but it was cost-prohibitive. According to Brad Stone in his book The Everything Store, this is how the story played out: “Greg Greeley [a finance employee] mentioned how airlines had segmented their customers into two groups — business people and recreational travelers — by reducing ticket prices for those customers who were willing to stay at their destination through a Saturday night. Greeley suggested doing the equivalent at Amazon. They would make the free-shipping offer permanent, but only for customers who were willing to wait a few extra days for their order. Just like the airlines, Amazon would, in effect, divide its customers into two groups: those whose needs were time sensitive, and everyone else. The company could then reduce the expense of free shipping, because workers in the fulfillment centers could pack those free- shipping orders in the trucks that Amazon sent off to express shippers and the post office whenever the trucks had excess room. Bezos loved it. ‘That is exactly what we are going to do,’ he said.” From there, Amazon started by offering “Free Super Saver Shipping” in 2002 on orders over $99, then $49, and eventually $25. Eventually, this turned into the membership program we now know as Amazon Prime. Since then, free shipping has had its grip on the e-commerce landscape, as it allowed customers to demand convenience and speed from online businesses. It’s grown to become a fairly standard marketing tactic, and is often an expectation of customers. “No such thing as a free lunch” – Free shipping isn’t free It’s worth pausing to remind ourselves that free shipping is exactly what we said above: a marketing tactic. There’s no such thing as “free” shipping, since there are costs associated with sending products from businesses to customers, whether for the initial order or a return or exchange. Postage, supplies and even customs fees or import taxes when shipping internationally all have to be paid for by someone. The reality is that either the business pays for shipping or the customer does. If the business offers “free shipping” and pays for it, that reduces their profit margin. If the business wants the customer to pay for the “free shipping”, then the costs of shipping must be added to the price paid for the products themselves. The question for e-commerce businesses isn’t really whether to offer free shipping or not. It’s whether the price of shipping should be included in the display price paid by the customer, or if it will be charged as an extra fee on top. Pros and cons of free shipping This is clearly a complicated topic, so let’s cover some of the pros and cons of offering free shipping as an e-commerce business: Pro 1: It increases conversion rates Since 59% of online shoppers consider free shipping to be a deciding factor in purchase decisions, second only to price, offering free shipping can boost conversion rates for your e-commerce store. Conversely, charging shipping fees can increase cart abandonment: According to Sendcloud research, 65% of European shoppers left a checkout because the shipping costs were too steep. By eliminating visible shipping fees, you remove a potential barrier to purchase and encourage customers to complete their transactions. Pro 2: It brings in new customers Meeting consumer demand is a significant benefit of offering free shipping. When a potential buyer sees that a product comes with free shipping, it becomes more attractive and makes them feel they are getting a better value for their money. To bring in new customers, businesses have to, at a minimum, meet expectations. Since 80% of consumers expect shipping to be free if they hit a certain spending threshold, and 66% expect free shipping for all sizes of online orders, this can play an important factor in attracting new customers to your store. Pro 3: It encourages loyalty and repeat purchases Once you bring in customers, it’s worth doing everything possible to hold onto them. Retention is cheaper than acquisition, after all. Customers appreciate the perceived value they receive when shipping is free, which can lead to them viewing the overall shopping experience as positive. Satisfied customers are more likely to be loyal, returning to your store for future purchases and recommending your business to others. This impact is amplified even more if your competitors do not offer free shipping. Pro 4: It increases AOV In cases where customers need to meet a minimum order value to qualify for free shipping, this can incentivise customers to add more items to their carts, increasing the average order value (AOV) and boosting your revenue. One survey found that 59% of respondents were willing to increase their order size to qualify for free shipping. If you are going to offer free shipping, general industry advice is to set the minimum threshold about 15-30% higher than your AOV to encourage customers to top up their carts. Con 1: It has cost implications Offering free shipping either means absorbing the cost of shipping orders yourself and decreasing your margins, or increasing product prices to cover the cost, potentially decreasing your unit sales. The second option is usually recommended. Shipping expenses, packaging materials, and logistics can become a significant cost for your business, particularly for large or international shipments. Businesses also need to consider how they’ll respond if shipping rates, for example the cost of postage, increases. Free shipping is even trickier if you sell low-cost or low-margin products. In these cases, absorbing the cost is probably not possible if you want to make a profit, but folding shipping costs into the product price can quickly turn a €2 product into a €6 product. Con 2: It creates sustainability issues Sustainability issues are a huge concern when it comes to free shipping, due to the carbon emissions and waste created when shipping higher volumes, faster, to more locations. According to Earth.org: Product shipping and return accounted for 37% of total greenhouse gas emissions in 2020 When shoppers opt for a fast delivery (e.g. 2-day shipping), emissions are far greater than those generated by in-person shopping or slower delivery options Return rates exceed 30% of all purchased goods, adding to the overall environmental impact of the free shipping offer Con 3: It creates logistical challenges To offer free shipping, businesses must be prepared with the proper logistical capabilities. For example, can your distributors handle the volume you will require? How will returns and exchanges work? What speed of delivery is to be expected? How will you ensure the offer is not being abused by customers ordering and returning products often? All of these concerns are amplified even more for small businesses, who may not have the resources or logistics setup available to larger sellers. Our price insights include shipping costs, ensuring you get the most accurate comparisons. Focus on what matters most – the final price! Schedule a call Should your e-commerce business offer free shipping? Whether to offer free shipping, and what the parameters for that offer will be, is a significant strategic decision for any e-commerce business. While it is a helpful way to bring in new customers, incentivise repeat purchases and boost the AOV, there are real sustainability, cost and logistics issues to contend with. Before making a decision, businesses should consider the pros and cons listed above, as well as questions such as: Are there any other options besides free shipping that would incentivise your customers even more? What are the parameters for your free shipping offer? Can you take advantage of bundle shipping, where customers wait a few days longer to get their item so it can be included in a larger shipment? How much does your specific customer base actually appreciate free shipping? What does your market research show about their willingness to pay a bit more to compensate for shipping costs? At Omnia Retail, the prices we scrape online and use to develop insights for users are all inclusive of shipping costs. This is because that’s the price the consumer compares in the end, making it the most important to focus on. Learn more about Omnia ‘s pricing software for retailers and brands here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
The Pros and Cons of Free Shipping for E-Commerce Businesses26.09.2023
Shopping Experience - What does Shopping Experience mean?
What does shopping experience mean? The term shopping experience covers all aspects of how a customer experiences its interactions with a vendor, at every touchpoint from the first contact through the transaction and...
What does shopping experience mean? The term shopping experience covers all aspects of how a customer experiences its interactions with a vendor, at every touchpoint from the first contact through the transaction and beyond. How customers view their shopping experience is all about feelings and emotions, so it exists on a spectrum: from positive to negative and everything in between. Why is it important to create a positive shopping experience? Ensuring customers have a positive shopping experience is crucial for retail businesses, whether e-commerce, brick-and-mortar or a mix of the two. First, and most obvious, is that customers are unlikely to purchase if they have a poor shopping experience. Why would you buy from a company that made it difficult to purchase, had rude customer service or was generally negative to work with? You probably wouldn’t. Second, just as you won’t win customers over with a poor experience, you definitely won’t win repeat customers. Three in four consumers (including 73% of millennials) say a consistent customer experience increases the likelihood that they will continue doing business with their favourite brand. A great shopping experience also makes it more likely that a customer will join a company’s loyalty program. Creating a positive shopping experience can actually make you more money, too; not only because you’ll win over more customers, but because those customers are willing to increase their spending. A whopping 86% of consumers say they are willing to pay more for a great shopping experience. Finally, a great customer experience can set a vendor apart from the competition, something that is more important than ever in today’s retail landscape. Talk to one of our consultants about dynamic pricing. Contact us What factors can influence a customer’s shopping experience? The e-commerce shopping experience can be influenced by an endless number of factors. Here are some examples: User interface and website design: A well-designed and user-friendly website or application interface enhances the overall shopping experience. It should be easy to navigate, visually appealing and offer intuitive browsing and search functions. Sales channel design: The design and layout of the sales channels, from the desktop website to the mobile app should be consistent across devices and optimised for seamless browsing, product selection and checkout. Product journey and information: Customers appreciate detailed and accurate product descriptions, high-quality images, product reviews and ratings. These elements help customers make informed purchasing decisions and build trust in the e-commerce platform. Shipping and delivery: For an e-commerce business, shipping is one of the biggest factors customers will remember. If everything goes right, they might never notice; but if everything goes wrong, they’re sure to be frustrated and feel they had a negative experience overall. Sellers need to ensure that shipping and delivery processes are reliable and efficient, and can impress customers further with services like transparent tracking or options for express or same-day delivery. Customer support: Talking to a grumpy or rude customer service representative can ruin anyone’s day, while also decreasing the chance of them buying from you again. That’s why prompt and reliable customer support has such a significant impact on the shopping experience. Efficient communication channels such as live chat, email or phone support should be available to assist customers at any time. Personalization and recommendations: Customised recommendations, offers or discounts based on demographic information about the customer or behavioural targeting can enhance the shopping experience by providing relevant and enticing product suggestions. Additional services: Going above and beyond makes all the difference. Offering additional services like gift wrapping, fast shipping options, flexible return policies or personalised assistance can differentiate an e-commerce seller in a crowded field. Assortment breadth and depth: A wide variety of products across different categories increases the likelihood of customers finding what they are looking for. Having a deep assortment within each category also helps cater to diverse customer preferences. However, having an endless supply of products only helps if they are relevant to the target customer base, so this should still fit within the wider retail strategy. Payment options and security: Providing multiple secure payment options and ensuring robust security measures for online transactions adds convenience and gives customers confidence in the safety of their transaction. In Europe, some of the most well-known options that customers expect include Visa and Mastercard, Paypal, Klarna, Apple Pay, Google Pay, iDeal, Giropay and others. Post-purchase experience: The post-purchase experience, including order tracking, order updates and timely resolution of any issues, is crucial to complete the cycle of a positive customer interaction. How to improve the shopping experience 1) Take care of your employees: Happy employees make happy customers. If you aren’t treating your employees well, especially ones who are customer-facing such as service representatives, then customers will bear the brunt of that frustration and have a poor experience. 2) Consider the end-to-end experience: Every touchpoint with your customers counts. With purely e-commerce businesses, this means looking at every interaction your customers have with the brand online. For omnichannel or brick-and-mortar, think about how the in-store and online experiences flow together. 3) Reward loyalty: Make it worth it to be a loyal customer of your store by rewarding those who choose to continue buying from you. It’s no small feat to win a loyal customer, and celebrating them will increase the likelihood of retention. 4) Don’t disappear after the purchase: Post-purchase interactions are still a part of the shopping experience. It’s important to follow up with customers, make sure they are satisfied and request a review or rating if they were, so others can find your store as well. 5) Create community and connect: It can be tricky to create community if your company operates solely online, but having those long-term connections with your customers, and between the customers themselves, can be highly impactful for the business. Read more about interesting pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What are the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Shopping Experience - What does Shopping Experience mean?22.09.2023
What quiet luxury tells retailers about consumer sentiment
A new trend in high-end fashion has emerged that speaks of a new era in how the ultra-wealthy convey their identity: Quiet luxury. Breaking from the days of loud logo-boasting in the early and mid-2000s, quiet luxury...
A new trend in high-end fashion has emerged that speaks of a new era in how the ultra-wealthy convey their identity: Quiet luxury. Breaking from the days of loud logo-boasting in the early and mid-2000s, quiet luxury gives a nod to subtle and almost invisible branding, while focusing on the overall fit and feel of an item of clothing. It has an “old money” feeling where a fashion time capsule transporting through the 1930s, 50s and of course, the 90s would capture similar styles and colours: Trench coats, leather, cream linen, 100% cotton, white button-ups, navy suede, cashmere and head-to-toe neutrals. There’s a reason these fabrics and styles have made a place for themselves in every decade since the turn of the 20th century: Quiet luxury is about clothing that possesses longevity, and it’s not phased with fitting in nor standing out. Compared to the days at the start of the new millennium of blingy design embellishments where even the short-sighted could spot a Gucci bag or a Dolce and Gabbana shirt, quiet luxury is less about attracting attention and more about embodying a lifestyle. Don’t get us wrong - quiet luxury still means status. However, if we look deeper into this trend, a change in consumer behaviour and psychology is noticeable, while the factor of economic anxiety permeates both buyers, luxury brands and mid-range brands trying to copy the trend. What does quiet luxury, also known as “stealth wealth”, mean for the fashion arena as well as sustainability? How and why has consumer behaviour changed in this manner? What lessons can brands and retailers learn? Omnia discusses this new trend as it pertains to the state of fashion, e-commerce and retail. Fashion continues to reflect the economic mood When the internet revolution optimised entire economies in the late 90s and early 2000s with growing wealth and booming revenues, consumer sentiment matched this energy. Shoppers wanted to show their successes and ambitions with material objects, and branded clothing and accessories were one of the best ways to do it. However, decades on, those same consumers as well as their children, who are now in the millennial and Gen Z age groups, are experiencing a totally different economic climate. “The idea of buying disposable or flashy fashion at this particular moment doesn’t feel as right as it did a couple of years ago,” said Robert Burke, chief executive of retail consultancy Robert Burke Associates, who shared this with Business of Fashion in an interview. “The psyche of the customer today, people are attracted to buying luxury goods that have longevity,” said Burke. Emphasising “this particular moment” that Burke refers to, consumers are more price-conscious today than they have been since the start of the covid-19 pandemic in early 2020: For two months in a row (May and June), US consumer spending has decreased by 3% versus last year, despite inflation falling significantly since this time in 2022. High-income earners are not excluded from this, as credit card and debit card spending for consumers earning more than $100,000 per year shows: As shown above, high-income earners have found ways to steadily decline their spending over the last 12-24 months, reaching -3% year-on-year spending in June 2023. As spending confidence declines among shoppers of all income brackets, shoppers are looking for a sense of long-term stability in their fashion choices so they don’t have to spend more money on clothing when the next trend cycle begins in a few months. “It’s a mirror to the current economic climate,” said Heather Kaminetsky, the North American president at Mytheresa, a global e-commerce marketplace for luxury brands. “There are times in the world when everything’s great and people want to show off, but right now, everyone’s a little bit uncertain.” During the height of the covid-19 pandemic in 2020 when travel bans and social restrictions were in place, consumers reflected the economic landscape with the casualisation of their wardrobe. Sweatpants, jumpers, t-shirts and sneakers became common choices for social or professional gatherings. Just as consumers reflected their feelings on the state of the world through their fashion purchases back then, they are repeating the cycle today as geopolitical tensions remain high, and inflation, food and energy costs cause consumers to crave the security and simplicity the quiet luxury trend purveys. “We came out of the pandemic and we had that maximalist moment, which was such a release,” said Lorna Hall, director of fashion intelligence at trend forecasting firm WGSN. This explains the 21% increase in global revenue from fashion retail between 2020-2021. “Now, reality has bitten: not just the economic reality, but the reality of real life. We’re back to daily norms.” What opportunities can quiet luxury give mass-market brands and retailers? Quiet luxury doesn’t only have to belong to the 1%. Since the emergence of it, more affordable brands that aren’t in this highly exclusive category should find ways to capitalise on it - and some already are. The bulk of consumers mostly purchase from fast fashion brands like Zara, Old Navy, Zalando, and H&M or from mid-range luxury brands like Banana Republic which have worked in the quiet luxury trend in unique ways. Banana Republic advertises that they design suits in Italian mills, and so does luxury brand Brunello Cucinelli, allowing this more affordable brand a step into the quiet luxury category. Other brands may create “capsule collections” that suggest they are a once-off phenomenon created for a specific person or time. Country Road’s 2023 winter collection includes a number of minimalistic basics, including a white fitted turtle neck knit that’s made from extra-fine Australian Merino wool with 20% silk. The item has no branding, bling or embellishments, however, the luxury of this item comes from the quality of the wool and silk and the sustainable practices that went into creating this garment. Upsell this with a strategic marketing plan, and Country Road becomes part of the quiet luxury inner circle before you can take out your debit card. Source: Country Road Australia The key for marketplaces like Zalando and ASOS or mass-market brands like Mango, Zara or Adidas to attract quiet luxury shoppers is to market their other winning attributes. Conveying agelessness or exclusivity will look different for each brand. For example, Adidas’ Adiclub rewards program conveys exclusivity by gifting members with first access to brand-new clothing ranges, giving invites to live events, discounting certain items, offering rewards for taking part in sporting community events, and even giving birthday gifts. A rewards program for a fashion-centric brand like Mango would not fit, which is why they opted for a video campaign featuring handmade and hand-painted ceramics made in La Bisbal d'Empordà, a small town in Spain, which are part of their new home collection. The campaign gives shoppers the feeling of owning something distinctive; something bespoke; and something that contributes to the economy of a small place far, far away. Both Adidas and Mango, which are brands that are unique to one another, used their individual winning attributes to convey either exclusivity or timelessness, which are central to the look and feel of quiet luxury. What minimalism is to home decor, quiet luxury could be to fashion For home and DIY retailers, quiet luxury intersects with the minimalism trend that has remained strong since before the Covid pandemic arrived. Minimalism spurred a number of brands to create furniture and decor ranges that focused on neutral tones, clutterless spaces and comfy textures. This offers even more brands and retailers opportunities to attract new customers, higher relevance and more sales. Trends like quiet luxury have staying power due to the fact that they offer accessible, easy-to-style pieces that can be replicated in both the luxury and mass-market categories. This dichotomy would not exist in 2006, the year the world delved into the high fashion scene of “The Devil Wears Prada”, where luxury leaders remained the gatekeepers and creators of trends. Today, social media allows anybody to become a viral trendsetter, from fashion to travel to homeware. Viral trends can be lucrative opportunities for brands and retailers if their sales, marketing and fashion merchandising teams work together to build a creative, robust strategy.
What quiet luxury tells retailers about consumer sentiment12.09.2023
Saniweb, one of the first to go live with our new pricing software
Press release Omnia Retail - September 2023 Dutch sanitary equipment retailer Saniweb is among the first to go live with a newly developed pricing software version from Omnia Retail, called Omnia 2.0. The company has...
Press release Omnia Retail - September 2023 Dutch sanitary equipment retailer Saniweb is among the first to go live with a newly developed pricing software version from Omnia Retail, called Omnia 2.0. The company has been developing pricing software for more than 10 years, and Omnia 2.0 marks a revolutionary leap in the development of such software. Saniweb has been using Omnia’s SaaS solution in dynamic pricing for several years, and transitioning to a new application offers benefits for a large business like Saniweb. With Omnia 2.0 providing a large set of features and solutions, both teams are celebrating the achievement of a successful migration. Kevin Gomers, Webshop Manager at Saniweb notes: “For several years now, Saniweb has been working together with Omnia with great satisfaction. However, our business never stands still. In the rapidly changing e-commerce landscape, you expect the utmost from your partners, including in the area of pricing tools. About 2 years ago we got in touch with Omnia’s dedicated Customer Success team, where we provided feedback on capabilities we were still missing for our use cases. They took it upon themselves and earlier this year, they presented Omnia 2.0 to us. It's a platform that allows us to translate our strategies into concrete and understandable pricing rules more easily. It's also a platform that collaborates with us, providing new insights to help us further refine our strategy. With our latest webshop, Saniweb.de, we immediately embraced the platform and quickly transformed our clear vision into a well-defined pricing policy. We are grateful to Omnia for allowing us to participate in this beta version. In addition to our German webshop, we will also be transitioning Saniweb.nl and Saniweb.be this summer." For Omnia this marks a big step, as Saniweb is among the first clients to fully transition to the new application. After merging with German pricing software provider Patagona in late 2021, Omnia was working on merging the two technologies into one new-and-improved application. This best-of-breed platform combines the strength of two pricing tools, topped with new, additional features and an improved user interface to better handle dynamic pricing strategies. Omnia is currently in the process of migrating all accounts to the new application, a process that requires planning, in order to guarantee stability in service delivery for its clients. For this reason Sander Roose, CEO of Omnia Retail notes: “ I am more than happy to see this first of many migrations to our new application being successful. This proves the additional value Omnia 2.0 provides to our clients and that we are capable to ensure a smooth transition for our customers.” In addition the combined company has stacked up its team of experts, in order to provide an even better service in dynamic pricing for retail companies. Dedicated Customer Success Managers and a team of Solution Consultants assist Omina’s clients to define and implement successful dynamic pricing strategies.
Saniweb, one of the first to go live with our new pricing software12.09.2023
Retail Pricing 2023 and Beyond
Three levers to success in an inflation-hit industry Retail and branded goods pricing is currently at the centre of major socio-economic and technological trends. A period of global market volatilities and record-high...
Three levers to success in an inflation-hit industry Retail and branded goods pricing is currently at the centre of major socio-economic and technological trends. A period of global market volatilities and record-high inflation is creating retail pricing’s most stubborn headache, occurring at the same time as its largest opportunity for advancement: Seismic leaps in AI, machine learning, and automation. After adjustments for inflation, only 52% of companies across 13 industries and 19 countries expect real revenue growth in 2023 – the lowest number in decades. In essence, retail and branded goods pricing today is a reflection of what is going on in the world. How are consumers and retail leaders alike dealing with and responding to these trends? How can brands and retailers keep their heads above water? In this article, we will discuss key trends affecting retail pricing, e-commerce, and consumer behaviour, and will offer vendors tried-and-tested pricing and commercial strategies. Market volatility: Inflation, food and gas increases, and consumer suffering For consumers and businesses alike, inflation seems to be the waterproof mascara of the retail industry – hanging on a little too long and doing its job a little too effectively. Europe began 2022 with 5.8% inflation in February, which only increased throughout the year to 9.1% in August. Simultaneously, the UK experienced a 40-year record-high of 10.1% inflation in mid-2022, while in the US, the average inflation rate sat at 6.5% for the year. Even as we enter the second half of 2023, retail pricing is still feeling the effects as brands and retailers maintain higher prices to offset the cost of inflation. Gas prices in Europe increased by 150% between July 2021 - 2022, while food costs are sitting 17% higher in April 2023 versus the year earlier. In Germany alone, cheese increased by 40%, according to the country’s Federal Statistical Office. As food and energy costs remain high and barely manageable, consumer suffering has resulted in more conservative spending and a shift to less expensive brands. Most notably, high- and low-income households are both cutting down on spending, with spending growth from high-income shoppers sitting at -3% for two months in a row, May and June, for the first time in two years. Retail pricing increases in Europe, as of April 2023 Source: Eurostat 2023. Year-over-year changes in EU food price inflation vs the United Nations global food commodity price index: Source: Food and Agriculture Organization of the United Nations, Eurostat. This change in consumer behaviour, coupled with stubborn inflation, has created a deadlock for retail pricing beyond food. Brands and retailers can’t afford to decrease prices without suffering significant losses. At the same time, consumers aren’t able to maintain the same spending habits they were used to before inflation became a consistent reality in the shopping cart. Consequently, brands and retailers need to react in creative ways to fuel growth and stay profitable. For this, we have identified three levers to succeed under these difficult market circumstances. Talk to one of our consultants about dynamic pricing. Contact us Pricing Innovation: Digitalisation of pricing and the development of dynamic competition Dynamic pricing is not as established as the industry of pricing itself. Set pricing without haggling or bargaining first occurred in the late 1800s when a shop owner, John Wanamaker, placed a price tag on an item in Philadelphia, USA. Implementing a pricing strategy and tracking price changes has largely been a manual task with some form of a digital blueprint or spreadsheet to keep track. Today, the convergence of the availability of large data volumes at a decent quality, fast computer processing power, and, ultimately, advanced analytics and AI have made it possible to apply dynamic pricing automatically at high speed. Today, dynamic pricing is not just used in airlines or hotels but also in e-commerce and online retail. According to a June 2023 study conducted by Horváth, using digitalisation to boost efficiency in areas like pricing processes was at the top of the list of industry-specific needs, with 55% agreeing that it would have a high impact, showing just how effective dynamic pricing has become. In addition, Horváth found that 30% agreed that implementing AI in business rules would also have a high impact. There are various pricing strategies brands can implement to improve profits, increase market share, and strengthen customer relationships. The beauty of dynamic pricing is that it can bring together all these different strategies at once while the application of specific rules is automated. Here are two leading pricing strategies in the omnichannel retail world: Penetration Pricing: Prices are initially set low to attract customers and increase market share. Once the brand is well-established, dynamic pricing can be implemented to adjust prices upward. Some e-commerce vendors use price scraping and dynamic pricing to out-price competition, often leading to a pricing war to make quick sales. Some firms play this strategy quite aggressively by promising customers to match any lower prices found by a competitor for the same product or service. This can be effective for winning over price-sensitive customers or market share. Competitor-based Pricing: This strategy typically pegs prices to competition. Prices do not need to be identical but might be slightly higher or lower following specific price difference rules or article family roles (e.g., private labels are always cheaper than competitors’ branded goods). For instance, above-competition pricing involves setting your prices higher than your competitors. It's often used by businesses that offer superior products or services and want to position themselves as a premium brand or to skim margins. To be successful with this strategy, the price adjustments to competitors need to be powered by the use of software monitoring competitors on a daily basis at an SKU level. Competitor-based pricing is typically different across SKUs and segments, hence, different strategic considerations and price differences might be applied. D2C: Brands are moving to direct-to-consumer (D2C) e-commerce in their masses Over the last decade, brands have increasingly shifted toward the “direct-to-consumer” model fueled by digitalization and e-commerce. The change began slowly in the early 2000s but has accelerated in recent years, with large brands like Nike pulling their stock from retailers starting in 2017 to focus on a curated D2C strategy that includes their own website, mobile app, and concept stores. D2C Ecommerce Sales Growth by Company Source: Insider Intelligence - D2C Brands 2022. (US, 2022, % change) However, when the Covid-19 pandemic arrived, along with lockdowns and supply chain blockages, brands of all sizes found a way to keep the machine moving by going D2C. Brands and wholesalers that were historically B2B (business-to-business) have found pricing success within the D2C channel, experiencing higher sales and revenue. However, the D2C move does not come without its difficulties for retail pricing. Brands that have their products in large retailers, supermarkets, and online marketplaces have to tread lightly so as to not agitate or create a competitor out of their retailer partners. Most brands who have retailer partnerships should expect most of their revenue to come from them, so a D2C pricing strategy should not alienate a brand from these lucrative streams of income. Brand leaders must learn to curate their offerings to please both the customer and their B2B partners. Here, strategy plays a key role, such as advertising Recommended Retail Prices (RRPs), following a strict minimum advertised price (MAP) strategy like Apple, implementing discounts, and retailer partner incentive schemes that align with the company’s overall strategies. Data and retail analytics: Attracting the customer in a whole new way Data has become a billion-dollar value driver, as it becomes the centre of industry and revolution, surpassing oil. It powers the question at the centre of capitalism: What and who drives a consumer to spend? With data and retail analytics, brands and retailers can create products and marketing and sales strategies that are better curated to what the customer wants. On an individual level, this data provides retail leaders with a blueprint of what customers are looking for, what they have purchased in the past, what kind of additional offerings they may want from a brand, and more. As British mathematician Clive Humby said in 2006, data is not precious in its raw state and only becomes valuable when it is refined, filtered and turned into something valuable. In the last decade, but more so in recent years, transforming big data into smart data has been at the crux of e-commerce success and customer acquisition for marketplaces like Amazon and Google Shopping. However, this success is extending to individual brands who, through their new D2C channels, can obtain the same smart data. This, of course, includes pricing data that is collected directly from e-commerce stores, larger marketplaces and retailers so that our clients always have up-to-date knowledge on market and pricing changes against their products. More than a decade ago, gaining pricing knowledge on competitors was secretive, elusive, and difficult to obtain. Thanks to developments in software, computing power, data mining, and Machine Learning, pricing data has become available for almost anyone to gather and utilise with transparency. In essence, brands and retailers are viewing data and retail analytics as a key to the locked door of growth, profit, and opportunity. This does not mean all data is of a high standard; in fact, along with the aforementioned developments, it has become easier for data mining companies to harness and sell data that has not been vetted thoroughly. It is up to brands and retailers to ensure they are partnering with a company that treats data carefully and meticulously. Pricing professionalisation around strategy, analytics and software is key for brands and retailers Considering all of the trends currently taking place within retail, e-commerce and consumer behaviour, retail pricing is operating during a complex and fast-moving time where socio-economic and political factors, as well as technological advancements, play a large role in how prices are calculated and how this affects businesses and consumers. Smart brands and retailers react quickly and use major trends to their advantage by upgrading pricing strategies, smartly playing omnichannel strategies, moving closer to consumers, and leveraging advanced analytics in pricing. Pricing software will be a linchpin in this transformation: Gartner found that pricing software can yield higher profits of up to 5% and margins of up to 10%. By using pricing software as a solution, brands and retailers can execute faster, data-driven decisions that are centred on driving growth and profit. Omnia and Horváth believe retail pricing is nearing the end of the post-Covid slump, where we gradually see inflation easing off and consumer sentiment improving within the US markets, and the EU still slightly lagging behind. Now is not the time for brands and retailers to buckle under these coinciding trends. Pricing needs to be prepared for the next strategic and technological level so that firms can double down on growth and margin targets over the next few years. Acknowledgements: We extend our thanks to one of our consultancy partners, Horváth, for their collaboration and insights on this article. As a leading multinational consultancy firm in Europe and the USA, Horváth specializes in performance pricing management and transformation.
Retail Pricing 2023 and Beyond25.08.2023
E-Commerce Brands & Retailers Building Trust with Transparent Pricing
Is there such a thing as too much honesty? In business, and in pricing, opinions differ. The concept of transparent pricing refers to having pricing information readily available and accessible to customers, benefiting...
Is there such a thing as too much honesty? In business, and in pricing, opinions differ. The concept of transparent pricing refers to having pricing information readily available and accessible to customers, benefiting both sides: Buyers can make informed decisions, compare prices and avoid overpaying Businesses can improve trust and loyalty from consumers, win more business and avoid angry reviews However, transparent pricing can also have downsides. What if you’re too honest about how you set prices, and customers decide you’re overcharging them? What if competitors use the information to undercut you? In this article, we’ll explore the role of pricing in the overall marketing strategy and how price transparency specifically is used as a messaging signal to build trust. The role of pricing in the marketing mix The original iterations of the Marketing Mix consisted of four P’s: Product, Place, Promotion and Price. Eventually, this expanded to the 7 P’s and added Physical Evidence, People and Process. While each of these areas is important to build a well-rounded marketing strategy, we want to focus today on the role of pricing and how it can be used as a marketing strategy in and of itself. In past articles, we have laid out two main ways in which pricing strategy influences marketing performance: It determines the volume of the marketing budget It influences how effective marketing strategies can be Both of these are certainly true. The price of a product, and its margin, determines how much revenue the company will bring in and how much funding will be allocated to marketing. The price also impacts how customers view a product in comparison to others in the same category, and the price elasticity of that product should be considered when setting a strategy. However, we would argue that we can build upon the second point to see a third way a pricing strategy can impact marketing: as a messaging signal. What if a brand or retailer chooses to be transparent with customers about its own pricing strategy? Regardless of the specific price levels and strategy chosen, what does the act of transparency signal to customers? The question of whether transparent pricing is the right strategy for e-commerce businesses is not black and white, but it is an interesting option to consider. Talk to one of our consultants about dynamic pricing. Contact us What is price transparency in e-commerce? First, let’s go over how price transparency actually plays out for e-commerce brands and retailers. Transparent pricing can be utilised in a variety of ways: Telling customers about all the factors that determine the final price they pay. This can include the cost of manufacturing, distribution, labour and other costs, as well as things like shipping, import duties and VAT. Showing price history. Historical price transparency typically involves showing customers how the price has changed over time, whether through one-time discounts and offers or increases and decreases of the RRP (Recommended Retail Price). Comparing prices across the market. Some brands and retailers show a live view of the price across other channels, so customers can make an informed decision about where to buy. Avoiding surprise costs. Companies ensure there aren’t any hidden costs that appear at checkout. The customer is aware throughout the process of the price they will pay. Explaining price changes. If the brand or retailer decides to increase or decrease the price on a product, or across their entire product line, they might explain the reason and data behind this price change. This may serve inadvertently as a marketing tactic, as shoppers may think highly of a brand that is open about their price changes, which could increase loyalty and sales. Following price regulations. In May 2022, the EU implemented a new directive aimed at bolstering consumer protection and their overall knowledge of a product’s pricing. The Price Indication Directive (PID) (part of the updated Omnibus Directive) stipulates that when a trader intends on implementing a price reduction on an item, they must also show the item’s previous price. The original price, prior to the reduction, is presented as the most recent and lowest price at least 30 days prior to the newly introduced reduction. Omnia Retail offers the only Dynamic Pricing tool with the ability to use and display the lowest price over the past 30 days, enabling e-commerce sellers to stay in line with the Omnibus Price. Learn more here. Transparent pricing case study: KoRo Drogerie One well-known example of transparent pricing is KoRo Drogerie, a Germany-based online shop selling a variety of long-life, natural and processed foods, plus kitchen utensils and cooking accessories. One of KoRo’s five basic principles is Fair Prices: The KoRo concept can and will only work if we pass on our cost savings resulting from the above principles directly to you. Quality must be affordable. Especially in this day and age, we are aware that it is easy to compare similar products from different suppliers. That is why it is KoRo's goal to be able to offer a fair price-performance ratio for all our products. Every consumer must be able to rely on KoRo to take care of the price comparison process so that customers can be sure that they have chosen the best shopping option. KoRo has had multiple versions of price transparency over the years. In the past, the company actually displayed price development history directly on the website, but this has since stopped – perhaps an example of too much transparency or not enough pay-off to make the labour worth it. Now, KoRo is using price transparency as part of their marketing strategy. The company announces via blogs when prices change for their product lines – whether prices are increasing or decreasing. For example, this blog from February 2021 (in German) announced an average price decrease of 5.34% due to changes in the market and a new calculation basis. Two years later, they announced prices would increase by an average of 8.5% in February 2023 as a result of high food inflation in Germany. This transparency is an effective messaging strategy, showing customers that the company can be trusted to communicate honestly and price fairly. This is consistent with the general perception of KoRo, which is famous in the German market for their fair and sustainable approach. The company receives a 4,78 rating on consumer trust website TrustedShops.de. Transparent pricing case study: Everlane US-based fashion retailer Everlane illustrates another version of price transparency. At the bottom of every product page, the company breaks down the true cost of the production process. The Madison Dress, for example, has the following cost breakdown: Past iterations of Everlane’s Transparent Pricing infographics actually included the “True Cost”, as well as Everlane’s final price and the traditional retail price. The brand typically uses a markup of 2-3x, whereas traditional retail is closer to 5-6x. It appears that this part of the infographic is no longer included on product pages, indicating that perhaps the brand decided it was too much transparency. Past Everlane pricing infographic - the bottom section is no longer included Putting pricing transparency into practice Any e-commerce business that wishes to utilise transparent pricing needs to have a solid data foundation from which to build its pricing strategy. Those insights can then enable marketers to make smart marketing choices and build the right messaging around pricing transparency – so the business can use it to increase consumer trust. Whether you should use pricing transparency for your business, and which type to choose, depends on your specific situation. It’s a fine balance: You want to increase customer trust, but you also need to earn a profit. And with some consumer protection laws requiring certain levels of transparency, like the PID and others, it isn’t only a commercial question, but a legal one, too. Transparent pricing has to be managed properly, with the right messaging and data, in order to be effective.
E-Commerce Brands & Retailers Building Trust with Transparent Pricing22.08.2023
How Established Brands and DNVBs Are Finding Success in E-Commerce
Is there anything that pairs better than e-commerce and direct-to-consumer (D2C) sales? With e-commerce, companies remove the inconvenience of having to go to a physical store, and products are shipped right to the...
Is there anything that pairs better than e-commerce and direct-to-consumer (D2C) sales? With e-commerce, companies remove the inconvenience of having to go to a physical store, and products are shipped right to the consumer’s doorstep. D2C sales models are the perfect pairing: with all middlemen removed, the seller has total control over the customer experience. The only middleman we see is the person delivering our package. In 2023, both established brands and digital native vertical brands (DNVB) are pursuing D2C strategies across a huge range of e-commerce verticals. In this article, we’ll highlight three especially interesting and competitive verticals in e-commerce – Electronics, Sports and Home & Living – and look at the current state of D2C businesses across these areas. Trending Verticals in E-commerce Worldwide e-commerce revenue is projected to reach $4.11 trillion in 2023, with the highest-selling verticals being fashion; electronics; and toys, hobby and DIY. Omnia is especially interested in analysing verticals with multiple retailers selling the same or comparable products that consumers research heavily online. These verticals offer significant dynamic pricing opportunities, since price fluctuations are constant and competition is high. Let’s look at an overview of three verticals that check these boxes. Electronics Consumer electronics continues to be one of the reigning e-commerce champion verticals, with sky-high sales over the last decade and further growth as work from home becomes a more established workplace vision for some professions. It is the second-most popular e-commerce category behind fashion, with expected revenue of $910 billion in 2023, or 22.1% of all online sales. Sports Sporting goods are a fast-growing e-commerce vertical, with 43.7% of sports products being bought online. The sports category is an interesting case, however, because of its high Average First Order Value (AFOV). Businesses with high AFOV need to make a profit on every transaction, because repeat purchases are not as common as other verticals. The AFOV for sports businesses is extremely high, but it has one of the lowest levels of 12-month growth in Customer Lifetime Value (CLV). The sports vertical is continuing to grow in the post-pandemic landscape, with businesses in the US, UK and Europe seeing a boost in revenue and traffic in the first quarter of 2023 compared to the end of 2022. Home & Living As you can see in the chart above, the home category, like the sports vertical, has a high AFOV and a low rate of repeat purchases, putting pressure on businesses to achieve a sufficient profit margin on each product. Home goods have faced some challenges post-pandemic, as people spent less time at home and less money on home improvement. The vertical has been slower to bounce back than other categories in terms of year-on-year revenue change, but businesses in the UK and Europe did see a boost to Q1 2023 revenues compared to the end of 2022. Current State and Outlook of D2C in E-commerce Direct-to-consumer (D2C) brands are continuing to grow worldwide, with nearly two-thirds (64%) of consumers making regular purchases directly from brands in 2022. This D2C wave is present in a wide range of markets: in the US, D2C is forecast to grow to $213 billion USD by 2024; in Germany, D2C revenue was already valued at €880 million at the end of 2021; and in India, total D2C sales was $44.6 billion USD in 2021. There are two types of brands that sell D2C: Digital native vertical brands (DNVB) – Companies that were born online and have a strong digital presence. These companies often sell niche products directly to consumers through e-commerce platforms and social media, bypassing traditional retail channels. Established brands – Companies who have built an established presence, reputation and customer base through various channels, including traditional retail, advertising and other marketing efforts. These brands may have a strong online presence as well, but their roots are often in traditional manufacturing and distribution. In the US, 40% of established brands are already implementing a D2C growth strategy. It’s a headline-grabbing topic of conversation, but how significant is the role of D2C in the wider e-commerce landscape? Estimates from Insider Intelligence said that D2C sales would account for 1 in 7 e-commerce dollars in 2022. And while DNVBs are often the brands capturing media attention, established brands are projected to account for 75.6% of D2C e-commerce sales in the US in 2023. In fact, the D2C online sales for established brands have had a higher growth rate than DNVBs since 2021, although both types of D2C brands still show strong growth. Challenges for D2C Brands Every operator in the retail space faces its own unique challenges, but D2C brands are a unique case. They retain more control over their customer relationship, products, pricing and supply chain dynamics, but they also hold responsibility for the entire end-to-end experience and whether their product makes it into the hands of consumers. Challenges for D2C brands in e-commerce include: Customer Acquisition Costs: Competition for digital advertising space is high, and as a result, the cost of advertising on social media platforms, search engines and other channels can be quite expensive. This can be especially challenging for D2C startups and small businesses with limited marketing budgets. Supply Chain Management: D2C brands typically manage their own supply chain, which can be complex and time-consuming. From sourcing raw materials to manufacturing and shipping products, there are many moving parts to manage. Delays or disruptions at any point in the supply chain can impact product availability and customer satisfaction. Competition from Established Brands: As mentioned earlier, established brands with existing customer bases and sizable marketing budgets can be formidable competitors for DNVB brands. These brands often have more resources to invest in marketing and customer acquisition, and they may have stronger brand recognition and customer loyalty. Customer Experience and Service: D2C brands are often held to higher standards when it comes to customer experience and service. Customers expect a seamless, personalised experience when shopping online, and any issues with shipping, returns or customer service can lead to negative reviews and damage the brand's reputation. Scaling Operations: As D2C brands grow, they may struggle to scale their operations while maintaining quality and consistency. This can be especially challenging when it comes to managing inventory, production, and shipping logistics. D2C Maturity in Key E-Commerce Categories: Electronics, Sports and Home Let’s return to the three e-commerce verticals we discussed earlier. Each of these has its own level of maturity, as well as successful D2C brands, both established and DNVB. Electronics The consumer electronics vertical is relatively mature when it comes to e-commerce D2C sales. Over the past decade, there has been a significant shift in the way consumers purchase electronics, with many people choosing to buy products directly from brands online rather than through traditional retail channels. Established brand: Apple Apple has long used D2C retail operations to drive customers into its “walled-garden ecosystem,” and has made clear its plans to continue investing in D2C. It’s clearly working: the company was able to triple its market value to $3 trillion between 2018 and 2022. DNVB: Anker Innovations Anker, a Chinese mobile charging brand, is considered a pioneering DNVB. While they also sell via Amazon and other marketplaces, a majority of their sales still come from D2C. Sports The sports vertical has been growing more mature with D2C sales, as has been evidenced by the number of new DNVB brands as well as established brands taking major steps to ramp up D2C efforts. Nike, for example, announced in 2021 that they would stop selling sneakers at American shoe store chain DSW, another in a long line of breaks with traditional retail. News stories like these are signals that, with Nike as one driver, the sporting sector is developing and maturing quickly, changes that retailers will need to adapt to. Established brand: Nike Nike has an established presence in traditional retail channels, but the company’s D2C operation, NIKE Direct, has been extremely successful in both e-commerce and brick-and-mortar. In 2022, it accounted for approximately 42% of the brand’s total revenue. DNVB: Peloton Peloton is one of the most successful examples of sporting DNVBs, having been born online before growing across different distribution channels, customer segments, geographies and categories. Home & Living The home and living vertical, which includes product lines such as furniture, cookware, bedding and more, is a strong D2C market due to its low barriers to entry and lack of strong retail competition. Established brand: Ikea Ikea has always been a direct-to-consumer brand, but is not a DNVB due to its brick-and-mortar origins. In the wake of the pandemic, Ikea’s online channels had more than 5 billion visitors and an increase of 73% in e-commerce sales during FY 2021. DNVB: Westwing Westwing was founded to be a “curated shoppable magazine”, where consumers could find beautiful home & living products online. The company is now present in 11 European countries and generated €431 million of revenue in 2022. D2C Brands and Dynamic Pricing Aligning prices with retailers for your entire product assortment is no small feat, which is why dynamic pricing software is so essential for brands who utilise a D2C sales channel. As Roger van Engelen, Principal at A.T. Kearney, told Omnia in a 2018 interview: “In my opinion, brands need to have dynamic pricing before they start selling directly to consumers because it will prevent them from agitating their retail customers. This, in turn, protects brands from triggering a price-markdown war, which helps protect brand price perception.” Keep in mind that most major retailers are already using dynamic pricing software for their e-commerce shops and to ensure products are competitively priced. As a brand, the software can help you follow a market price even within strict limits. No one wants a market-wide price race to the bottom, or to anger retailer partners. To stay better aligned with your partners and pricing strategy, and to start gathering better data on your shoppers, try Omnia Dynamic Pricing free for two weeks.
How Established Brands and DNVBs Are Finding Success in E-Commerce17.08.2023
Is e-commerce prepared for the EU’s new Price Indication Directive?
After its first introduction in 2021, followed by some delays in implementation, the EU’s Price Indication Directive (PID) is being implemented across the e-commerce and retail landscape throughout European member...
After its first introduction in 2021, followed by some delays in implementation, the EU’s Price Indication Directive (PID) is being implemented across the e-commerce and retail landscape throughout European member states including the Netherlands, Italy, Greece, Poland, and others. However, some countries have expressed concern about how the PID will be implemented, considering how vast and segmented the retail industry has become. How will this affect retailers, marketplaces and online stores, as well as consumers going forward? What are the specifications that retailers need to abide by? Omnia answers these questions and provides a solution for retail clients who may be concerned about how to implement this new legislation in an effective, seamless way. What are the PID’s key changes affecting retail stores and consumers? The PID is part of a larger legislative move within the Omnibus Directive towards bolstering consumer protection and transparency between retail stores and consumers. The PID section, which was a piece of legislation first created in 1998, is being updated with new rules to reflect the times. It focuses specifically on new ways of applying and advertising discounts, while the greater Omnibus Directive includes changes to other aspects of e-commerce such as online reviews, personal data, how aggregator websites display suggestions, and more. The PID focuses on ensuring retailers, online stores and vendors on marketplaces aren’t deceptively creating the illusion of a price decrease. Under Article 6a, a discount must be based on the lowest price within the last 30 days prior to the newly-introduced reduction and not a base price created by the retailer/vendor. In addition, when a trader intends on implementing a price reduction on an item, they must also show the item’s previous price. Price Announcements For example, a price decrease can be displayed as a percentage (“20% off”) or as a specific amount (“€20 off”). This can be shown with the previous price in a crossed-out form. Article 6a does not apply to long-term price reductions that shoppers may get with loyalty programs, cards or memberships, but specifically the price announcements. Here, we see how the PID gives transparency to pricing announcements: Before PID: A discount of 10% is announced. After PID: Discount is in fact 0% because the lowest price in the past 30 days is the same price as today. While a trader may usually advertise a discount of 33% (from 150€ to 100€) because it looks like a higher discount, thus incentivising consumers to buy a product, the PID now forces the trader to advertise either a 9.09% discount or not to advertise it at all. This means that as a retailer with an effective pricing strategy, one has to be able to access the cheapest price of the past 30 days and base their advertised discounts on it. More general price reduction announcements like “Sale now on” or “Black Friday specials” are also subject to Article 6a. Retailers, however, can still use general marketing techniques like “Best prices in town!” without Article 6a being invoked. Retailers The PID defines traders to be “any natural or legal person who sells or offers for sale products which fall within his commercial or professional activity”. In a nutshell, this includes sellers on marketplaces but not the actual marketplace itself or similar platforms like comparison shopping engines and aggregators. An example here would be eBay which acts as an intermediary platform between traders and shoppers. However, an intermediary like Amazon is subject to the PID rules when it is the actual seller of the goods or when it sells on behalf of another trader. In addition, Article 6a applies also to traders based outside the EU that direct their sales to EU consumers, including to traders offering goods via platforms. Talk to one of our consultants about dynamic pricing. Contact us Across the EU, reactions have been mixed Transposition and interpretation of the PID have not been a seamless or instantaneous process for most EU Member States. In early July, E-commerce Europe, which represents more than 150,000 businesses selling goods and services online, held a workshop to discuss its findings on how the PID is being approached by Member States. It showed mixed reactions and concerns, with each country approaching the PID with varying levels of seriousness. Among the concerns were the technical difficulties of indicating the prior price on price tags; how consumers will understand the various prices; how this affects promotional campaigns on items that need to sell rapidly (like fresh food), and the technical issues of displaying the prior price when selling through marketplaces. The countries experiencing the most difficulties were Italy, Sweden, Poland, Finland and Belgium. A number of survey questions were given to Member States regarding the implementation of the PID, with one survey showing high concern: Question: Have you experienced difficulties with implementing the new rules on price reductions? Answers: 10 Member States - Yes, regarding technical difficulties to indicate the prior price on physical price tags in stores. 9 Member States - Yes, it is more difficult to keep track of the prices and establish the prior price reduction. 8 Member States - Yes, regarding the concerns about less compliant competitors gaining a competitive advantage. 7 Member States - Yes, regarding technical difficulties to indicate the prior price in online selling interfaces. 5 Member States - Yes, regarding technical difficulties to indicate the prior price when selling through online marketplaces. How is Omnia taking action for existing and potential clients? In our Omnia 2.0 product that launched this year, our clients are able to have full insights into price history with a feature called the Directive Pricing Indicator. It shows the lowest selling price in the last 30 days on their dashboards so that brands and retailers utilising our product can easily comply with the Price Indication Directive. As the next iteration in our product development, we will make this data available in the setting of pricing strategies. In addition, Omnia plans to show the history of a client’s competitor prices in the last 30 days so that they are aware of their competitor’s pricing moves too. Your partner in price maturity and transparency The new Price Indication Directive will not only add value to the e-commerce experience for shoppers, but it will solidify trust and legitimacy between brands, retailers, their intermediaries, lawmakers and consumers. Transparency within pricing is a vital part of strategy and pricing maturity. As a client of Omnia’s, implementing these price-centric changes is efficient and simple. There is something to be said about a brand or retailer and their respective leaders wanting to improve their impact on the planet. As we’ve known and seen for the last five decades, it would be easy and mostly inconspicuous for a brand to simply continue the production, manufacturing and distribution tactics that are harmful to the environment. Up until recently, choosing sustainable operations within a business has been viewed as optional or as lacking demand from consumers.
Is e-commerce prepared for the EU’s new Price Indication Directive?15.08.2023
Sustainability in 2023: What brands and retailers can learn
There is something to be said about a brand or retailer and their respective leaders wanting to improve their impact on the planet. As we’ve known and seen for the last five decades, it would be easy and mostly...
There is something to be said about a brand or retailer and their respective leaders wanting to improve their impact on the planet. As we’ve known and seen for the last five decades, it would be easy and mostly inconspicuous for a brand to simply continue the production, manufacturing and distribution tactics that are harmful to the environment. Up until recently, choosing sustainable operations within a business has been viewed as optional or as lacking demand from consumers. Today, that is no longer in question. Brands and retailers that prioritise sustainability experience growth and loyalty from consumers, especially those in e-commerce. Online shopping produces up to 4x less carbon dioxide emissions than traditional store shopping, according to Dr Helen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris. As we discuss the growth potential of brands with products that make environmental, social and governance (ESG) claims, we take a look at which economic powers are leading the charge against environmental damage and what technologies brands and retailers can start looking into to lower their carbon footprint. In addition, we also ask, are consumers translating their eco-conscious sentiments into credible spending behaviour? Let’s jump into one of retail’s largest shadows: Sustainability. The EU is mobilising against fast fashion in 2023 The world’s largest fast fashion giants like H&M, Zara and Shein have been dealt a striking punch to the profit gut in June, as the EU parliament voted to tackle excessive production and consumption practices within the clothing industry, affecting how these brands have been operating for decades. Low production costs, high carbon footprints, questionable working conditions and greenwashing scandals have become part of the fabric of the fast fashion industry while revenue soars and environmental and social responsibility goals go unmet. European governments voted to create stricter rules and recommendations, including targets that are legally binding and quantifiable, as well as a total ban on the destruction of unsold textiles, which are often burnt. Due to the low-quality nature of fast fashion clothing, consumers in the EU are throwing away 5.8 million tonnes of textiles every year. On average, these clothes are only worn 7-8 times before being added to landfills. Source: Statista (Study conducted in 2020, released in 2023) According to the EU Parliament, the environmental representatives of the member states “request to ensure that production processes become less energy- and water-intensive, avoid the use and release of harmful substances, and reduce material and consumption footprints”. These recommendations will support new regulations presented by the EU Commission in 2022. This comes after a similar crackdown in March which targeted greenwashing and will focus on increasing surveillance of and penalties on brands that inflate or outright lie about their sustainability efforts. According to the EU Commission, this new legal threshold will save up to seven million tonnes of CO₂ emissions over 15 years. How are other economic powerhouses leaning into sustainability efforts within retail and e-commerce? American lawmakers have also been busy drawing up legislation to take on environmental, social and governance (ESG) efforts within retail and e-commerce. In 2022, the FABRIC Act (Fashioning Accountability and Building Real Institutional Change Act) was drafted and, among the new rules and regulations that brands and retailers would have to abide by, one of the incentivisations is a 30% tax reduction to return garment-making back to US soil to reduce excessive air travel and international shipping. Furthermore, The Fashion Sustainability and Accountability Act will require large fashion brands, including luxury ones like Prada and Armani, to declare their environmental and social practices and impact. This includes being transparent about their carbon emissions, supply chain systems, and their treatment of employees. This moves the onus onto the companies to be responsible for their impact on the planet, instead of the consumer. Speaking of consumers, how are US shoppers reacting to and engaging in eco-friendly behaviour? A study by GWI surveying approximately 21,000 Americans found that 39% of people want brands to be socially responsible and a further 37% want brands to reduce their environmental impact. In addition, 35% said a dismal environmental track record and false sustainability claims would deter consumers from shopping from a brand. Moreover, and since the US and Russia are the top two countries for greenhouse gas emissions per person per year, it is pleasing to see that consumers are making more eco-friendly decisions regarding their purchases: Drones and electric cars are the last mile’s biggest hope for a greener delivery system One of the worst contributors to carbon emissions within the e-commerce spiderweb is delivery to the consumer, whether that’s groceries, clothing or takeout. Often referred to as the “last mile” - similar to the last stretch of a long race - it is expensive, time-consuming and, more often than not, harmful to the environment. Brands and retailers have had to keep up with consumer demands which have swiftly moved from two-day delivery to 60-minute delivery, especially within the food category. This has, however, affected efforts to curb carbon emissions. How do e-commerce leaders balance the need for meeting consumer demands and the increasing pressure to improve their environmental and social impact? It may feel like a scene out of Blade Runner 2049, but home delivery via drones is becoming more and more popular. In 2021, approximately half a million drone deliveries were taking place worldwide, which increased to 1.5 million in 2022. In addition, the drone delivery package market is estimated to be valued at $555 million by 2030, with a growth rate of 49% between 2022 - 2030. “Drones could become an important part of the delivery supply chain. Companies will be much more likely to reach their emissions goals if they do not have to deliver a one-pound burrito with a two-ton vehicle,” says Rob Riedel, a partner at McKinsey. Source: McKinsey Drone Delivery Tracker and Forecast In Europe, drone technology for delivery is being developed by Airbus in the Netherlands and DHL in Germany. US companies like Boeing, FedEx and Alphabet (Google’s parent company) are also leading the way. Despite the excitement around the possibility of replacing traditional vans with drones, the industry will have to calculate how to make each individual drone delivery more cost-effective. Currently, one delivery of a small package within 8 km by a normal van emits 6.4 kg of carbon dioxide and costs €11, including labour and energy. With a drone, under the same conditions, a delivery emits 1 kg of CO₂ but costs €12.60. Labour takes up the majority of this cost as the current format is that only one drone delivery can be operated by one person versus hundreds of packages being delivered by a driver in a van. Currently, electric cars pose the greatest chance of the last mile drastically lowering their carbon emissions, as one driver can deliver multiple packages, keeping labour and energy costs low. Delivery by an electric car including five packages travelling within 8 km emits 0.14 kg of CO₂ and costs €1.50. Brands and retailers within e-commerce committed to tackling their environmental footprint should start strategising a future where drones and/or electric cars are a part of their delivery strategy. At the current growth rate (49% between 2022 - 2030), drone deliveries, amongst other eco-friendly delivery methods, could become integral to e-commerce’s supply chain methods over the next few decades. Are consumers acting on their statements about eco-conscious spending? In May 2023, McKinsey and NielsenIQ released one of their most extensive studies that analysed five years’ worth of direct-to-consumer sales data in the US, covering 600,000 unique products across 44,000 brands within 32 CPG (consumer packaged goods) categories including food, drinks, personal care and household items. Considering that consumer spending contributes two-thirds to the US GDP, analysing how sustainability-related claims on product packaging affect spending and consumer behaviour for the near and distant future is paramount to whether e-commerce and retail leaders may or may not invest more in sustainability. The study, which examined the performance of products that made ESG claims in competition with products that did not, found that US shoppers are overwhelmingly making the shift to more sustainable purchasing decisions: Products with ESG claims accounted for 56% of the total sales growth during the five-year period of the study (2017 - mid-2022). In particular, products with ESG claims experienced a 28% increase in cumulative growth versus 20% for products with no sustainability or social responsibility claims. Visualising, with this raw data, how US shoppers are translating sentiment into sales shows that consumers are actioning their beliefs around sustainable shopping practices. Within CPG categories, however, sales growth among products with sustainability-related statements is not even. For example, more consumers are spending on hair care products with ESG claims than on baby formula products with similar claims. This may be because new parents are wary of environmental claims such as “plant-based” or “vegan” and may opt to trust products that are more traditional. Hair care products account for approximately 45% of the retail sales among products with ESG statements, while baby formula only contributes roughly 5%. Nevertheless, critics may say that it is only the most prominent and wealthiest brands that can afford to implement environmental and social changes to their products and packaging, but the data proves different: In 59% of the categories, the smallest brands with sustainability claims had more growth than brands who did not. It was similar for large brands, where 50% of the categories saw products with ESG-related claims experience more growth than those without. If this data is anything to go by, it suggests that the retail and e-commerce sectors can begin to shift their thinking on sustainability: It is no longer a half-ignored checkbox on a list that curtsies to the planet in a moral dilemma, but a profitable, strategic and centred part that is integral to a brand’s ethos and practices. The time is now for brands and retailers to get on board A global survey conducted by McKinsey across 90 countries asked employees in several industries, including retail and e-commerce, how the company they work for is addressing ESG issues. Regarding the reasons why ESG is being tackled, 51% of respondents who work in retail and CPG said that it is because the company sees it “as a growth opportunity”, while 40% said it is to meet consumer expectations. Both of these reasons give hope to the notion that mindsets around sustainability are changing for the better, whether it is to seek growth or to retain eco-conscious customers. In 2023 and beyond, brands and retailers may continue to feel the effects of Covid-retailed supply chain issues, inflation, and energy disruptions. In addition to this, they will have to keep up with consumer demands and spending habits regarding their environmental and social responsibility stance. As the data has shown, more and more consumers are consistently choosing products with ESG-related claims, resulting in larger growth in comparison to brands that have no sustainability claims. Whether a brand or retailer offers one or hundreds of categories of products, the effort to improve its environmental impact must be genuine, consistent, tracked and quantifiable.
Sustainability in 2023: What brands and retailers can learn02.08.2023
Psychological Pricing: Strategies, Examples, Consumer Psychology And More
Modern-day pricing is so much more than a numbers game. When thought about correctly, it’s a powerful way to build your brand and drive more profits. But how do you access the full power of pricing? The key is to...
Modern-day pricing is so much more than a numbers game. When thought about correctly, it’s a powerful way to build your brand and drive more profits. But how do you access the full power of pricing? The key is to understand the psychology that goes into a pricing strategy, and this article is a perfect place to start. To continue our series of articles about different pricing strategies, in this article we’ll discuss what psychological pricing is, how it works, and what you need to build a great psychological pricing strategy. What is psychological pricing? To understand why psychological pricing works, we need a quick lesson in marketing and pricing psychology. Take a look at Maslow’s hierarchy of needs, which is a theory of how humans prioritize different things in their lives. At the bottom of the pyramid are physiological needs - you know, the things we as humans truly need for continued survival. These include food, water, shelter, rest, oxygen...et cetera. Above the physiological needs are safety needs. In other words, once you have the basics of survival covered, humans become more concerned about their general safety and security. After worrying about safety and security, the theory states that humans care about belonging and community. We want to build friendships, experience love, and the “gezelligheid” that comes from being around other people. After community, people begin caring more about themselves and their aspirations. The next tier above belonging is “Esteem” and the very last tier (the one at the tip of the pyramid) is “Self-Actualisation.” Chances are you know all of this already, especially if you work in e-commerce marketing. Maslow’s hierarchy is a foundational element of modern marketing theory… so, why is it being mentioned again? When you, your pricing team, sales team, and marketing teams want to create a psychological pricing strategy, you should refer back to Maslow’s hierarchy to serve as guidance for the strategy. As you’ll see shortly, this framework gives you the freedom to be creative in your strategy, while also making sure it is effective. So the answer to why psychological pricing works is because these strategies are based on a deep understanding of what drives people, not just customers. To even get started, marketing teams, pricing teams, and sales teams need to have a deep understanding of what drives people, not just customers. Talk to one of our consultants about dynamic pricing. Schedule a demo Examples of psychological pricing strategies They are everywhere, and are employed by some of the top global companies like Amazon, Hershey, Motorola, Apple, and Costco. In this section, we’ll highlight a few examples of psychological pricing tactics, many of which we’ve already written about extensively on Omnia’s site. 1) Value-based pricing Value-based pricing is a basic pricing strategy, but it’s one of the hardest to pull together because it requires an excellent understanding of the market and a lot of self-reflection. In a value-based pricing strategy, you use your price as a way to control consumer understanding of your product. Do you want to be seen as a luxury brand? Then you probably should have a luxury price. Do you want to come off as the best value-for-money option on the market? Well, your price should reflect that. Value-based pricing requires a lot of research into your target market, competitive landscape, and business goals. That means a lot of cooperation across departments, but that cooperation is a great way to build a more cohesive strategy. 2) Odd-even pricing Odd-even pricing is a psychological pricing tactic that uses the power of number psychology to drive consumers to action. The odds and the evens refer to the numbers in a price: “odd” retail prices feature mostly odd numbers (like €7.99), whereas “even” prices feature mostly even numbers (like €8.00). Most often we see prices that end in odd numbers, but even prices have their own psychological power. Odd-even pricing can be used strategically in several different ways, whether it’s to offer strategic discounts or just create a price that is memorable. Below is an example of how Uniqlo does exactly that - the company is discounting a shirt that originally cost €24.90 (a mostly “even” price) down to €7.90 (a more “odd” price). 3) Charm pricing Charm pricing is very similar to odd-even pricing. In a charm pricing strategy, companies use prices as a way to elicit an emotional response in consumers and drive them to action. Some of the most notable examples of charm pricing can be seen in late-night infomercials. These pricing strategies are notable for their specificity, exceptional bundling strategies, and, often, their delivery, for example “3 for €20”. Strategies for success: How small but impactful moves can influence consumers There are a number of ways to influence buying decisions and, under certain conditions, retailers can actually get consumers to spend more. Certain nudges and strategies, which are simple and easy to implement in nature are referred by Dan Thwaites and Patrick Fagan, co-founders of Capuchin Behavioural Science, who shared their knowledge with Omnia Retail’s customers at Price Points Live 2022. The Decoy Effect This is a technique used by retailers to push consumers toward two product options that are similar in value (such as a microwave) by introducing a third one as a decoy that is much more expensive. Adding a decoy is considered “a violation of rationality” by introducing cognitive bias against it. Consumers are pushed toward the other two options without even knowing it. Academic Dan Ariely shared in his book Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions a study he did to show how well the decoy effect works. In his experiment, he presented three options for a subscriptions to his students to choose from: 1) Online-only access for $59.00 a year 2) Print-only access for $125.00 a year (the decoy) 3) Online and print access for $125.00 a year 16% of the students chose the first option, none chose the second option, and 84% chose the third option. Ariely then removed the decoy option. Even though no one selected the second option in his earlier experiment, this time with only two options, the results showed a considerate shift. When given only two options, 68% of the students chose the online-only access for $59.00 a year, and only 32% chose the online and print access option for $125 a year. The Anchoring Effect This is a little more complex than the decoy effect, however, it is still geared towards creating cognitive bias by steering a consumer to a certain product or brand or price based on the belief that it is the best option. Certain information is presented to the consumer to which they become anchored to. This is done intentionally. For example, if a retailer was conducting research and asked how much a consumer would pay for a smoothie that had collagen production ingredients in it, the only information the consumer would have to go on is their previous experience with buying smoothies, because they wouldn’t know what the cost is for collagen-inducing ingredients. Or, perhaps a retailer is wanting to push sales for a new waffle-making machine and it is marketed as having cutting-edge technology for perfectly shaped waffles with new mechanics to prevent spills or messing. Consumers may latch onto the idea of something being “new and improved” versus previous experiences with older machines. The Precision Effect Does €4.99 look less expensive than €4.00? A number of studies and papers have been written about this theory, including the journal paper entitled “The Price Precision Effect: Evidence from Laboratory and Market Data” in Marketing Science by Manoj Thomas, Daniel H. Simon and Vrinda Kadiyal from Cornell University. These academics coined the term “the precision effect” which ultimately suggests that prices with rounded numbers, such as €20.00, look larger - or more expensive - than €25.55 for a product. In addition, one of their studies found that homeowners spent more money buying houses when properties were listed with rounded numbers. The precession effect can be used by retailers to increase sales and ultimately improve turnover. Nudging consumers means understanding buying behaviour During times of economic difficulty, retailers need to dig deep into the pockets of creativity to connect with concerned consumers and to sustain profit and growth. Consumers are the beating heart of retail and e-commerce and understanding how they think, feel and spend during times of financial success as well as financial stress is pertinent to e-commerce’s survival. Using these strategies shared by the Capuchin co-founders, as well as many other nudging tactics, can be a game-changing move on the part of the retailer in surviving inflation or any other global phenomenon. Psychological pricing advantages and disadvantages Psychological pricing strategies are extremely advantageous, but are also hard to set up. Here are a few of the pros and cons for these techniques. Advantages of psychological pricing Get a better understanding of the playing field: When you aim to use a psychological pricing strategy, you need to do a lot of research into who your competitors are, what strategies they are using, and what your target audience thinks of those pricing strategies. This research gives you tons of insights that you can use across the organization. More organizational alignment: A psychological pricing strategy should never be carried out by an isolated pricing team. Instead, these strategies require serious cross-department commitments and communications. More strategic: With a psychological pricing strategy, you can actually be proactive in your strategy. Rather than just trying to maximize profits or break even, you can consider things like public perception of your products, competitor comparisons, and more. Disadvantages of psychological pricing Complex: Psychological pricing strategies are complex. They require a lot of cross-organizational cooperation and insights. This makes them hard to set up and stick to. Time-consuming: Because psychological pricing strategies require in-depth research, they can be time-consuming to set up. If you invest in software (like Pricewatch or Dynamic Pricing) the job becomes easier, but it still takes a lot of energy. Final thoughts The term “psychological pricing” can cover any number of pricing strategies, several of which we’ve covered in this article. But there are no limits — in all honesty, any pricing strategy that uses consumer ideas about product value is inherently psychological, so feel free to be creative. What is most important though is internal alignment. Psychological pricing strategies work best when they align with marketing and sales to ensure a cohesive experience for the user across your webshop. Read more about interesting pricing strategies here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What are the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
Psychological Pricing: Strategies, Examples, Consumer Psychology And More22.06.2023
How do brands become and stay relevant?
Are there any brands you used to love as a kid that are no longer around? What about brands that have lasted from before your childhood until the present day? Looking at the differences between these long-established...
Are there any brands you used to love as a kid that are no longer around? What about brands that have lasted from before your childhood until the present day? Looking at the differences between these long-established brands and the ones that didn’t last can offer valuable insight for today’s brands: How do you become and stay relevant long into the future? What is the difference between Nokia or Blackberry, who were extremely popular in the early 2000s in the mobile telecommunications category but couldn’t evolve to keep up with the market, and Apple or Samsung, who are the current market leaders to this day? In this article, Omnia identifies some key lessons to be learned from established brands that have stayed relevant over time, as well as highlighting some real-world success stories. Lessons from established brands that have managed to stay relevant 1) Be intentional about your pricing and discount strategy Different brands will approach pricing in different ways, as they should – each one is different. Think of a luxury brand selling high-end clothing: Customers go to this brand with high expectations of quality and status. They also know in advance that they will pay a high price for those goods, and likely don’t expect many discounts. With a low-cost brand that targets more price-sensitive consumers, however, price is the main decision factor, and discounts may be expected more often. Both of these strategies are valid; what the most long-lasting brands have in common is that they are intentional about their pricing and discount strategy. Brands have to consider questions such as: If you offer discounts, how will discounting impact our brand image? Will our customers see us as a discount brand? How will this impact our margins? Is it a viable long-term strategy? What else can we do to ensure our perceived value isn’t tarnished, for example, better service or impressive packaging? If you don’t offer discounts, how can we promote our products without discounting? Should we offer loyalty programmes or find another way to capture data? Should we offer special services to differentiate from other brands? There’s no right answer, although it’s worth mentioning that many brands who choose not to discount can stay relevant and offer value to customers through other promotions like BOGO, free shipping, money-back guarantees, bundling and more. Let’s look at two examples of long-lasting, established brands that have managed to hold onto their reputations in the market – even with different discount strategies. Dyson A household appliances company founded in the UK in 1991, Dyson started by making vacuum cleaners and has grown its product assortment to include hair dryers, air purifiers, bladeless fans and more. The company and its founder, Sir James Dyson, are known for their technological innovation of everyday household products. Dyson heavily leverages brand loyalty and the company’s reputation for high-quality products, which enables them to charge higher prices. While the company does offer D2C discounts on its website, the customer base is willing to pay the premium price point upfront because they know the product will last. Dyson vacuum cleaners, for example, can cost over $700, making it the most expensive vacuum on the market. Talk to one of our consultants about dynamic pricing. Contact us Ortlieb On the other side, German bike wear brand Ortlieb is well-known in the market for never giving discounts. Because this is an intentional strategy, the company has used it to maintain a strong brand image, along with other benefits like a five-year guarantee, waterproof products and German manufacturing. 2) Remember the product life cycle Successful brands have a deep understanding of their own product assortment and where each offering is in its product life cycle, or PLC. When brands strategically align pricing with each stage of the PLC, they avoid endangering revenue from retail partners and instead price alongside the market. A brand’s pricing strategy over the course of the PLC may look like this: Different groups of products can then be priced according to their stage in the cycle. For example, the maximum discounts set by the brand will likely rise over time and be highest during the decline stage, as the brand sells off product to make room for new assortments. The PLC can also guide distribution strategy. Many brands may want to sell older products through retailers and keep the newest collections on their own D2C channels, enabling the brand to focus on those new product lines. 3) Be careful about competition with your retailer network Many successful brands use a combination of D2C sales and retail partnerships, whether they started with traditional retail strategies and added D2C or vice versa. This is an effective strategy to diversify sales and reach new customers, but it’s important to mitigate the risk of competing with your retail network. There are a number of factors to consider here. One way to avoid competition is by differentiating product assortments between D2C channels and retail. Research from McKinsey shows that brands who get their product assortment right achieve higher sales, better margins, more loyal customers and leaner operations. One example of this is speaker company Sonos, which launched a retail partnership with IKEA in 2019. Sonos developed a line of connected speakers just for IKEA that blended into the home environment: One as a lamp and one as a small bookshelf. The product line is only offered at IKEA, and while it maintains some core benefits of Sonos – high-quality sound and the ability to control through an app – it is differentiated from core D2C offerings, lessening the risk of competition. Sonos VP of brand and marketing Pete Pedersen said this about the partnership: “The best partnerships are always those rooted in respect, admiration and complementary skill sets. IKEA has been a terrific partner and we couldn’t be happier with the collaboration. Together we’ve pushed boundaries on form factors, materials, packaging and go to market strategies. IKEA’s massive global presence has also helped bring Sonos into many new territories where we might not have otherwise been.” It’s also crucial to be cautious and avoid competing on price. Successful brands don’t undercut their own distributors and resellers. For example, if a brand drops a price on any of its products in D2C channels, its retailers will probably follow. Instead, brands that stay relevant aim to keep a good balance; staying up to date and matching prices in the market, but also avoiding sending prices “to the moon”. Dynamic pricing software is key to automatically adjust pricing across channels based on predefined pricing strategies and rules. 4) Build a brand image that reaches different generations To stay relevant as a brand, companies have to build a brand image that resonates and lasts. This means not only building up a culture and community around the brand through marketing, but also ensuring that the younger generations, who will become top spenders soon, continue to find the brand interesting. If a brand relies on the first generation of buyers it has, even if it was highly successful with those buyers, then eventually its customer base will age out and there will be no one left to replace those sales. What kinds of marketing tactics can build up a relevant brand identity that reaches younger generations? Let’s look at Gen Z specifically as an example. This set of buyers expects brands first and foremost to act and market based on their values. Nearly half of Gen Zers say that a brand “appearing trustworthy and transparent” motivates whether they engage or not. Language, acronyms and jokes that are relatable in the present moment are also important, although pushing too hard on this can feel inauthentic or even cringe-worthy. Other marketing tactics that work for Gen Z: Influencer marketing, funny or entertaining campaigns and TikTok videos. Fenty Beauty, Rihanna’s beauty brand, is a great example of building a consistent brand image that grows with its customers and reaches younger generations. Fenty ran a campaign to find a model for a 2023 campaign and asked customers to submit their own content using the hashtag #TheNextFentyFace. This turned every customer who posted into a micro-influencer, while also building up Fenty’s own image as a brand for everybody. 5) Use the right technology Of course, to remain relevant, brands must keep up with current technology and evolve the customer experience over time. Some older brands have a hard time adapting to changing times and technologies, but those are typically the ones that don’t last. Established, relevant brands use technology to build best-in-class online and omnichannel experiences: Personalisation: Utilise technology to gather customer data and preferences, enabling personalised shopping experiences. Implement recommendation engines that suggest relevant products based on customer behaviour, purchase history and demographic information. Mobile optimisation: With the increasing use of mobile devices for online shopping, it's crucial for e-commerce brands to have a mobile-friendly website and dedicated mobile apps. Optimise the user experience for mobile devices to ensure seamless navigation, quick loading times, and easy checkout. Artificial Intelligence (AI): This is especially top of mind in 2023 with the rise of ChatGTP and other large language models. Brands can leverage AI to automate and enhance various aspects of the e-commerce business. Use chatbots or virtual assistants to provide instant customer support, automate customer service inquiries and offer personalised recommendations. AI can also be used for inventory management, demand forecasting and dynamic pricing. Social Commerce: Leverage social media platforms to drive sales and engage with customers. Use technology to enable social shopping features, such as "buy" buttons or in-app checkout options, allowing customers to make purchases directly from social media platforms. Data Analytics: Brands that stay relevant capitalise on all customer data available to them, gaining insights into shopping patterns, preferences and trends. Use advanced analytics tools to optimise marketing campaigns, personalise offers and identify new opportunities for growth. It’s crucial to stay updated on the latest technological advancements, industry trends and available tools. Any brand not paying attention to these may find itself quickly irrelevant. Maintaining customer trust = maintaining relevance as a brand At its core, brand relevance is about winning and maintaining the trust and loyalty of customers over time. To do this, a company must build up its brand reputation and network of retail partners, intentionally choose its pricing and assortment strategies, utilise the right technology and continue to offer clear value to the customer. Do all of this while staying true to your mission, values and who you are as a brand, and you might just be the established brand we’re all using as a success story 10 years from now.
How do brands become and stay relevant?14.06.2023
Amazon European Expansion Accelerator: What does it mean for sellers?
Amazon Europe is experiencing a shake-up designed to increase the e-commerce giant’s profits and market share, opening its European sellers to nine new markets across the region. On April 18th, Amazon announced a new...
Amazon Europe is experiencing a shake-up designed to increase the e-commerce giant’s profits and market share, opening its European sellers to nine new markets across the region. On April 18th, Amazon announced a new offering called the European Expansion Accelerator (EEA) which is meant to enable sellers to expand to a list of additional EU and UK stores in just “two clicks and in less than three business days”, the announcement said. Amazon European Expansion Accelerator will affect a range of stakeholders Impact on Amazon sellers According to Amazon, businesses must be registered as a professional Selling Partner with at least one active Amazon Europe account in order to use the EEA. They can then choose which market(s) they want to expand into. According to the company, benefits of the program are: Time and resource savings Expanding business reach Automated scalability Diversified revenue streams It’s clear from the announcement that this new solution is aimed especially at small-to-medium businesses (SMBs), as it discusses being able to expand business with little money or effort. However, some key points were left unmentioned and there are definite concerns sellers should be aware of before using the EEA. First, if sellers are going to be able to cover additional costs like storage, shipping, or potential customs charges, they will have to sell sufficient product volume via the marketplace. Although Amazon makes it sound like internationalisation will be simple and sellers will make quick money, it’s important not to underestimate the advertising budget that may be required. Running ads on Amazon can get expensive, especially in the more crowded verticals, with an average cost-per-click (CPC) of €0,75 ($0.81) while the average for advertising elsewhere falls between $0.05 and $10 (€0,04 and €9,24). Additionally, Amazon only mentioned legal provisions like sales tax very briefly in the announcement, while other major areas like customs were not mentioned at all. For sellers who are considering UK expansion, however, customs will be a significant factor. With the changes brought on by Brexit, the “red-tape curtain" has become very expensive, costing businesses an average of 8 - 9% for both exports and imports of goods and services. Other factors like language translation should be considered as well, as the EEA doesn’t include search engine optimisation for translated texts. There are both benefits and challenges presented by the EEA offering, and sellers should consider both sides before making a decision about whether to participate. Impact on consumers There are currently hundreds of millions of monthly visitors across Amazon Europe stores, and the EEA has the potential to show them more shops, vendors and products than ever before. According to Amazon, there were more than 86,000 third-party sellers with Amazon EU marketplace sales of at least $100K in 2020. This number has likely risen and will continue to significantly grow going forward. How this will affect shopping choices and pricing remains to be seen as the program ramps up. We can assume the range of products available will increase, and pricing may become more competitive for sellers, and attractive for shoppers, as vendors from different regions enter EU stores. Impact on other marketplaces Amazon is likely to see an increase in EU sales with the EEA as new sellers gain access to these markets and consumers have access to more product and vendor choices. However, other existing marketplaces with a European presence, such as Zalando or Bol.com, may see a small decline in investment as sellers expand to the Amazon platform. Leon Curling-Hope, Omnia Retail’s Head of Marketing and Insights, says this of the EEA’s impact on other marketplaces: “I believe that this will be short-lived due to the long-term nature of the Amazon business. We need to take a step back and see Amazon as a marketing platform like Google Shopping, where it forms part of the ‘marketing mix’, but not a silver bullet.” As for how those other sites may react to the changes at Amazon, Curling-Hope observed the challenge for local marketplaces to compete with the retail giant. “Local marketplaces face the challenge of competing with Amazon's vast product selection, efficient logistics, and aggressive pricing strategies. We could see them become or attempt to become more efficient here in one or more of these verticals.” Talk to one of our consultants about dynamic pricing. Contact us What does this mean for pricing on Amazon? From the seller’s point of view, the EEA has some intriguing potential for better pricing strategies across EU markets. Sellers who use dynamic pricing software will be able to remain competitive in local markets and automatically adjust pricing based on local competition and market signals. We can expect to see more offers on the local market due to the opening of the EEA and the opportunity for more sellers to sell across borders. On Amazon’s side, the EEA is likely to increase the company’s power in the EU and the UK. By analysing their vast amount of data on local demand and competitor pricing, Amazon can adjust its prices to offer the best possible value to customers while maximising profits on their own product offerings. With dynamic pricing software, sellers will remain competitive and quickly spot when new entrants join the market, automatically adjusting pricing strategies accordingly. For example, if a new market entrant from another country has a better product offer in terms of price, this doesn't mean that you need to compete with him on price; you will first want to check on a variety of factors: whether this is a relevant competitor or not, vendor reviews, shipping costs, delivery time, stock levels and more. The pricing rules set by the seller in their dynamic pricing software ensures that every relevant factor will be executed automatically. See how Dynamic Pricing from Omnia can help you automate your pricing strategy across Amazon, across countries and all other e-commerce channels.
Amazon European Expansion Accelerator: What does it mean for sellers?01.06.2023
The Buyer Journey: Where Do Consumers Start Their Product Search?
In 2023, there are approximately 2.64 billion digital buyers, accounting for one-third of the global population; a huge pool of shoppers for e-commerce brands and retailers to sell to. But competition is fierce, and...
In 2023, there are approximately 2.64 billion digital buyers, accounting for one-third of the global population; a huge pool of shoppers for e-commerce brands and retailers to sell to. But competition is fierce, and with the average conversion rate sitting at just 1.64%, it’s crucial for businesses to do whatever is necessary to get more shoppers to the checkout button. Having a better understanding of the buyer’s journey, and how each online shopper starts their product search, is a key step in boosting conversion and sales. In this article, Omnia breaks down the latest statistics on product searches in the buyer’s journey and offers three ways brands and retailers can capitalise on this information. Breaking down the E-commerce buyer’s journey and product search The buyer’s journey framework can be described with a number of stages, but the simplest version has three: Awareness, Consideration, and Decision. Since we’re discussing specifically how consumers carry out their product searches, we’ll be focusing on the Consideration stage, where someone is aware of their pain point and is looking for the right solution. Where do consumers start their product search? According to research from Jungle Scout, a majority of consumers (56%) in the US start product searches on Amazon in 2023. 42% use search engines and over one-third (37%) use Walmart.com, with the other top sites being social media platforms. The percentage of US consumers starting product searches on Amazon, search engines and Facebook has decreased since Q1 of 2022; while Walmart.com, YouTube, Instagram and TikTok have grown their share. TikTok is the fastest-growing source for product searches, with about 36% more consumers using the app for this purpose compared to last year. TikTok’s user base skews younger, and among Gen Z, 43% are using TikTok to search for products. Another study of the EU5 (Germany, the UK, France, Italy and Spain) and the US found that 66% of consumers start their product searches for all categories on Amazon rather than on Google or other search engines. Out of this group of countries, the numbers were highest among Italians, with 74% using Amazon as their main prodct search engine; and lowest with the French, where 61% search most on Amazon. Talk to one of our consultants about your pricing and how it influences product search. Contact us How brands and retailers can capitalise on the E-commerce buyer journey Looking at the e-commerce buyer’s journey statistics above, there are a number of ways brands and retailers can utilise this information to increase sales and use resources more efficiently. Here are a few areas to consider: 1) Traffic and Conversions The statistics above on where product searches originate is a helpful baseline to see which channels are being used most often by consumers in the “Consideration” stage. Companies should certainly use this information to guide their strategy, but it’s also true that the most successful channels may vary by retailer or brand. Each seller should review which channels are bringing the most traffic and which have the highest conversion rate. These should be prioritised when allocating effort and resources for ads and product listings. However, the strategies utilised on the most successful channels can also be imitated on other sites to reach even more potential buyers. 2) Price Elasticity The channels used by your buyers is a deciding factor in the price elasticity of demand for your products. For example, if you highly depend on Comparison Shopping Engines (CSEs) like Google Shopping, the price elasticity is higher for a number of reasons: product availability, the at-a-glance comparability of offers and the intention of users coming to CSEs to find the best price. If your customers buy directly through your online shop, price elasticity is less elastic, because the user may already be a fan of the brand and is making decisions between product lines rather than focusing heavily on price. However, both may be included in your consumer’s journey, if they first research on the direct brand channel, then watch for the price just before the buying decision. 3) Assortment and Pricing Strategy Knowing the importance of the different channels for your business and products, and their price elasticity, should guide your pricing and assortment strategies and how you price versus competitors. Any brand that has D2C sales needs to differentiate their assortment to avoid competition with their own retailer partners. When assortments are differentiated, such as when certain SKUs are only offered through D2C channels, the lower price elasticity can work in the brand’s favour. Our recent blog on differentiating product assortments goes into this topic in more detail. Meeting customers where they are with an omnichannel experience EuroCommerce, an organisation representing the retail and wholesale sector in Europe, put out their 2022 European E-commerce Report and included the following quote from Director-General Christel Delberghe: “The Covid-19 pandemic acted as an accelerator for online sales, as e-commerce quickly responded to the challenges of the Covid pandemic by ensuring continued access to producers and services to consumers. 2021 saw e-commerce sales continuing to grow, albeit at a slower pace as Covid restrictions loosened up. But consumers, many of whom had not gone online before, have seen the utility and convenience of e-commerce, and preliminary results from a study currently being conducted for us expect online sales to make up an average of 30% of retail turnover by 2030. The consumer journey has completely changed: our customers expect to be able to use various combinations of online and offline interaction. Retailers will have no choice but to invest in making their offering a seamless experience.” Omnia has seen this changing consumer journey in action among the e-commerce retailers and brands we work with. As customers grow to expect a more seamless omnichannel experience, it will become increasingly important to win sales on the platforms where the initial product search begins, whether that be Google, Amazon, TikTok or another site.
The Buyer Journey: Where Do Consumers Start Their Product Search?25.05.2023
How vendor ratings influence consumer behaviour in e-commerce
Picture this: It’s the 1980s. The Iron Curtain hasn’t fallen yet. Hairstyles are big, and punk culture is bigger. There’s no internet yet available to the public. You want to buy something new – maybe a bigger...
Picture this: It’s the 1980s. The Iron Curtain hasn’t fallen yet. Hairstyles are big, and punk culture is bigger. There’s no internet yet available to the public. You want to buy something new – maybe a bigger television to watch all those new cable channels like MTV that everyone is talking about. How do you choose which TV to buy? At the time, you would likely have asked around, collected opinions from family and friends; maybe gone down to the local electronics store to ask the staff for help. There wouldn’t yet be a way for you to instantly compare every television brand on Earth and see what other buyers had to say about them. To younger consumers in the 2020s, this is hard to imagine. Seemingly every website that offers something for sale these days has some type of rating or review system to help you gauge the quality, credibility and price-to-value ratio of any vendor. These ratings influence our behaviour in countless ways, big and small. Today, Omnia is exploring the background of vendor ratings, how much weight they carry among consumers, the impact for D2C brands and more. An overview of vendor ratings, then and now If all consumers knew exactly what they wanted and bought directly from each brand’s D2C shop; if there were no middlemen or comparison tools, then vendor ratings might never have been necessary. But because the e-commerce landscape contains so many brands and retailers, between 12 - 24 million globally, it makes sense that consumers would want ways to compare the different offerings and sellers available to them online. The first online reviews started to pop up around 1999, mostly on sites like eBay. Eventually, there were three main sources where consumers could go specifically for reviews: RateItAll, Epinions, and Deja. Over time, there were further iterations, from Yelp and Facebook to marketplaces like Google and Amazon. The platforms using vendor ratings Marketplaces and comparison shopping engines (CSEs) are both used by consumers around the world to find and compare products and shop online. One survey found that more than 8 in 10 shoppers in the US make purchases on marketplaces at least monthly, while 35% buy on marketplaces at least once per week. Both marketplaces and CSEs connect buyers with sellers, with CSEs having the added role of helping shoppers compare vendors, products and their prices side by side. Along with marketplaces and CSEs, other pure review sites like Trusted Shops and Trustpilot are also popular platforms among consumers. Vendors with high ratings on these sites will often display the badges proudly on their website to demonstrate their credibility. One of the most influential similarities between marketplaces and CSEs are the ratings and reviews, which play a huge role in how consumers choose which vendor to buy from or which product to choose. Along with looking at the price, consumers will consider questions such as: How many ratings/reviews does each competitor have? How high is the vendor’s average rating? Which of the vendors I’m considering has the highest rating or most reviews? How much weight does a review have on consumer decisions? For vendors, the modern day rating or review is a form of word-of-mouth advertising, a name that comes from those friends and family recommendations you might have relied more heavily on before the Internet. Vendors who have earned a positive rating from past buyers are more likely to attract new consumers compared to those with a low rating or very few reviews. From the consumer side, the importance of vendor ratings and reviews, and how they impact purchase decisions, is well-documented: More than 99.9% of consumers read reviews when shopping online On a five-star rating scale, 3.3 stars is the lowest rating customers are likely to consider 96% of customers specifically look for negative reviews 49% of consumers worldwide say positive reviews are one of their top three influences for purchasing a product 91% of younger shoppers age 18 to 34 trust online reviews as much as personal recommendations Importance of reviews by generation The difference in impact of reviews on consumers of different generations is especially interesting. For example, let’s look at review recency: Nearly all consumers (97%) think the recency of reviews is at least somewhat important. Across all ages, many consumers also value the quantity of reviews, but 64% would choose recency if they had to pick between the two. Here’s how that choice differed across generations: The impact of reviews when shopping for costlier products showcases an even wider divide between older and younger consumers. When asked in the same survey if they read more reviews for expensive products, respondents said the following: How relevant are vendor ratings for D2C? Although they sell their products directly to buyers via their online storefronts, D2C brands are not exempt from the importance of ratings. Many also sell on marketplaces and most will have a presence on CSEs, so their ratings will be important and consumers will still want to compare similar products across different brands. Product reviews of comparable products from competitor brands may also have increased importance for D2C. The importance of reviews for different product categories There are also differences in rating impact depending on the product category. According to PowerReviews, electronics is the top product category for review consumption, while consumers purchasing categories like toys, groceries, and babycare rely less on reviews. Source: Power Reviews 2023 Prioritise fixing your ratings first Beyond all of the data points listed above that show the importance of vendor ratings, they also play a role in pricing strategy. However, it’s worth noting that a vendor with bad ratings should first work on fixing those ratings and increasing their quality before focusing on price optimisation. For vendors who have achieved positive ratings and are working on pricing strategies, you can use other vendors’ ratings to optimise pricing across channels. For example, you may not want your pricing software to automatically adjust your price to the cheapest offer on the market; instead, you want it to take into account the offers that are competitive on price and also come from a vendor with sufficient ratings. That way, you avoid a race to the bottom with competitors who aren’t actually at your level. Many vendors wonder how many reviews are needed to make a real impact on sales. There is no magic number; however, the data shows that even one review makes a difference. PowerReviews analysed more than 1.5 million e-commerce product pages on 1,200 vendor sites (brands and retailers) and discovered that when page visitors were shown anywhere from one to 100 reviews, there was a 76.7% lift in conversion compared to those who were shown zero reviews. Vendors with even more reviews saw even bigger increases in conversion: Source: Power Reviews 2023 As for how the average rating itself affects conversion rate, it’s no surprise that as the rating of a product increases, the conversion rate increases as well. Products in the band of 4.75 – 4.99 stars have the highest conversion rates on average. Interestingly, conversion rates drop significantly for 5-star rated products, down to about the same level as products which receive ratings of 3.00 - 3.49. This is because 46% of consumers generally don’t trust 5-star ratings, including 53% of Gen Z shoppers. Source: E-Commerce Fastlane To experience Omnia Dynamic Pricing, which allows you to automate any pricing strategy efficiently and at scale, set up a demo here.
How vendor ratings influence consumer behaviour in e-commerce05.05.2023
Comparison shopping engines: How to optimise your presence
We live in a world of endless choice, and while the number of options can be exciting for shoppers, it can also be overwhelming. Comparison shopping engines (CSEs) have emerged as a valuable tool for shoppers to make...
We live in a world of endless choice, and while the number of options can be exciting for shoppers, it can also be overwhelming. Comparison shopping engines (CSEs) have emerged as a valuable tool for shoppers to make informed purchase decisions and for e-commerce brands and retailers to increase online visibility and sales. But CSEs are not all the same; some, like Google Shopping, are huge generalist sites covering any product you can think of, while others are vertical shopping sites focused on specific categories. The most popular sites also vary by country, and each population uses them differently. In this post, Omnia discusses what consumers use comparison shopping engines for, the top sites by country, some benefits and challenges of selling on CSEs, and what we expect to see in the future. Consumers use comparison shopping engines to reduce choice overwhelm and find the best price As our global economy continues to accelerate, consumers are faced with an increasing number of choices and opportunities. This means that many consumers are overwhelmed by too many offers that they have difficulty evaluating. This is how CSEs first appeared in the 1990s: influential digital institutions wanted to create a solution that would keep internet users in contact with available products, assisting the shopper in making a purchase while reducing confusion and overwhelm. Comparison shopping engines have now become a significant piece of the tool belt for e-commerce businesses looking to increase their online visibility and boost sales by going head-to-head against the competition. CSEs allow customers to quickly view different products from multiple vendors, compare features and prices, and make informed decisions about what to buy. CSEs are often some of the highest ranking websites in their respective regions, and for brands and retailers selling on CSEs, the sites can increase visibility among shoppers who may not have otherwise found the business or products through other marketing methods. With Google, for example, Google Shopping results and ads appear either above the search results or on the right side of the page, guaranteeing users will see the products first. What consumers want out of a CSE One study cited in the International Journal of Advanced Computer Science and Applications asked respondents to define which characteristics of a CSE would determine its quality: 81% wanted the CSE to find a lower price offer 80.2% wanted the CSE to be easy to use 76.8% wanted the CSE to be accurate in finding the right offer 70.2% wanted to have access to additional information about the offer and/or supplier 58.7% wanted the CSE to also have ratings, comments, and evaluations from other buyers That first statistic is consistent with other studies and the conventional wisdom that CSEs are used first and foremost to find the best price, which makes sense considering that they are also referred to as “price comparison websites” CSEs are used across the world, but the most popular sites and categories vary No matter the country, there are shoppers looking for the best deal, so CSEs have a worldwide presence. Some of the most popular CSEs in European markets include: How CSEs are used varies by location, age group, income level, and other factors. In a study in the UK, for example, shoppers in the 35-44 age range were the most likely group to have used a price comparison website, with 75% saying they had shopped on a CSE before. Source: Statista CSE comparison: Google Shopping and Amazon Google’s CSE arm is Google Shopping, and it’s one of the biggest comparison sites worldwide. Users shop across the platform more than 1 billion times per day, with 36% of all product searches originating on the site. Meanwhile, 49% of all product searches originate on Amazon, which has more than 1.7 million sellers for shoppers to compare. There is a key difference between the two, however, since Amazon is a marketplace. While marketplaces may include some comparison features, such as filters and sorting options, they are not primarily designed to be comparison engines. Amazon has a vested interest in getting customers to the checkout button or, even better, buying their own branded products on the site. Google sees its role differently: In 2021, Google Commerce President Bill Ready said the following on a podcast: “We’re not a retailer, we’re not a marketplace… What we do want to do is make sure that on a Google surface, the user can discover the best products, the best values, the best sellers, and then seamlessly connect to those sellers. Most of the time, that actually means clicking out to that seller’s own website; it is not our goal to necessarily keep the user on our platform.” This is interesting to note for brands and retailers selling on either site, and other CSEs in general, as it indicates the key differences between the goals of the platforms themselves. While any CSE will still monetise the process through ads, transaction fees, or other channels, some such as Google may not take on as much of the responsibility of getting the shopper all the way to the purchase point. Because of this, Google Shopping may be a unique case that does not fit perfectly into either the marketplace or CSE bucket. Benefits and challenges of selling on CSEs While each comparison shopping engine comes with its own pros and cons for brands and retailers, some of the key benefits and challenges to consider are consistent across platforms: Benefits: Expanded visibility: Listing products on CSEs enables retailers and brands to increase their visibility to potential customers who are actively searching for products. Improved conversion rates: CSEs often attract customers who are further along in the purchase process, meaning that they are more likely to convert into buyers. Increased sales: As a result of the increased visibility and improved conversion rates, retailers and brands may see an increase in sales. Cost-effective advertising: Unlike other forms of advertising, CSEs often operate on a cost-per-click (CPC) model, which means that retailers and brands only pay when someone clicks on their listing. Challenges: Increased competition: CSEs are highly competitive marketplaces, with many retailers and brands vying for the attention of shoppers. If some competitors with the same product offer are out of stock, have fewer or worse reviews, or have different delivery options, then the ones leading in these areas can win the best position on the CSE. Those products will be more likely to be chosen by consumers who care about the quality and trustworthiness of the offer. Cost: While CSEs can be cost-effective, the CPC model can quickly add up, especially for smaller retailers and brands with limited marketing budgets. Product data management: Retailers and brands must provide accurate and up-to-date product data to CSEs, including pricing, availability, delivery options and product descriptions. This can be time-consuming and requires ongoing maintenance. Limited control: CSEs can have their own guidelines around product data, and retailers and brands may have limited control over how their products are presented on the platform. One interesting factor that can be both a benefit and a challenge is consumer trust, as it is dependent on the reputation of the specific CSE in general or in a particular market. In the UK, for example, a government study found that while most consumers trusted CSEs at least a fair amount across most measures, trust levels were much lower in two key areas: Half of consumers did not trust CSEs to ensure data is not shared with third parties without permission Four in ten did not trust CSEs to treat all suppliers equally On the other hand, some comparison sites have built up a high level of trust in their markets. Check24, for example, has been operating since 1999 and is highly trusted in Germany. Price is not the only competition factor on CSEs While price is the determining factor of a product’s visibility on a comparison search engine, vendors will not only compete on who has the cheapest price. As we explored earlier, there are other factors that influence the quality and trustworthiness of an offer for consumers. When developing pricing for CSEs, sellers should consider the following factors in their strategies: 1) Filters Sellers should filter who they would like to compare product offers with and who they will adjust prices in relation to. Not every competitor will be as important to each seller; for example, even if a seller has a very competitive price, if they are a small retailer or a newcomer with an unknown name and no reviews, they won’t appear to be as trustworthy to a consumer compared to a well-known retailer the consumer trusts for fast and secure delivery. The seller may want to skip adjusting prices to these companies. 2) Market knowledge It’s important for sellers to know their market and differentiate pricing strategies between assortments and categories. For example, if you sell sporting t-shirts and sporting shoes, each market and product may have a different set of competitors, so a market analysis will be a crucial starting point. 3) Timing of price adjustments If you adjust your prices in the morning at 8am and your competitor(s) adjust theirs at 9am, then your offer will already be outdated after an hour. You can learn this through market observation, which is made simpler with Omnia’s data. 4) Price elasticity Price elasticity tends to be quite high on CSEs, so be aware and, if possible, analyse data for the platform to build the right pricing strategy for your products. Omnia has a feature in place to calculate price elasticity, as well as a process for elasticity accuracy in our software. 5) Seasonality Any seasonal factors that impact your product assortment should be taken into account when setting a pricing strategy. Special sales events like Black Friday will start with a pricing strategy weeks before, while also seeing increased competition. The same goes for Christmas shopping, when sellers need to keep delivery dates in mind for shoppers who want their products by Christmas eve, and how prices might change along with this. Seasonality shapes consumer behaviour and shopping needs throughout the year, so it is a good idea to have important dates and periods prepared for the whole assortment. 6) Channel alignment Aligning the offers you provide on the CSE with all other sales channels will be important for consistency. Considering the specific conditions of each marketplace and CSE in price calculations will lead to different prices. However, having automation and an overall pricing strategy, with rules such as rounding to a particular digit, will help properly represent the vendor in the market and easily master all different channels. The future of comparison shopping: Where do CSEs go next? With the world of e-commerce changing so rapidly, what can we expect of comparison shopping in the future? Increased use of AI and Machine Learning: Comparison shopping engines will increasingly leverage artificial intelligence (AI) and Machine Learning to provide more personalised and targeted search results to shoppers. This will result in more accurate product recommendations and better user experiences. Deeper integration with social media: Comparison shopping engines may integrate more deeply with social media platforms such as Instagram and TikTok to allow shoppers to make purchases directly from these platforms. This could result in an increase in impulse purchases and a greater focus on social media marketing for retailers. More focus on the changing customer experience: CSEs will need to continually adapt to provide a seamless, up-to-date customer experience. This could include developing mobile-specific features and interfaces, such as voice-activated search and augmented reality shopping, as well as loyalty programs or new payment models. Shifting competition: CSEs will face new types of competition as brands and retailers rethink their own selling models. Will more brands choose to sell D2C? Will retailers use their own experience selling branded products on marketplaces to produce their own labels? As costs rise amid inflation and other world events, retailers and brands will look for alternatives to increase profits, which may create competition for marketplaces from new angles. Greater emphasis on sustainability: As consumers become more environmentally conscious, comparison shopping engines may need to emphasise sustainability in their search results. This could include highlighting products with eco-friendly certifications or partnering with brands that prioritise sustainability. Growing regulatory attention: Comparison shopping engines may face increased scrutiny from governments, particularly in the areas of data privacy and antitrust. This could result in greater transparency requirements for the engines and stricter rules around data collection and use.
Comparison shopping engines: How to optimise your presence28.04.2023
Pricing: An approach to prosperous business development
Isn’t it a scary thought that 75% of S&P 500 incumbents will no longer be listed on the index by 2027? Due to slow or nonexistent evolvement, Standard & Poor’s data show that the evolution of corporate success has been...
Isn’t it a scary thought that 75% of S&P 500 incumbents will no longer be listed on the index by 2027? Due to slow or nonexistent evolvement, Standard & Poor’s data show that the evolution of corporate success has been dwindling for more than 50 years, stipulating that the average lifetime of an enterprise has decreased from 61 years in 1958 to just 18 years in 2011. Adaption and evolution are pertinent to the success of any enterprise, and no case of this being true is larger than the digitization of shopping. From malls to iPhones, the development of e-commerce has been the funnel for the start and the end for countless brands and retailers. As e-commerce experiences its largest growth spurt in the last three years since 2020, creating the most competitive landscape the industry has ever faced, one factor for e-commerce success has remained strong and true: Price is the number-one profit driver. As correctly stated by Prof. Hermann Simon, the world’s leading expert on pricing and the founder of Simon-Kucher & Partners, just a 1% increase in prices can yield up to 10% in profit. In this article, Omnia will discuss the importance of pricing for an enterprise’s long-term success and will display why a pricing strategy, coupled with a pricing software solution, is simply smart business development. In inflationary times, pricing is the cornerstone for enterprise success For decades, as one of the 7 P’s of marketing - a basic blueprint for retail and brand owners to launch successful products - pricing took a comfortable middle-child spot without enough attention being paid to it. The impressive and explosive trajectory of e-commerce in the last five to ten years has changed that. However, it isn’t just the growth of e-commerce that has directed the light onto pricing, but the very nature of its competitiveness and oversaturation. Consumers have become king, experiencing more options to shop and more capabilities to compare. The retailer no longer enjoys the peace of mind of knowing the consumer has to come to them - quite the opposite. As the balance of power shifted to the consumer, brands and retailers began rubbing their hands together to strategise on how they can capture the customer once more. As the other P’s (product, place, people, process, promotion and physical evidence) became less prominent as shopping moved to a web shop, pricing has become the top factor for consumers when choosing or abandoning a particular brand or retailer. In 2023, following the effects of covid lockdowns, supply chain issues and record-high inflation, pricing is more influential than ever: McKinsey reports that price is at the top of the list of consumers’ motivations to change their spending behaviours. US consumers are switching brands and retailers now more than they did in 2020 and 2021 (33% versus 46%). Furthermore, in PwC’s 2023 Global Consumer Insights survey, 96% of consumers said they intend to adopt cost-saving behaviours over the next six months and 69% have already amended spending on non-essential items. With price becoming so pertinent to consumer spending decisions in inflationary times, it becomes that much more vital for brands and retailers in e-commerce to stay ahead of market changes and conditions while driving revenue and profit upwards. On the other end of the spectrum, it’s not simply consumer buying behaviour that has propelled the importance of price: If one analyses the last decade of e-commerce, it is the powerful monopoly of marketplaces like Amazon, Google Shopping, Zalando and eBay, as well as large D2C online stores, that have developed a sense of control and manipulation of pricing in multiple categories. From electronics to personal care and everything in between, vendors and D2C small-to-medium businesses (SMBs) are contending with lower prices on these giant platforms that they feel pressured to meet or beat. And, without expertise and the right tools, how can they? Amazon has 1.9 million SMBs worldwide as third-party sellers on its marketplace, and owns a 38% majority of the US’s e-commerce market share, showing just how influential one marketplace could be over the pricing of multiple categories. It then becomes imperative that enterprises have access to scraping data and robust pricing rules and technology to remain competitive in an industry largely dominated by marketplaces. Talk to one of our consultants about dynamic pricing. Contact us Mobilising pricing power Considering how competitive and concentrated the e-commerce arena has become, with marketplaces like Amazon and Google Shopping dominating market conditions, while the D2C stream increases by double digits, how does an enterprise create a forward-thinking, data-driven pricing strategy? How does an enterprise know when to action that 1% price increase so fondly spoken of by Prof. Simon? A Bain & Company global study shows that of the 1,700 retail leaders surveyed, 85% say management teams need to make smarter pricing decisions and only 15% believe they have effective price monitoring tools. The gap is considerable. However, as a McKinsey study suggests, incorporating AI-based pricing into retail pricing and promotion can add a valuable Dollar impact of between $106 million - $212 million, which may go a long way in easing the frustrations of the aforementioned business leaders, as well as their margins. In addition, Boston Consulting Group (BCG) shared in a study of theirs that it may take as little as three months to see up to a 5% increase in profit by implementing optimised pricing. As Prof. Simon also said, “Profits are the cost of survival and the creators of new value,” but, are retail leaders ready to maximise this value that’s right in front of them for their brand and their customers? According to the same Bain & Company study, implementing “new pricing capabilities” can increase the average profit by between 200 - 600 basis points: The crux of mobilising pricing power is knowing that it is not a once-off solution to fixing dismal profit margins, high sales team turnover and waning customer loyalty. Leadership needs to view pricing as the relationship is cannot get out of - and that’s a good thing. Developing pricing muscle and pricing maturity is a multi-year journey with an investment in data, automated processes and talent. Building longevity in value When one thinks about the kind of brain power, talent, hard work and almost indispensability a company may possess to reach the S&P 500 list, it seems inconceivable that a concept as elusive as adaption and evolvement could be its downfall. This goes to show how a simple mindset shift could be the deciding factor of stagnation and dissolution or growth and profitability. McKinsey shares that digitization “has less to do with technology and more with how companies approach development” and that when well executed, “it can unlock significant value by compressing timelines and eliminating duplication or inefficiencies.” As e-commerce technology advances and becomes more intelligent, it is unthinkable that one of the most critical and unpredictable factors - pricing - is not maintained manually. However, not only is the automation of pricing informed by competitor data and market insights necessary to demonstrably meet commercial goals, it is the partner in pricing, not just the software, that is needed.
Pricing: An approach to prosperous business development20.04.2023
Product Life Cycle: Pricing strategies for brands in the PLC
Living beings are not the only ones impacted by the circle of life; products have their own version, from birth (introduction) to death (decline) in the market. The Product Life Cycle (PLC) does not just happen to...
Living beings are not the only ones impacted by the circle of life; products have their own version, from birth (introduction) to death (decline) in the market. The Product Life Cycle (PLC) does not just happen to companies, however; it can be used to their benefit when pricing is strategically aligned with the different stages of a product’s life cycle. In this article, Omnia explores the typical brand pricing mentality and how those brands, especially ones using the D2C channel, can strategically price products based on their life cycle. D2C pricing strategies of brands and retailers Many brands with an omnichannel strategy start selling D2C without having clear goals defined for the channel. If an objective is defined, it is often something to do with getting closer to the end customer; but revenue growth is typically not the main objective of the D2C channel. Why is this? Largely because of retailer relationships and trying to avoid competition with one’s own retail partners. Brands with D2C sales still depend on their retail network, so they need to ensure they are not endangering revenue from those retail partners. Brands take their retail network’s prices into account and will mostly choose to be a late follower, meaning the brand does not follow the cheapest price in the market. Instead, it keeps its price at a certain level for a period of time to give retailers more flexibility and the chance to sell their products first. This strategy also helps brands to earn good visibility in the market for new products. The resulting pricing strategy is not to offer the cheapest price, which could also erode brand identity, but instead to price alongside the market. The role of PLC in brand pricing strategies For brands, the pricing strategy throughout the PLC may look like this graphic: Following the pricing of the market requires brands to be aware of where each product in their assortment is in its PLC and how the pricing should adjust to match. Defining the length of a product’s lifespan can be challenging, and conventional wisdom is often that PLCs are shrinking over time; however, there is no strong empirical evidence of shortening PLCs at the product category, industry, technology, or model level. To weave Product Life Cycle into the “follow the market” pricing strategy described earlier, brands should start by building groups of products according to their stage in the cycle: Pricing tactics can then be assigned to each product group. Brands should define the maximum discount, or price boundary, for each group and define how the market price will be followed; for example, D2C will have the cheapest price, or 5% over the cheapest price, and so on. Depending on the PLC stage a product is in, brands should define allowable ranges for discounts. Usually, the scale of discounts would increase over time, as a product moves toward the end of its life cycle. For example, let’s consider a hypothetical furniture brand called ABC Couches. The brand’s “Super-blue ultra-comfy couch” launches in 2023 and has the following price boundaries. Introduction stage: Maximum discount given in the market is 10% Growth and maturity stages: Maximum discount given in the market is 15% Decline stage: Maximum discount given in the market is 30% Of course, brands cannot base their pricing strategies for D2C products solely on the Product Life Cycle. Other factors, like seasonal promotions, will also play a role. Talk to one of our consultants about dynamic pricing. Contact us The intersection of seasonal promotions and PLC Seasonal promotions are not completely separate from pricing based on Product Life Cycles; in fact, they can work together for a successful brand pricing strategy. The strategic goals of a seasonal promotion can differ by PLC stage: Introduction stage: When a new product launch is timed to coincide with a seasonal sale, promotions could be used to accelerate the launch. Growth stage: Seasonal promotions are used to continue growth of the product. At this stage, brands are more focused on demand-based pricing, so that will be a factor. Maturity stage: Brands trend toward competitor-based pricing in this stage, so seasonal promotions may be used to match or win versus competitor products. Decline stage: A promotional program or seasonal discount can be used to sell off a current item if a new or updated product is launching soon. This may also temporarily improve the sales outlook during the decline stage, but any improvement stemming from a non-product tactic is likely to be short-lived. As mentioned previously, brands will typically take into account the prices offered by their retailers when using seasonal promotions. If their aim is to price alongside the market, then they will want to ensure any seasonal discounts do not drastically undercut their retailer partners. Brands will also need to consider other potential effects of reducing a price: From how consumers and competitors will respond to how it could impact brand identity. Other factors that impact Product Life Cycle and pricing One size does not fit all when aligning a brand’s pricing strategies with the Product Life Cycle. A number of other factors may be at play when setting a pricing strategy. How PLC differs between verticals Finding statistics on the “average Product Life Cycle” is almost impossible, because it is so dependent on the specific product, vertical, category, and other factors. But while we cannot define an exact length of time for the average PLC, it is interesting to look at the difference in PLC length relative to other verticals. For example, fashion is known for having relatively short Product Life Cycles compared to other verticals. Most fashion brands operate based on seasons, releasing new items in preparation for each new season. While seasonality, both holiday-driven and climate-driven, and Product Life Cycles are not the same, some products, particularly those that are part of a “fad” or fast fashion trend, may see their Decline stage (end of life) as soon as the end of the season arrives. Other products, like basics, may have a much longer PLC. And then there are the products that have multiple life cycles; for example, fashion trends from the 90s that went through their Decline stage and have since come back into style, with updated versions increasing sales in the 2020s. Shorter Product Life Cycles mean that fashion brands will have different pricing strategies and may change pricing more quickly and often compared to other verticals. PLC-based pricing strategies across different channels Depending on the channel, pricing strategies based on the Product Life Cycle may need to be altered. Brands could decide that products in the Decline stage, also called End-of-Life or EOL products, might be sold only online rather than in physical stores. While retailers can benefit from the traffic of seasonal sales to sell of EOL products, D2C brands have few or no physical stores, and the ones they do have work differently than traditional retail. Another example would be differences in location. Seasonality is flipped depending on the hemisphere, so the Product Life Cycle and seasonal pricing strategies would be different in Europe versus South America. The PLC of campaign-specific products Consumers are also looking at user-generated content such as reviews, ratings, and recommendations, which can serve as powerful motivators to buy. While influencer marketing is certainly widely used, consumers say they are most likely to take product recommendations from everyday users like friends and family (37%) versus subject matter experts (25%), celebrities (7%), social media influencers (6%) or even the brand’s social media account (8%). Some products are designed and created only for special marketing campaigns, such as promotions run by or through celebrities. These products may only be sold for a limited time, giving them a predefined Product Life Cycle and different pricing strategy. One example of this would be Kyle Jenner’s Birthday Collection that sold out in 30 minutes and was restocked, but only available until her birthday on August 10th. To effectively price based on PLC, brands need Dynamic Pricing Pricing products according to their stage in the Product Life Cycle can be an effective strategy, but this requires the right data and automation to maximise the impact of promotions. Businesses can use dynamic pricing technology, also called real-time pricing, to automatically adjust prices to account for changing demand, competitor prices, market fluctuations, and other factors. This allows companies to capture more revenue by deploying the right price, on the right channels, at the right moment. Source: Hubspot Using a solution like Omnia Retail’s Dynamic Pricing makes it simple to run both planned and dynamic promotions, so brands can maximise sales of the full range of their product assortment from introduction to end-of-life. Try it for free.
Product Life Cycle: Pricing strategies for brands in the PLC14.04.2023
The Impact of Social Media on Consumer Behaviour in e-Commerce
In recent years, social media has grown from a simple communication tool to stay in touch with friends and family to a powerful channel influencing consumer behaviour in e-commerce. With the rise of shopping online...
In recent years, social media has grown from a simple communication tool to stay in touch with friends and family to a powerful channel influencing consumer behaviour in e-commerce. With the rise of shopping online coinciding with the popularisation of “social commerce” on platforms like TikTok, Instagram, and Facebook, consumers can now discover, research, and buy products on the social media apps where they are already spending an average of 2.5 hours per day. To compete in the modern e-commerce space, it is essential for businesses to understand this dynamic and adapt their strategies accordingly. In this guide, Omnia will discuss the current landscape at the intersection of social media and e-commerce, discuss its impact on consumer experience and behaviour, and offer some ideas for how brands and retailers can capitalise on the opportunity of social commerce. The growing importance of social media in e-commerce In the early 2000s, the first mainstream social media platforms like Myspace and Facebook focused heavily on text content, with users sharing content with friends or followers in the form of written updates and statuses. With the launch of Instagram and Snapchat, the industry started to trend more toward mobile, images, and video content, and this has only continued with the explosive growth of TikTok. Source: https://www.smartinsights.com/ecommerce/ecommerce-strategy/social-commerce-trends/ In recent years, social media platforms like TikTok, Instagram, and Facebook have increasingly become popular avenues for online shopping and product research, a phenomenon referred to as “social commerce”. According to Accenture, social commerce is set to grow three times faster than traditional commerce in the next few years, reaching $1.2 trillion by 2025. This growth will be driven primarily by Gen Z and Millennials, who will make up 62% of global social commerce spending by the same year. However, purchasing products through social media is not the only way the platforms impact online shopping; in fact, this is a newer development. Platforms are also used to research or gain inspiration: 75% of all internet users use social media to research products 28% use social media to find inspiration for things they can do or purchase 23% use social media to check what content is being posted by their favourite brands Unlike traditional e-commerce giants like Amazon, which excel when consumers know what they want to buy, social media offers a unique browsing experience that allows users to "window shop” online and discover new products through engaging content. Talk to one of our consultants about social commerce and pricing. Contact us What are consumers buying through social commerce? An Accenture report predicted by 2025, the highest number of global purchases through social media would be in the categories of clothing (18%), consumer electronics (13%), and home decor (7%). Beauty and personal care is also predicted to grow quickly in key markets, and fresh food and snack items will be a sizable category (13%), although those sales are almost exclusive to China. E-commerce customer experience on social media The shopping experience on social media can differ from traditional e-commerce. While mobile makes up for approximately 43% of e-commerce activity, social media platforms are used on mobile devices about 80% of the time. This has led to an increased focus on delivering seamless and enjoyable shopping experiences tailored for smaller screens, as well as features allowing consumers to buy products without app switching or leaving the platform. Instagram and TikTok: The leading platforms in social commerce While most social media platforms include some sort of shopping capability, two of the most popular for social commerce are Instagram and TikTok. Instagram’s shopping section, which allows users to purchase directly from the app, took off starting in 2019. By now, users are able to access a shop on the company’s profile and buy via stickers in Instagram Stories, links in photo and video posts, and through ads shown in their feed. Instagram Shop and Instagram Checkout now have more than 130 million monthly users and there are more than 25 million businesses on the app. TikTok is one of the newest large-scale social media platforms, having only launched in 2018, but its rapid growth should make all businesses pay attention to the e-commerce opportunity it presents. Within its first year, TikTok reached 500 million monthly active users, and was the most downloaded app globally in 2022 with 850 million downloads, followed by Instagram and WhatsApp. While TikTok’s user base heavily skews toward Gen Z, adoption is growing with millennials, and these are the two generations that make up the majority of social commerce spending. Two out of three users say they are likely to buy something while on the platform, and 55% use TikTok to research new brands or products. How social media has changed consumer behaviour for e-commerce Even outside of true social commerce, where a customer buys something directly through the social media platform, the advent of social media has dramatically impacted consumer behaviour and decision-making in e-commerce overall: Research and inspiration: As mentioned previously, many consumers use social media to research products and find inspiration for what to buy. 87% of shoppers say they search or consult with social media before purchasing any item and 22% of consumers prefer social media as their channel to discover new products. Research online, purchase offline: This phenomenon, abbreviated as ROPO, is important for any business with an omnichannel strategy to watch. It refers to a consumer behaviour where shoppers research the product online, such as through social media, but make the final purchase at a physical store. Reviews and recommendations: Consumers are also looking at user-generated content such as reviews, ratings, and recommendations, which can serve as powerful motivators to buy. While influencer marketing is certainly widely used, consumers say they are most likely to take product recommendations from everyday users like friends and family (37%) versus subject matter experts (25%), celebrities (7%), social media influencers (6%) or even the brand’s social media account (8%). Discounts and promotions: Just like a funny video or engaging news story, discount codes and flash sales can go viral on social media, spreading rapidly and creating a sense of urgency around purchases. E-commerce social media stars: Brands who get it right Some brands just get it when it comes to social media and social commerce. Below are a few glowing examples of those who have successfully leveraged social media to drive consumer behaviour and sales: Glossier, CLUSE and Snug Glossier is what’s known as a digital native vertical brand, or DNVB, meaning it was born online and is a fully D2C business. Social media helped the company grow to more than $100 million in revenue within four years of launching back in 2010. A self-described content-first company, Glossier has a heavy social media presence with content created by influencers and followers alike, and has the mantra “Glossier is listening”, encouraging customers to help shape products and packaging. Founded in the Netherlands in 2009, CLUSE is a fashion brand that started e-commerce operations in 2014. The brand’s extensive use of Instagram, its social commerce features, and user-generated content has been key to the brand’s growth. Snug is a sofa-in-a-box company based in London. Much of its £31.6 million (about €35.9 million) revenue in 2021 was driven through social media, especially Instagram and Pinterest. Snug’s founder and CEO Rob Bridgman told Econsultancy that “people spend more time researching which sofa to buy than which house,” which is why the company focuses on making the purchase simple and accessible via social media. Social media will continue to play a key role in the customer’s e-commerce journey Using social media to market and directly sell e-commerce products comes back to a basic business principle: Meet your customers where they are. With the average user already spending nearly 2.5 hours per day on social media, giving them the convenience of seeing a recommendation or making a purchase right where they are is powerful. As customers grow more and more accustomed to this convenience, the area of social commerce is only expected to grow.
The Impact of Social Media on Consumer Behaviour in e-Commerce12.04.2023
How to Find Success on Marketplaces: A Guide for Brands
In the competitive world of e-commerce, marketplaces like Amazon, Google Shopping, eBay, and Idealo have become key players, connecting buyers with sellers and offering a simple way to comparison shop. Amazon, for...
In the competitive world of e-commerce, marketplaces like Amazon, Google Shopping, eBay, and Idealo have become key players, connecting buyers with sellers and offering a simple way to comparison shop. Amazon, for example, captures 37.8% of all e-commerce sales in the United States. However, while selling on marketplaces can enable brands to reach new customers and increase sales, it also has its disadvantages, including increased competition and decreased profit margins. To be successful in marketplace sales, businesses need to understand the role they play in retail and how to differentiate themselves among a sea of sellers. In this blog, Omnia will explore the realities of selling on marketplaces, best practices, while adding our predictions on the future of marketplace sales. The role of marketplaces in the e-commerce landscape Marketplaces exist to connect buyers with sellers. With so many e-commerce brands and retailers competing for sales – somewhere between 12 and 24 million worldwide – marketplaces have become key players in online sales, enabling customers to simplify comparison shopping. The coronavirus pandemic boosted the relevance of marketplaces as well, as customers looked for places they could buy many different products in one location. So how do the marketplaces actually make money? There are a variety of business models. Some charge commissions, where they receive a percentage of each transaction. There are general listing fees, featured listings, and ads where sellers can boost their products to the top of search results. Some marketplaces also offer to take part of the process over for the seller; for example, the Fulfilment by Amazon (FBA) model, when a manufacturer chooses to outsource shipping and warehousing to Amazon. In a survey from Digital Commerce 360 and Bizrate Insights, 84% of respondents in the US said they make purchases on marketplaces at least once per month. 35% buy from marketplaces at least weekly. Common categories for purchases differ by country and website, but below are some of the most successful shopping categories for top marketplaces: The realities of selling on marketplaces As with any retail channel, there are benefits and challenges that accompany selling products on a marketplace. Some of the advantages and disadvantages include: Advantages Expansion: Marketplaces enable existing brands to expand their reach, whether from selling in new regions or reaching new customer demographics. Trust and traffic: Marketplaces provide a major advantage to new e-commerce stores: web traffic and trustworthiness. Buyers may be hesitant to purchase from an unfamiliar website, but they feel more secure making a purchase on a well-known platform such as Amazon. New revenue streams: Marketplaces provide new revenue opportunities to e-commerce businesses, allowing them to access new customers and increase sales. For example, Amazon claims that companies selling on their marketplace can increase sales up to 50%. Disadvantages Decreased profit margins: Transaction fees are a marketplace norm, so total profits from selling the same product at the same price will be lower than selling D2C from your website. With transaction, advertising, and fulfilment fees, Amazon can take up to 50% of a seller’s revenue. Increased competition: Raising prices to cover marketplace fees might not be such a simple option, as competitors may be selling similar products at a better price. Unless you're selling something unique, you'll likely need to compete on both price and visibility, which are highly connected and dependent on each other. Giving up control: The marketplace processes transactions and is the primary source for customer service. This means businesses will give up some control over their customer experience, data, and product perception compared to when they are hosted on their own websites. Selling through any third party where the business has less control will have implications for the customer experience. When building a marketplace strategy and choosing which marketplaces to work with, brands should keep in mind the concerns that customers may have: The graphic above shows that 45% of customers found that prices were higher on marketplaces in May 2022 compared to the past, indicating how little control a brand can have over its prices on a marketplace. Other challenges marketplace customers encountered also have to do with limited control over customer experience; longer lead times for delivery (36%) and products out of stock (35%) would be the fault of the marketplace if they run fulfilment, such as the FBA model at Amazon. Shipping fees (24%), limited assortment (21%), and customer service wait times (16%) are also dictated by the marketplace. 10 important factors for successful marketplace selling To successfully sell a brand’s products on marketplaces, businesses will need to make their product listings stand out, promote and advertise, differentiate from competitors and other channels, and more. High-quality product listings: Creating well-written, accurate, and detailed product listings that include high-quality images and videos can help attract potential customers and increase sales. When selling in a new market with a different language, consider working with a native speaker for translation or editing to ensure product descriptions do not sound like they came from an online translation service. Positive customer reviews: Positive customer reviews are a powerful tool for building trust and credibility. According to one US survey, nearly all (99.9%) consumers say they read reviews at least sometimes when shopping online. Encourage your customers to leave feedback on your products and services. Product assortment: Offering a diverse range of products can help attract more customers and increase your chances of making a sale. Ensure that your product selection is relevant to your target audience and differentiated as needed between marketplaces or retailers and your D2C channels. Strategic advertising: Marketplace ads and paid listings can boost the visibility of your items or store and improve search result rankings. However, be mindful of budget when engaging in any type of advertising. Optimization for search: Optimise your product listings for search engine visibility by including relevant keywords and phrases in your titles and descriptions. Promotions and discounts: Offering discounts can increase brand loyalty if a customer has bought from you before, but even more importantly in the competitive marketplace environment, it helps attract new buyers. According to RetailMeNot, 80% of consumers feel more encouraged to buy from a brand that is new to them if there is a discount or offer. Competitive differentiation: Differentiate yourself from the competition by offering unique product features or bundles. For example, if you are wanting to create a sportswear line, Nike and Adidas own the majority of customer sales in this category, however, is there something they are missing? Creating what is called a “challenger brand” is about finding a gap in the market and using it as the key to your success. Compliance with marketplace policies: Ensure that you comply with the marketplace's policies regarding product quality, returns, and refunds to avoid penalties and maintain your store's reputation. Stock levels: If a product is not in stock, customers cannot buy it; but the seller can also get penalised by the marketplace if its products are not consistently in stock and available for purchase. Pricing: Marketplace sellers need to constantly adjust their pricing to stay near the top of the results and avoid being undercut by competitors while still maintaining reasonable profit margins. Dynamic pricing software like Omnia enables sellers to automate the price and price perception management based on large quantities of data, ensuring products are always priced in a way that fits the company’s pricing strategy. All of the above factors, especially reviews, stock levels, and the quality of a competitor’s listing, can be used as additional data when formulating a pricing strategy. A vendor may choose only to compare and adjust its price with offers of the same quality, or might not adjust a price to match an offer if there is no stock available. All these factors are taken into account when automated pricing is applied. How the relationship between brands and marketplaces is changing The relationship between brands and the marketplaces they sell on has been evolving over time. Let’s consider Amazon as an example. Brands who want to sell through the retail giant can either offer their products as a vendor or a seller: Vendor model: Amazon's vendor model involves buying products directly from the brand-name manufacturer, then selling the products under their own label on their platform. Otto and Zalando operate with this model as well. Seller model: Under the seller model, brand manufacturers use Amazon purely as a platform to market and sell their goods, but ownership remains with the manufacturer until the goods are sold to the end consumer. One of the main differentiators between these models is price: Under the vendor model, Amazon sets the price; with the seller model, the brand sets its own price. This level of control is appealing to brands, and there is a trend in the current landscape of more brands moving from the vendor model to the seller model on Amazon, giving them complete control over their pricing. Some of this shift away from the vendor model is happening by force: Amazon contacted vendors telling them the company would be actively pursuing direct partnerships with brands beginning on January 15th, 2024. The future of marketplaces No one can predict the future, but while marketplaces surely are not going anywhere, the way brands and customers interact through this third party is likely to continue evolving in the coming years.
How to Find Success on Marketplaces: A Guide for Brands01.04.2023
How to respond to competitor price changes without starting a price war
With the increased transparency in the market, pricing becomes a very competitive game. All retailers are monitoring one another, and a single price change can trigger a chain of price changes. This is especially true...
With the increased transparency in the market, pricing becomes a very competitive game. All retailers are monitoring one another, and a single price change can trigger a chain of price changes. This is especially true for leading enterprise retailers, the one being monitored by competitors. A small price change provokes main competitors to follow. Within a day, the new status quo can become a few euros lower than before. So how can you create a sustainable setup that keeps you competitive yet does not disrupt the market? We have 3 tips on how you can make smart pricing decisions. 1 - Split competitors into different tiers It is important to take a wide range of competitors into account. This establishes a price benchmark, even if your main competitors are not selling this product. However, keep in mind you may not want to follow the price change of a smaller competitor at the risk of pulling your major competitor (and the rest of the market) down with you. This can best be avoided by analyzing your competition and splitting it into different tiers: Tier 1 competitors are major competitors. They generally decide the pricing level and everybody follows. Tier 2 competitors have a proper shop (not the image you and major competitors have) Tier 3 competitors are all other competitors selling the product Once you split them into tiers, apply more sophisticated logic. For example: Tier 1 competitors: when one of my tier 1 competitors is priced lower I do the same Tier 2 competitors: when at least two of my tier 2 competitors are priced lower, then I follow. Tier 3 competitors: do not follow down, only up If you sell products in a wide variety of categories, we’d highly recommend creating competitor tiers for each. For example, your competitor landscape for high-end cameras is different than those for kitchen appliances. 2 - Accept a small pricing gap to avoid a race to the bottom A single euro difference can make a huge difference in terms of revenue when comparing prices to that of your competitors. However, you do not have to match the prices of every competitor. Some example scenarios: For the tier 2 or 3 competitors be willing to accept that they are priced a few euros or percentages lower than you. Your stronger brand should be able to compensate for the difference. However, do lower your price if the gap gets too large. Regarding competitors continuously undercutting you by a few euros or cents, do not continue the pricing war and allow a small price gap. Otherwise, within a few days, you will lose all the margins and the new status quo is low. 3 - Think Of When To Price-up & Work Towards Healthier Margins When implementing dynamic pricing, most consider how to compete with competitors when prices are going down. But, it is equally important to think about scenarios where you have an opportunity to price-up. If your competitors follow your prices down all the time, there is also a big chance they will follow you up. For example, if there is only one other (tier 1) competitor, and you are both priced on the same level, you can try to price-up a few euros. There is a big chance that your competitor will follow your pricing strategy. You both remain equally competitive (so revenues will not drop that much) but you will have a better margin. In the blogpost related to “margin vs revenue: how to stay competitive and profitable” there are more examples of how to price-up and increase margins. So... how do you implement such Logic? We recently added new (beta) functionality to our pricing engine, called market conditions. This allows you to select parts of your assortment on both product assortment conditions as well as market conditions: Talk to one of our consultants about dynamic pricing. Contact us Product assortment conditions The *if* statement that you are familiar with lets you select any product characteristics. Either static parameters, like categories and brands, or more dynamic parameters, like sales and stock levels. Market conditions An additional layer of conditions that allows you to select any combination of market scenarios. There are 3 templates: When a certain number of competitors are present for that product When a certain number of competitors are lower/higher than my current selling price When a min/max/avg/most-occuring price is lower/higher than my selling price The combination of product assortment and market conditions is very powerful and enables you to outsmart competitors by tuning our repricing engine. This allows you to follow your desired pricing strategy regarding any subset of your assortment and in any market scenario. The market conditions will allow you to implement the above tips. Moreover, conditions allow you to create solutions for other dilemmas as described in the “dilemma blogs” How to reprice your online assortment without frustrating your store employees? Margin vs revenue: how to stay competitive and profitable?
How to respond to competitor price changes without starting a price war30.03.2023
AI, ads, and pricing: How is e-commerce marketing itself?
One of the questions we see asked most often in the e-commerce and pricing space is this: As an e-commerce company, what percentage of sales should be invested in marketing? When it comes to the size of your marketing...
One of the questions we see asked most often in the e-commerce and pricing space is this: As an e-commerce company, what percentage of sales should be invested in marketing? When it comes to the size of your marketing budget, and how the funds are allocated, there are many possibilities, some more impactful than others, and every business is different. Spending will differ between brands, retailers, and marketplaces as well. It requires careful planning, exploration, and analytics to uncover the best distribution of funds across channels and to ensure your promotional activities are effective. To help e-commerce businesses understand top areas of marketing investment in the current retail climate, Omnia is diving into the latest trends for the size of e-commerce marketing budgets and how those funds will be spent in the years to come. But before we discuss the future, let’s cover how we got here and the current landscape. Mass hiring and then firing: Factors laying the foundation for the change in marketing priorities The e-commerce industry as a whole experienced significant swings in sales during the COVID-19 pandemic and as it started to ease. Lockdowns encouraged consumers to buy online, and more than 100 million people worldwide shopped online for the first time, expanding the existing pool of two billion digital shoppers. While brands saw a more gradual increase in sales, retailers and marketplaces experienced a more drastic spike as customers looked for places where they could buy many products in one place. For example, Amazon experienced a 57% increase in sales during the second quarter of 2020. This significant growth trend, and the consumer demand that drove it, meant many e-commerce companies were increasing budgets and headcount to meet the moment. Hiring skyrocketed: The UK, for example, saw a 345% increase year-over-year in posted e-commerce management jobs in June 2021. Amazon added 427,300 employees in just 10 months, averaging 1,400 per day in 2020. Facebook added approximately 10,000 jobs in the same year. In keeping with the rapid growth they were experiencing, retailers made up 30% of all e-commerce job offers in 2021. Marketing budgets increased: One CMO survey found that while companies planned to spend 11.3% of their budgets on marketing in February 2020, by June 2020 that number had increased to 12.6%. On Facebook and Instagram, marketing spend increased by 50% between 2020 and 2021. As the pandemic has eased, however, the e-commerce spike has readjusted. 2022 brought about a number of challenges: high inflation, the war in Ukraine, and economic uncertainty, all of which have impacted the global economy and e-commerce companies of all sizes. Online sellers have seemed to align with the general downturn trend we have seen from software and tech businesses in North America and Europe, with marketplace giants like Amazon and eBay cutting thousands of jobs in late 2022 and early 2023, even amidst the seasonal holiday shopping period. Another group hit hard were home goods retailers, with Wayfair laying off nearly 10% of its workforce and Made.com filing for insolvency just 16 months after its IPO. Tightening purse strings across the economy mean companies are being more intentional with spending, and many marketers are being asked to defend their budgets. While Marketing Week found that Q4 2022 was the seventh consecutive quarter with a net increase in marketing spending, the falling axe still remains, as 86% of CEOs expect a recession in 2023 with marketing budgets usually the first to get slashed. Talk to one of our consultants about your next pricing strategy. Contact us How much do e-commerce companies spend on marketing? Calculating marketing budgets can be a tricky task even in a thriving economy: If you invest too heavily, you could be left in a bad financial situation, and if you don't spend enough, your products may go unnoticed and unpurchased. Alternatively, if you’re spending the bulk of your budget in the wrong channel or platform, your strategy needs to be reorganised. That's why staying flexible with your budget can ensure you're able to adapt to changes, stay on top of your marketing efforts, and be ready to scale as your business expands. That being said, it is helpful to have some benchmarks to work from. Data compiled by the US Small Business Association recommends B2C businesses like e-commerce companies should spend 7-8% of their revenue on marketing. However, other sources estimate average e-commerce marketing spending to be between 15-20% of revenue, with some spending up to 30% to acquire customers. A 2020 CMO Survey from Deloitte found that product-focused B2C companies are spending 15.9% of revenue on marketing initiatives. The wide range of 7-30% might seem unhelpful, but it gives a good general understanding of the marketing investment e-commerce companies make. Most would likely fall somewhere in the middle, with newer or ambitious companies spending more as a proportion of revenue to fuel growth and more established companies spending a lower percentage for steady, incremental growth. Within the context of our current environment, most marketers aren’t expecting to decrease budgets in 2023. A HubSpot survey of 1,000 marketers found that 47% said their budget would increase and 45% expected their budgets to stay about the same. Source: Hubspot E-commerce marketing budgets As we move further into 2023, we’re continuing to see new trends in usage of certain marketing strategies and the allocation of marketing spend among e-commerce companies. Any marketing strategy will be held up by some basic pillars: historically, many talked about the 4 Ps of marketing, but these days that framework is often extended to the Seven Ps of marketing: All seven pillars of the marketing mix are important, but some are experiencing more significant shifts in the current e-commerce landscape. For example, Promotion is constantly in flux due to the changing advertising environment. Although it is still only the third largest advertising platform, Amazon’s ad business is growing fast, while digital ad giants like Google and Meta are facing slowdowns in ad revenue. Elsewhere in the industry, Apple is exploring bringing more ads to iPhone apps but also rolled out a major privacy feature in 2021 that requires iOS users to “give explicit permission for apps to track their behaviour and sell their personal data, such as age, location, spending habits and health information, to advertisers.” This has significant ramifications for any company advertising to iPhone users. Digital ads and paid search aren’t the only avenue for promotion, of course. Other common channels that continue to expand in influence include: Content marketing SEO Email Social media Affiliate marketing Referrals One area that many companies are cutting budgets in is software, and e-commerce marketing teams are likely to be asked to cut their SaaS spending as well. Since there is a SaaS tool for just about any marketing need, cutting spending in this area could impact any of the Ps in the marketing mix, but will likely impact Process and People the most. At the same time, we are witnessing major advancements in AI, such as ChatGPT, which is already impacting tools across the marketing stack. More marketing budget may be allocated for AI-enabled software going forward to increase efficiencies in the marketing organisation. Finally, one P in the marketing mix is getting more attention in e-commerce than ever before – Price. And it’s with good reason: McKinsey found that improving pricing by just 1% can raise profits by 6%. That’s a far bigger impact than a 1% reduction in variable costs or fixed costs, which can boost profits by 3.8% and 1.1% respectively. During a time of inflation and economic irrationality, e-commerce companies are placing more focus on dynamic pricing and pricing software such as Omnia. According to Forrester, companies who use dynamic pricing can increase profits by as much as 25% . Enterprise companies in particular will often have a dedicated team to work with the pricing software, meaning their investment also extends to human capital. The e-commerce marketing budget can and should evolve over time For most e-commerce businesses, whether retailers, brands, or marketplaces, marketing budgets and their allocation will always vary. This could be due to the seasonal nature of your product, the evolving strategies of competitors, or how your quarter is going. Keeping your marketing budget stable as a portion of your company's revenue keeps you in a solid financial position, but it also means you'll need to re-evaluate marketing budgets when you analyse financial reports. The total budget amount and allocation will also need to be consistently revisited to ensure the team is keeping with current trends and using resources on the highest-performing channels. Make sure to check in with your marketing strategy monthly and quarterly, while ensuring your e-commerce team is maintaining their skills and knowledge in paid media, social commerce, and emerging marketing trends.
AI, ads, and pricing: How is e-commerce marketing itself?28.03.2023
2023 trends and how stores can capitalise on an e-commerce slump
We all experienced the sudden, dramatic shifts in retail during the first year of the COVID-19 pandemic. Stores shut down, sales shifted online, and the number of ecommerce companies globally (excluding China) grew to...
We all experienced the sudden, dramatic shifts in retail during the first year of the COVID-19 pandemic. Stores shut down, sales shifted online, and the number of ecommerce companies globally (excluding China) grew to 12 million. Large retailers and marketplaces saw significant increases in sales as customers searched for places that offered a wide variety of products in one place. Amazon, for example, saw sales increase by 57% during the second quarter of 2020. That was then – what about now? Today, we’re witnessing a new shopping era: a landscape that built upon many of those pandemic trends, but is still ushering in a comeback for brick-and-mortar. As we forge ahead in 2023, Omnia is exploring key retail trends in this new landscape and ideas for how brick-and-mortar retailers can make the most of the current e-commerce slump. Trends in the post-Covid retail landscape What does this new post-pandemic shopping era look like in practice? We compiled four retail trends in 2023 that are impacting brands, retailers, and consumers alike. 1) The slowing of e-commerce and uplift for brick-and-mortar The sudden spike in e-commerce sales in 2020, shown in the chart below, has readjusted over time. The e-commerce share of total retail fell in 2021 and 2022 after the initial pandemic jump. Prior to the pandemic, the growth rate of e-commerce had always outpaced overall retail sales. But since restrictions started to ease and physical stores started reopening again in mid-2021, the e-commerce growth rate has remained lower than the growth of retail sales. Meanwhile, brick-and-mortar is on the rebound. In the US and the UK, store openings are higher than store closures, with more openings than even pre-pandemic levels in 2019. Coresight Research tracked a year-on-year decrease of 55% in US store closures from September 2021 to 2022. In the UK, PwC reported a significant slowdown of closures from both before and during the pandemic, with 34 closures per day in H1 2022 compared to 61 per day in H1 2020. Source: Coresight Research The rebound for physical stores may be partially driven by some consumers making a conscious change. Globally, 47 percent of consumers said they were significantly more likely to purchase from brands who had a local presence. The strength of brick-and-mortar is expected to continue: Forrester research predicts that in 2024, 72 percent of US retail sales will still happen in-store. 2) Inflation may put a dent in sales volume, but it’s increasing the nominal value of sales With inflation hitting 40-year highs in 2022, many customers faced the challenge of wage increases not keeping pace with rising prices. People prioritised essentials over non-discretionary items, while also feeling the hit to their overall purchasing power. According to a Deloitte consumer survey, the share of respondents intending to delay large purchases has been steadily increasing since mid-2021. But even if this puts a dent in retail volumes, high inflation has also increased the nominal value of sales. Source: Deloitte This chart shows nominal retail sales vs. real retail sales since February 2020, with the two breaking apart starting in March 2021 due to the impact of inflation. Even though retail sales are down by 0.1% since that month, nominal sales have gone up 9.4%. 3) Brands are reclaiming control in e-commerce and DTC is growing Back on the e-commerce topic, another trend in this new shopping era is about big consumer brands reclaiming control. We’re seeing brands more frequently choosing to cut out retailers and intermediaries, instead selling direct to consumer (DTC) online. Why are these brands choosing to get more involved in their e-commerce efforts? A variety of reasons: it gives them more control, allows them to cut out non-value-added-retailers, and enables them to handle the volume of work and competencies they must fulfil. According to Dirk Hoerig, co-founder and CEO of commercetools, “The major downside of reliance on wholesale—or marketplaces, for that matter—is the watering down of the brand experience… Until a few years ago, most brands simply accepted this situation as a cost of doing business. Then, when the pandemic drastically weakened foot traffic to brick-and-mortar retail stores, many brands were pushed to invest heavily in their websites and other channels like social media that allowed them to sell directly to consumers. Now that they’ve seen the benefits of DTC sales—including stronger customer relationships and wider profit margins—they don’t want to go back.” One example of this is Nike. In February 2022, news broke that Nike would be sending less inventory to Foot Locker stores – its closest retailer relationship – in favour of expanding DTC sales. During their fiscal year ending May 31, 2022, NIKE Direct (the DTC brand) generated $18.7 billion USD of revenue, more than double that of FY2017. And they’re not alone. Growth in traffic to DTC sites is higher now than pre-pandemic – not the case for e-commerce, which has adjusted itself after the pandemic spike. 4) Owned sales channels creating competition with a brand’s retailers Brands today have sales and distribution channels ranging from their own webshops to retailers to marketplaces and platforms like Amazon However, having an omnichannel strategy including these owned sales channels does create an extra challenge. Brands stand in competition with their own third-party retailers when both are selling the same product. We’re seeing brands grapple with finding this balance. Not only are they needing to watch their retailers, but also their own retail strategy and prices to find the optimal mix. It’s because of this trend that Omnia Retail is placing more and more focus on dynamic pricing solutions for brands and DTC. Learn more about our pricing solutions for brands here. Talk to one of our consultants about dynamic pricing. Contact us How can brick-and-mortar retailers make the most of the e-commerce slump? Amidst all these changes, there lies a significant opportunity for brick-and-mortar retailers to use their current momentum and capitalise on the slowing of e-commerce. We saw above some of the evidence of this e-commerce “slump”. Another indicator is the rise in layoffs. Amazon, the biggest name in e-commerce, announced 18,000 planned job cuts in January 2023. Meta, the parent company of Facebook and Instagram and the biggest name in social e-commerce, laid off 13% of its workforce in November 2022 – the first time they’ve had to contend with layoffs in 18 years. What does all of this mean for brick-and-mortar stores? It means now is their time to shine, if they can effectively capitalise on the situation. Here are some ways physical retailers can stand out and compete for customers’ spending: Provide unique in-person experiences – After the pandemic, the value of in-person experiences cannot be overstated. Consumers want to get back to physical stores again. Remember: 47 percent of consumers said they were significantly more likely to purchase from brands who had a local presence. Brick-and-mortar stores can host events, personalise the shopping experience for each visitor, or even partner with other businesses to create something brand new. Remove friction in the buying process – It’s commonly said that online stores are where shoppers go for convenience. Brick-and-mortar stores that can remove friction in the buying process – i.e. make it simpler for people to buy from them – can capture business from customers who still want convenience but want to shop in person. For example: Offering a variety of payment options, an intuitive store layout, additional SKUs available for delivery or pickup, etc. And don’t forget to remind shoppers that when they buy in-store, they can have their products now instead of later. Embrace omnichannel strategies – Brick-and-mortar doesn’t have to mean only in-person shopping. For instance, brick-and-mortar stores can also offer online ordering with in-store pickup, deals on social media for in-person shopping, and more. Talk about sustainability – Shopping at brick-and-mortar retailers can reduce waste from shipping and packaging, something that is especially important for Millennial and Gen Z shoppers who see environmental issues as extremely important. What comes next? Retail is always changing, and the post-pandemic trends we’re seeing now will continue to evolve in the coming year. But if current trajectories continue, brick-and-mortar stores have a unique opportunity to stage their comeback. E-commerce growth rates are slower than the growth of overall retail sales. Layoffs among tech and e-commerce companies are not letting up. And nearly half of all consumers want to buy from brands with a physical presence in their area. With more and more brick-and-mortar stores opening every day compared to recent years, customers have plenty of options for in-person shopping. The question that remains is where they will choose to spend their money. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments.
2023 trends and how stores can capitalise on an e-commerce slump23.03.2023
E-commerce discounts: Types, benefits, and how to use them
In today's world, where online shopping is becoming more and more prevalent, e-commerce businesses need to be creative and strategic when it comes to attracting and retaining customers. One of the most popular and...
In today's world, where online shopping is becoming more and more prevalent, e-commerce businesses need to be creative and strategic when it comes to attracting and retaining customers. One of the most popular and effective ways to do this is through the use of discounts and promotions. Uncertain economic conditions make this even more relevant: 60% of shoppers are actively seeking more coupons, offers, and discounts to help offset the higher prices they are paying across retail categories. In this blog post, Omnia explores the different types of discounts and promotions commonly used in e-commerce, the benefits they provide to businesses, and some best practices for using them effectively. An overview of discounts and promotions No matter what you call it – discount, offer, promotion, coupon, Rabat (Dutch) or Rabatt (German) – what we are discussing here is giving customers a chance to get an offered product cheaper or with an additional benefit. Let’s run through some of the typical promotional models seen in e-commerce as well as examples of the events or reasons why businesses would run a promotional campaign. Typical discount models Discounts and promotions come in many different forms, from monetary savings to freebies to rewards, and it's important for businesses to understand the various options available to them. Here are some of the most common types used in e-commerce: Percentage off: This is a straightforward discount that offers customers a percentage off the price of an item or order. For example, a business might offer 10% off all orders over $50, or a 15% discount for customers who subscribe to their newsletter. Coupons or fixed-amount discounts: Some brands and retailers offer coupons for a fixed discount, for example €10 off. Coupons are increasing in popularity, with the global mobile coupons market projected to reach $14.8 trillion by 2027. Free shipping: Many customers are deterred by shipping costs, so offering free shipping can be a powerful incentive to buy. Businesses might offer free shipping for orders over a certain amount, or for a limited time. Buy one get one free (BOGO): This promotion encourages customers to buy more than they originally intended. Businesses might offer a free item with the purchase of another item, also known as “two for the price of one”. Bundle or bulk discounts: Some products will be packaged in bundles, allowing customers to get a discount on what they would have paid for each item separately. Other times, discounts will be offered for bulk orders (e.g. buying a case of wine vs. one bottle). Loyalty rewards: Some businesses offer loyalty rewards programs to incentivize customers to purchase more frequently. They may offer special discounts or promotions that are only available to loyalty members, for example, free shipping with Amazon Prime or Zalando Plus. Some discounts and promotions are applied automatically to a customer’s cart at checkout, while others require a discount code to qualify the order for the deal. Curious about how discounts can be used in your pricing strategy? Talk to us now. Schedule a demo Examples of typical promotional events or campaigns Usually, e-commerce businesses have a reason behind their promotional campaigns, whether it be timing-related such as holidays, product-related like a new product launch, or something else: Timely discounts Time-based or seasonal promotions like Black Friday, Cyber Monday, winter holidays, and back-to-school season are common reasons for discounts to run. These tend to be high-volume time periods and brands and retailers offer promotions to win sales over competitors. Seasonal items may also be discounted during their low periods, such as swimsuits and summer sporting gear during the off-season. One example is this time-based discount for Black Friday from fashion brand Steve Madden: New products or clearance Brands may use offers to promote a new product launch, or use discounts to sell off a current item if a new or updated product will be launched soon. Promotions can help retailers to make space in their product assortment for new or higher-performing items. Nordstrom Rack has their “Clear the Rack” sales to make way for new products from brands: Data collection Retailers may run a campaign where they send a discount code to loyal customers such as subscribers or those with memberships so they can track the consumer’s behaviour and implement a data-driven marketing approach. Beauty retailer Sephora has a loyalty program called Beauty Insider that uses a points system and exclusive benefits to reward customers: Benefits and challenges of using discounts and offers in e-commerce Benefits of e-commerce promotions E-commerce companies choose to run promotional campaigns and offer discounts for a variety of reasons. Some of the benefits that can be achieved when properly executing a promotional campaign include: Attracting new customers: Offering enticing deals can reach new potential buyers and encourage them to try out a product or service. A survey from coupon website RetailMeNot found that 80% of consumers feel encouraged to buy from a brand that is new to them if they found an offer or discount. Driving sales: Promotional campaigns can stimulate sales, particularly during periods when demand might be low. According to the American Marketing Association, online shoppers who used coupons spent an average of 24% more than customers who did not make use of those offers. Increasing online conversions: Boosting conversions can be one of the biggest benefits of online offers. After using a coupon code, 57% of online shoppers said that without the discount, they would not have made the purchase. Encouraging repeat purchases: Offers can give a boost to customer loyalty, as customers may be more likely to return to a business that offers ongoing deals and rewards. A report from Vericast showed that 40% of online shoppers felt more favourable toward brands that offer a coupon or a discount, with 39% more likely to make a repeat purchase in the future and 30% saying they would be more loyal to the brand going forward. Common challenges when using discounts and promotions While discounts and promotions can be beneficial for e-commerce businesses, they can also present some challenges: Eroding profit margins: Businesses may find that discounts erode their profit margins, particularly if they offer too many promotions too frequently. Changing expectations: If they are not careful, businesses may have issues with what consumers expect. They may firstly train customers to only buy when there is a discount, which can be problematic if customers start to expect discounts all the time; or secondly, desensitise consumers to the offers so they are no longer effective. Hurting brand image: Discounts and promotions can sometimes lead customers to associate a brand with being “cheap”, which can damage its reputation and brand image. Best practices for optimising pricing strategies To mitigate these challenges, particularly profit margin concerns, and capitalise on all the possible benefits, businesses need to use strategic promotion management and follow best practices for optimising their pricing strategies. What does good promotion management look like? No matter if you are a retailer, brand, D2C, or marketplace, it starts with making targeted pricing decisions depending on the market you are operating in: Are your categories and articles seasonal? Are your customers price-sensitive? Do you have overstock? Using questions such as these to set high-level goals will help ensure your promotions have the impact you’re hoping for. What can a brand or retailer do to create promotional programs without sacrificing profit margins? Motivate a repeat purchase: Offer a coupon after the transaction, or give a discount if they become a newsletter subscriber so you can keep in touch. Use a loyalty program: Encourage customers to join your loyalty program rather than just offering one-time coupons. Offer tiered coupons: Instead of a flat percentage discount, encourage customers to spend more to save more by tiering coupons. For example, €10 off €50 or more, €20 off €100 or more, €50 off €250 or more. Incentivise customers to make referrals: Ask shoppers to refer new potential buyers in order to receive their discount. Offer subscriptions: Subscription or membership-based programs capitalise on customer loyalty and can give you recurring revenue. Have a reason – Giving consumers a reason for the sale or discount – whether that be a holiday, product launch, or new loyalty program – can keep expectations in check and avoid customers demanding those prices year-round. This happened to US retailer JCPenney, who decided to move away from a constant “sale” setup and lost customers who were angry about the change. The role of psychology in promotional pricing Consumer behaviour is, of course, impacted by psychology, and it plays a significant role in the world of e-commerce discounts and promotions. Understanding the psychological aspects of pricing can help businesses to ensure they choose the right promotional strategies for their target audience. One well-known example of this is price elasticity: as price increases, demand falls. This is the foundation of why businesses offer discounts in the first place – because according to price elasticity, decreasing the price increases demand. However, this is not always the case, and it is good to know the price sensitivity of each product.Another psychological factor at play is around behavioural economics and how consumers view different types of savings. A majority of consumers would rather “get money off” (e.g. €10 off) versus “save money” (e.g. save €10). The reason comes down to linguistics: “saving” money implies the avoidance of loss, while “money off” implies consumers gain something from the offer. They may be saying the same thing, but “money off” is a more positive (and impactful) message. How to use dynamic pricing tools for promotional pricing With dynamic pricing tools and systems like Omnia Retail, users can integrate multiple internal data sources such as season, stock level, contribution margin, distribution channel, and compare data to competitors to calculate the optimal prices. Easily apply unique discounts to different assortments and product groups. Discounts in the form of a coupon or “rabat” code can be used for different products where a retailer runs a specific pricing strategy. Read about more interesting blogposts here: What is Dynamic Pricing?: The ultimate guide to dynamic pricing. What our the best pricing strategies?: Read about 17 pricing strategies for you as a retailer or brand. What is Price Monitoring?: Check out everything you need to know about price comparison and price monitoring. What is Value Based Pricing?: A full overview of how price and consumer perception work together. What is Charm Pricing?: A short introduction to a fun pricing method. What is Penetration Pricing?: A guide on how to get noticed when first entering a new market. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy. What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. What is Price Skimming?: Learn how price skimming can help you facilitate a higher return on early investments. What is Map Pricing?: Find out why MAP pricing is so important to many retailers.
E-commerce discounts: Types, benefits, and how to use them23.03.2023
Meet the Team: Vanessa Verlaan
Name: Vanessa Verlaan Company Role: Chief Operations Officer --- What do you do at Omnia Retail? Ensuring that everyone within Omnia reaches their full potential, building a scalable and engaging company. What is your...
Name: Vanessa Verlaan Company Role: Chief Operations Officer --- What do you do at Omnia Retail? Ensuring that everyone within Omnia reaches their full potential, building a scalable and engaging company. What is your past experience, of working in your position? I have been an air traffic control trainee. It was a very impactful and insightful experience, something I still look back on with a lot of pride and pleasure. What do you like about working at Omnia Retail so far? No matter their background, specialism or seniority, I can learn from everyone within Omnia. Everyone is inspiring, and together we daily raise the bar. What are the values that drive you? Curiosity: I am interested in what drives and motivates people. If I have a different opinion than someone else, I want to understand what reasons are behind it. Not to convince them of my point of view, but to broaden my horizon. Improvement: I am always thinking of how we can do something better, smarter, or faster. In my role, this mindset comes in handy, and it matches Omnia’s Obsession with Excellence value. What are your top favorite books, podcasts, or documentaries? - Powerful by Patty McCord - The Harry Potter books - Documentaries about food and nature What do you enjoy doing when you are not working? I am currently doing a master’s in business administration. But when I’m really off, I enjoy being outdoors with my family. I have a small vegetable garden and enjoy cycling and hiking. Let’s end with your favorite quote! "Seek to understand before you seek to be understood."
Meet the Team: Vanessa Verlaan23.03.2023
Meet the Team: Julian Bieber
Name: Julian Bieber Company Role: Working Student Backend Development --- What do you do at Omnia Retail? My main area of expertise within Omnia is the resource utilization of our databases and jvm based applications....
Name: Julian Bieber Company Role: Working Student Backend Development --- What do you do at Omnia Retail? My main area of expertise within Omnia is the resource utilization of our databases and jvm based applications. In other words, I help to ensure that the processes under the team finish in a reasonable amount of time. What do you like about working at Omnia Retail so far? I greatly enjoy working within a team that provides an environment where learning is a constant objective. Which heavily relies on our ability to confidently recover from mistakes. What are your top favorite books, podcasts, or documentaries? My favorite book series is “Stormlight Archive” by Brandon Sanderson, I am delighted by the world building. What do you enjoy doing when you are not working? In my free time I go bouldering, lift weights, go skating (inline or ice), enjoy the occasional CTF challenge and program some 3d graphics. Furthermore, I enjoy baking various cakes and cookies.
Meet the Team: Julian Bieber21.03.2023
Why Brands Should Curate Their Product Assortment
The direct-to-consumer (D2C) wave continues to sweep across the world of e-commerce, but unlike early examples of D2C brands who started out that way, we are seeing more companies add DTC sales to existing retail...
The direct-to-consumer (D2C) wave continues to sweep across the world of e-commerce, but unlike early examples of D2C brands who started out that way, we are seeing more companies add DTC sales to existing retail strategies. This can be an exciting way to diversify sales channels, reach new potential customers, and boost revenue. It also creates the challenge of brands “competing” with their own retailers, which may be detrimental to the brand-retailer relationship, as well as their product’s overall pricing and competitiveness in the market. To mitigate this risk, brands can differentiate product assortments between their DTC and retail sales channels. According to McKinsey, those who get the product assortment right “enjoy more sales, higher gross margins, leaner operations, and most importantly, more loyal customers.” To help brands understand the importance of assortment differentiation, Omnia explores the various types, their benefits, and how price fits into the strategy. Benefits of product assortment differentiation When brands move toward D2C, they need to differentiate the product assortment to avoid competing with the retailers that sell their products. Why would a D2C brand differentiate their assortments? Manage brand experience – There is more potential to improve the brand experience and build stronger relationships with customers when differentiating product offerings across channels. Increased sales – Brands can see a bump in sales because they are increasing the amount of options available. Decreased cannibalisation – Differentiating products between D2C and retailers can help mitigate the risk of direct competition or cannibalising sales. Data access – Brands often don’t get access to any sales data from retailers, but selling D2C provides more data on what customers are and aren’t buying. Thereafter, assortments can be adjusted as needed. Meet customer needs – Strategically differentiating assortments for different selling environments gives brands the chance to better address customer desires. As reported by McKinsey, a more customer-centric product portfolio could create an additional 2-4% increase in sales. Additional benefits for retailer partners – Access to more data enables brands to improve products, not only for their DTC efforts but also for the products being sold through the retailers. It’s a win-win. Types of product assortment differentiation Mass personalisation 66% of customers expect companies, including brands and retailers, to understand their needs and expectations, and one type of product assortment goes all the way down to the consumer level with mass personalisation. Nike By You is a shining example of this strategy, where consumers can even make and design their own Nike products on a user-friendly website. They also have the manufacturing process in place for those personalised items to be created quickly, so customers could, for example, get shoes in their chosen colours and style in two weeks. The prices are higher than a typical mass-produced product, but for the customers who want to customise items, there’s a lot of margin to capture. Unique SKUs Another type of differentiation is when brands make unique SKUs for specific retailers, where one feature is added or the colour is a bit different. This gives the retailer a unique EAN code and non-matching products, helping to increase their sales and boost the brand’s relationship with the retailer. The assortment is not personalised at a consumer level, as with Nike, but is differentiated for key retailers. German manufacturer Miele is one example of this. Service offerings A third type of assortment differentiation is around the services offered. Some brands sell monthly subscriptions, offer monthly payments instead of one big expense, or provide unique customer service or brand experiences. US Razor brand Gillette launched its own “Shave Club” in 2015 to compete with D2C brands like Dollar Shave Club and Harry’s, and differentiates from its retailers by enrolling members in product giveaways, providing chances to win entertainment and sporting event tickets, and offering a money-back guarantee for unsatisfied customers. Availability of assortment Beyond differences in the products themselves, the chosen assortments and amount of products can also be differentiated across retailers and DTC. For example, ABC Shoe Company sends 60% of its running equipment assortment to e-commerce Retailer X, while Retailer Y receives 70% of the assortment since they also offer a wider assortment of hiking gear. A portion of ABC’s assortment is offered exclusively in its own online shop. In other words, the brand experiments with the breadth of their assortment; the products they make available to different retail partners. An example of this would be Adidas: the company’s product assortment can be purchased to varying degrees across a wide range of retailers and marketplaces, but some product lines – such as the partnership with Stella McCartney – can only be bought directly from Adidas. Categories where assortment differentiation is not the right strategy Some product categories are not built for assortment differentiation; for example, products that can be easily substituted. Think about a FMCG item like razor blades: They are fast-selling and there aren’t as many features where brands can differentiate: people might not care as much about the colour, for instance. Brands just need to create the best razor blade possible for their target audience, because other brands will step in and take those sales if they don’t. Even with products like these, however, differentiation can still be done outside of the assortment with your branding or the services offered in D2C versus retailer sales. Can price be a product differentiator for brands? Price is an important piece of the differentiation topic, partially because it is always relative. Products are highly comparable these days thanks to marketplaces and comparison shopping engines, with the exception of some unique items, and highly transparent in the retail market, enabling consumers to shop around for the best price or compare products with substitutes. There are two main strategies brands use to manage this balance: Comparing to retailers: Samsung compares or sets a D2C price in relation to MediaMarkt Comparing to other brands: Samsung compares or sets a D2C price in relation to LG What’s important to keep in mind is that for brands who sell through both retail partners and D2C, retailers are clients and a competitor at the same time, so it needs to be managed correctly. Price shouldn’t be a differentiator with retailers, but something that should be thought about cautiously and strategically. A fair price relative to your retailers is key to avoid triggering widespread pricing changes across all sellers of your products. Price can be a differentiator with other brands. The price-to-value ratio of the product should be in line with the products of other brands on the market, meaning that if your product is the same quality and a higher price, you haven’t differentiated and the pricing strategy doesn’t make sense. Managing the product portfolio with dynamic pricing Dynamic pricing is a tool that enables brands to automate the management of prices and price perception based on large quantities of data. The system can take in data from both retailers and brands, using the strategy you set to automatically make decisions and manage price. Brands can use this to avoid market collisions; for example, they can quickly pick up on whether an action of theirs caused a price to decrease across the market, and can remedy the situation right away. In a world where brands are frequently selling through a number of channels, especially with the combination of D2C and retail, dynamic pricing can play a key role in boosting sales without ruining relationships with retailers or customers. Interested in seeing how dynamic pricing could impact your product assortment? Schedule a demo of Omnia here.
Why Brands Should Curate Their Product Assortment09.03.2023
Developing Average Order Value over time in e-commerce
When you start getting pressure from the top to increase revenue, maybe your first thought as a marketer is to go out and try to win new customers. But there are other ways to boost sales. Instead of investing heavily...
When you start getting pressure from the top to increase revenue, maybe your first thought as a marketer is to go out and try to win new customers. But there are other ways to boost sales. Instead of investing heavily in trying to acquire new customers, you can maximise the value of the customers you already have by increasing Average Order Value (AOV), sometimes called Average Basket Value (ABV). This approach can help you grow your business without proportional increases in marketing, advertising, and other costs. In this article, Omnia takes a look at strategies to increase AOV, external factors that can impact the metric, and how to handle fluctuations over time. Strategies to increase Average Order Value for e-commerce Boosting AOV over time should be a focus point for all types of e-commerce retailers. Why is this metric so important? A higher AOV means increased revenue from the same number of customers, enabling revenue growth without proportionate increases in marketing and sales costs. So, optimising AOV can be a high-impact lever for marketers to drive business growth. There are a variety of strategies that can be employed to increase the AOV for an e-commerce business, including: 1. Upselling and cross-selling One of the most common and effective ways to increase AOV is to upsell or cross-sell the customer, either at the time of purchase or after the purchase has been completed. One McKinsey study found that cross-selling and other techniques for category penetration can boost sales by 20% and profits by 30%. Upselling is the act of inviting customers to buy a comparable, higher-end (i.e. more expensive) item than the one they initially were considering. Cross-selling is the practice of encouraging customers to purchase related or complementary products or accessories. For example, if a customer is buying a camera in your e-commerce store: You could upsell them to a higher-end model or the newest edition. You could cross-sell an additional lens or tripod to accompany the camera. 2. Bundling products or offering discounts on packages Consider creating product bundles or packages that offer multiple items at a discounted price. When a bundle includes items that are i) of interest to the customer and ii) represent a great value, it can increase AOV while also encouraging customers to purchase additional items they may not have otherwise considered. For example, UK beauty retailer LOOKFANTASTIC has a number of versions of “The Box”, bundles for different types of beauty products and special editions like Mother’s Day. A great time to utilise bundles and increase AOV is to create an “all-in-one” package – something that includes everything they would need or want for their desired experience. For example, a food and beverage retailer could sell bundles themed around holidays or events: the Super Bowl bundle, New Years Eve bundle, etc. 3. Implementing minimum order thresholds As customers, we’ve all been there: the online store says you need to spend €8,79 more to get free shipping, so you add something to your cart. Or, maybe you have to spend a certain amount to qualify for a discount on offer. Minimum-order thresholds are a proven way to boost AOV for e-commerce. Offering free shipping or discounts on orders that exceed a certain amount will incentivise customers to add more items to their cart to meet that threshold, and often the amount they end up spending will exceed the minimum you set. Not sure where to start? Digital ads expert Aaron Zakowski suggests setting the minimum threshold at 30% higher than your AOV. That way it feels attainable to the greatest number of customers possible. If you set the threshold too high, there may be an increase in abandoned carts. Extra costs like shipping contribute to nearly half (48%) of abandoned carts, so a properly set threshold is a win-win for both seller and consumer. Talk to one of our consultants about dynamic pricing. Contact us 4) Creating loyalty programs One strategy to increase AOV while also improving customer retention is to offer rewards or discounts for customers who spend a certain amount or make repeat purchases. This encourages continued business and incentivises customers to increase their order size. All the key metrics – from AOV to retention to profit – are connected, too: One study by Bain & Company found that a 5% increase in customer retention can increase profitability by 75%. Source: Shopify | Data: COLLOQUY 5) Announcing time-limited offers Creating a sense of urgency with time-limited promotions or flash sales can encourage customers to buy more items at once. This can be especially impactful during a low season if such a time exists. For example, if you sell seasonal items like swimsuits, you could offer a winter sale. While swimsuit sales are typically lower during the colder months, a time-limited promotion encouraging customers to stock up before the spring and summer rush might boost AOV during a historically slower period. 6) Personalising the customer experience Personalisation can produce higher AOV as well. 40% of US consumers say that a personalised customer experience led to them making a more expensive purchase than originally planned. The most effective way to personalise e-commerce experiences is through data. Leverage customer data and analytics to personalise product recommendations and marketing campaigns based on a customer's purchase history, browsing behaviour, and preferences. First-party data – the data you collect directly from your customers, like Nike with its membership program – is especially impactful. It enables you to make informed decisions and personalise the customer experience based on things they told you directly. Personalising with first-party data pays off, too. Brands utilising first-party data in key marketing functions achieved a 2.9-times increase in revenue lift and a 1.5-times increase in cost savings. External factors that affect Average Order Value Shifts in AOV are driven by more than the tactics marketers employ to encourage customer spending. The most obvious external factor that impacts AOV is seasonality. This applies both to products with a seasonal element (e.g. swimwear or ski equipment) but also any business impacted by buying seasons (e.g. Black Friday and pre-winter holidays, back-to-school season, etc). Economic disruptions can impact AOV as well. For example, the first COVID-19 lockdowns created drastic shifts in AOV in the EU over the course of just a few weeks. Prior to the spreading of the pandemic, AOV hovered between €90.37 and €82.84. By February 17th, that number had increased by over 25% from the week before to €103.81 per order. AOV then dropped off dramatically following the first European lockdown announcements on March 9th. Source: barilliance.com Another economic factor impacting AOV is inflation. With rising prices, AOV actually increases assuming sellers pass added costs on to consumers – even if total sales take a hit. The chart below illustrates changes in AOV and inflation in Europe from Q4 2021 until Q3 2022. Seasonality can be seen in the drop-off in December 2021, after the peak of Black Friday and the holiday shopping high season. March 2022 shows another drop after a strong February, likely due to the start of the war in Ukraine, consumer uncertainty, and inflation. By April, brands and retailers were already adjusting prices, after which we see AOV increase in following months. Source: Awin Your AOV increased or decreased – what now? For many e-commerce companies, AOV is a fairly steady and predictable metric. However, because of AOV’s potential impact on revenue without proportional increases to marketing and sales spend, it’s a KPI e-commerce companies should continue focusing on. If your AOV has decreased – suddenly or over a period of time – it’s crucial to figure out why, and quickly. Analyse the current tactics being used and why they may not be working. Are your customers no longer responding to tactical nudges that worked in the past? Do you need to update target customer profiles to improve personalisation efforts? Perhaps your loyalty programmes and discount offers are no longer appealing to your target demographic? Trying out new or updated tactics, such as the ones discussed in this article, is a helpful way to shake things up. If the issue is not down to marketing tactics but a product assortment problem, or another major factor like a new competitor entering the market, that will require a deeper analysis and discussion across the company. If your AOV is increasing, great! That means something is working. Analyse which tactics are having the biggest impact, and double down on those. If some techniques are not contributing to the increase, switch them out for others to see if you can boost AOV even more. Increase sales to people with existing purchase intent By concentrating on Average Order Value, you are able to capitalise on customers that have already expressed purchase intent. These visitors have already shown that they want to buy, and may even have products in their shopping cart. It is then easier for you to help them discover additional or higher priced items that are relevant to their needs. The loyal customers will continue to boost AOV over time, as 57% of consumers say they spend more with brands they’re loyal to. Optimising for Average Order Value is about increasing the value for those who already spend with you, a helpful complement to any new customer acquisition strategy. This way, customers who spend more money on your site will get more in return.
Developing Average Order Value over time in e-commerce02.03.2023
Amazon moves to cut distributors to improve profits
In a bid to increase annual profits, Amazon is actively severing its relationships with third-party sellers. From 15 January 2024, as an email from Amazon to third-party sellers suggests, the e-commerce authoritarian...
In a bid to increase annual profits, Amazon is actively severing its relationships with third-party sellers. From 15 January 2024, as an email from Amazon to third-party sellers suggests, the e-commerce authoritarian will be pursuing partnerships with brands directly, squeezing brand owners out of their relationship with distributors if they want to remain on the online marketplace. Source: Consulterce - LinkedIn Amazon has experienced a downturn in sales and ad revenue from merchants in 2022, compared to the pandemic years of 2020 and 2021. “Amazon is trying to increase profit margins in its retail division at all costs right now,” says Martin Heubal, a strategy consultant who used to work for the tech giant and who helps Amazon vendors achieve growth on the platform. Bloomberg News reports that the platform’s advertising sales growth was shaky all throughout 2022, which affected its profit margins. In addition, Amazon’s sales growth was at its slowest over this period, resulting in new strategies to increase profits. Other game plans to boost profits include the recent layoffs of 18,000 employees, which is the largest in the company’s history. In addition, it was announced in early January that three warehouses in the UK would be closed down as a part of their downsizing procedures. What’s the impact on brands and distributors? Amazon suggests this new procurement strategy is to cut out the middleman and lower costs for consumers, however, this strategy suggests a broadening of the monopoly they have within online retail to force brands to choose between growth and profit with the marketplace or moving with their distributor who is being cut out. In the US, 40% of all online shopping is done on Amazon, which means 40 cents of every dollar a consumer spends is shopped on Amazon. Many brands may find that because of this grasp on consumer spending power, they may have to choose to do business directly with them, leaving their partnerships with distributors null and void. To add salt to an open wound, their business models and distribution strategies will be turned on their heads, while third-party sellers struggle to stay buoyant. In the same email, Amazon said distributors can still sell these products directly to customers on Marketplace, however, this will require price changes that will affect both the distributor and the consumer. Typically, distributors sell in bulk at a lower price, which benefits all parties. By having to move from B2B to D2C, a distributor will have to factor in new costs and strategies. Talk to one of our consultants about dynamic pricing. Contact us As 15 January 2024 approaches, brands have tough decisions to make As we know, 1P (first-party) brands lose many commercial freedoms when selling on the marketplace such as price setting. As we have seen in the past, once Amazon gains market share within a vertical and control of the client, they can dictate a price. So, is this a good move, long-term, for consumers and brands? Alternatively, if brands have other D2C channels, are they enough to maintain the same profit margins? Omnia’s Founder and CEO, Sander Roose, shared that the larger problem is this decision by Amazon will create many complexities for brands. “All of a sudden, brands will have new things to learn and new decisions to make. For example, how will the working relationship play out with Amazon after years of having longstanding relationships with their distributors? Should they sell 1P or 3P? How, and to what extent, should they use Amazon ads to fuel sales? What will the process be when Amazon starts making changes or demands about prices or inventory? This, I believe, is the main setback for those brands.”
Amazon moves to cut distributors to improve profits23.02.2023
Meet the Team: Melissa Cron
Name: Melissa Cron Company Role: Junior Consultant --- What do you do at Omnia Retail? I’m in the Junior Consultant traineeship so I will be rotating through different functions within the company. I’m currently in the...
Name: Melissa Cron Company Role: Junior Consultant --- What do you do at Omnia Retail? I’m in the Junior Consultant traineeship so I will be rotating through different functions within the company. I’m currently in the Customer Success team where my main goal is to help our customers gain the maximum value out of Omnia. This comes with building new and existing relationships, understanding our customers’ pricing needs, and translating them into our tool. What is something people in your industry have to deal with that you want to fix? Nowadays the internet is saturated with retailers and brands selling online which, as a consumer, can overwhelm you with the number of choices available. Now imagine this from the seller's perspective: they need to monitor their competitors and quickly adjust their own prices based on all this information while taking into account their own pricing strategies/goals. Without a tool like Omnia, this can become an extremely tedious, time-consuming, and manually-intensive task. What is your past experience, of working in your position? Regarding my educational background, I hold a BSc in Economics and Business Economics from Maastricht University, and an MSc in Strategic Management from Erasmus University Rotterdam. After my studies and before joining Omnia, I moved back to Thailand and worked as a Customer Service Officer in the automotive department of a microelectronics manufacturing company. What do you like about working at Omnia Retail so far? Each day presents a different challenge so there is always something new to learn. I feel that the bar is set very high within the company, which encourages me to do my best. The company values are something important to me and they really are instilled in everything we do. Last but definitely not least, my colleagues are great; they’re a fun bunch and always there to lend a hand or support when needed. What are the values that drive you? Honesty, empathy, integrity, and kindness What are your top favorite books, podcasts, or documentaries? - The Twilight Saga - The Surgeon: A Rizzoli & Isles Novel - Favorite documentary: Inside Job What do you enjoy doing when you are not working? I have recently taken up baking which is quite fun (although the cost of ingredients nowadays has me questioning this hobby). Besides that, you will probably find me on the couch looking online at the many restaurants in Amsterdam I would like to try, reading non-fiction books, or watching TV shows (usually reality TV shows or The Office on repeat most of the time). My resolution for this year is to be more physically active, but that is still a WIP. Let’s end with your favorite quote! “You miss 100% of the shots you don’t take” - Wayne Gretzky
Meet the Team: Melissa Cron23.02.2023
Meet the Team: Anas Anjaria
Name: Anas Anjaria Company Role: Backend Engineer --- What do you do at Omnia Retail? I work on new features, product stability, streamline development process etc. What do you like about working at Omnia Retail so far?...
Name: Anas Anjaria Company Role: Backend Engineer --- What do you do at Omnia Retail? I work on new features, product stability, streamline development process etc. What do you like about working at Omnia Retail so far? I love the working culture, Munchie-mittwoch, and my colleagues here. Whenever I am stuck somewhere, there is always someone to help me out. Apart from work, I meet some of my colleagues and we spend time together (for instance cooking together). What are the values that drive you? Working culture, good development processes, opportunity to work on new stuff & challenges. What do you enjoy doing when you are not working? I share my experience via blogging.
Meet the Team: Anas Anjaria22.02.2023
E-commerce prices drop by 1% in January 2023 compared to 2022
Online shopping prices saw a 1% decrease in January 2023, compared to prices during the same time in 2022. In a consistent trend with decreasing e-commerce prices, January became the fifth month in a row that...
Online shopping prices saw a 1% decrease in January 2023, compared to prices during the same time in 2022. In a consistent trend with decreasing e-commerce prices, January became the fifth month in a row that year-on-year online prices have dropped, according to the Adobe Digital Price Index. Major categories like such as electronics, computers, home appliances and garden products all experienced major price drops thanks to the impact of inflation on the consumer’s wallet, which has culminated in year-on-year (YoY) decreases. Computers saw the largest price decline, seeing a 15.8% drop; with electronics seeing an 11.9% drop. Home appliances decreased by 2.5% and home-and-garden products fell by 3.5%. Sporting goods saw 6.4% and books 3%. However, one category that has not seen decreases of late is groceries, which has seen a YoY 12.6% increase in January. Tools and the home improvement category have also seen an increase of 6.9%. These two categories, especially groceries, have continued to see consistent support from consumers, despite a change in purchasing decisions, including buying in bulk, waiting for specials, or changing to white-label brands. Although prices for home-and-garden products fell 3.5% YoY, this came after numerous months of the category seeing steady price increases. Consumers have long supported this category thanks to a massive shift in how consumers like to spend their time and money during and post the covid-19 pandemic. Families and young professionals have, across the board, begun spending more time at home between 2020 - 2022. Overall, these decreases are also a result of the global inflation crisis that is finally settling down after many months of high prices. As predicted by Aline Schuiling, a Senior Economist Eurozone at Group Economics of ABN AMRO Bank, who shared her inflation predictions at our Price Points Live event in Amsterdam in October 2022, inflation will drop drastically from 2022 - 2023, and then even more so in 2024. What this means for brands and pricing There are different methods of adjusting prices. It is always important to look not only at the price alone, but the availability, the data, how well a product is selling, and the associated marketing budget. For some products, a downward price adjustment will be necessary because there is more competition for the lower price. In addition, the behavioural data from Google Analytics and the profitability of Google advertising efforts can be taken into account when deciding if a price should be reduced, maintained or even raised. Profitability is more decisive in the end, and this can be increased across assortments of data and insights on the respective products and categories are available. For brands with a dynamic pricing solution like Omnia’s, reacting to these market changes is automated and immediate. However, for brands who are trying to keep up with changing consumer behaviour and the impact of falling inflation, it will be a constant battle of walking one step forward and two steps back.
E-commerce prices drop by 1% in January 2023 compared to 202216.02.2023
D2C in 2023: What we predict and recommend for brands
In 2019, as a retailer, a D2C brand, or a pricing expert; if you heard the statistic that, in 2022, 64% of consumers will make regular purchases directly from brands, you’d likely wonder what could possibly take place...
In 2019, as a retailer, a D2C brand, or a pricing expert; if you heard the statistic that, in 2022, 64% of consumers will make regular purchases directly from brands, you’d likely wonder what could possibly take place in between those years for D2C shopping to become the majority choice for consumers. Direct-to-consumer, commonly called D2C, has jumped leaps and bounds in the last few years thanks to the traditional relationship between brand and retailer experiencing a reckoning with covid-19 lockdowns and closures that spanned two years. In essence, the new face of D2C e-commerce was born out of a need for survival amongst brands, from tech to fashion, who were staring down the barrel in 2020 with closed retailers, supply chain issues and sitting stock. On the other end, stay-at-home consumers were searching for a way to receive goods directly to their homes. Today, D2C sales, including established brands and digital natives, are estimated to reach $182.6 billion in 2023 and, overall, D2C sales have increased by more than 36% from 2020 - 2022 in the US. Despite these successes, D2C - both online and offline - has also suffered from the global inflation crisis of 2022 that left brands contending with 10.1% inflation in the UK, 6.1% in France and a 31.7% increase in energy prices across the EU. Facing increased competition, residual inflation, and a crackdown on sustainability practices, how does D2C fare for 2023? As we explore this growing sector of global e-commerce, Omnia looks to paint a portrait of its current state, as well as our predictions and expectations for the year ahead. Established brands will dominate revenue in 2023, showing the major shift big brands have made to D2C Despite showing impressive growth over the last few years, revenue for digitally-native vertical brands (DNVBs) will take a backseat to the more established brands that have made the move to D2C in recent years. In 2023, digitally-native brands are expected to earn $44.6 billion in revenue while established brands will earn much larger revenues, taking home $138 billion. In 2024, these numbers are expected to rise to $51 billion and $161 billion respectively. However, that doesn’t mean any less focus should be placed on the digital side of a brand’s sales stream. Although it is notable to see how well digitally-native brands are doing in the retail landscape, it is more noteworthy to see just how many established brands have made the move to D2C while some have circumvented the retailer route altogether at inception. Tech and home appliance brands like JBL, Phillips, Dyson, Bosch, and Miele, and sports brands like Nike, The North Face, Patagonia, New Balance and Under Armour have gone D2C - and these are just a handful of international brands that are making the move. In Europe alone, D2C e-commerce has grown by 23% between 2021-2022, with Germany leading the way as it remains Europe’s most sophisticated nation regarding logistics, infrastructure and a supply chain network. In addition, 57% of multinational companies worldwide gave “significant financial investment” in their D2C strategy, while another 31% added “moderate investment”. In the US, the amount of D2C brand consumers are set to increase to 111 million shoppers in 2023, making up 40% of their population. Globally, D2C-specific shoppers are at 64%, up 15% from 2019. Source: Insider Intelligence - D2C Brands 2022 Talk to one of our consultants about dynamic pricing. Contact us Why more consumers are choosing D2C over retailers When we see brands experiencing double-digit growth in their D2C channels, we know it’s because consumers have been making a conscious and active decision to go to the brand they love and trust directly. According to Statista, the leading reason consumers choose to shop directly from a brand, at 49%, is better pricing. In second place is free delivery at 47% and free returns at 35% in third place. Free delivery and returns were made industry-standard by Amazon before the covid-19 pandemic arrived, and have become the expectation of most consumers who specifically choose online shopping over a retailer for the reason of convenience and speed. Source: Statista 2023 However, despite what many consumers think that they are getting a cheaper price directly from a brand, this is often not the case, which is why brands need a thorough dynamic pricing tool to offer a better price - not always the cheaper one - for the brand’s consistent growth. As Omnia`s pricing data show, the necessity for a dynamic pricing solution is twofold: Brands have to contend with their entire retailer network. On average, a brand’s product will be sold by more than 1,000 shops on multiple marketplaces and comparison shopping engines in a national market, which the D2C channel must compete with. Secondly, prices are volatile; meaning that on average the lowest market price for a third of all products for any assortment will either increase or decrease on a daily basis. A dynamic pricing tool gives a brand the ability to react to market changes and consumer demands. The need for market insight is, therefore, vital for a brand. D2C in 2023: In the face of increased competition, new brands will need to find a way to stand out Gymshark, a UK-based sports apparel brand founded at first, in 2012, to digital customers only, has been labelled as a “challenger brand” for one simple reason: It’s found success in creating products around neglected areas within sportswear; one of them being the interests of the everyday gym-goer, instead of the successes of famous athletes. Nike, Adidas and Reebok, who have largely encompassed their ethos, identity and marketing around the famous athlete, from Rafael Nadal to Shaquille O’Neal to Cristiano Ronaldo, have peddled the dream of sporting victories to billions of consumers who - for the most part - can’t or won’t achieve that level of sporting success; although it is nice to fantasise. Instead, Gymshark looked to focus their communication and overall identity on the wants and needs of the daily sport-lover and gym-goer who has a 9-to-5, or a family at home. In addition, the brand has focused on creating gym wear that isn’t only for model-like physiques or for fully able-bodied consumers. The online store shows people one would actually be sharing the leg press machine - not Tiger Woods. Now valued at €1.39 billion only a decade after its inception, the lesson that Gymshark can offer longstanding brands with a D2C channel is to not tell consumers to challenge the status quo with sharp taglines (“impossible is nothing”; “just do it”) but to actually do it themselves. By 2025, the sportswear market across the globe will be valued at €395 billion, with a growth rate of 8-10 percent, showing just how much potential there is within the market to rise above the fray. “Activewear start-ups have found success by creating hyper-specialised products and marketing to local communities first,” reports Business of Fashion. Not dissimilar to Gymshark, Off-White, the brand created by Virgil Abloh, learnt to fill an almost non-existent high-fashion-meets-streetwear gap. The creative director sadly passed away in 2021, however, his vision for meeting a misunderstood or neglected part of the streetwear market caught the attention of Louis Vuitton which led to his appointment as the luxury brand’s menswear artistic director in 2018. Off-White is still in production today. “In a large part, streetwear is seen as cheap. What my goal has been is to add an intellectual layer to it and make it credible,” said Virgil. Strategic partnerships are also part of Off-White’s game plan to succeed in this niche, collaborating with both ends of the spectrum - from Jimmy Choo to Levi’s to Sunglass Hut to Nike. Whether a brand is within the activewear or luxury category or not, we see opportunities for D2C players to focus on a niche in their segment or, like Gymshark and Off-White, look at the needs of consumers buying from those categories to see where they aren’t being met. How D2C brands can prioritise long-term success and growth in 2023 Rely less on digital marketing spending for growth In the early years of Facebook and Instagram, it was easy for brands to rely on sizeable marketing budgets to push growth. As consumers consumed content that was both organic and paid for, brands could rely on these platforms for sales and awareness. In addition, digital marketing on these channels used to be more affordable than it is today: On average, the cost per impression (reaching one person equals one impression) on Facebook cost $14.9 in 2021 versus $7.8 in 2019. The cost to advertise also gets more expensive if there are more ads within a segment, making the increasing competition among D2C brands in food, clothing, or tech even more costly. The smarter alternative to funnelling funds into digital marketing is to have an all-rounded approach that involves social media with user-generated content, tips and “how-to” video content; strategic partnerships with brand ambassadors; personalised email marketing and subscriptions; as well as omnichannel in-store experiences. How D2C brands spend money to acquire customers matters over the long term with strategic, disciplined spending being better over the long term. Focus on quality customer data British mathematician Clive Humby said in 2006 that “Data is the new oil”, which is a statement that has proven to be true over the last few years. Research firm Magna Global found in a study they conducted that 83% of consumers are willing to share data - such as retail preferences, location, age, and marital status - to access discounted or personalised services. In addition, McKinsey reports that 80% of consumers want personalisation from retailers, which is a lesson the D2C sector could learn using customer data. Using quality customer data, D2C brands can build stronger relationships with customers, based on their personal preferences, when it comes to new product launches, sales, returns and delivery, and more. D2C can also optimise pricing and product assortment, as well as help brands understand the customer journey online. Hire the right talent Finding and retaining quality talent will be key to achieving long-term D2C success. From branding to e-commerce to digital to customer experience (CX/UX), having professionals and experts in these arenas is a non-negotiable point. Firstly, companies can look to see who, in the team, has the knowledge, credentials and skills to push forward the D2C agenda while offering them leadership positions or promotions. Another way to secure strong talent is to acquire professionals from existing scale-ups that have shown to be strong competitors in the market. First-party data and underserved niche markets will be D2C’s best friends in 2023 Over the last three years since D2C experienced its most growth, we’ve been pleasantly surprised at the sector’s resilience, considering it is up against e-retailer and marketplace behemoths like Amazon, eBay, Bol.com, Walmart, and Target, as well as social commerce marketplaces under the Meta title. Both brands and consumers have shown an almost stubborn competitiveness in forging their own way within retail and e-commerce. However, 2023 will not come without its challenges for D2C brands: Gaining and implementing strategies with first-party customer data will become more vital for growth while Apple and government regulators work to make third-party data a thing of the past. In addition, as the competition increases within D2C, brands will have to find ways to rise above the fray to stand out. In categories like skincare, beauty, or sports apparel where mostly established brands own the customer, new and emerging D2C brands should grab underserved niche markets by the horns.
D2C in 2023: What we predict and recommend for brands02.02.2023
Design Infringement in Fashion: A Growing Concern for Brands
The line between creative inspiration and infringement can be thin, dotted, or invisible at times. This was one of the lessons that Adidas had to learn this month when it lost its $8 million lawsuit against American...
The line between creative inspiration and infringement can be thin, dotted, or invisible at times. This was one of the lessons that Adidas had to learn this month when it lost its $8 million lawsuit against American fashion label Thom Browne over the use of parallel stripes in their designs. The German sportswear giant, who filed the lawsuit in 2021 saying that Thom Browne’s use of the stripes infringed on their trademark logo, believed that the use of the striped design was “confusingly similar” to the one presented in their logo. In 2020, global fashion brand Zara was sued by a smaller luxury label, Amiri, for copying a design of jeans without permission to use the design that included pleated leather panelling and zippers around the knee; after which the two brands decided to settle. And, more recently, French luxury brand Hermes has sued NFT artist Mason Rothschild for creating and selling NFT digital images of their famous Birkin bag, saying that the name of his work, entitled “MetaBirkin”, appropriated the Birkin trademark. At the crux of these lawsuits, along with many others, is a conundrum of creative expression, trade infringement, artistic licence and consumer confusion that affects D2C brands both small and large. As the fashion category within retail is so often pushed forward by something as ambiguous as creative expression, is there a defined lane that brands must stay inside of to avoid causing a fashion collision? Are fashion and beauty brands blurring into a homogenous cauldron of shared creativity? Do fast-fashion brands like SHEIN, Revolve, H&M and Zara get away with copycat behaviour because of their overall size and influence in e-commerce? Copyright and intellectual property laws may favour fast-fashion giants “Designers could not claim protection for any and all sweaters simply because they happen to make sweaters. But they can copyright the creative aspects of their work that make it different from the norm, such as a unique pattern,” says lawyer and Editor-in-Chief of The Fashion Law Julie Zerbo. “The reality is, in most cases, it's perfectly legal to knock off a dress design,” says Zerbo, which is why Amiri’s case against Zara resulted in being settled out of court as Zara made the case that the skinny jeans were “generic, ornamental and not distinctive” enough for Amiri to act on protectable trade dress rights, according to their legal representatives. In a similar instance, Nigerian designer Elyon Adebe found a replica of one of her crochet sweaters on SHEIN, the Chinese fashion brand that is the most-installed shopping app in the US; which seems to have copied the design and the colour scheme. The handmade garment was priced at $330 while the sweater on the e-commerce giant was priced at $17, catering to the Generation Z (aged 11 - 26) market that has largely contributed to SHEIN’s success. The copied sweater was removed from SHEIN’s website after Adebe posted about it on social media. The fact that many fast fashion behemoths are able to infringe, borrow or take inspiration from smaller D2C brands without much financial or social recourse leans toward a point made by Eleanor Rockett, author of the academic paper “Trashion: An Analysis of Intellectual Property Protection for the Fast Fashion Industry” published for the University of Plymouth, who said fashion is an industry “with copying at its heart” but further thickens the grey area when saying, “Intellectual property protection must strike the appropriate balance between inspiring innovation and restricting imitation.” She also references a theory that suggests copying spurs on innovation instead of stifling it, by saying that the more a trend or design goes viral, the faster it becomes irrelevant, in turn making for ripe conditions for more design innovation. European copyright law offers wider protections than in the US Rockett states how lax the intellectual property laws are in the US, which is supported by Zerbo’s thoughts above, and that the openness of them actually encourages copying and hastening the fashion cycle so that new designs can be made. In Europe, however, the requirements needed to be protected by copyright law offer far more coverage in the sense that there are only two requirements to meet: The design’s originality. It must be proven it is the creator’s own intellectual property The design must have the ability to be expressed in an exact and objective manner by an individual American law only offers protection if there are distinguishable features on the garment while European copyright law gives brands and designers wider protection. For example, in 1994, French luxury label Yves Saint Laurent (YSL) sued Ralph Lauren for copyright infringement. YSL’s dress was black, full-length, made of silk, had gold buttons, no pockets and a narrow lapel. The Ralph Lauren dress was black, full-length, made of wool, had black buttons, included pockets, and a wide lapel. YSL still won despite the dresses in question having unique characteristics, and took home €323,000. Find out more about how Omnia can help brands with price monitoring. Read more Are fashion and beauty brands blurring into a homogenous cauldron of shared originality? Shared originality - something that can’t quite technically exist but is tending to spread within fashion and beauty retail. Just this week, Nike sued Lululemon for patent infringement, accusing Lululemon of using some of Nike’s flyknit technology in their lifestyle sneakers. Although both brands produce sportswear and lifestyle shoes and clothing, their markets, branding, identity, ethos and marketing strategies are completely different; however, something that used to be a uniquely Nike product is now - kind of - Lululemons too. In addition, prior to this, Lululemon did not include any shoes as a part of their offering, making the fly knit look-alike their first venture into offering sneakers. In the past, Adidas has been accused of using fly knit technology in their Primeknit shoes too, adding fuel to the fire that proprietary designs and formulas that are used, borrowed or outright stolen make for a market that lacks individuality. While the shoes may not look similar, it is the fly knit technology patented by Nike in 2013 that Lululemonhas allegedly infringed upon, which is a knitted textile used in Nike's running shoes. Credit: @lululemon Instagram Credit: @Nikerunning Instagram Eventually, will everything look the same to consumers? Because branded items are losing their distinctiveness, consumers may opt for an item that looks similar to one they truly want, but is cheaper, thus increasing the competition within pricing. Brands are now not only competing on a product level, but on a pricing level because said products are becoming homogenised. The same can be said within beauty which has seen an explosion in market saturation in the last five years. If Chanel and MAC release liquid concealers within just a few months of one another that both offer pore-blurring technology, the product is no longer bespoke and the consumer can begin to choose a winning product on a price level, pushing forward the snowball effect that stepping on another brand’s proprietary technology only leads to a price war in the market. Although brand individuality is blurring, consumers can enjoy the unintended benefits When it comes to pricing, it works in the consumer’s favour when brands with similar products compete; keeping prices steady for shoppers. If there was no competition in pricing, there would only be monopolies; stifling opportunity and competition for new, smaller brands. When Andrea Saks from “The Devil Wears Prada” was on the receiving end of a scathing monologue from Miranda Priestley, played by Meryl Streep, for making a snarky comment about high-end fashion, she learnt that the “lumpy blue sweater” she was wearing wasn’t an exemption from the fashion industry, but very much a cog in the machine of it. Priestley's point was that fashion is not only cyclical, but shared, easily influenced and even more influential. Fashion is an industry full of brands and trends that either intentionally or unintentionally step on each other’s toes when it comes to designs, formulas or technology; all in the name of attracting and holding consumer demand. This is not to say that trademarks are up for grabs, and brands have the right to protect what they have built. Ultimately, the consumer must decide how they go about navigating the flock of brands that are all starting to look like doves and this is at times where dynamic pricing for D2C brands plays the biggest role for the consumer.
Design Infringement in Fashion: A Growing Concern for Brands31.01.2023
The Evolution of the Beauty Industry in 2023 and Beyond
Consumers who enjoy shopping from the beauty category have long been used to two main pillars to choose from: Luxury brands like Dior or Yves Saint Laurent, and drug store brands like Revlon, Essence and Catrice which...
Consumers who enjoy shopping from the beauty category have long been used to two main pillars to choose from: Luxury brands like Dior or Yves Saint Laurent, and drug store brands like Revlon, Essence and Catrice which are found in pharmacies. Recently, a third pillar, made up of new-age makeup and skincare companies such as Drunk Elephant or Fenty Skin, has arisen and shown intimidating potential to the status quo within beauty. However, alongside the wave of new beauty brands aiming to disrupt the industry with reformed ingredients and packaging policies, there has also been an increase in the number of famous actors, singers and social media influencers who have released beauty products and skincare lines, overwhelming the industry as a whole. It begs the question of if there is enough space for all of them to thrive. It also takes us to another point: Do we really need another celebrity beauty product? How are these new beauty brands different? And, are long-standing luxury brands affected by the hype about indie brands? Here is a look at how the world of beauty is doing in 2023 and beyond. The rise of celebrity and “Instagram” beauty brands For decades, the only association celebrities or supermodels had with makeup or skincare brands was the fact that they were the face of it: Kate Moss for Rimmel; Cindy Crawford for Revlon; or Beyonce for Neutrogena. Nonetheless, there was a defining knowledge amongst consumers that this was not their personal brand but simply an endorsement. Since around 2015, however, the rise of brands created and owned by celebrities include ranges from Kylie Jenner, Rihanna, Selena Gomez, Ariana Grande, Kim Kardashian, Jennifer Lopez, Victoria Beckham, Pharrell Williams, Kate Moss, Scarlett Johansson, Hailey Bieber and now even Brad Pitt and Travis Barker have entered the field. With a revenue industry expected to be $571 billion in 2023, endorsements and campaigns are no longer what celebrities want - they’re more interested in owning a piece of the billion-dollar pie that industry leaders like Kylie Cosmetics, valued at $1.2 billion, and Rihanna’s Fenty Beauty, valued at $1.4 billion, have managed to gain. Charlotte Palermino, a qualified esthetician and the co-founder and CEO of Dieux, a US skincare brand founded in 2020 that focuses heavily on sustainable ingredients and packaging, says, “It feels like there is almost no thought to the execution but that the main goal is to simply make money,” in reference to the haul of celebrity beauty brands. This trend has coincided with the growth of platforms like Instagram and TikTok that make for well-oiled machines that directly reach millions of consumers each minute of the day. The Instagram account for Fenty Beauty received more than 45 million engagements (likes, comments, shares) on its posts in the year of 2021 while the account for Kylie Cosmetics received over 64 million. And, remember, this is just one of the many social media platforms that celebrities are using to attract a loyal fan base for growth and revenue. Instead of paying for an expensive TV advert to run during prime time viewing, celebrities simply photograph, film and post from their personal and branded Instagram and TikTok profiles, which is not only essentially free to create but allows the everyday consumer into the lives and beauty routines of the ultra famous. For celebrities, this combination has catapulted their brands into the same stratosphere that long-time brands like Covergirl and L'oreal have existed in for decades in a short period of time. An Instagram beauty brand is not the same as selling on Instagram When we talk about Instagram beauty brands, we’re not simply referring to brands that are sold on the platform. Beauty has experienced a radical surge in new brands being born out of the Instagram era which means aesthetics, beautiful packaging, and even font selection are vital to the virality of a product. Instagram beauty brands are minimalistic, sleek, and colour-coordinated, with a focus on not trying too hard to impress. In addition, how strategic a brand is with their Instagram feed layout adds to the virality and legitimacy of it. Instagram brands have a larger focus on being photogenic so that consumers will want to follow and mimic their page, and ultimately buy their product. There is also a stronger focus on connecting to consumers on a deeper level by posting user-generated reels and tutorials to show how the product can be used by anyone at home. We see here how Fenty Skin, which is part of Fenty Beauty, uses a minimalistic design for the packaging and sticks to a particular colour scheme in their content strategy. Above is Beauty of Joseon, a Korean beauty brand that gained rapid popularity on Instagram between 2020 - 2022 thanks to its simplistic branding and cleanly-curated feed. Here we see Rhode, the skincare line from Hailey Bieber, which remains true to the ‘Instagram brand’ philosophy of uncluttered packaging, post-worthy selfies and lifestyle shots, a modern font, and a dedicated colour scheme. What new beauty brands are trying to get right Clean Beauty For decades, established beauty powerhouses have made little to no effort to improve their sustainability efforts and to answer questions on their animal testing policies. However, in the last five years, the trend of “clean beauty” has skyrocketed like a bullet out of a gun, forcing older beauty houses to contend with new, indie brands that make clean beauty central to their identity, marketing and long-term strategy. To be clear, clean beauty refers to products that are cruelty-free, vegan, sustainably made, and with ingredients that are safe for you and the environment. Beyond that, clean beauty may involve excluding ingredients like fragrance which can be irritating to the skin, as well as toxic ingredients that may be carcinogenic. Sustainable Production and Packaging Outside of the bottle, sustainability within packaging is a large focus for indie brands. However, it’s not as simple as ensuring your packaging is plastic-free or recyclable. Indie beauty brand leaders constantly have to walk the tightrope of creating a product that not only does what it claims to do, but remains within a respectable price range for consumers, all while having to factor in the cost of eco-friendly and ethical production processes, delivery, and packaging. Despite these challenges, new-age beauty brands have much stronger policies on eco-conscious packaging, using materials like paper, glass, airless packaging, and aluminium, compared to the global behemoths that have dominated beauty practices for the last century. Sustainability as a core element of a brand’s identity has also become essential to consumers, as a THG Ingenuity study shows that 74% of consumers are willing to pay for more for a skincare product that has sustainable packaging. Direct to consumer In 2023, the total amount of online sales completed in the beauty and personal care market is estimated to be 27%, and is expected to increase to 33% in 2025. Of that, 63% of online purchases will be done via a smartphone instead of a laptop by the same year. With this growth rate, more consumers are choosing to engage with a brand directly instead of heading to a large beauty retailer. It is no surprise, then, that most new-age beauty brands have started out with a D2C ecommerce-only model before even considering moving to brick-and-mortar retailers. They have bypassed the traditional ways brands would typically get lift-off within a market by recreating the rules for themselves. In this sense, D2C brands can receive first-hand data on what their shoppers like and dislike; they can pick up the pain points of the online shopping journey; and they have full control over their packaging and delivery practices. Should luxury brands be worried? Luxury brands have seen fads within beauty before when every celebrity from Britney Spears to Jennifer Lopez had their own fragrance in the early 2000’s, however, this trend was premised on a cultural obsession with celebrities, supermodels, tabloids and their lifestyles. In 2023, things are different: Two key factors for a successful beauty or skincare brand are transparency and authenticity. Actor Jared Leto told Vogue Magazine that he “has never been interested in beauty products,” and then released a body care line with 12 products. With new celebrity brands popping up at least once a month, consumers end up feeling overwhelmed, confused and frustrated facing a saturated market. As the up-and-down hype of a new celebrity brand comes and goes, consumers will want to turn to something trustworthy and made of quality, and this is where luxury brands have a chance to shine by reaffirming their relationship with consumers. Regarding indie brands such as Drunk Elephant, Dieux, Glow Recipe and The Ordinary, luxury brands may have to step up their efforts to be more sustainable and transparent about their production processes, who make up their C-Suite, how their packaging is made and more. For the most part, luxury brands have thrived on having an air of mystery and exclusivity about them which may no longer work for younger consumers. The more transparent you are as a brand, the more millennials and Gen Z shoppers, who make up the bulk of the consumer pool, will trust you.
The Evolution of the Beauty Industry in 2023 and Beyond26.01.2023
Meet the Team: Jolene Ekuam
Name: Jolene Ekuam Company Role: Junior Consultant --- What do you do at Omnia Retail? I am undertaking the traineeship program at Omnia. Currently I am part of the sales team, working as a business development...
Name: Jolene Ekuam Company Role: Junior Consultant --- What do you do at Omnia Retail? I am undertaking the traineeship program at Omnia. Currently I am part of the sales team, working as a business development representative. My day to day responsibilities involve vetting the leads that we receive from our marketing team's efforts and generating new business from right fit prospects. What is something people in your industry have to deal with that you want to fix? I feel quite strongly about the topic of closing the gender gap in Tech. Future solutions are being developed by tech businesses, which are progressively influencing the course of humanity. The issue is that there are not enough women in these positions, especially in senior leadership positions, which poses a threat to exclude half of the world's population from discussions that will determine our shared destiny. I hope to one day influence and encourage young women like myself to venture into the tech industry. What is your past experience, of working in your position? My educational background is in economics and management, I graduated with a Bachelor in Business from Monash University in South Africa. Thereafter I moved to the Netherlands and pursued my Master studies at the Maastricht School of Management. Alongside my studies, I also did an internship at a health-tech startup based in Delft. What do you like about working at Omnia Retail so far? I really like the company culture and my colleagues at Omnia. We are a very diverse bunch and we embrace each other's diversity. I enjoy the flexible work arrangement whereby one can choose whether to work from home or from our office at Amstel. What are the values that drive you? Empathy, Self-reflection, Integrity and Loyalty What are your top favorite books, podcasts, or documentaries? Books: Martha Beck – The Way of Integrity Podcast: Oprah's ‘Super Soul’ podcast (for inspiration) & Adelle Onyango’s ‘Legally clueless’ (for relatability and a good laugh) Documentary: Beyonce's Homecoming (this interview would not be complete if I did not find a way to include Queen B!) What do you enjoy doing when you are not working? I love seeing and experiencing new things, I love to travel and explore new places and meet new faces. I am always open to trying out new activities or new cuisines whenever I can. I love to experiment in the kitchen with different recipes and soon I hope to start taking acting classes which I used to love when I was younger. Let’s end with your favorite quote! “Knowledge has to be improved, challenged and increased constantly, or it vanishes.” - Peter Drucker.
Meet the Team: Jolene Ekuam26.01.2023
Meet the Team: Yuqiang Liu
Name: Yuqiang Liu Company Role: Backend Developer --- What do you do at Omnia Retail? The team and I maintain the retrieving process of offers from web, ensure stability and accuracy. What is something people in your...
Name: Yuqiang Liu Company Role: Backend Developer --- What do you do at Omnia Retail? The team and I maintain the retrieving process of offers from web, ensure stability and accuracy. What is something people in your industry have to deal with that you want to fix? It will help reduce communication cost to have up-to-date visualized structures of projects, microservices, pipeline automations, etc. Graphviz is strongly recommended What do you like about working at Omnia Retail so far? Besides interesting and challenging work, I like the great people here and the culture of free-to-be-you-and-me. Not only friendly and welcoming, I also feel close like family. What are the values that drive you? Becoming a better me every day. What are your top favorite books, podcasts, or documentaries? 1984 – George Orwell The unbearable lightness of being – Milan Kundera The little prince – Antoine de Saint-Exupéry What do you enjoy doing when you are not working? Cycling., the passion I have found again in Omnia. Encouraged by other cycling lovers in Omnia, I’m going to participate in a bike marathon this year, over 200 km. Yeah, good luck to me :-) Let’s end with your favorite quote! “Plato is dear to me, but dearer still is truth.” – Aristotle
Meet the Team: Yuqiang Liu23.01.2023
What is Price Skimming?
Price skimming is a pricing strategy that can facilitate a higher return on early investments, influence the branding and appeal of a product, and allow a brand to target specific segments of a given market. Brands use...
Price skimming is a pricing strategy that can facilitate a higher return on early investments, influence the branding and appeal of a product, and allow a brand to target specific segments of a given market. Brands use price skimming to optimize revenue and margin across the lifecycle of a product, skimming off market segments. Furthermore, it helps maintain a better ROI regarding research and product development. Customers who are most loyal or seek premium products are more likely to pay top price. The subsequent skimming allows lower price points to attract the rest of the market. In this guide, you’ll learn: What is price skimming? Price skimming strategy Price skimming vs penetration pricing What are the advantages and disadvantages of price skimming? Ways to compete against predatory pricing and gain e-commerce sales What is Price Skimming? Price skimming is a pricing strategy often related to innovative and high-demand products. Brands set a high price ceiling for new products due to market analysis and consumer demand. The top layer of loyal customers buy at high prices. A retailer then pivots to accommodate new layers of consumers by slowly lowering the price over time. Retailers continue in skimming pricing until it levels-off at a base price. Retailers initially set prices high due to demand and then slowly “skim” the price down as the novelty of the product decreases and accessibility to it increases. Samsung uses price skimming strategy in regards to its mobile phones. When customer demand is high due to a new release, the price is set to attract the most revenue. After the initial fervor and hype wanes, Samsung adjusts price points to suit more consumers in the market. Samsung initially leverages price skimming to take market attention and share away from their main rivals. For example their Galaxy phones were priced to take share away from the iPhone. Price Skimming Strategy Price skimming involves targeting top-level consumers, those who buy at premium prices. Lowering price ensures a brand aligns price points with more customers. Nike, a serial manufacturer and retailer of shoes and clothing, applies price skimming to popular trainer releases. This is done by charging premium prices for new products and limited releases. Brand’s at the top of their market like Nike, have no trouble setting prices high. High prices are warranted by the demand for its trainers and loyalty to the Nike brand. Months after a release, Nike lowers prices to accommodate more layers or subsets of customers, those who are more willing to buy the product at a sales price. The dynamic between online and offline sales adds another layer of strategy. Retailers need to align in-store and online prices, for the Ropo Effect (research online buy offline) may increase in-store sales. Price Skimming vs Penetration Pricing Successful retailers remain agile regarding pricing strategy, for setting prices low or high can be fortuitous. Price skimming and penetration pricing differ in application despite being equally useful. Penetration pricing involves setting a lower price point as compared to market competitors. It allows a brand to gain exposure in a crowded market, quickly gaining market share via consumers looking for sales prices. Penetration pricing also helps attract new users, introduces brands to a market, competes with market leaders, and helps in acquiring market share. Often, the strategy is paired with price monitoring software for optimal timing and performance. Related Reading: Why Price Is the Most Important P Price Skimming Advantages 1 - Supply and Demand & ROI Premier products necessitate preparation and early investment. High price points in combination with low supply, for example the introduction of the PS5, helps recuperate earlier investments and ensures an overall better ROI. As the products availability increases over time you would then expect to see the price decrease as the demand decreases. For example, Apple invests a lot of money into technology and research. That warrants the premium pricing of its iPhones. The high prices akin to price skimming allows Apple to reinvest the higher return on investments back into the brand, which helps strengthen its branding. 2 - Brand Image “Sneakerheads” may pay more than 10x the retail price for a pair of popular trainers. Ownership equals prestige, novelty, and limited accessibility to them. Price skimming inspires consumer feelings and behavior that sculpts a brand’s image. The Adidas brand’s Predator football boot has gone through many iterations over the years due to its popularity. The soccer boot was first introduced in 1994. Last year, Adidas released the Predator 20. 3 - Market Analysis Retailers celebrate price skimming because it segments customers for deeper market analysis. Skimming allows marketers to segment customers into groups. Analysing what percentage of a given market paid premium prices is useful information to use for future products and pricing strategy. At the moment, Sony may consider price skimming in regards to its PlayStation 5. Early adopters and brand fanatics gladly paid premier prices for Sony’s newest release. However, data reflects a trend. Sony lowered the price of its previous PlayStation products over time. Sony sold more PlayStation 4 consoles in the third and fourth year after its release than the first two years on the market. It’s likely that Sony, observing a rising trend in gaming combined with its previous sales data of PlayStation consoles, initiated a price skimming strategy. (Source: https://camelcamelcamel.com/PlayStation-4-Console/product/B00BGA9WK2) Related Reading: Amazon Success Strategies 4 - Pricing Strategy Price skimming is an element of a larger pricing strategy. Some brands leverage price skimming for ROI and market analysis, but skimming price can be beneficial as a way to further inform a brand’s broader price strategy. For example, Nike had very modest sales goals in mind upon releasing the very first Air Jordan trainers. At the time, a “sneakerhead” or the thought of paying hundreds of dollars for a pair of trainers were nonexistent. The subsequent cycle of setting premium prices for new releases followed by loyal customer purchases created Nike’s brand mystique. Price Skimming Disadvantages 1 - Pricing Objectives Price skimming recuperates early investments and creates a mystique around a product or brand. But, it can potentially alienate early adopters too. Emotional appeal can help or hinder a brand. Lowering the price of a previously high-priced item may irritate early adopters. The lowered price affects early adopters, and it also means that more people are likely to own a product. That lessens its sense of prestige and exclusivity. Consider long and short-term goals along with possible reactions from loyal customers. In 2007, the price of that year’s must-have gadget, the iPhone, was lowered from $599 to $399. This enraged early adopters to the point that Steve Jobs had to make a public apology and offered $100 Apple store credit to any iPhone owner who felt “cheated.” Related Reading: How to Build a Pricing Strategy 2 - Reality Check Price skimming is an incredible pricing strategy available to those offering high-demand products. Luxury brands, like Gucci and Louis Vuitton, command high prices for its highly sought clothing and accessories. These brands are at an advantage in having more leverage in setting high prices that rarely come down. A major disadvantage of price skimming is that many brands don’t have the ability to implement it. However, Dynamic Pricing software delivers the data to make real-time pricing decisions a lot easier. 3 - Relative Competition The decision to wage price skimming is often relative to a retailer’s competition. Setting prices high can inspire customers to buy from competitors. Price changes rarely go unnoticed by the competition! Consider launch prices related to Xbox and Playstation products: Annually, Xbox and PlayStation are compared. And, price is always a main focus. Any pricing maneuver from Sony is sure to be closely monitored and countered by Microsoft (and vice versa) for years to come. Utilizing retail tools, such as Pricewatch, enables you to get real-time data pulled from a competitor’s website as well as shopping search engines. Conclusion Price skimming is another tool retailers leverage to gain market share and crush competitors. Used in combination with sophisticated pricing software, skimming prices can be tremendously advantageous. Recover a greater return on initial investment, position products to attract premier buyers, gain greater awareness regarding customer segmentation, and use data to inform future pricing strategies. Curious to learn about some other pricing strategies? Check out some of our other articles below. What is Value Based Pricing?: A full overview of how price and consumer perception works together. What is Charm Pricing?: A short introduction to a fun pricing method What is Penetration Pricing?: A guide on how to get noticed when first entering a new market What is Odd Even Pricing?: An explanation of the psychology behind different numbers in a price. What is Bundle Pricing?: Learn more about the benefits of a bundle pricing strategy What is Cost Plus Pricing?: In this article, we’ll cover cost-plus pricing and show you when it makes sense to use this strategy. Here’s What You Need to Know About Psychological Pricing (Plus 3 Strategies to Help You Succeed): Modern day pricing is so much more than a numbers game. When thought about correctly, it’s a powerful way to build your brand and drive more profits. How to Build a Pricing Strategy: A complete guide on how to build a pricing strategy from Omnia partner Johan Maessen, owner of Commercieel Verbeteren.
What is Price Skimming?18.01.2023
Amazon layoffs: Tech and retail contend with a post-pandemic slump
During the peak of Covid-19, businesses around the world experienced the toll of the pandemic with either sky-rocketing growth or heartbreaking closures. The structure of national lockdowns and social restrictions meant...
During the peak of Covid-19, businesses around the world experienced the toll of the pandemic with either sky-rocketing growth or heartbreaking closures. The structure of national lockdowns and social restrictions meant that businesses, especially in retail, that had a primarily online business model thrived, gaining in revenue and hiring staff to meet their new demands. By early 2022 in the US, e-commerce transactions, as a whole, increased by 55% during the pandemic, increasing spending by $609 billion. Online businesses, marketplaces and web shops on the receiving end of this were growing exponentially and it seemed like this trend would continue upwards as economies recovered and social restrictions eased. However, by the end of 2022, reports of successful businesses having to downsize or close became more common, and by the first week of January 2023, e-commerce’s biggest name, Amazon, announced 18,000 planned job cuts. It would be the largest in Amazon’s history. Leading up to this, Bed Bath & Beyond had been experiencing disappointing sales and layoffs in 2022, culminating in 120 store closures published by the retailer by the second week of 2023. Meta, Facebook and Instagram’s parent company, cut 11,000 jobs in November last year, which was the first time the company has had to do so in 18 years. What has caused these closures and layoffs? How did businesses not gauge growth with caution? What can e-commerce stores and D2C brands do to curtail similar outcomes? Omnia looks to answer these questions and more. Hypergrowth was employed to meet demand Facebook, TikTok and Instagram are not traditional retailers and they’re certainly not brick-and-mortar stores. However, it would be naive for any e-commerce player or marketplace to ignore their growing place in retail. As social commerce leaders, billions are being spent by consumers who are purchasing items directly from these apps as Forbes predicts that social commerce is growing faster than e-commerce to reach a value of $1.2 trillion by 2025. From 2020 - 2021, Meta platforms experienced more usage than ever as stuck-at-home consumers scrolled endlessly to try to pass the time, with Facebook increasing users by 11.8% from 2019 - 2021 and TikTok by a large 85% in the US in 2020 alone. On Facebook and Instagram combined, global ad spend increased by 50% from 2020 - 2021, with the e-commerce category seeing an ad spend increase by 41%, beauty by 40% and fashion by 95%. More people on the platforms meant more spending was being done through in-app shops which ultimately led D2C brands to hurryingly increase their marketing budget for social commerce. With this snowball of growth, it is no shock to hear that Meta confidently hired 10,000 new employees in 2020 alone to meet heightened demand, only to have to cut 11,000 employees just three years later. The same can be said for Amazon. By November 2020, the e-commerce giant had hired 427,300 new employees around the world in just 10 months, averaging 1,400 per day. The jump from 2019 to 2020 alone was a 50% increase, seeing positions from warehouse workers to software engineers increasing in their thousands. Fast forward to January 2023 and the departments affected most by the layoffs will be retail operations, devices business and recruitment, as reported by the Wall Street Journal. Other companies like Shopify laid off approximately 1,000 employees in the second half of 2022. Stitch Fix, a personal shopping and styling service, reported this month that 20% of its workforce would be cut after experiencing a boom during the pandemic as more consumers shopped for clothes online, which resulted in a struggle to maintain the same sales growth. Source: Statista As depicted by the above graph, we see within “retail" that 2021 only saw 288 layoffs worldwide while 2022 saw 19,311. Within “consumer”, 2021 saw only 3,600 job reductions while 2022 saw 19,691. Optimism and overconfident projections As this trend moves across retail, e-commerce and tech, it begs the question: There have been many periods of surging growth and demand in the past. Why was growth not gauged with more caution and planning? Was the train moving too fast? Some could suggest that just as unexpected as the growth and demand within e-commerce in 2020 and 2021 was, so was the impact of global supply chain blockages and soaring inflation. No analyst or economist could’ve predicted a war between Russia and Ukraine, resulting in the highest food and energy costs in decades. And, no one person could’ve seen just how versatile the consumer would be in responding to record-high living costs by changing brands or retailers or cutting out certain luxuries. In statements released by their respective CEOs, Facebook and Shopify both said their accelerated approach in 2020-2021 was based on the thought that this trend would simply continue after the pandemic became old news. Stripe, an internet payment processing platform that cut 14% of its workforce in November 2022, attributed the rise and fall to “too much optimism”. Speaking to the Washington Post, analytics firm Insider Intelligence says, “Everyone kind of bought into the myth that e-commerce is going to permanently accelerate. But in order for that to happen, you have to have a fundamental change in behaviour that’s going to be sustained into the future. And the reality is e-commerce kind of consistently grows for years and years and years at about 15 percent a year, plus or minus a couple of percentage points.” Attributed to the pandemic recovery and high living costs, another reason retail and e-commerce are feeling the pinch is that consumer behaviour is changing - yet again - to keep up with a changing world. “We’ve seen consumers just want to be out. They want to be in the stores, they want to shop, they want to touch, they want to try on - that whole experience. And so we’ve seen the online purchases normalise and pull back from the highs of where they were in 2020,” says Wells Fargo Capital Finance. Layoffs, as an approach to gain back market share Professor Jeffrey Pfeffer from the Stanford Graduate School of Business shares that layoffs are not a winning strategy to improve company performance, and that there is a plethora of evidence that shows this. “The tech industry layoffs are basically an instance of social contagion, in which companies imitate what others are doing. If you look for reasons for why companies do layoffs, the reason is that everybody else is doing it,” he says. Although Prof. Pfeffer agrees that Facebook and Amazon did indeed overhire and that there was a “bubble in valuations”, layoffs as a solution don't increase productivity or stock prices, and are often the result of “an ineffective strategy, a loss of market share, or too little revenue”. Here are some ways in which retail leaders can avoid layoffs while still providing relief to expenses: Consider implementing a company-wide salary decrease of 10% while senior management takes 20%. In this sense, everyone in the company gets a small percentage of the problem instead of a part of the company getting 100% of the problem. Temporarily postpone bonuses and promotions Consider furloughing employees instead of outright layoffs Look at the company’s top performers and place them in teams that perform averagely. Studies show that placing a top performer in a team can boost team output between 5-15%. Offer employees fewer or flexible hours which may result in them earning less, however, they may want to prioritise other areas of life any how Remain strategically cautious - even when it’s easy not to be The trend of obscene growth followed by unprecedented closures and layoffs is becoming more common as e-commerce and retail navigate an industry - and a consumer - that’s always changing. If even the biggest companies in the world are capable of making overprojections, retailers, marketplaces and D2C e-commerce brands should heed the call to remain calm and cautious amongst accelerated growth, even when it is easy to be overconfident about future growth.
Amazon layoffs: Tech and retail contend with a post-pandemic slump11.01.2023
Analysis: Prices on Zalando drop by up to 23% over Black Friday
Despite slow performance expectations for Black Friday 2022, retailers and marketplaces around the globe proved once again how well a shopping event like Black Friday can do - even in the face of record-breaking...
Despite slow performance expectations for Black Friday 2022, retailers and marketplaces around the globe proved once again how well a shopping event like Black Friday can do - even in the face of record-breaking inflation, energy and food costs. The small and medium tech and domestic products categories, such as TVs, toasters and headphones, showed the largest price drops while consumers wanting to make good use of the discounts arrived in full force with their wallets in hand. Results in the US showed a 2.3% increase in online sales compared to 2021. In the Netherlands, data from credit card translations and online sales showed a 12% increase in purchases while spending increased overall by 30% in the week leading up to Black Friday. As an event, the most successful retailers and online marketplaces like Zalando have learned how to get the most out of consumers and their vendors using competitive pricing strategies. As Omnia works to provide critical data and information to our clients to better serve their pricing approach and to increase their knowledge of online marketplaces, we’ve taken a look at how Zalando, one of Europe’s biggest online marketplaces, managed its pricing on Black Friday 2022, as well as before and after. Zalando’s pricing before, during, and after Black Friday Our team analysed 10,000 product prices on Zalando across multiple vendors within various categories, however, with a specific date range surrounding Black Friday, which took place on 25 November. As shown below, Zalando’s prices increased by 8% in the three weeks leading up to Black Friday, starting on 25 October. Then, there is a significant price drop by 18% on the 17th, signalling the start of Black Friday week. The decrease in prices reached its highest amount with a drop to an average price level of 85.5 % on Sunday, 27 November. This means that prices have fallen by 23% (compared to a pre-Black Friday level of 108%) in just one week. After Cyber Monday, prices returned to pre-Black Friday numbers which were still higher than prices in October. Price Level on zalando.de over time, Source: Omnia Retail Data Price Level on zalando.de: For the analysis, the prices on the first day of the observation on 25 October mark the reference point (100%). From there our data shows that the price level (on average for all observed products) is increasing until 16 November. A turning point is 17 November: From a price level of 108%, the average price level dropped to 85.5%, which marks a relative drop of 23%. To win the Buy Box, price became the top driver for vendors We have observed additional dynamics in the price-change frequency over the Black Friday period which leads us to believe that Zalando implemented repricing strategies to create a stronger sense of competition for the Buy Box: In our methodology, a price-change ratio of 0% means that the price never changes A price-change ratio of 100% means that a price always changed at any observation time stamp (which was every 15 minutes). A price-change ratio of 1.5% meant that a price would change once per day. Over the Black Friday period, this ratio climbed to 7% on average, meaning that the price would not only change once every 24 hours, but it would change once every 5 hours. Source: Omnia Retail Data Usually, to win the Buy Box, the top driver has never been about price: Over the same observation period, 25% of products had a maximum of one vendor change in the Buy Box and 7.4% of products had no change at all despite 56% of these products showing price increases. Even in the three weeks leading up to Black Friday, the Buy Box owner never changed for 28% of all products. This shows that, historically, price is likely not the main driver for winning the Buy Box, however, during Black Friday, Zalando’s pricing strategies brought pricing to the forefront as a top factor, instigating lower prices and stiffer competition. In the graph below, one can see Zalando’s Black Friday pricing strategy at play: Source: Omnia Retail Data Outside of competition scenarios, the Buy Box is less about price and more about convenience If price is usually not the determining factor for winning the Buy Box, regardless of competition scenarios, what is? Speed of Delivery Our data suggest that delivery times are vital to remaining in the Buy Box. To win the Buy Box, a vendor must have a maximum delivery time period of four days, which becomes even less when the number of vendors per product increases. In other words, the more competition there is for a certain product, the more important convenience becomes for the vendor and ultimately the customer. Availability of Stock As seen below, the Buy Box change ratio when all products are available is at 2.1%. However, when products are unavailable up to 24 hours, the change ratio doubles to 4.09%, showing just how vital availability of stock is to winning the Buy Box. As a vendor, it is essential to have consistent levels of stock, otherwise your chances of losing the Buy Box is much higher. Source: Omnia Retail Data Unlike Amazon, Zalando leaves competitors wondering about their Buy Box strategy As an online marketplace, Zalando’s focus remains within the fashion market, attracting 48.5 million active customers across 25 European countries, earning a revenue of €10.5 billion in 2020. Zalando claims not to have a Buy Box like Amazon in an attempt to distance itself from the image of a platform where prices change within minutes due to the high competition among vendors: “We do not want to enable a price war. Therefore, only one vendor offers a product. If more vendors offer the same product, convenience decides who is listed on the platform. This is calculated by an algorithm on the basis of factors such as shipment speed, trustworthiness and return speed. There is no pressure on price to win any kind of Buy Box,” says Zalando’s VP of Direct to Consumer Carsten Keller. Nevertheless, as a marketplace, Zalando opens its platform to third-party sellers just like Amazon does. According to their website, 800+ partners are active in their partnership model entitled “Zalando Fulfilment Solutions”. This means that, in some cases, more than one retailer, including Zalando itself, is offering a product on the platform. And this, as the above statement indicates, leads to a situation where the platform has to decide which offer is listed and shown to the end consumer. Finally, this is where we can speak of a Buy Box offer similar to Amazon’s, as the principle of a product being offered by multiple vendors on the same platform is the same. If Zalando is not open about its Buy Box strategy, how can vendors benefit from Omnia’s services? A vendor selling on Zalando is able to retrieve all available data from the platform into Omnia’s software as a direct scraping source. As the website does not show competitor prices, the data will nevertheless be useful to run an internal data analysis shedding light on what pricing strategies can be useful on Zalando. With Zalando as data source, the retrieved data can be used within different sets of pricing rules. Vendors need to have a robust pricing strategy for Zalando In times of high spendings, such as over Black Friday and the Christmas festive season, vendors need to prioritise a number of factors, from stock levels to delivery times, as well as competitive-based pricing to make the best of their real estate on Zalando. As seen from the above data, price is not historically the most important factor for Zalando’s Buy Box, however, Black Friday 2022 proved that the marketplace is willing to adjust its commercial values to create an environment where lower prices will result in more spending.
Analysis: Prices on Zalando drop by up to 23% over Black Friday22.12.2022
Meet the Team: Melissa Castelyn
Name: Melissa Castelyn Company Role: Financial Controller --- What do you do at Omnia Retail? I am responsible for most of the operational work in the finance department. This stretches from debtors and creditors...
Name: Melissa Castelyn Company Role: Financial Controller --- What do you do at Omnia Retail? I am responsible for most of the operational work in the finance department. This stretches from debtors and creditors control to month-end closing, year-end closing, reporting, invoicing, payments and any other financial related items that the business needs. What is something people in your industry have to deal with that you want to fix? Finance work is historically quite manual, but with tools like PowerBI and Python, I believe the way finance departments run can be much more automated. I would like to find and implement these ways and tools that are available and transform the way finance works. I also feel strongly about mitigating mental-load in the workplace. There is a lot of research on how the way of work can affect your mental load, and in turn your stress levels. By using better ways of working, communication and task-management in departments and across whole businesses, this can be reduced significantly. There really are some brilliant schools of thought on this topic, as well as very innovative software and tools that can be used. What is your past experience, of working in your position? I am a South African Chartered Accountant (=bAcc degree+masters+3 years articles+board exams). My articles were completed at Africa’s biggest retailer, a corporate company called Shoprite Checkers. During those 3 years I moved through the whole company, seeing almost every department. I stayed on for another 3 years in various departments, after which I made the move to the Netherlands, starting off at a media start-up for 2 years before landing at Omnia. What do you like about working at Omnia Retail so far? The way of working and culture really makes it a great place to work. Everyone is given full trust from day one and this really creates a sense of ownership. I enjoy the freedom that we are given to be who we are and fulfil our roles in ways that work best for us as individuals. What are the values that drive you? Self-reflection, honesty, trust, loyalty, ingenuity. What are your top favorite books, podcasts, or documentaries? A fine balance - Rohinton Mistry Human Kind: A Hopeful history - Rutger Bregman Culture Map – Erin Meyer What do you enjoy doing when you are not working? I love travelling, especially to places by the sea, so that I can have a daily swim. When in Amsterdam, I enjoy a lot of yoga, dinners with friends, going to the theatre and live performances. I am also learning Spanish as an extra language and have weekly online tutor classes. Let’s end with your favorite quote! “If you think you are beaten, you are. If you think you dare not, you don’t. If you’d like to win, but you think you can’t, it’s almost certain you won’t. Life’s battles don’t always go to the stronger or faster man. But sooner or later, the man who wins is the man who thinks he can.” - Walter D. Wintle
Meet the Team: Melissa Castelyn22.12.2022
As we head into 2023, Omnia reflects on a successful year behind us
Like any good sports team, Omnia takes a look at its wins and losses that shaped the year. With the acquisition of Patagona in 2021, this year would be the first full year as a combined company, bringing challenges and...
Like any good sports team, Omnia takes a look at its wins and losses that shaped the year. With the acquisition of Patagona in 2021, this year would be the first full year as a combined company, bringing challenges and triumphs. As the team enjoys the festive season and cooler weather, Omnia takes a look at some of the milestones and goals achieved that made 2022 a successful year. In addition, we’ll be sharing some of our best performing thought leadership articles that helped solidify our name as leaders in pricing and retail knowledge in Europe. Team and customer events furthered our vision to be market leaders in pricing solutions In March, the team met in Darmstadt to reveal the new logo to the entire company. The new logo, which is a combination of the previous Omnia Retail and Patagona logos, represents the symbolic union of the two teams after Omnia acquired the company in 2021. Thereafter, everyone enjoyed a team bonding exercise at Climbing Forest Darmstadt. Customer events were of utmost importance in 2022 to deepen our relationship with our current customers; to answer any questions they may have, and to establish new business contacts. This year’s e-commerce events included sharing our new logo and stand design with the public and getting to know some new international fairs too. In June, Omnia Retail was in London for Shoptalk Europe, followed by Webwinkel Vakdagen in Utrecht at the end of the month, as well as K5 Future Conference in Berlin. In September, there was DMEXCO, which is a digital marketing expo and conference in Cologne, followed by the huge Hardware Fair in Cologne, where we have been partof the tailored e-commerce expo for two days. The event highlight of the year for Omnia was when we hosted our very own event, Price Points Live, which saw the best minds in pricing, consumer psychology, e-commerce, inflation, and sustainability in e-commerce come together to share their knowledge for our customers. Taking place in Amsterdam in October, it was a chance to provide our customers with detailed and quality knowledge to improve their businesses and teams. It was also the first time that the Amsterdam and Darmstadt customers were interacting and mingling together under the Omnia name. In addition, the event put us in the category of thought leaders who drive success with data, support and insights for our customers. Review the full video of the event here. The team welcomed new faces from six new countries in 2022 One of our core values is “free to be you and me”, which promotes diversity, inclusion, understanding and acceptance of all people, with no judgment based on gender, race, nationality or any other factor, which is why having team members from various backgrounds has always been important. By the end of 2022, Omnia totalled employees from 26 countries around the world, up from 20 in 2021. Females in line management positions also increased, growing to 27% in 2022 from 9% in the previous year. In addition, women in leadership positions increased to 33%, up from 17%. Customer feedback showed a positive experience Omnia received 10 new reviews on G2, one of the world’s most well-known aggregators for software services, with an average score 8.3 out of 10. Reviewing Omnia’s best articles for 2022 Our content team spent many hours and minutes researching trends and topics that would be helpful to our customers, as well as other entrepreneurs, retail leaders and those keen on expanding their knowledge in pricing. Here are our top 10 articles for 2022: The Strategies Behind Amazon’s Success Price: The Most Important P in the Marketing Mix Understanding and Using Market Penetration Strategies How Odd Even Pricing Helps You Utilize The Power of Psychology What is Bundle Pricing? For the Bicycle Industry, 2022 Creates a Continued Supply Chain Crisis How Pricing Influences the Consumer Decision Making Process Adjusting your Pricing Strategy to the Product Life Cycle Stage How Does Amazon’s Search Algorithm Work? What is MAP Pricing?
As we head into 2023, Omnia reflects on a successful year behind us22.12.2022
Meet the Team: Max Bäumer
Name: Max Bäumer Company Role: Team Lead Technical Support --- What do you do at Omnia Retail? I manage the Technical Support team. What is something people in your industry have to deal with that you want to fix?...
Name: Max Bäumer Company Role: Team Lead Technical Support --- What do you do at Omnia Retail? I manage the Technical Support team. What is something people in your industry have to deal with that you want to fix? Technical Support is usually the first contact point, when customers are facing issues. From time to time, customers are emotionally triggered during this conversation. In general this does not help solving the underlying issue faster, even worse, it affects us mentally aswell. In general, I would prefer when anyone in the industry is treated with the respect one would like to receive themselves. What is your past experience, of working in your position? Don’t really have any. I kind of tripped, fell and landed at Patagona (now Omnia). And now look where I am :) What do you like about working at Omnia Retail so far? The people are the most important part. Even after Covid forced most people into home office, the connection remained strong. I’m happy to call most people not only my coworkers, but actually friends. I think having this many foodies around, is only one of the reasons. Besides, I always enjoyed the freedom to try out new things and learn new skills. What are the values that drive you? Food and good sleep. Besides, perhaps respect, compassion / empathy and kindness. What are your top favorite books, podcasts, or documentaries? Eragon, Qualityland and The Kangaroo Chronicles. What do you enjoy doing when you are not working? Eating food big time and doing lots of sports because of the previous point. Let’s end with your favorite quote! “Hinten kackt die Ente” (My Dad)
Meet the Team: Max Bäumer19.12.2022
Festive season: Omnia sees chances for beverages market gains
Retail is experiencing a first this festive season: This is the first time in 92 years that the industry has had to contend with Black Friday, Christmas and a World Cup all at the same time. In addition, 2022’s...
Retail is experiencing a first this festive season: This is the first time in 92 years that the industry has had to contend with Black Friday, Christmas and a World Cup all at the same time. In addition, 2022’s Christmas period marks the first one with zero restrictions on alcohol and social gatherings since 2019. Typically, these three events lead consumers to spend more in various categories, from food to tech to alcohol, giving retail a much-loved boost. The festive season, which includes Christmas and New Year’s Eve, mostly sees alcohol sales increase over this period as friends and families host parties and dinners. The alcoholic drinks category saw $1,484 billion in revenue in 2022 and is expected to be valued at $393 billion by 2026. However, as unprecedented food and energy costs dominate household budgets and headlines this year, consumer spending and behaviour are changing faster than ever. Will shoppers be grabbing their favourite bottle of gin or red wine this Christmas? Are consumers turning to alternatives? What are the alcohol consumption trends as we enter 2023? We’re looking at this category in particular as the festive season continues. Christmas alcohol sales may get a boost from the FIFA World Cup Although alcohol sales may be banned at all stadiums in Qatar, the FIFA World Cup, which is the first World Cup taking place during Europe and the UK’s winter season, is propelling alcohol sales in some parts of the world. According to Pernod Ricard, which owns alcohol brands like Jameson and Absolut Vodka, found that 45% of consumers are eager to watch the football matches at home with friends and family, which boosts sales for domestic use. Jameson has created a football-themed campaign offering five unique bottles with different football shirts which will cater to the game’s biggest fans as well as those looking for gifts during the festive season. In the UK, the popular brand Westons Cider began off-shelf advertising and offering festive season promotions back in November to make use of the timing of the World Cup. Although retail is facing the overarching issue of high living costs as a deterrent for spending, alcohol sales are often a category that is little affected during tough economic times. Instead, shoppers tend to reduce spending in other areas while keeping items like beer, wine and spirits as a treat after long days or on weekends. What’s new and what’s changing in the alcoholic drinks market? Emerging economies in Asia added significantly to growth The Asia Pacific region (APAC), which includes China, has contributed the most to the drinks market’s growth, with revenue from China alone bringing in $319 billion in 2022. The APAC region, including many countries with emerging economies, saw steady growth from 2021-2022 despite the pandemic, while some developed economies saw a decline. Increasing levels of wealth and new market entrants are fueling this growth in Asia and the US. Niche categories show development The IWSR, which specialises in market analysis for alcohol in 157 countries, is seeing new trends and changes in the global drinks market with the growth of niche categories such as agave-based spirits, sugar-free tonics and aperitifs, non-alcoholic beer and gin, Japanese whiskey, flavoured gins, craft beer. These new entrants are diversifying each segment and are becoming appealing to new, younger buyers. E-commerce alcoholic-drinks sales are growing Between 2020 - 2025, beverage alcohol e-commerce is expected to grow in value by 66%. This is thanks to the impressive growth in omnichannel and pure player e-commerce channels that have sprung up in the last two years, including marketplace apps for home delivery, specialist marketplace web shops (such as a website offering wine from various vineyards and regions), and D2C online stores from brands. In Germany, the majority of online drinks sales is done via marketplaces and in second place, online specialists. In the Netherlands, the majority is omnichannel shopping, with online specialists coming in second too. Christmas may see an increase in low- or no-alcohol beverages IWSR reports that “moderation choices are driven by consumption occasions.” In other words, with events like Christmas and New Year’s Eve typically seeing consumers enjoy more alcoholic drinks on those days in particular, the increase in low- and no-alcohol drinks in the market will see an uptick this festive season. People who are hosting parties, dinners and other festive get-togethers, as well as attendees who don’t want to consume too much alcohol, will be enjoying low- or no-alcohol drinks. Alternatively, there will also be “blenders”, as described by IWSR, who will drink both non- and alcoholic drinks. There is always an opportunity to add value Taking into consideration record-high inflation as well as the increased cost of living, retailers and brands should heed the call to create value for customers. There are many opportunities now - combining Christmas, the World Cup and New Year’s Eve - for themed promotions, discounts, in-store experiences and advertising. If Christmas shopping is expected to decline by 3% in the six weeks leading up to the day compared to 2021, there is even more reason for retail leaders to look at where they can attract consumers and influence buying decisions, especially within a category like alcoholic beverages, which typically revels in popularity at this time of year.
Festive season: Omnia sees chances for beverages market gains08.12.2022
By 2023, 27% of a consumer’s cupboards will be made up of pre-owned items
When you think about all the times you received a gift that ended up in your storage cupboard for a few years, here’s a statistic that is sure to shock you: Each year, the UK spends approximately £700 million in...
When you think about all the times you received a gift that ended up in your storage cupboard for a few years, here’s a statistic that is sure to shock you: Each year, the UK spends approximately £700 million in unwanted gifts and about £42 million of that winds up in landfills. You may have thought about using that gift you received a few Christmases ago, but you can’t quite put your finger on when or how. Or, perhaps you’ve outgrown a beautiful leather bag from a previous season that’s collecting dust. Over the last decade, the resale market for pre-owned clothing and accessories has skyrocketed to levels that rival even the most popular of e-commerce stores. In Europe alone, the revenue for the resale market was €1.4 billion in 2021, with names like Depop, Vinted, Etsy, eBay and Vestiaire Collective becoming household names. In this article, we discuss who are the resale market’s biggest supporters, how the industry is growing globally, and why getting consumers to choose second hand is harder in the face of capitalism. More millennials are choosing second-hand gifts this season According to data collected by Trove, an e-commerce operating system for trade-in and resale platforms, 74% of millennials would receive a pre-owned gift and 64% would give one too. Considering that Millennials (ages 26 - 41 in 2022) contribute the most to global spending and economic growth, this shift in thinking and buying behaviour is interesting and optimistic to see. The resale market being powered by mostly Gen Z and Millennial consumers is not surprising since one of their main values when shopping from a particular brand is authenticity and identity. When a brand has a strong identity, it resonates better with younger shoppers, especially when they are open about their practices; who makes up their C-suite; and their efforts for inclusivity and sustainability. This comes from a desire to stand out instead of fit in, unlike older generations. Most pre-owned gifts are high-end bags that are in excellent condition; vintage watches, blazers or shoes; or retro sunglasses like the original RayBan wayfarers. Leather items, if taken care of, are also often seen as second hand gifts that are desirable. If a younger audience is keen to give or receive second hand gifts, designer labels would be smart to create and market a pre-owned division, which would target sustainability efforts and new markets for revenue. In the face of capitalism and newness, the resale market has its work cut out for them Getting the average consumer to choose secondhand over a brand new item is like a salmon trying to swim upstream, which is why it can be difficult for resale platforms to see continuous support, growth and profit. One of Europe’s largest resale e-commerce sites, Vinted, reported €118 million in losses for the year of 2021, which is a number five-fold from the previous year. The losses are mainly due to marketing expenses after acquiring German competitor Rebelle. Vinted spending three times as much on marketing in 2021 compared to 2020. Although their losses are much higher, it must be noted that their revenue also increased from €148 million to €245 million, which is a testament to the mission of continuing the fashion cycle instead of adding to waste and carbon emissions. The company’s directors are reportedly not concerned about the increase in losses as E-commerce News EU reports that it was always the plan to increase spending on marketing to drive growth. The feeling of buying something that’s new and shiny is a feeling that can’t be recreated (unless one buys something else, of course), which is the serotonin boost brands and retailers love to see when annual sales reports come in. However, that doesn’t mean the culture of consumption and capitalism should not be met with more sustainable ideas. In 2021, Vinted alone was valued at €3.5 billion and operating in 16 countries. Vestiaire Collective, the French marketplace for secondhand fashion, is valued at €1.7 billion and just acquired Tradesy in 2022. In the Middle East and the UK, there’s The Luxury Closet which sells second hand high-end fashion and accessories, and just secured $14 million in its fourth round of funding. If these numbers are anything to go by, needless to say, the second hand apparel market is not only growing but cultivating new attitudes on fashion and sustainability. Source: Statista 2022 Vestiaire Collective conducted a survey to learn more about the shopping behaviours of thousands of consumers around Europe, Asia and the US, and found that the main reason, at 50%, for choosing second hand items over new ones was affordability, while sustainability came in second at 40%. Notably, sustainability as a reason for shopping used items increased significantly since the 2020 survey; and 25% of the average consumer’s cupboards are filled with pre-owned items. This is expected to grow to 27% by 2023. Sellers, who use these platforms to sell luxury or vintage bags, coats, watches and more, are seeing both the monetary and the environmental value in selling them, with 40% of sales being attributed to the climate crisis. In addition, 59% of shoppers either discovered a brand or bought it for the first time second-hand. Attitudes are changing Traditional retail and consumer buying choices are being challenged more and more as the climate crisis continues to worsen. People who may have been big fans of buying the latest season’s shoes or coats are rethinking their choices, opting for the same luxury items via a different experience that’s more sustainable and affordable. These same brands are even creating their own pre-loved channels, like Marc Jacobs, for shoppers to sell and buy second hand items. This allows the life cycle of a clothing item to continue years longer than the average timeline, which is 2-3 years. This shows that the fashion industry is maturing as consumers’ attitudes are changing towards newness and consumption. However, it isn’t just the fashion industry that’s seeing second hand channels and platforms flourishing; we are also seeing it with smartphones and other tech products, children’s toys, and gym and sporting equipment. If brands and retailers commit to creating pre-loved channels, and if resale platforms continue to grow as they have been, we see this as a successful concept with lifelong potential.
By 2023, 27% of a consumer’s cupboards will be made up of pre-owned items01.12.2022
Christmas Gifts in 2022: A Conundrum of sustainability and capitalism
A large part of the festive season is buying gifts for friends and family, as well as ourselves, with the November to January period being retail’s most profitable and chaotic time of the year. With inflation and the...
A large part of the festive season is buying gifts for friends and family, as well as ourselves, with the November to January period being retail’s most profitable and chaotic time of the year. With inflation and the increased cost of living causing drawbacks in spending in the European and UK market since February, retailers and e-commerce players alike have been anticipating the gifting season to boost yearly sales and revenue. Something that retailers also have to contend with each year is new gifting trends, basket loading, and increased returns; creating a tornado where retailers try to meet consumer demands as well as keep their heads above water regarding returns and sustainability efforts. Ahead of the festive season, we’re exploring gifting trends, how e-commerce and brick-and-mortar stores can better manage returns, and other aspects of this time period. Gifting trends for 2022 Shopping and finding inspiration on social media Instagram, TikTok and YouTube aren’t just platforms for people to share their holiday photos and video tutorials. They’ve become multi-billion Dollar virtual businesses that push content using algorithms to make sales. Social commerce, as it is now called, is expected to be valued at $1.2 trillion by 2025. Users of the platforms are not only shopping from them, but they are using the platforms for gifting inspiration. The same way people use online reviews as a testing ground for a product, more and more consumers are using social media to research a product or brand. In fact, according to a Sprout Social report on the common ways people find the perfect gift, 40% of consumers are seeing organic posts from brands and another 34% are researching a product on the platforms. Limits on spending This year, the average consumer in the US and the UK will spend roughly €1,100 on holiday gifts, while shoppers in France, Germany and Spain will spend approximately €405 on gifts during this season. These numbers are still considerable, however, it is a far cry from what families used to spend in the years leading up to the pandemic. According to a new survey done by Retail Economics, 51% of shoppers are imposing spending limits on gifts for Christmas this year; while 90% of low income shoppers are setting limits as opposed to 68% of the most affluent shoppers. Personalised gifts After facing and surviving the life-and-death reality of a global pandemic, many people are turning to personalised gifts for loved ones to show how much they care. This includes engravings on jewellery, imprints of initials on leather items, sandblasted champagne flutes, handmade gifts and more. The personalised gifts market is set to grow by 7.8% per year over the next five years, reaching €36.9 billion in 2027. Who’s offering extended return policies over Christmas 2022? Because retail is so reliant on the festive season for hitting targets, moving inventory and making profit, shoppers have more power than ever when it comes to returns over Christmas and New Year’s; enjoying extended return policies. And, what many retailers and consumers may not know is that leniency on time actually reduces returns more than any other returns policy factor. Here are just some of the companies offering extended return policies: ASOS, an online clothing and accessories retailer, is giving shoppers up to 2 months and 10 days to return an item. If you shopped between 14 November - 24 December 2022, you have until 24 January 2023 to make a return. Amazon’s Christmas returns extension is from 7 October - 31 December 2022, offering shoppers up to 31 January 2023 to return. H&M allows purchases between 14 October 2022 - 3 January 2023 to be returned until 31 January. GHD, a global hair care brand, allows purchases between 1 October - 24 December to be returned until 14 January 2023. Patagonia has no deadline for purchases being returned. Banana Republic allows returns for purchases made between 1 November - 31 December 2022 to be returned until 31 January 2023. Ralph Lauren’s extended returns policies allow purchases Investing in technological upgrades can reduce the rate of returns The process of a shopper returning an item has never been an easy and affordable part of the logistical chain. For many years, the industry-standard of offering “free and easy returns” has fulfilled consumer demands, however, it has left an ever-increasing hole in the pocket of D2C brands and retailers; so much so that global brands are ushering in a new era of limited or charged returns. In recent weeks, Zara, J. Crew, LL Bean and Dillard’s in the UK began charging a fee for mail-in returns, while Kohl’s in the US has stopped paying for a return’s shipping costs. CNN Business reports that some retailers are considering refunding shoppers for their return and letting them keep the item because the cost of a return is too much. In addition, these same retailers don’t necessarily want returned stock because they have mountains of excess inventory already, from gym apparel to home decor. In the US alone, the cost of shipping returns amounted to $751 billion, according to the National Retail Federation, while the number for online shopping alone is $218 billion. Although free returns remain a top factor for choosing a particular retailer, some consumers are enjoying the Black November discounts and the extended returns policies so much that they’re ordering one item in various sizes or colours, such as a coat in medium and large, and then logging a return on the size that doesn’t fit. This practice is called “Bracketing” and it is the result of shoppers taking advantage of free returns; not trusting sizes online; or opportunistically buying an outfit for a single event and then returning it (which is also known as wardrobing). If every shopper did this, retailers would be paying for one return on every order with their free returns policy. On average, the returns process costs twice as much as the delivery process, making bracketing and wardrobing unsustainable for a business and even more so for the environment. So, how can retailers minimise the cost of returns? The obvious reason would be to start charging for returns, which would cut down on bracketing and wardrobing significantly. However, the less obvious choice that also improves the customer experience would be to invest in technological and informational upgrades on products online. Dr. Heleen Buldeo Rai, an author and researcher at the Vrije Universiteit Brussel in Belgium, who has researched and written extensively on the topic of sustainability within e-commerce, shares in a literature review entitled “Return to sender? Technological applications to mitigate e-commerce returns” that using internet-enabled tools and data analysis to improve product information may result in fewer returns. For example, some D2C beauty brands are making use of an AI tool that allows a buyer to take a photo of their skin tone in real-time to match it with an exact shade of foundation. A case study Dr Buldeo Rai references sees online clothing stores in China make use of virtual fitting rooms where you can try on an item of clothing using an AI model with your personal measurements. In this case study, returns decreased by 56.8%. Other technologies include colour swatches, video product reviews, and zoom technology, which has shown that just one unit increase of zoom usage leads to a 7% decline in the odds of a consumer logging a return. By focusing on improving the customer experience with technological upgrades and features, fewer returns will result in lower overhead costs and a lower impact on carbon emissions. Christmas spending may be lower in 2022, while a better returns system is on the horizon Christmas shopping in 2022 is not expected to be as abundant as previous years due to ongoing inflation and increased living expenses, however, retail can still expect shoppers to make good use of discounts, extended Black November sales, free shipping and free returns. As a pull-in for customer loyalty, it is understandable why retailers would want to keep free returns as an option. However, unless retailers and e-commerce pure players prioritise a new customer experience to reduce returns, it will continue to be an expensive headache, totalling $642 billion per year as it currently stands. Overhauling the returns process will also improve retailers’ environmental impact. A study conducted by Dr Buldeo Rai shows that just under 80% of consumers are willing to wait longer for a delivery or to collect their own purchase. With this kind of information, retailers can offer better delivery and returns options that are easier on their pocket and the environment.
Christmas Gifts in 2022: A Conundrum of sustainability and capitalism24.11.2022
Meet the Team: Manuel Zahn
Name: Manuel Zahn Company Role: Team Lead of Team Constellation --- What do you do at Omnia Retail? My team and I handle the planning, implementation, and acceleration of dataflows in our pricing platform. Every day, we...
Name: Manuel Zahn Company Role: Team Lead of Team Constellation --- What do you do at Omnia Retail? My team and I handle the planning, implementation, and acceleration of dataflows in our pricing platform. Every day, we process hundreds of millions of data points, such as offers and price recommendations. What is something people in your industry have to deal with that you want to fix? Traditionally, in the software industry, we have to manage infrastructure, which distracts from focusing on the actual product. I encourage you to consider serverless architectures, where the cloud provider takes care of the infrastructure, and you can save time and invest it in your core product. What is your past experience, of working in your position? I studied computer science and economics at TU Darmstadt. During that time I worked as a research assistant in the Multimedia Communications Lab (KOM) in Darmstadt. There my main focus was researching and lowering the energy consumption in smartphones. I’ve also had a six month internship at NEC Laboratories Europe, where I researched about automated configuration of cloud-based IoT platforms. Soon I joined Omnia as a working student in 2014 :) What do you like about working at Omnia Retail so far? What I like most about Omnia Retail are the awesome people. There is always a friendly and constructive atmosphere which is the baseline for growing. Due to the large variety of tasks, the everyday work never gets boring. What are the values that drive you? Curiosity and Creativity What are your top favorite books, podcasts, or documentaries? - Methodisch Inkorrekt (Podcast) - Geschichten aus der Geschichte (Podcast) - A Journey Beyond (Documentary) What do you enjoy doing when you are not working? I’m passionate about cycling. In every season. I’m a fan of bikepacking. This means bicycle adventures on a Gravel Bike with minimum baggage plus tent. So far I cycled through the Alps, Scandinavia and Spain/France. Who is in for the next level of adventure? Let’s end with your favorite quote! “The Sky's the Limit” by Captain Picard in the final episode of Star Trek TNG
Meet the Team: Manuel Zahn24.11.2022
Meet the Team: Elisa Mozena
Name: Elisa Mozena Company Role: Senior Corporate Recruiter --- What do you do at Omnia Retail? As a Sr Corporate Recruiter, I hire new Omnians to help further build our teams. What is something people in your industry...
Name: Elisa Mozena Company Role: Senior Corporate Recruiter --- What do you do at Omnia Retail? As a Sr Corporate Recruiter, I hire new Omnians to help further build our teams. What is something people in your industry have to deal with that you want to fix? I know recruiters sometimes have a bad reputation and this is one of the goals I have in my career - I want to have a positive impact on every candidate I meet with, independently of the interview outcome. We’ve all been candidates once, including myself, and I know how stressful and time consuming looking for a new job can be. What is your past experience, of working in your position? Before becoming a recruiter I worked for a time at the Finance department of a Hotel (it was not for me), and before that I was a Chef. I worked in Michelin-star restaurants and came quite a long way but at certain point I wanted to develop intellectually and decided to go back to study. I followed a BA degree in Amsterdam and as part of it I did an internship in recruitment. I fell in love with recruitment and have been in this field ever since. What do you like about working at Omnia Retail so far? The people - I love working with inspiring, smart and driven people. A players attract A players ;) What are the values that drive you? I link to think I match with all of our values, but Obsession with Excellence comes first. It’s different than being a perfectionist. There is no such a thing as “perfect”. Obsession with Excellence is about improving, always doing your best, and having high standards. What are your top favorite books, podcasts, or documentaries? I listen to Brazilian Podcasts, it’s the easiest way I have found to stay in touch with my culture. Regarding books, my no1 will always be Harry Potter, All the Light We Cannot See, The Outsider. What do you enjoy doing when you are not working? When I’m not working I’m doing crochet, spending time outdoors, or taking dance classes. Let’s end with your favorite quote! A smooth sea never made a skilled sailor (it’s actually a Brazilian quote).
Meet the Team: Elisa Mozena24.11.2022
Price Points Live: Prof Hermann Simon on goal-setting and true profit
Considering the impact of inflation and lagging economic growth on the books of eCommerce shops and retailers in Europe and the UK, taking advice from the world’s leading speaker on pricing and profit may be a good...
Considering the impact of inflation and lagging economic growth on the books of eCommerce shops and retailers in Europe and the UK, taking advice from the world’s leading speaker on pricing and profit may be a good idea. Professor Hermann Simon, who founded Simon-Kucher & Partners; who has published more than 30 books on business and pricing; and who has a business school named after him in Hong Kong would be the ideal choice; which is why Omnia Retail was impressed and delighted to have him join our panel of keynote speakers at our annual Price Points Live event in Amsterdam last month. During tough economic times, there are numerous topics and issues that Prof. Simon could’ve focused on, but in the name of giving the best advice to retail players keen on heeding his guidance, Prof. Simon shared his thoughts on two important things: The importance of goal-setting and answering what true profit really is. In the final article in a series of articles focusing on the interesting topics shared by our keynote speakers, we will share Prof. Simon’s insight on true profit and setting the right targets. What is true profit? “Profits are the cost of survival and the creators of new value,” says Prof. Simon in his book True Profit! No Company Ever Went Broke Turning A Profit. Although this sentiment is powerful and inspiring in its own right, the nitty gritty of the meaning of true profit is far more direct: “True profit is what the entrepreneur can keep after the company has met all contractually agreed claims of employees, suppliers, banks, and the state.” Profit and pricing: Setting goals and avoiding common mistakes Prof. Simon says one of the biggest causes of profit weakness is having the wrong targets or goals. He surmises that most businesses, 47%, are volume-oriented and only 28% are profit-oriented. “Profit orientation is the only meaningful goal because it is the only one that observes both the market side and the cost side. Elimination of profit killers is the most effective way to profit improvement. This especially applies to price wars and overcapacities, since they are the most dangerous profit,” says Prof. Simon. Other causes of profit weakness include having incorrect incentives for employees such as sales commissions; overstretched diversification; or responsibilities in the management board. Profit drivers other than price include volume in 2nd place and cost in 3rd respectively. However, price is the most effective, as a 1% price increase yields a 10% profit increase, according to Prof. Simon. When it comes to pricing, Prof Simon states that the most important thing to understand about it is value, or value to the customer; and this should be a key factor when businesses price their products: “Price and value must be balanced!” When it comes to the most common mistake businesses make when it comes to pricing, Prof. Simon says it is when one’s costs are used as a basis when formulating prices. In addition, to make it worse, all costs are used, including fixed costs. “Fixed costs are not influenced by price and volume.” When it comes to inflation Considering the fact that Prof. Simon’s leadership at Simon-Kucher has helped the company achieve $522 million in revenue in 2021, most business owners are keen to hear his thoughts on how to sail through it without hitting too many waves. “For companies to survive and grow, they need to get the cash in as quickly as possible and then spend it as quickly as possible” as inflation is fundamentally the devaluing of money. Watch Prof. Simon’s full interview at Price Points Live as well as the interesting panel discussion at the end of the event here.
Price Points Live: Prof Hermann Simon on goal-setting and true profit23.11.2022
Black Friday 2022: Our predictions and recommendations
Each year, avid shoppers look forward to the annual Black Friday shopping event, which kicks off the holiday gifting season, where brands and retailers reduce prices on items from electronics to jewellery to levels that...
Each year, avid shoppers look forward to the annual Black Friday shopping event, which kicks off the holiday gifting season, where brands and retailers reduce prices on items from electronics to jewellery to levels that inspire crowds in their thousands. Around the world, shoppers who may not be able to afford certain products, or feel that they are getting a better deal than the usual price, can now make a purchase, or a consideration at least. Consumers who find shopping for items like dishwashing liquid a tedious task may buy in bulk on Black Friday to avoid it being on the shopping list in future, which is also known as pantry loading. Whichever category consumers fall into, Black Friday attracts people from almost every socio-economic background, making it retail’s favourite day of the year. As we await Black Friday in 2022, which officially falls on 25 November, it takes little effort to see that this year’s event may be quite different to that of previous years, considering record-high inflation has hit Europe in the jugular since the start of the Russia-Ukraine conflict. Despite mixed reports on how this year’s Black Friday will go, Sander Roose, CEO and founder of Omnia, predicts there will still be many retailers and brands who are aggressive in their discounting strategy for the fact that they are holding excessive stock and, quite possibly, because they feel inclined to discount heavily as they know they are dealing with inflation-stricken consumers. However, some studies are showing consumers to be spending more now than before the arrival of Covid-19 as people grapple with surviving a life-and-death reality. Let’s take a look at this year's Black Friday predictions in comparison to previous years, and if high inflation is a strong enough deterrent for consumers. Market predictions for Black Friday in 2022 London-based e-commerce researchers IMRG have found unimpressive results in their data collection. Previously, over the years, IMRG has found that Black Friday is the pinnacle of retail’s fourth quarter trading period. In 2022, it is estimated that not only will Black Friday not be as abundant as previous years, growth estimates are at -5% in comparison to 2021. The clothing, home, beauty, garden and electrical markets are not expected to see any growth this Black Friday. Other than inflation and low confidence in the economy, there’s another factor influencing Black Friday spend this year - the FIFA World Cup. Some retailers predict that a global focus on the games may negatively impact shopping on Black Friday weekend, with 34% of 118 retailers thinking it will reduce shopping, according to an IMRG survey. However, if retailers and e-commerce stores are smart, especially those in clothing, sporting apparel and electronics, they should see this global event as a golden opportunity for them to curate their marketing, deals and the customer experience to include the World Cup theme. Regarding the general feeling towards Black Friday from consumers, a survey from Zendesk gives a more positive outlook, showing that 4-in-5 consumers are more excited than ever for this year’s Black Friday and that the increases in living costs are propelling them to bigger deals and discounts. This behaviour isn’t new, suggest Dan Thwaites and Patrick Fagan, who are the founders of Capuchin Behavioural Science. "A rise in stress, or mortality salience, has been equated with a rise in purchases of ‘escape products’ such as beer or status products like luxury watches, reflecting the thought, often ascribed to Epicurus, ‘Let us eat and drink, for tomorrow we die,’” says Dan. However, consumers should be wary of spending brashly, as a new investigation by consumer watch group Which? found that 9-in-10 Black Friday items on special were the same price or cheaper in the six months prior to the shopping event. Comparing the EU, UK and the US Despite inflation and higher living costs, Europeans have experienced an overall increase in their purchasing power-, or expandable income, since 2021 due to the reopening of economies, businesses and tourism. GfK’s study on the average purchasing power per person per year in Europe sits at €16,344 - an increase of 5.8% compared to last year. However, there are giant differences between some countries regarding their spending abilities. For example, Liechtenstein’s purchasing power per capita is €66,204 while Ukraine’s is €1,540, so although spending abilities have improved, not every European may be seeing or feeling it. This is evident in the year-on-year decrease in holiday spending in specific European countries, which includes Spain, whose purchasing power was below the continental average: Source: Statista 2022 Filip Vojtech, a geo-marketing expert at GfK predicts that the increase in purchasing power amongst Europeans may not necessarily translate to retail purchases this Black Friday and the festive season, as the uncertainty regarding inflation and high energy prices is keeping many Europeans conservative with their money. In Germany, for instance, Horizont reports that Black Friday shopping is expected to be low this year, as consumers are more interested in saving. If bargain hunters do shop, 76% of them want to place a larger focus on planned purchases and price-centred campaigns, instead of hurried buying for the sake of buying. In the UK, the same IMRG study found that 47% of retailers believe that the stress of increased cost-of-living is enough to deter shoppers from eagerly shopping on Black Friday weekend. However, another 43% of retailers said that today’s higher bills will actually pull consumers into Black Friday spending so that they can make good use of heavily discounted products. Nevertheless, the spending will be less spontaneous and more considered. In this instance, we could say that the state of consumer spending on Black Friday in the UK may look similar to Europe. Source: Statista 2022 US consumers provide a unique - albeit complex - case. McKinsey reports that, although they are concerned about inflation and have historically low confidence in the economy at the moment, American shoppers are also showing eagerness to spend and have remained robust and confident spenders in the last few months, as retailers like Home Depot and Walmart have reported. American consumers are also expressing a higher sentiment for the holiday season this year than they have in a few years. The Consumer Pulse Survey conducted by McKinsey shows that 55% of US shoppers are excited about holiday shopping, which traditionally begins with Black Friday, and have the savings to spend. In addition, consumers across the Atlantic are so excited about holiday spending that their usual wait for Black Friday specials is creeping back a few weeks with 56% starting their spending in October. Black Friday: What’s selling, who’s taking part and who’s not in 2022 Lower volume sales means bigger discounts As Sander predicted, certain categories have experienced lower sales this year than they had planned. This is due to an overwhelming global demand starting in 2020 that retail leaders thought would spill into 2022. However, global demand for items from e-bikes to washing machines has slowed down, and retailers will be ambitious to discount considerably. Products in the luxury small domestic appliances (SDA) category, like a Nespresso coffee machine, and products in the luxury major domestic appliance (MDA) category, like a SMEG gas stove, will likely not see major sales this Black Friday, which is not surprising since their popularity this year has been lower and in decline compared to 2021. However, because their volume sales have been low this year, these are the items that retailers will be desperate to get rid of and will likely have the biggest discounts. GfK says that standard and basic SDAs like TVs and cordless vacuum cleaners, which have already received a 15%-plus price cut this year, will be the biggest targets for larger discounts this Black Friday. Products in the tech and electronics category, such as headphones, smart watches, bluetooth speakers and more, will also see the biggest discounts, as reported by the New York Post. High-income earners won’t feel the pinch Despite 43% of global consumers believing now is the time to pull back on non-essential spending rather than jump straight in, high-income earners who aren’t necessarily affected by inflation and high living costs will still continue to enjoy Black Friday spending like previous years. Premium products in the luxury domestic appliances category mentioned above will still be supported by premium buyers. Gen Z has higher demands for Black Friday discounts Black Friday is retail’s favourite day of the year to get rid of stock at drastically low prices, however, some age groups, like Gen Zers (born 1997 - 2012), require retailers to offer a minimum of 41-50% of a discount for them to want to participate. The other, older age groups - Millennials, Gen X and baby boomers - require between 21-30% of a discount to consider shopping. This may be so for two reasons: The more obvious reason is that Gen Z shoppers are often in high school, in university or have recently entered the working world, meaning their expendable income is lower than the older age groups. The less obvious reason, which took some research on our behalf when looking at Gen Z’s buying behaviour, is that Gen Zers are far less concerned with fitting in when it comes to shopping, and prefer choosing a brand that separates them from the crowd, unlike Millennial shoppers. They are also more likely to spend money on a brand that values authenticity and sustainability. Typically, it is large-scale retailers and global brands that dominate Black Friday offerings, and not the smaller, lesser-known companies who are not focused on pushing inventory and creating a product at the cheapest price possible. A product would, therefore, need to be heavily discounted for the average Gen Z shopper to consider buying it. FOMO (Fear of missing out) and ego-boosting behaviour From a psychological point of view, Dan and Patrick share that events like Black Friday trigger emotionally-charged consumer behaviour. We may still see confident spending from consumers who are simply shopping because they feel they might be missing out if they don't. "The thought of deals disappearing triggers this fear of loss, making us feel we have to act,” says Dan. “Simply making something look like a sale can be enough to trigger the behaviour,” Dan continues, such as using the colour yellow which has been studied as being an influential colour for discount offers. “Even though the product is no cheaper, people buy more. This is due to representativeness bias. If something looks like a duck and sounds like a duck, we think it’s probably a duck. Same with discounts - even if they’re actually not.” When one does in fact find a good deal after doing some research online, consumers tend to feel as if they have “gotten one over the store,” as Mark Ellwood says, author of Bargain Fever: How to Shop in a Discounted World. “And it's also really fun. You didn't know it was dopamine surging through your brain. But you still come out of the store, and you're grinning, and you're thinking, 'That was amazing.' We should have that moment all the time,” continued Mark to CBS News. This sentiment is further expressed in the academic paper “The Excitement of Getting a Bargain: Some Hypotheses Concerning the Origins and Effects of Smart-Shopper Feelings" by Robert M. Schindler from the University of Chicago who says that “Just as ownership of a product may have many different types of consequences, so also there may be different types of consequences resulting from the price a consumer pays. This includes the implications which a price may have on the consumer's self-concept. Paying a low price for a particular item might lead a consumer to feel proud, smart, or competent.” In the name of sustainability, some brands are giving Black Friday a miss In an effort to sway shoppers from shopping in excess or to encourage them to focus on recyclable materials, some global brands are not offering Black Friday sales, while some have created their own spin on it. Ikea launched a campaign called #BuyBackFriday which asks customers to bring their used furniture for resale instead of throwing it away. Fjällräven, a bag and outdoor apparel brand, uses the event to remind people who long-lasting their products are, instead of hyping people up to buy another coat. Shoe brand Allbirds actually increased their prices on Black Friday in 2021 by $1 and gave the money from each purchase to Fridays for Future, an organisation focused on climate change. Monki, which owns H&M, will not be offering Black Friday specials at all. Black Friday becomes Black November To lure in foot traffic or to get rid of stock volumes; either way, global brands and retailers (both online and offline) have extended a one-day event into days and weeks of Black November specials. Globally, we see that the annual shopping event began changing years ago, with the introduction of Cyber Monday at first, and then the rapid move to online shopping during Covid-19 lockdowns. For the first time ever, in the US, during 2021’s Black Friday event, there was a decline in year-on-year growth by $100 million. This may be because 49% of consumers took advantage of the earlier specials on offer throughout the month of November, according to the America National Retail Federation. In addition, the total number of Black Friday weekend shoppers fell from 186 million in 2020 to 179 million in 2021, showing again how consumers are choosing to enjoy discounts and deals earlier on. Specifically, Target launched their Black Friday sales in mid-October - more than one month before the official event. Amazon teased shoppers with its October Prime Day, a warm-up to Black Friday. Adidas and Nike launched their strategies more than a week before the event, offering between 15-50% off. How can retailers make the most of this year’s Black Friday? Start your Black Friday deals earlier As mentioned above, the Black Friday festivities are beginning in early November and sometimes in October. According to a PwC study, 43% of shoppers choose the earlier Black November deals to ensure items are in stock. Another 37% shop earlier to make sure their purchases are delivered in time for the festive season; and 31% do it to avoid the large crowds. Introduce dynamic promotions With dynamic promotions, you are constantly (and automatically) surveying and evaluating your competitors’ prices and your volume sales, even throughout the chaos of a sale, so that your promotional strategy maximises revenue, maintains competitiveness among the sea of Black Friday sales, and better moves inventory from warehouse to consumer. Treat this year’s event as a test one can learn from Although each year is proving to be different, it would be wise for brands and retailers to look at their marketing and promotional strategies to see what worked in 2021 and what didn’t. Going forward, each year should be treated as a study that can be learned from. Optimise the in-store and online experience In-store digital media, additional discounts for shopping online, multiple delivery options, email sign-up discounts, stock volume and delivery updates… There are many ways to help consumers enjoy their Black Friday shopping experience even further. Consumers tend to remember the brands that went the extra mile in creating a positive shopping experience. Take the opportunity to cross-sell to increase revenue Specifically for retailers in clothing, sports apparel and electronics, creating bundles of products that compliment each other may drive up revenue and entice shoppers to spend. For example, creating a Black Friday bundle discount on a smart watch with wireless earphones; running trainers with exercise equipment; winter coats and boots; and so on. Lessons for Black Friday 2022 Although there are remaining questions on shopper turnout for this year’s Black Friday weekend, one thing stands firm: Retailers and brands are ready to offer big discounts on sitting stock, with the largest deals taking place in the tech, electronics and domestic appliances categories. This strategy rings true across all major markets, including the EU, US and UK, despite the US showing the highest levels of consumer excitement around Black Friday shopping. In the EU and UK, inflation and high living costs remain a potential blockage for retailers to experience the shopping rush of Black Fridays in the past.
Black Friday 2022: Our predictions and recommendations22.11.2022
Price Points Live: A more sustainable eCommerce industry is possible
“Online shopping produces up to 4x less carbon dioxide emissions versus traditional store shopping,” says Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris, who joined the panel of speakers at...
“Online shopping produces up to 4x less carbon dioxide emissions versus traditional store shopping,” says Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris, who joined the panel of speakers at our annual Price Points Live event last month in Amsterdam. She shared her insights regarding sustainability and e-commerce. Over the last decade, many retailers and brands around the globe have been working towards a greener industry, with packaging, manufacturing and delivery being the top three cogs in the machine with the worst environmental impact. In this article, the third in a series where Omnia gives an in-depth look at what we learnt at Price Points Live, we will discuss what retail, both online and offline, can learn and do to improve their economic and environmental impact regarding packaging and delivery. During Dr Buldeo Rai’s talk, she shared 10 insights based on studies and experiments conducted for the purpose of finding eco-friendly solutions to last mile delivery. Here are three that e-commerce players should take note of: 1. Consumers make the final choice When it comes to choosing delivery options, it is the consumer that has the final choice, and not the retailer. According to Dr Buldeo Rai’s research, most consumers are not willing to pay for delivery, as the industry standard today is free delivery. However, they are willing to wait longer or to collect their purchase, as seen in the results of a study below. Dr Buldeo Rai surmises that after conducting this study in Belgium, similar results were seen in the Netherlands, Bolivia, China and Brazil, showing the global trend in delivery options. The same consumers were asked the same question, however, the delivery time estimate was changed to 3 - 5 days, and the results were very similar. Choosing a slower delivery time/method has a significantly positive economic and environmental impact per parcel delivered, and as we see below, most consumers are still willing to wait a little longer. Retailers can use this information to motivate consumers to choose more eco-friendly delivery options. 2. “Did You Know?” Consumers choose more environmentally friendly delivery options when they are informed. Dr Buldeo Rai and her team found through an experiment that 59% of online shoppers would opt for a slower delivery method if the web shop had a “did you know” information box sharing that if they are given more time to group parcels, the environmental impact of delivering this parcel will be lower. 3. Reusable bags are more environmentally friendly after a number of uses The average parcel contains between 130 - 250 grams of padding and packing material, which alone has an impact on the environment and adds to the ever increasing levels of waste. However, retailers struggle to find a solution for this due to the fact that the average parcel journey includes 17 falls, and packages need to be cushioned, otherwise a consumer will expect a free return - which is another headache for retailers. One option is reusable bags, but this option will also need its own logistical process so that bags are actually being reused. Below, we see how using reusable bags (red line) decreased in their environmental impact per use, while single-use bags remained the most impactful. Still in search for a solution to the dreaded last mile “By 2025, about 30-50% of everything we buy will be done online. And so, it is time for us to look at ways to organise the e-commerce supply chain in a more sustainable way,” says Dr Rai. In a paper written by Dr Buldeo Rai, in collaboration with Sara Verlinde and Cathy Macharis, the idea that crowd logistics (also known as crowd shipping) could be an operationally cost effective and environmentally friendly alternative to traditional parcel deliveries is discussed and tested. However, contrary to previous research, Dr Buldeo Rai concludes that crowd logistics, as it currently stands, is not more sustainable than current delivery methods: “The impact on sustainability is dependent on several factors, including the crowd's modal choice and consolidation of parcels.” For example, if someone was delivering a parcel dedicated solely to delivering this one parcel, instead of on the way home or on the way to work (as the concept of crowd shipping intends), it would significantly increase the delivery’s environmental impact. The idea behind crowd shipping has potential, but the logistics need to be fine-tuned. Watch Dr Buldeo Rai’s full keynote speech on sustainability in e-commerce here.
Price Points Live: A more sustainable eCommerce industry is possible17.11.2022
Price Points Live: How retailers can benefit from consumer psychology
In the last few months, the EU has experienced inflation at a high of 10.1% as well as a slight economic recession, as predicted by ABN AMRO Bank’s Senior Economist Aline Schuiling. So, with unprecedented inflation...
In the last few months, the EU has experienced inflation at a high of 10.1% as well as a slight economic recession, as predicted by ABN AMRO Bank’s Senior Economist Aline Schuiling. So, with unprecedented inflation following a global pandemic, how can retailers tap into new ways of understanding consumer behaviour? This is where Dan Thwaites and Patrick Fagan, co-founders of Capuchin Behavioural Science, come in. Influencing the consumer’s mind to choose one product over the other, or to spend more money instead of less, is a tricky tightrope to walk on. In this article, which forms part of our in-depth view on each topic discussed at our Price Points Live event last month, we will discuss how data-driven and science-backed techniques regarding consumer psychology can benefit retailers and e-commerce players. Strategies for success: How small but impactful moves can influence consumers There are a number of ways to influence buying decisions and, under certain conditions, retailers can actually get consumers to spend more. Certain nudges and strategies, which are simple and easy to implement in nature are referred by Dan and Patrick themselves: The Decoy Effect This is a technique used by retailers to push consumers toward two product options that are similar in value (such as a microwave) by introducing a third one as a decoy that is much more expensive. Adding a decoy is considered “a violation of rationality” by introducing cognitive bias against it. Consumers are pushed toward the other two options without even knowing it. Academic Dan Ariely shared in his book Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions a study he did to show how well the decoy effect works. In his experiment, he presented three options for a subscriptions to his students to choose from: Online-only access for $59.00 a year Print-only access for $125.00 a year (the decoy) Online and print access for $125.00 a year 16% of the students chose the first option, none chose the second option, and 84% chose the third option. Ariely then removed the decoy option. Even though no one selected the second option in his earlier experiment, this time with only two options, the results showed a considerate shift. When given only two options, 68% of the students chose the online-only access for $59.00 a year, and only 32% chose the online and print access option for $125 a year. The Anchoring Effect This is a little more complex than the decoy effect, however, it is still geared towards creating cognitive bias by steering a consumer to a certain product or brand or price based on the belief that it is the best option. Certain information is presented to the consumer to which they become anchored to. This is done intentionally. For example, if a retailer was conducting research and asked how much a consumer would pay for a smoothie that had collagen production ingredients in it, the only information the consumer would have to go on is their previous experience with buying smoothies, because they wouldn’t know what the cost is for collagen-inducing ingredients. Or, perhaps a retailer is wanting to push sales for a new waffle-making machine and it is marketed as having cutting-edge technology for perfectly shaped waffles with new mechanics to prevent spills or messing. Consumers may latch onto the idea of something being “new and improved” versus previous experiences with older machines. The Precision Effect Does €4.99 look less expensive than €4.00? A number of studies and papers have been written about this theory, including the journal paper entitled “The Price Precision Effect: Evidence from Laboratory and Market Data” in Marketing Science by Manoj Thomas, Daniel H. Simon and Vrinda Kadiyal from Cornell University. These academics coined the term “the precision effect” which ultimately suggests that prices with rounded numbers, such as €20.00, look larger - or more expensive - than €25.55 for a product. In addition, one of their studies found that homeowners spent more money buying houses when properties were listed with rounded numbers. The precession effect can be used by retailers to increase sales and ultimately improve turnover. Nudging consumers means understanding buying behaviour During times of economic difficulty, retailers need to dig deep into the pockets of creativity to connect with concerned consumers and to sustain profit and growth. Consumers are the beating heart of retail and e-commerce and understanding how they think, feel and spend during times of financial success as well as financial stress is pertinent to e-commerce’s survival. Using these strategies shared by the Capuchin co-founders, as well as many other nudging tactics, can be a game-changing move on the part of the retailer in surviving inflation or any other global phenomenon. The entire recording of the event can be reviewed here.
Price Points Live: How retailers can benefit from consumer psychology15.11.2022
Price Points Live: Inflation is set to decrease to 2% in 2024
With inflation being the number one issue on the minds of business owners, economists and consumers alike, it was no surprise that the topic was first on the list during Omnia’s annual Price Points Live event, which...
With inflation being the number one issue on the minds of business owners, economists and consumers alike, it was no surprise that the topic was first on the list during Omnia’s annual Price Points Live event, which took place in Amsterdam a few weeks ago. In a series of articles, we will share an in-depth view of the event’s topics, starting with inflation, and then including consumer behaviour and psychology, sustainability in e-commerce, and pricing and profit. Sharing her knowledge and predictions regarding current and future inflationary trends, Aline Schuiling, who is the Senior Economist Eurozone at Group Economics of ABN AMRO Bank, explained how the ECB (European Central Bank) predicts and calculates inflation and what the EU can expect in the coming years. Trajectories for inflation show a confident decrease Aline’s inflation predictions for the next few years show that Europe can expect a decline in inflation and will rest at 2% again by 2024. This prediction is supported by a study conducted by Statista, which shows that inflation will remain at 2% from 2024 - 2027. In addition to a positive outlook regarding inflation, GDP growth for 2022 had a better result than expected: Annual GDP growth is expected to sit at 3.1% and in 2024, it’s expected to sit at 1.9% growth. Thanks to a resurgence of tourism, the easing of bottlenecked supply chains and the lowering of energy and food prices, these short-to-medium term projections should instil more confidence in the markets and the economy. When calculating inflation, Aline assures that numbers are derived from comparisons to the previous year. “For example, in the first few months of the pandemic in 2020, inflation was actually in the negative. Then you see prices start to go up later on and then inflation starts to increase. Why? Because it is compared to the year before when inflation was actually in the negative,” says Aline. In the table below, we see Aline’s point, in addition to the contribution of food and energy price surges, as mentioned above. Despite support from governments, recessions in the EU and UK are likely At its worst time, inflation in the EU reached 10.1%, which has had a detrimental effect on consumer spending and behaviour, confidence in the markets and overall GDP growth. Due to this, a number of European governments have tucked into their coffers to support economies (households and businesses) affected by the energy crisis. Notably, Germany leads by spending 6.5% of its GDP on energy support, while the Netherlands has spent 4.8% and Italy has spent 3.3%. France has capped the prices of gas and electricity to 6%. Despite these efforts, Aline reports that consumer confidence has been the lowest ever since the financial crash of 2007 - 2008: Source:Source: Refinitiv, ABN AMRO Group Economics Inflation & central banks by Aline Schuiling, Price Points Live, 13.10.2022 In addition, a slight recession is expected in the third and fourth quarters of 2022 and the first quarter of 2023 in the EU and UK, despite decreasing inflation. However, the US will experience a slightly stronger economy as well as a larger bump up in 2023. Source: Refinitiv, ABN AMRO Group Economics Inflation & central banks by Aline Schuiling, Price Points Live, 13.10.2022 For price setting behaviour, these predictions matter Although some of these expectations don’t look overwhelmingly positive, central banks, businesses, retailers and e-commerce players rely on these predictions for setting prices in the near and far future. This, in turn, affects the consumer. It is vital for all businesses to be aware of these changes and on top of what the ECB expects for the Eurozone economy. Retailers who have a quick and confident response to high inflation not only survive but thrive in the years to follow: “The most resilient retailers were able to drive 11% annual growth in total return to shareholders”, McKinsey reports, between the years of the Great Recession of 2007 - 2009. This number was five times higher than their peers through to 2018. Within e-commerce and retail, there is an opportunity here to test one’s robustness. After all, if brands and retailers want to ensure long-term success, they must develop sound strategies for difficult periods and inflationary challenges. The entire recording of the event can be reviewed here.
Price Points Live: Inflation is set to decrease to 2% in 202427.10.2022
E-commerce and pricing take centre stage at Price Points Live
Europe’s greatest minds in e-commerce, pricing, retail, and consumer psychology converged on Saint Olof’s Chapel in Amsterdam on Thursday 13 October 2022 to share their knowledge in an exciting panel discussion event,...
Europe’s greatest minds in e-commerce, pricing, retail, and consumer psychology converged on Saint Olof’s Chapel in Amsterdam on Thursday 13 October 2022 to share their knowledge in an exciting panel discussion event, hosted by Omnia Retail. As the leaders of pricing software across Europe, creating the annual event for Omnia’s clients allows a way for each client to remain on top of their pricing strategies, e-commerce trends, as well as the ability to meet consumer demands. Find the full event recording below. Event Recording The event included six keynote speakers from various sectors in retail who shared insights and valuable knowledge in economics, inflation, e-commerce, pricing and consumer psychology. The speakers included Professor Hermann Simon, the leading pricing consultant who founded Simon-Kucher & Partners, and the author of over 40 books on pricing and business. David Sloff, the Commercial Director of Northern Europe at Diageo; Dr Heleen Buldeo Rai, a researcher at the Université Gustave Eiffel in Paris; Patrick Fagan and Dan Thwaites, the founders of Capuchin Behavioural Science; and Aline Schuiling who is Senior Economist Eurozone at Group Economics of ABN AMRO Bank. The event was moderated by Suyin Aerts and Omnia Retail’s Founder and CEO Sander Roose took to the stage to welcome event attendees and also took part in the concluding roundtable discussion at the end of the event. Aline Schuiling discusses current and future inflation This year, inflation across Europe has been the top issue on the minds of ordinary citizens, making it an important topic to delve into when discussing pricing strategies. Schuiling, who, as mentioned above, specialises in economics, shared an eye-opening statistic: “In Europe, energy prices are 40% higher than they were a year ago.” However, European consumers have not been left alone to deal with price increases. ”The good news is that European governments are contributing to offset the cost of gas to protect households and businesses,” says Schuiling, with Germany in the lead contributing 6.5% of their GDP. “Earlier this year, France already capped the cost of electricity and gas, and although their inflation is not zero, this shows you how governments can help,” says Schuiling. Despite high inflation being the order of the day today, Schuiling and her team of economists have positive predictions for the next two years: “From now and until 2024, the European Central Bank aims to anchor inflation at 2%, which is a steady decline from 10.1% in 2022.” How retailers can use consumer psychology to increase sales Speaking on the intersection of data, consumer psychology and e-commerce, Dan Thwaites and Patrick Fagan, co-founders of Capuchin Behavioural Science, took the stage to share how they help clients achieve commercial goals by influencing the minds of consumers. To showcase how specific, data-driven and science-backed their work is, Patrick shared how people who have a shorter name or nickname are viewed as more cheerful and popular. Another study they shared on how you can manipulate perceptions of yourself is wearing glasses, as studies have shown that people who wear glasses are viewed as being smarter and more reliable. So, how do these behavioural effects result in increased profits for brands? “Guiness, the beer brand, saw an increase of sales by 25% just by creating the Guiness beer glass and having large cardboard signage in the aisles. These act as slight nudges to influence a consumer’s purchase behaviour,” says Patrick.”Even products that are the colour orange see an increase in sales around Halloween time, like Reese’s peanut butter cups, because people are seeing orange everywhere and this acts as a subtle nudge,” he continues. “A study was done to show the influence of incidental cues on our perceptions and behaviours when a bottle store played different kinds of music while a consumer looked for wine. The amount spent on wine was more than double when classical music was played versus pop music,” Patrick shared. Other tactics to increase sales is to add phrases like “special purchase” or “everyday low price” next to the price to insinuate that this is a good deal. Capuchin’s strategies are based upon proven studies that have shown how consumers can spend more or less under certain conditions. There is empirical evidence for an intertemporal substitution effect, where people spend more money today because they expect goods to be more expensive tomorrow. Another study was shared on the anchoring effect which shows how prices may look more attractive when placed to something more expensive. For example, a luxury car is seen as more affordable when placed next to a luxury yacht. Another study based on the decoy effect allows retailers to place a decoy product that’s expensive next to the product they actually want to sell. Suddenly, the price of that product doesn’t seem so high when compared to the decoy. Lastly, an interesting study on numerical cognition shows how consumers see prices with lots of zeros as being higher. So, retailers could price a product at €4,655.00 instead of €4,000.00 and the lower price with the zeros may be perceived as being higher. Can e-commerce become fully sustainable? Dr Heleen Buldeo Rai, a researcher at the Universite ́ Gustave Eiffel in Paris, is interested in sustainable e-commerce and urban logistics and how online retail can work toward a greener industry in the future. Her keynote included 10 insights that retailers and brands would find interesting. “By 2025, about 30-50% of everything we buy will be done online. And so, it is time for us to look at ways to organise the e-commerce supply chain in a more sustainable way,” says Dr Buldeo Rai. “Online shopping produces 4x less carbon dioxide emissions versus traditional store shopping,” says the researcher, but home delivery still remains the most impactful part of the e-commerce journey on the environment, meaning retailers should consider offering new delivery options like collection points to lower their environmental impact. Dr Rai and her team found through an experiment that 59% of online shoppers would opt for a slower delivery method if the website had a “did you know” information box sharing that if they are given more time to group parcels, the environmental impact of delivering this parcel will be lower. Brand and retailers share more than they think, and shouldn’t be arguing with one another, says David Sloff As the Commercial Director of Northern Europe at Diageo, David explored the different perspectives a brand and retailer can have on the term “price”. He opened up about the complexity of different definitions of pricing, depending on the lens you are using to look at pricing. In his role as a brand owner for various consumer brands at P&G, such as Ariel and Braun, he stresses that it’s important to distinguish which price we are taking and, secondly, what goals one has when setting prices. On the topic of how brands should approach the Goliath that is Amazon, David recommends that brands shouldn’t fight the “Amazon-machine”, but sit and write down a strategy on how to control variables and keep them all consistent and fair with other retailers. Lastly, when talking about the intersection between brands and retailers, David says it’s all about the question of “How much value do we share?” And now, more specifically, “How much of the inflation do we share? We see more fights between brands and retailers but it's so important not to forget the goal of serving consumers,” he says. More good advice from David included focusing on value creation thinking in the mid-to-long term. Prof Hermann Simon explains the importance of goal-setting and true profit The last keynote speaker to present was Professor Herman Simon who is the Founder of Simon-Kucher & Partners and is the leading pricing consultant. He began by posing the question, “What is true profit?” In addition to defining it as the money made after all overheads, debts and contractual obligations are paid, Prof Simon goes on to share what the true profits are of food retailers, e-commerce platforms like Amazon, and tech companies. True profit for food retailers remained between 2-3%, while tech companies like Apple had profits in the mid-20 percentages and up. The point, for Prof Simon, is that the gap between “winners and losers” is growing “as some companies are getting it right and some aren’t” when it comes to choosing the right goals. According to Prof Simon, “profit orientation is the only meaningful goal because it is the only one that observes both the market side and the cost side. Elimination of profit killers is the most effective way to profit improvement. This especially applies to price wars and overcapacities, since they are the most dangerous profit.” When a profit driver is improved by 1%, Prof Simon surmises that the result is that the profit multiplier of price is 10, the cost is 6, for volume is 4. On the topic of inflation, Prof Simon says that it is essentially the decreasing value of money and for companies to survive and grow, they need to “get the cash in as quickly as possible and then spend it as quickly as possible.” The event concluded with all speakers joining Suyin and Sander on stage for further discussion on some of the key points made. “We know that these are very challenging economic times, but the exciting thing is that we really believe that pricing matters more than ever and can really help you win in the market, and we’re happy that you’ve chosen Omnia as your partner to achieve that,” concludes Sander. Stay posted for more business and commerce content or follow us on our LinkedIn page!
E-commerce and pricing take centre stage at Price Points Live27.10.2022
Meet the Team: Srinivas
Name: Srinivas Sista Company Role: Operations Process Manager --- What do you do at Omnia Retail? I am a part of the Operations team and work on projects that need processes and structure. What is your past experience,...
Name: Srinivas Sista Company Role: Operations Process Manager --- What do you do at Omnia Retail? I am a part of the Operations team and work on projects that need processes and structure. What is your past experience, of working in your position? I started my career as an analyst and then worked in ecommerce startups in SouthEast Asia for five years mainly in the Operations teams including 3 years as a cofounder of an ecommerce startup. After I moved to the Netherlands I worked in a social media agency, founded a micro mobility startup, worked as a freelancer in a content team, a postman and a sales development representative before joining Omnia. What do you like about working at Omnia Retail so far? I like the work culture - the culture of feedback and being able to speak openly yet professionally. What are the values that drive you? Mutual respect and the right to find happiness. What are your top favorite books, podcasts, or documentaries? TED Talks, Books by Aldous Huxley ( essays) and mostly fiction. BBC Earth as a documentary is great. What do you enjoy doing when you are not working? Walk my dog, spend time with family or play chess.
Meet the Team: Srinivas25.10.2022
How inflation is affecting production and overconsumption
With falling profits, rising inflation and bloated overhead costs, the world of retail and eCommerce is experiencing one of its biggest challenges since the 2008 global recession. Wall Street reported that of the 79...
With falling profits, rising inflation and bloated overhead costs, the world of retail and eCommerce is experiencing one of its biggest challenges since the 2008 global recession. Wall Street reported that of the 79 large retailers that shared their financials during the period of 1 April - 23 May, 59% of them reported a decrease in consensus revenue for 2022 and 71% estimated a decrease in earnings for 2023. During the same period, the S&P Retail Composite Index fell 24.1%. Either directly or indirectly, inflation affects everyone and everything that involves monetary exchanges, but two of the most impacted arenas are production and consumption. How are retailers feeling the pinch? Are consumers taking on the costs of retail corporations’ slacking profits? How does inflation affect consumer behaviour? And, amongst the fog, is there an opportunity for retail to shine through these difficult times? We’re answering these questions as we look at the impact of inflation on production and overconsumption. The domino effect of increasing inflation The Belgian food retail company Colruyt Group, reported in September that their profits for the most recent financial year have experienced a significant decline due to rising inflation. However, in a move unique to most food retailers, the group’s CEO Jef Colruyt has promised that the decrease in profits as a result of high inflation will not be a burden passed onto consumers and that they will continue with their low-price strategy into the new financial year. To offset the financial cost, the group is considering selling a part of its wind energy company Parkwind. Other food retailers are experiencing empty shelves as relationships with manufacturers and farmers have soured due to tense conversations over energy, employee and transport costs. For Colruyt alone, these rising costs could amount to approximately €200 million. Luckily for loyal Colruyt buyers, their relationships with manufacturers and farmers remain steady, and food shortages are not expected to be an issue. On the apparel side of retail, Nike is expanding its relationship with online marketplaces like Zalando, however, not without a cost. Although sales rose by 4% in the last quarter, the increase in manufacturing costs caused a 20% drop in earnings per share. In addition, gross margins fell to 44.3% due to higher transport costs including freight and logistics. However, the new relationship with Zalando is expected to be a successful one for both brand and retailer, as more Europeans will be able to access premium Nike products through Zalando if they are a Nike club member. Returns is already a €111 billion issue for e-commerce players - and that’s just over the festive season. Couple that with 2022’s inflation shock-to-the-system, it is no wonder brands and retailers are reaching for ways to curb overhead costs. In an eyebrow-raising moment for most consumers, global clothing brands Zara and Boohoo have begun charging for returns for their online shopping customers due to rising delivery costs. Zara is charging €1.95 per return, or, a return is free if they drop it off at a branch. It is also a tactic to increase footfall and to lure in impulse shopping. However, the commute to a Zara branch still requires time and money from the consumer and may be considered an inconvenience for shoppers who choose online shopping for the reason of convenience. From production to consumption, how are retailers and brands reacting? A 2022 report by Unicef concluded that if every person in the world consumed resources at the rate of people in the EU and the OECD (which includes the US, the UK, parts of South America, Australia, Turkey and many European countries), we would need 3.3 Earths to sustain the level of consumption. An even worse statistic showed that if everyone consumed the way people in Luxembourg, Canada and the US did, we would need 5 Earths. In the long run, operating a sustainable company - and a sustainable world - with eco-friendly supply chains, manufacturing and delivery processes will be the most effective solution to overconsumption. It is a mammoth task that requires a years-long commitment, but companies like Apple, Google, Patagonia, Beyond Meat, Who Gives A Crap and more have made major moves to be more sustainable, to promote lower consumption, and to reuse. After piloting a secondhand items program, luxury fashion brand Balenciaga is planning to implement it full time after it showed much support from Balenciaga customers wanting to sell their secondhand purchases as well as potential shoppers keen to have a piece of the brand at a more affordable price. The brand, owned by Kering, says the move is part of their goal to become “a fully sustainable company” with a focus on consuming less, recycling and reusing. Balenciaga has selected Reflaunt, an online service that sells second hand luxury items to “embrace circularity” as their chosen resale platform. In August, Michael Kors also launched its resale side of the business, saying the goal is to extend the life of MK products and to reduce waste. The very existence of any luxury brand goes against the ideals of minimalism and anti-materialism. In fact, a luxury brand generally embodies the opposite: Flashiness, opulence, excess. It will be interesting to see how well these resale strategies work in terms of interest, sales and impact on overconsumption. On the consumer end, can inflation cause a decrease in overconsumption? French economist Jean-Pierre Malrieu says that “in these times of overconsumption, inflation is a gift from heaven” and adds that high inflation tends to “restore balance” when it comes to materialism and over spending. Sharing in this trend are many US consumers who, as reported by the New York Times, are changing their consumption habits. Some families have stopped using a house cleaning service and have opted to clean their homes themselves. Others have stopped taking their pets to professional groomers. Holidays include camping at local spots instead of cross country trips. Audible and Kindle subscriptions are being cancelled and replaced by books, walking and board games. Others have grown a vegetable garden and have learnt to make treat meals like pizza so that they don’t have to spend money on takeout. Some are updating old clothes instead of throwing them out and replacing them. How can retailers offset the impact of inflation without layoffs or passing the cost down to the consumer? Focusing on affordability. In retail, there are always ways to cut costs. Looking for suppliers that are less expensive or materials that are cheaper is a good starting point. Introduce exciting incentives. It’s been proven that team morale and productivity can be ignited when incentives are introduced. Whether it is bonuses, extra paid leave, or half days on Fridays, employees react well to incentives, with organisations using incentive programs achieving 27% higher profits and 50% higher customer loyalty levels. Implementing robotics and AI technology into supply chains. A study by Berkshire Grey found that processing time could decrease by 25% and processing costs by 35% if automation and robots are used in manufacturing and distribution. Take a granulated approach to price increases. Instead of applying widespread, top-to-bottom price increases to every product to offset inflation that will likely infuriate customers and erode loyalty, segment the products into categories that can withstand a price increase based on a customer’s eagerness to pay. Only the robust survive We have seen, with concrete data, how retailers who have a quick and confident response to high inflation not only survive but thrive in the years to follow, in comparison to those who stumble around wondering what to do. “The most resilient retailers were able to drive 11% annual growth in total return to shareholders”, McKinsey reports, between the years of the Great Recession of 2007 - 2009. This number was five times higher than their peers through to 2018. It’s numbers like these that prove how much power a brand, retailer or marketplace may have in times when they think they are powerless. The current inflationary period is not expected to disappear any time soon, and it certainly won’t be the last time retail experiences increasing freight and logistics costs, high demand and fractured supply chains. As stressful and as slow-moving as it is to trudge through the mud of inflation, one could almost develop a copy-and-paste strategy to sail through these seas each time they come round again. It’s all about making bold, forward-thinking decisions to turn challenges into opportunities. FAQs: Which countries have the highest overconsumption levels? UNICEF concluded in a 2022 report that if every person in the world consumed resources at the rate of people in the EU and the OECD (which includes the US, the UK, parts of South America, Australia, Turkey and many European countries), we would need 3.3 Earths to sustain the level of consumption. An even worse statistic showed that if everyone consumed the way people in Luxembourg, Canada and the US did, we would need 5 Earths. Tips to save money at home Choose to clean your own home instead of a house cleaning service Skip taking their pets to professional groomers and bathe them at home. Vacation locally instead of cross country trips. Cancel streaming subscriptions or podcasts that aren’t being used. Grow a vegetable garden or learn to make your favourite meals so that you don't have to spend money on takeout. Tailor old clothes instead of replacing them.
How inflation is affecting production and overconsumption20.10.2022
As retail awaits higher spending this festive season, brick+mortar enjoys a comeback
Inflation may be the top-of-mind issue for retail and e-commerce players alike, but a new and surprising trend that should maintain morale and a robust attitude is seeing the sharp decline in store closures in the US...
Inflation may be the top-of-mind issue for retail and e-commerce players alike, but a new and surprising trend that should maintain morale and a robust attitude is seeing the sharp decline in store closures in the US and UK. In addition, the holiday season is set to bring increased spending compared to 2020 and 2019, despite an increase in the cost of living and a decline in confidence in the markets. Adobe Analytics expects global holiday season shopping to reach €938 billion this year, making the festive season retail’s favourite time of year. Omnia takes a look at why brick-and-mortar is experiencing a smoother ride versus previous years, and what we can expect for 2022’s holiday spending. 2022 is the year brick-and-mortar rallied Two years into the global e-commerce boom that has been predicated on Covid-19 lockdowns and stay-at-home restrictions, e-commerce players have been taken aback by the sky-rocketing growth - and matched demand - for shopping online. However, now that most of the world has opened up and lockdowns are a thing of 2020, pent up demand from consumers has resulted in another trend: Brick-and-mortar stores are seeing more openings since pre-pandemic levels in 2019. Today, store openings in the US and the UK are higher than store closures, showing a surprising reversal in the years leading up to 2020. Coresight Research has tracked retail store openings and closures in the US and has seen a year-on-year 55% decrease in store closures from September 2021 to 2022. Some of the factors include overwhelming demand from consumers to get out and shop; higher demand for premium real estate spaces, such as in Manhattan, and financial incentives for tenants during the pandemic when real estate was floundering. In the US alone, 2022 has seen 5,000 new store openings, including brands like Hermes, Gap Inc and Deichmann. In the UK, PwC reports that store closures have significantly slowed down since 2020 and 2017 with an average of 34 closures per day in the first half of 2022, compared to 61 per day in 2020. Despite the successes of brick-and-mortar stores this year, the reasons and conditions for its success can’t be expected to last. As consumers return to normal, pre-pandemic life, the desire to shop won’t last, especially since inflation is the highest it's been in the US, UK and the EU in decades. In addition, since demand for high-end retail spaces has reached bidding war levels, rent will increase and financial incentives won’t be on offer anymore. For the upcoming holidays, e-commerce and brick-and-mortar will receive a welcomed boost among inflation Retail’s favourite time of year is around the corner, and festive season decorations, deals and promotions are already filling Instagram timelines, shopping aisles and Bol.com carts. With a whirlwind last two years dealing with unpredictable markets and evolving consumer behaviour, one thing remains a sturdy, reliable bench for retail to rely on: Holiday spending. Consumer spending is expected to see an increase in 2022, which bodes well for brick-and-mortar stores as well as e-commerce shops. PwC reports that consumer spending for the upcoming holidays in December will increase by 10% when compared to the same period in 2019 - the very December that saw some of the very first cases of Covid-19. Spending will increase by 20% versus spending in 2020. What else can we expect from consumers this festive season? An average of €1,472 will be spent this holiday season, which includes gifts, travel and entertainment An average of €777 will be spent on gifts; €465 on travel; and €230 The highest spender is expected to be a young male living in the city Consumers will spend more money on themselves this year as well as their families compared to previous years In terms of age groups, millennials (approximately 24 - 40-years old) will spend the most, at an average of €1,878 while Brands with loyalty cards, programs and credit cards can expect 79% of millennials to use them for their associated brands Household annual earnings more than €123,000 will likely overspend on their holiday budget by 15%, taking their holiday spending to an average of €2,840 - double that of the average mentioned above A majority of of consumers, 41%, will wait until late November for the best holiday deals The ever-surprising consumer If there’s anything retail can learn from consumer behaviour this year, it’s how resilient and robust shoppers are, despite rising living costs and a changing retail landscape. One of the attributes of the improvements and predicted successes discussed in this article are the attitudes and motivations of consumers, which remain unpredictable in the best way possible. As retail heads into the holiday season, and brick-and-mortar store openings remain steady, consumers will be watched closely for the next trend in offline and online shopping.
As retail awaits higher spending this festive season, brick+mortar enjoys a comeback19.10.2022
After rising inflation, consumers turn to credit and more debt
Inflation is not a new phenomenon that consumers, businesses, banks or e-commerce giants have had to deal with. The first time the term was used to describe an inflation of a currency was in Latin in 1838; after which...
Inflation is not a new phenomenon that consumers, businesses, banks or e-commerce giants have had to deal with. The first time the term was used to describe an inflation of a currency was in Latin in 1838; after which it became a term and a practice often used and implemented by governments. To the consumer, hearing that inflation is increasing is simply a sound call that their cost of living will increase. To businesses and e-commerce players, it’s a sign that their overhead costs and the prices of their product may have to climb the ladder too. It’s safe to say that inflation isn’t the favourite of most - consumers and businesses alike. Fast-forward to 2022 and many countries in Europe, Asia and the US are experiencing some of the highest inflation levels in decades as a culminating effect of the Covid-19 pandemic and Russia’s invasion of Ukraine. In August, the UK reached a staggering high of 10.1% inflation, a number they haven’t reached in 40 years, while the Bank of England predicts that it will increase to 13% later on in the year. It was the same for France, who reached 6.1%; a 37-year high. In the same month, the EU reached 9.1% inflation. It’s been a year of much stress for the average consumer, which begs the question: With inflation on the rise all round, will people expand their debt limits? Will credit pose a risk to markets? Do inflation expectations mean anything for consumers? We’re looking at the relationship between rising inflation and increasing credit debt, and if shoppers are turning to credit to offset the sting of rising living costs. How rising inflation results in higher credit card debt It is well known that each time inflation increases, governments turn to interest rates to offset the effect on economic growth and unemployment. It’s almost as if rising inflation and increases in interest rates go hand in hand as a solution for fiscal departments the world over, and it is no different today. To sum up the chain reaction into one sentence, supply chain issues coupled with rising inflation causes higher prices in gas, food, utilities and clothing to pressure consumers into using their credit cards to make ends meet, resulting in more consumer debt and a higher dependency on borrowed money. Let’s break this down a little further: Supply chain issues. Once the pandemic began to slow down, the surge in demand for anything from Korean skincare, Italian bicycles and Swiss watches outweighed the global supply chain’s ability to meet the demand. Something as obscure as a lack of shipping containers caused massive delays on a global scale, which resulted in businesses having to find other (more expensive) ways of shipping their products. And even if they didn’t find another way, the cost of a shipping container in 2022 rose nine times the price it was in 2019 from $1100 to $9200. Following this, Russia’s invasion of Ukraine sparked massive increases in inflation around the world. Russia is the world’s number one gas exporter, and with the instability surrounding the Russia-Ukraine conflict, markets became unsteady, sending inflation sky-rocketing. As gas prices rose, so did food, home essentials, utilities and more. Salary increases cannot match this speed, so consumers turn to credit cards to assist with the monthly bills. In the US alone, credit card balances rose by $52 billion in the last quarter of 2021 alone, showing just how dependent consumers can become on credit. This is the largest quarterly increase in 22 years. UK credit card debt is set to increase by 8%, reaching a 5-year high, and it is expected to climb another 5.5% in 2023. European banks are tightening up In July, the European Central Bank conducted a survey asking banks across Europe if they had seen a loosening or tightening of credit standards, which include their internal guidelines and approval criteria. Speaking specifically about the second quarter of 2022, 153 banks responded saying that they had considerably tightened credit standards on loans to businesses and home loans due to a decrease in risk tolerance in a time of low confidence in the markets and a shaky economic outlook. However, the demand for loans increased in the second quarter and is expected to do so in the third quarter too, thanks to the increased prices of production, continued supply chain disruptions and high energy prices. Consumer credit was also tightened during the same period, with higher risk perceptions as the main reason. At the same time, the European Parliament’s Internal Market and Consumer Protection Committee has approved new rules on credit lending, credit debt, overdrafts and loans that are unsuitable for consumers’ budgets. The new rules are part of the Consumer Credit Directive (CCD) that was created 14 years ago. Quite notably, the current state of the EU economy is the first to instigate Parliament to make changes in the 14 years the CCD has been around. Creditworthiness, pricing rules and information regarding requirements have all been amended, with more restrictions to combat overwhelming debt. For example, consumers applying for a credit card or a credit increase will have to give more information regarding their financial obligations and living expenses. Banks can now use and ask for information from non-financial entities like a consumer’s smartphone contract provider or utilities companies to obtain information on their accounts. Although these changes are mostly positive for the long-run financial health of consumers, it may be stressful in the short term while they are reaching for borrowed money to get them through the month. Do inflation predictions mean anything to consumers and businesses? An essay written by Veronique de Rugy and Jack Salmon at George Mason University in the US touched on consumer expectations regarding inflation. They surmised that inflation expectations matter. Why? Because if it is known that price increases are coming tomorrow, it affects what is being spent today. If businesses can see increasing overhead and wage prices for next year, they’ll increase the price of their products this year. This is how an economy stays in the black. This sentiment is shared by the European Central Bank who published a report trying to understand consumers’ expectations of inflation, how sociodemographic factors influence those expectations, and how the role of uncertainty affects a higher or lower prediction. The report, entitled “Making sense of consumers’ inflation perceptions and expectations - the role of uncertainty”, published in the ECB Economic Bulletin of 2021, found that higher expectations of inflation and a negative economic outlook mostly came from young females that belong to lower income and educational groups. People with a more positive outlook on the economy and a lower expectation of inflation reported having more financial comfortability. Overall, the report concluded that inflation predictions and expectations from consumers are in fact important for “the monetary transmission mechanism” - In other words echoing what de Rugy and Salmon stated above, that predictions influence today’s consumer behaviour. Inflation: A necessary evil? With the EU’s tightening of credit approval processes to combat overwhelming debt, and with the understanding that inflation expectations play an important role in the present and future economies of countries around the world, we can remain hopeful that the rise in inflation is not all that bad. However, inflation is not predicted to decrease for the rest of 2022 or even into 2023, bringing rise to the fears that consumers will rely on credit more often. Understanding and dealing with inflation - as a consumer or a business - is like walking a tightrope on the edge of a mountain. As a brand or a retailer looking for space in a shopper’s cart, you’ll have to compete just that much more to get their attention and their hard-earned money. For example, a shopper will have to choose between their favourite brand of cat food versus the cheaper, maybe less nutritious brand. Or, if a consumer receives a bonus, are they going to spend it on having the latest iPhone (even though they already own one) or buying a much-needed washing machine for the very first time? This is where consumer behaviour and price elasticity meet. Learning how brands and retailers can better navigate through times of high inflation using Dynamic Pricing is something our CEO Sander Roose is passionate about. Stay posted for more business and commerce content or follow us on our LinkedIn page!
After rising inflation, consumers turn to credit and more debt28.09.2022
Dynamic pricing strategies and tactics to cope with inflation
High inflation is here to stay for years to come Across the world, inflation remains at sky-high levels, with the G20 average Consumer Price Index (CPI) at 9.2% year-on-year for July ‘22 and the OECD countries at 10.2%...
High inflation is here to stay for years to come Across the world, inflation remains at sky-high levels, with the G20 average Consumer Price Index (CPI) at 9.2% year-on-year for July ‘22 and the OECD countries at 10.2% year-on-year for the same month. As Roman Steiner, partner at McKinsey’s Zurich office, explains, there are five issues contributing to inflation that, together, add up to a perfect storm: labour costs and the availability of talent, as well as rising prices in agriculture, hard commodities, freight, and energy. Contrary to what the heads of Central Banks communicated at the start of the inflationary period, we shouldn’t expect inflation to be resolved soon. And, although aggressive interest rate hikes will somewhat help to temper inflation, it will remain a topic that should be top-of-mind at least for the coming years. Retailers have got the hardest “sell” to make Inflation typically cascades through the chain. It starts with higher energy and material costs, to higher component costs, to brands increasing the purchase prices retailers have to pay for finished products, to retailers having to try to get consumers to pay more for those products. In this chain, retailers typically have the toughest “sell to make”, as sustained high inflation - and particularly the soaring energy costs in many regions - are really driving consumers to actively search for savings and become more choiceful in how they spend their money. As Kevin Bright, McKinsey’s Global Leader of Consumer Pricing Practice, notes: “Consumers are substituting one category for another, exiting a category, or shifting to a different brand. There’s massive downshifting, particularly from mainstream brands to value brands.” All of this indicates that the concept of price elasticity should be top-of-mind for retailers. On an overall level, it’s likely that price elasticity across the board is increasing as many households are in a situation where they have to eat away from their buffers. But we also know that price elasticity varies wildly in between categories, so retailers need to be choiceful in where they try to pass on price increases to consumers and where to take a hit on their margins. Interestingly, this is the first serious inflationary period where retailers have pricing software available that can help them to effectively and efficiently cope with the high frequency and high volume of changes both in the purchasing side as well as the market side (changes in consumer prices). In the remainder of this article, we will provide some guidelines on how retailers could use the power of pricing software to cope with inflation. Playing mix when possible One of the interesting things that typically occur when retailers start with dynamic pricing - and, thereby, are able to reprice their full assortment with high frequency - is that the products in the long-tail start selling better. Because of this, we have seen many cases where, although the retailer decided to price more aggressively, which led to significant revenue growth acceleration, the average margin percentage still grew. While this might sound contradictory at first glance, this is because the high margin long-tail products start selling better and weight more heavily in the mix. How strong you are in a category will determine how much you can rely on playing mix. If your shop is often the starting point for shoppers searching, you can rely more on playing mix and it can be wise not to move down too aggressively on all products as the shopper will end up buying one of the products in your assortment, anyways. If, on the other hand, virtually all of the traffic in a category comes from product level out-clicks from comparison shopping engines (and so you don’t have a dominant position), you will need to price competitively on each and every product. Inform yourself on what your key competitors are doing and how they are responding Most retailers operate in an environment where there are multiple shops offering the same product. Especially in these times where e-commerce has become an integral element in many categories, the competitive landscape has become wide. That means that it pays for retailers to study the behaviour of their key competitors before making major changes to their own strategies. In order to help our customers get a clear overview of key competitors and their positioning on the overlapping assortment, we are about to launch the “competitor overview dashboard”. This dashboard shows the total number of competitors found and automatically surfaces your main competitors based on a “match rate” for the selection of the assortment you have made. The match rate breakdown allows you to quickly identify those competitors that have the biggest overlap with (possibly a subsection of) your own product assortment. This not only enables you to continuously verify your list of key competitors, but also to identify if new players have entered the market that require closer attention. The dashboard then shows the relative price positioning of each of those key competitors, as illustrated in the (anonymised) screenshot below. We advise you to use this screen both to determine your initial inflation response plans, as to verify responses by your competitors after you have made significant pricing strategy changes. Note that this screen enables you to go back in time as well, so you can compare today’s positioning with that of a week ago, per see. Differentiate in pricing strategies to maximise profit No matter how successful you will be in passing on price increases to consumers, it’s likely that you will have to absorb some of the hit via lower margins in these exceptionally challenging times. Omnia always recommends its customers to be very choiceful in where to be aggressive in pricing, and where to grasp the opportunity to take more margin, but in these inflationary times with margin pressures for all retailers, that matters more than ever. We also believe that this advice not only benefits our customers, but makes the market operate better as a whole. Our recommendation is in-line with what McKinsey advises in their article “Navigating inflation in retail: Six actions for retailers”: “Go granular with pricing and promotion and tailor value delivery to consumers. Instead of implementing broad price increases that may erode customer trust, retailers can tailor their inflationary price response by customer and product segment, considering both margin performance and consumers’ willingness to pay. Raising prices is unpleasant for both consumers and retailers. Retailers that take a surgical approach are more likely to emerge with profitability and consumer relationships intact.” There are multiple ways to operationalise this advice. One of the ways is to make use of the price elasticity classification algorithm that the Omnia platform applies to a large set of historical data in order to arrive at an elasticity classification of categories and products. You could then apply a strategy like “lowest price point of this list of five key competitors” in a highly elastic category while applying “most occurring price point in the market” in an inelastic category. The benefit of this approach is that you leverage the power of machine learning in the automated price elasticity classification, while maintaining the control and the explainability of pricing rules. Price elasticity is not the only way to segment your assortment and differentiate more in pricing strategies. You could also identify Key Value Items (KVIs), for example, based on which products are highly viewed. In order to automate this as well, the Omnia platform can be directly connected to the Google Analytics API which allows you to consider views on product details pages (PDPs) in your strategy. That is a way to implement a high-runner strategy. Both approaches to going more granular will lead to becoming price aggressive on products where it is more important to consumers and it will have more impact on sales volumes and price perception of consumers, and to take more margin on products where price is less of a consideration. From an overall perspective, this is likely to lead to the best combination of the top and bottom line, as well as price perception. Be prepared to move up The Omnia software basically enables you to automate any pricing strategy you can think of. Yet, not all pricing strategies are created equally. In these inflationary times where many retailers feel an urge to pass on at least part of the price increase they are confronted with to consumers, it is especially important to apply strategies that enable you to grasp the opportunities of a market that is moving up. To illustrate: when you are applying a pricing strategy as “price position one in the market,” it's highly unlikely that you will quickly pick up on the trend of “the market” moving upwards as the chance that there is still a “garage box retailer” selling for a low price is substantial. On the contrary, if you apply a basic strategy like “most occurring price point of a certain list of X key competitors” or a more nuanced “market conditions” based pricing strategy, you are much more likely to pick up on those upwards trends. Automatically reflect your purchase price increases Omnia recommends implementing safety rules that prevent you from selling products at a loss (or at too low a margin). Without such rules you might be matching a very deep promotion of another retailer for which that retailer has negotiated back funding from the supplier to (partially) fund such a deep price-off. That would be disastrous for your profitability. By feeding your purchase prices to the Omnia platform, and making sure your pricing strategies end with safety rules as “never go below purchase price + X%”, you are realising that purchase price increases have a real-time impact on your pricing. Also, here there are various ways to implement this. You could configure Omnia to simply set the price to the defined minimum boundary. But it is also possible to configure Omnia to not change the price when you are not able to match the price point of a competitor due to minimum margin requirements. That is where, again, the Market Conditions functionality comes into play. Track your progress It’s always important to track the impact of your pricing strategy changes on your performance in terms of sales and gross margin, and price-ratio vs the market. That is why the Omnia platform brings all of those metrics together in the Performance screen. In these inflationary times with margin pressure and increased importance of pricing, tracking these metrics is more important than ever. Summary While inflation undeniably puts retailers and brands in a very challenging position, understanding and using the full capabilities of a dynamic repricing software can help soften the blow. Combining careful analysis of competitor and consumer behaviour with granular pricing strategies will give you the best chance of walking the fine line of staying competitive in a highly dynamic market while ensuring the profitability of your business.
Dynamic pricing strategies and tactics to cope with inflation21.09.2022
What can the European e-commerce industry learn from the US?
Although Europe is not in the top five e-commerce markets globally, it should not be discounted as a strong contender within the pool of the most successful e-commerce markets around the world: It's valued at $827...
Although Europe is not in the top five e-commerce markets globally, it should not be discounted as a strong contender within the pool of the most successful e-commerce markets around the world: It's valued at $827 billion in 2022, with an expected annual growth rate of 14% until 2025. After all, Germany and France follow in sixth and seventh place respectively, and one cannot ignore that the sheer size of the US market plays a large part in its success. With differences and similarities alike, what can the European e-commerce arena learn from the US? Lessons for the European and American markets Following an in-depth report created by McKinsey showing the positive impact on profits when more time, strategy and budget is allocated to retail media, it can be suggested that the European, Middle East and African regions (EMEA) should take notes from the US’s successful focus on retail media, a sector of the industry that is being led by Amazon, Target and Walmart Connect in the US. It is also a growing trend in the UK. "In 2021, retail media in the US was worth $30 billion, and retail media networks (RMNs) are growing at a 10% annual rate in the UK." But, what is retail media, exactly? This includes in-house and out-house targeted advertising for the retailer and the very brands they stock. In doing so, it reaches the very needs and wants of the customers. The type of media includes in-store advertising with digital screens, social media marketing through a retailer’s digital platforms and third-party advertising on Google. McKinsey estimates that if a retailer sets up their own RMN, their profits could increase by between 60% - 85%. In supporting this conclusion, this may also be because RMNs have access to first-party data that can target customers with relevant content instead of traditional mass marketing. Speaking of the value of first-party data, research shows that 91% of consumers are more likely to spend money on a brand that offers them deals and recommendations that are actually pertinent to them. European retailers are following North America's lead in retail media expansion with similar results. Although e-commerce penetration in Europe is slightly less than in the US (14.4% vs 15.3% of all retail sales), Western Europe is far ahead in terms of the in-store digital experience. This includes increased use of robotics and AI in retailers to improve the overall delivery and experience. For example, brick-and-mortar stores in Western Europe offer more omnichannel options like BOPIC (buy online, pick-up in-store) and roboticized item collections like Ochama in the Netherlands which uses robots to collect and package each item. In-store modernisation is more advance in Europe than in the United States. Talk to one of our consultants about dynamic pricing. Contact us How are retail markets in the EU, UK and US reacting to high inflation? Currently, retail markets in the various continents are reacting differently to high inflation. In the UK, a 40-year record high of 10.1% inflation was reached in August, which was attributed to increasing costs in energy, food, vegetables, and staple items like toilet paper and deodorant. France experienced a similarly sharp increase, reaching a rate of 6.1%, which is the country’s highest in 37 years. Surprisingly, the UK and France have been made outcasts with this statistic, as countries across Europe like Germany, Italy, as well as Canada and the US experienced a slowing down of increasing inflation in July. Furthermore, the Bank of England predicts that 10.1% will not be the worst numbers that we see - in fact, inflation in the UK may rise to 13% later in the year. Despite some positives regarding inflation in the EU mentioned above, the continent’s largest online fashion retailer, Zalando, has experienced decreases in revenue every month since the start of 2022. The Financial Times reported that Zalando has experienced a 29% drop in net cash this year to €1.6 billion. Across the Atlantic, retail sales remained steady and consistent in July and August. Although it may be incremental, retail sales increased by 0.7% across multiple categories. As the world’s largest retailer, Walmart reported strong returns despite rising inflation and described “resilient consumer spending” as the reason. Home Depot, another American retailer, has also experienced steady and increasing turnover, detailing the spending on home DIY and improvement as “incredibly high”. In fact, this last quarter ended with Home Depot achieving their highest sales and earnings ever. This shows how US consumers are investing in the homebody economy more than before, despite the almost total end of covid-19 restrictions. Other US retailers like Target and Lowe’s experienced positive returns on their shares this month too. E-commerce markets in developing countries are showing promise Other players are showing their grit as they grow. Brazil is proving to be the country with the e-commerce market with the largest annual growth rate. The Indian e-commerce market is expected to grow to $111 billion by 2025, and with a census of more than 1 billion people, the Indian e-commerce industry should be something for industry leaders to look at for investment opportunities. In 2021, Latin America saw a 25% increase in e-commerce sales from 2020. By 2023, online retail sales in the Asia-Pacific (APAC) region, which includes Australia, Afghanistan, Bangladesh, Bhutan, Myanmar, Brunei, Cambodia, Indonesia, New Zealand, South Korea, Singapore, Vietnam and many more, will be a total greater than the rest of the world combined. China does fall part of this region which gives it a greater boost. Is there a clear winner? When it comes to the status as the reigning e-commerce market champion, we don’t see a clear winner between the US and the EU. Both markets flourished under the urgency and chaos of Covid-19 restrictions, however, both markets have more to learn when it comes to offering customers targeted deals and promotions. The EU shows promise of using robotics and AI in a more effective way than the US, while shoppers in the US are proving to show more resilience in the times of high inflation. Despite the competitive nature of both North America and the EU, both markets could share in the knowledge and learn valuable lessons from one another.
What can the European e-commerce industry learn from the US?15.09.2022
The e-Commerce Consumer Journey
If the planners and strategists of successful brick-and-mortar stores from 30 years ago knew just how vital the consumer journey would become to the success of retailers, they’d give themselves an extra pat on the back....
If the planners and strategists of successful brick-and-mortar stores from 30 years ago knew just how vital the consumer journey would become to the success of retailers, they’d give themselves an extra pat on the back. From walking through the fresh produce aisle in the 90’s to navigating the very wants and needs of a millennial searching for vegan moisturiser online, understanding the consumer journey has always been pertinent to retail. Decades ago, shop planners knew that placing toiletries next to dry food goods would not make sense to the shopper as they travel through each aisle. In the same way today, customer experience officers are essentially trying to do the same thing - except with the added chaos and stress of the world wide web. Harvard Business Review defines the customer journey as “the steps your customer goes through in engaging with your company and/or product or service.” This includes the independent, internal process a potential shopper goes through before landing on your web shop’s homepage. For example, a potential consumer may be thinking that they would like to get into running as a hobby and they are searching online for a simple training schedule. These initial internal thoughts and feelings of the consumer are an important part of the customer journey - and it begins before they’ve even discovered the retailer. What are the main drivers of a buying decision online and which categories of products do people most love to compare online? We’re answering these questions and more as we delve into the customer journey as it stands now. How retailers can begin to better understand their customers with customer psychology and personas Customer psychology is a field of focus that developed from retail leaders trying to understand and monetise consumer behaviour. "Looking at a shopper’s age, location, socio-economic background, profession, purchase and search history, and other data can help e-commerce owners understand their shoppers and retain their attention and loyalty." Delving into the psychology of customers is a time-consuming, lengthy process, albeit a worthwhile one. To start this journey, online retailers and marketplaces could begin by creating a buyer persona or a set of personas by using customer data from: Loyalty programs. These programs are a certified way of receiving information on what’s most important to your customers based on how, why and when they use it. Newsletters and mailers. By looking at what consumers click on in mailers, you can see what products they’re most interested in. You can also see what kind of sales language works best for them. Organised focus groups. Based on shopper data, a retailer can organise a formal focus group of recent shoppers to ask them questions about their shopping experience, what criteria helped them choose your website, the product, the delivery and/or returns process, the intent behind choosing this product and brand, and more. Based on the information received from all three avenues, as well as taking a deep dive into a web shop’s Google Analytics data, e-commerce stores can begin to create a customer journey map - from Google or Instagram to the checkout page. What are the main drivers of consumer buying decisions? If we’re truly trying to understand consumer behaviour and psychology, there’s one main question at the centre of attempting to understand the key drivers of buying decisions online: Why? The split second a consumer clicks “Pay”, a series of thoughts, emotions, and strategic comparisons have already taken place to bring the consumer to that moment. In an academic paper written by Ana Teresa Machado entitled “Drivers of shopping online: A literature review” and published in Open Edition Journals surmised that the main drivers for buying decisions are made up of: Perceived benefits of online shopping. These may include the ease of shopping from the home or office; saving on time spent at the mall; finding deals specific to online shopping vs offline; or being able to easily and quickly compare prices for similar products across multiple stores simultaneously. Perceived risks of online shopping. These may be finding out at checkout that there is a hefty delivery fee; not being home when the delivery arrives; having to deal with a confusing or disorganised returns system; having one’s credit card information stolen; not understanding how to navigate the online store. External factors, which are: Consumer traits. This may be personal brand preferences or individualistic ideas on how frugal or frivolous one should be when shopping. It includes their lifestyle, socioeconomic background, location and personal choices, for example, if a shopper is vegan and focused on sustainability. Situational factors. This includes shoppers finding themselves in a particular situation: Being in a rush and looking for one specific product; being restrained by budget; purchasing a gift for someone else; trying a new recipe for the first time, and so on. Product characteristics. This may be product size, taste, texture, quality, price, and availability. Previous online shopping experiences. The number one reason for cart abandonment is finding additional, unexpected costs from online stores who don’t communicate shipping and delivery fees effectively. If a shopper feels slighted by one negative online shopping experience, this will affect the next one. Price comparisons: Which are the best and most-loved categories to compare? Briefly mentioned above, being able to compare prices efficiently and easily is a top reason why consumers choose online shopping over offline. One could have multiple marketplaces, branded online stores and e-retailers all open in separate tabs on their laptop with the ability to compare and choose the best product for their needs and budget. For example, the same New Balance running shoe may be present across 10 different e-commerce stores, however, which one is going to offer the best price, delivery time and method, returns policy and a discount for their next purchase? The consumer holds the power in choosing which online store will be the right choice for them, whereas brick-and-mortar shopping often leaves consumers feeling like they have no choice but to make a purchase there and then if they want a specific product. Because shoppers of e-commerce can easily compare, they also have the ability to be more informed than ever before regarding a product - or even an entire product category. Google surmises that 59% of the online shopping population today are making far more informed purchasing decisions compared to a few years ago. This trend was perpetuated by the rise in mobile shopping as searches for the “best” product surged by 50% year-on-year in the categories of apparel, home and garden, beauty and personal care, and computers and electronics. There are some products that don’t receive a lot of comparison searches, like toothpaste, and there are some that receive a ton of online traffic. That’s because, thanks to consumer psychology, we understand that some consumers intrinsically know that some products (like toothpaste) all do the same job, pretty much. However, not all moisturizers or running shoes or wireless headphones do the same job. A growing culture of feedback Luckily for the e-commerce industry, shoppers are more interested than ever to give feedback and reviews regarding their experience with a brand or marketplace. Google finds that 88% of consumers say they trust online reviews just as much as personal recommendations. Shoppers are using the reviews, comments and photos of a product to help make their decision in real-time. In fact, this statement is so true that when beauty brand Sephora implemented this reality and actively prioritised reviews on their mobile app, sales increased 167% in-store. Shoppers are also more open to giving data if they are going to receive relevant deals and promotions. Using both the data and the feedback, retailers can understand the customer journey now more than ever. Retailers and marketplaces can find pain points and common issues experienced among shoppers and actively target them to be remedied. It is up to retailers and brands to make good use of what the customer has to say and share to improve the consumer journey and to maximise sales.
The e-Commerce Consumer Journey15.09.2022
Complete Guide to Selling on Amazon in 2022
With a massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. But Amazon is also an...
With a massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. But Amazon is also an overwhelming online platform for Sellers and consumers alike. With so many options for how to shop, sell, advertise, and win on Amazon, it’s no wonder there are lots of questions. In this guide we’ll answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform.
Complete Guide to Selling on Amazon in 202201.09.2022
How important is UI/UX in the online shopping journey?
Anyone working in the digital space in the early 2000’s can remember the experience of visiting a website: Blurry images, large bodies of text, broken links, slow page speed, empty categories and many more, as the world...
Anyone working in the digital space in the early 2000’s can remember the experience of visiting a website: Blurry images, large bodies of text, broken links, slow page speed, empty categories and many more, as the world grappled with web development in its infancy. Needless to say, the user’s experience was static, disjointed, and enjoyable to say the least. Over the last two decades, web development has seen the growth of an entire sector called User Interface and User Experience - often abbreviated to UI/UX - which focuses entirely on the design and quality of experience while using a product or online service. While UI prioritises the look-and-feel of a website, UX focuses on the conceptualisation, implementation and delivery. From online stores to marketplaces to delivery tracking to getting a quote for travel insurance, any brand with a successful digital strategy includes UI/UX. Nevertheless, when it comes to shopping online, how important is UI/UX? Could a potential shopper abandon their cart early because of poor UI/UX? What are the trends today and beyond in UI/UX? We’re answering these questions and more as we delve into the online shopping journey. A superior user interface and experience leads to higher conversions Organising the flow within an online store is not dissimilar to how a supermarket organises their produce. Just how it wouldn't make sense to put toilet paper and cucumbers next to one another, UI/UX designers have the important job of creating seamless usability for shoppers, no matter what they’re looking for. Just like Amazon’s revolutionary recommendations feature that pushes sales and revenue, supermarket planners - and e-commerce designers alike - have to build a space that creates easy and helpful navigation as well as keeping profit top-of-mind. The UI/UX department is customer-centric, meaning it is built around earning and retaining consumer loyalty. If an online store or marketplace has an excellent user interface, they can expect positive outcomes: Increased screen time An intelligent, clutter-free and user-friendly UI/UX strategy will increase a shopper’s screen time. More screen time results in more sales and higher ROI (return on investment). A Forrester study revealed that good UI can improve a website’s conversions by 200% and good UX can increase conversions by 400%. Improved SEO If shoppers are spending more time on your online store, this will inadvertently improve your SEO (search engine optimisation). In addition, the way in which an online store is built goes a long way in Google prioritising your website. If your store is reminiscent of the early 2000’s websites mentioned above, Google is going to push your store back to pages 2, 3 and 4 in preference for more contemporary, shopper-optimised web stores. Increased streams of revenue from mobile and social commerce Revenue doesn’t just have to come from desktop customers. If you have a successful UI/UX strategy, your online store is mobile and tablet friendly, also called responsive,and connected to Instagram Shop’s marketplace, ensuring multiple channels of website visitors and sales from various types of consumers. Social commerce is expected to grow faster than e-commerce to €1.1 trillion by 2025, showing just how versatile and mobile-friendly an online store needs to be. Talk to one of our consultants about dynamic pricing. Contact us UI/UX trends for e-commerce in 2023 Dark Mode Apple introduced Dark Mode in 2018 on their iPhones and iPads, which uses darker colours on the display at night time or on a set schedule. Dark Mode not only lessens the harsh brightness of one’s screen on the eyes, but adds a level of sophistication too. It also reduces blue light and battery drainage on mobile devices. Some users opt for Dark Mode as a permanent setting. Instagram, Wikipedia, Amazon and Google have already started offering Dark Mode as an option. For desktop web stores and mobile apps, consumers will start seeing this feature more often. Voice search capabilities By 2026, the global voice recognition market will be valued at €25.9 billion and, currently, 71% of shoppers prefer to use voice search instead of typing, according to a PwC study. With the number of voice recognition speakers increasing in US and EU homes, being voice-search-responsive is vital to a retailer’s UI/UX strategy. Voice search and commerce embody the epitome of convenient and easy shopping, making it part of the next retail revolution. In addition, being voice-search-friendly lends a hand to improved accessibility and usability for consumers with disabilities. Video reviews When searching for and researching a product, it is always helpful to have shopper reviews on the same page as the product with a star rating and a short blurb, but e-commerce consumers today treat this as an expected feature that goes without saying. Considering that 80% of shoppers say that video reviews give them more confidence when buying an item, and an additional 50% of shoppers worry that a clothing or apparel item will look different in person, we should be seeing more e-commerce stores offering video reviews. Detailed and intuitive descriptions When shopping for shoes, a bikini or a new moisturising cream, a detailed description of the fit, feel, ingredients or incentivising characteristics goes a long way in providing important information as well as motivating the consumer to purchase. Coreelle, a South Korean online marketplace for high-end skincare, provides detailed descriptions using graphics and keywords in an interesting way. For example, a shopper can learn about this product in an innovative way by looking at the various images, key features like how it is vegan and cruelty-free in nature, and can learn how to use it by tapping the “how to use” tab. UI/UX is part of a brand’s identity and success 67% of website users are likely to make a purchase and 74% of users will return to a website if it has good UI/UX. However, the percentages are just as high for consumers who have waited longer than five seconds for a website to load or if they had a negative user interface experience. In fact, a website’s bounce rate increases by 35% if it doesn’t load within five seconds. E-commerce brands and retailers must ensure that they are aware of what consumers want along the shopping journey and how they can consistently improve and stay ahead of competitors.
How important is UI/UX in the online shopping journey?25.08.2022
How we collect vital data for our customers (Part 2)
In recent years, data has surpassed oil in being the most valuable commodity on Earth. In just the four years between 2016 - 2020, the data market in the US grew in value from €129 billion to €211 billion. In a...
In recent years, data has surpassed oil in being the most valuable commodity on Earth. In just the four years between 2016 - 2020, the data market in the US grew in value from €129 billion to €211 billion. In a nutshell, data is how we understand something on an intricate level without bias and subjectivity, and within the world of e-commerce and retail, it is the cog in the machine that’s indispensable. In this four-part series, Omnia shares the process a potential customer will enter into once they decide to choose our pricing software solutions. In early August, we shared part one, which included the technical pre-requirements a customer needs to begin their pricing journey. Today, we are delving into how we collect data as one of the initial and most vital parts of the process. Where does the data come from? Speaking to David Gengenbach, a developer at Omnia, and Berend van Niekerk, Omnia’s Head of Product, it is impressive to see how much time and attention goes into getting detailed - and most importantly, correct - data for the pricing strategies of customers. There are two types of data that provides everything needed to reprice an entire online store or marketplace: Internal data and market data. Internal data Internal data includes information that comes directly from the customer. “Everything from sales data, purchase prices, stock data, performance measures, information on champion and non-champion products, new and old products, categories, seasonal products… it’s important to provide as much information as possible,” says Berend. Insights from Google Analytics and additional plugins can also be used to understand where traffic is going and which products are most popular. If your online store is using Shopify, Magento, Shopware, Plentymarkets or JTL, you can make use of our "Pricemonitor plugins" which you can find in the respective app store. The plugin allows you to connect easily to our database, without having to involve your IT department. After the initial data is connected to Omnia, the customer has the ability to modify all information within the tool. They can clean the data, change the formatting and add additional logic and calculations to the data. In this way the user can do the required modifications, without having to bother their IT department. “There’s less hassle for the customer this way,” says Berend. External data Market data, or external data, comes in two categories, according to Berend: "Data from marketplaces and comparison websites, like Google or Amazon, and data that is directly collected from competitors' websites." Typically our customers use a combination of both. The data from marketplaces and comparison websites will provide a good view of all competitors selling the product, where data that is scraped directly from your competitors will ensure you the most up-to-date and complete overview of your main competitors. The data from marketplaces and comparison websites includes highest and lowest pieces, reviews, delivery times and many other features. How do we ensure data quality? Vetting data is also part of the scraping and collection process. David, who specialises in competitor data, shares that there are four aspects to data quality: Finding the right competitor prices by ensuring that the competitor prices are for the exact same product as you are selling. For example, if we were checking the prices on Google Shopping for the iPhone 13, we would not consider the prices for second hand iPhones, where many websites advertise on Google. These prices would not be included. Within those prices, making sure that we identify any outliers. For example, perhaps Google grouped the products incorrectly and there is a very high or low price in the grouping. The timeliness of the data: Making sure that we update the prices on a particular schedule, so that we collect any price updates quickly. Data quantity plays a role too. If we conduct a product search, and there are 10% less products today compared to yesterday, we need to investigate what may be causing that. Superior pricing strategies are informed by our data Within the retail and e-commerce landscape, there is no successful web shop or marketplace without a comprehensive dynamic pricing strategy. And, in turn, there is no complete dynamic pricing strategy without data. However, it is up to the customer how much of their internal data they are willing to give. The more data we have, the more we can create a profitable and competitive pricing strategy for each customer. Stay posted for our next part of the series on what customers can do with this data.
How we collect vital data for our customers (Part 2)24.08.2022
Meet the Team: Brend
Name: Brend Kolfschoten Company Role: Junior Consultant --- What do you do at Omnia Retail? Enjoying a lot what I’m doing within the company and getting to learn a lot while doing it. Within Customer Success team I’m a...
Name: Brend Kolfschoten Company Role: Junior Consultant --- What do you do at Omnia Retail? Enjoying a lot what I’m doing within the company and getting to learn a lot while doing it. Within Customer Success team I’m a supportive partner for all the companies connected to Omnia. Making sure that everyone gets the most out of the system. What is something people in your industry have to deal with that you want to fix? Creating an environment where there is room for creativity and a lot of testing. Due to the growth of online stores, Dynamic Pricing became more relevant than ever. Making it possible for companies to change prices on a more regular base. By taking away any restrictions the data or any analysis could pose. What is your past experience, of working in your position? Before starting at Omnia I’ve finished a master degree in Data Driven Business. After finishing the degree I’ve worked on forecasting methods in which Dynamic Pricing would be one of the key factors for determining the results. While studying I have built up experience in Customer success, Customer support, and sales within several different industries. What do you like about working at Omnia Retail so far? Every day is completely different. Making it an interesting work environment where there are a lot of things to learn. Working in a really diverse team but having the drivers for working at Omnia. Different members within the teams all have their own field of knowledge making it a place where we could learn from each other. Noticing also that I’m working with smart people all around me. What are the values that drive you? Empathy, Courage, Determination and Curiosity What are your top favorite books, podcasts, or documentaries? - Boook:The Tipping Point: How little things can make a big difference - Malcolm Gladwell - Documentary: The last dance - docuseries on the rise of superstar Micheal Jordan - Song: A horse with no name - America What do you enjoy doing when you are not working? I’m a musician and playing within 2 different bands. Having about 40 performances a year all over the Netherlands. Being an entertainer on stage and really giving and receiving energy from the crowd. To make sure I have the energy to jump around the stage for a few hours I’m also a big fan of sports. My main sport is Cross-fit but I like to pick any challenge by changing up the sports I’m doing like: Football, basketball, beach volleyball, bouldering and squash. Let’s end with your favorite quote! “Life is like a box of chocolates, you never know what you’re going to get” - Forrest Gump
Meet the Team: Brend18.08.2022
Faster shipping is changing demands, with retailers edging to keep up
There is a reason a retailer’s shipping or delivery method is called “the last mile”. It’s easily one of the most challenging and complicated parts of the logistical and supply chain process - and one of the most...
There is a reason a retailer’s shipping or delivery method is called “the last mile”. It’s easily one of the most challenging and complicated parts of the logistical and supply chain process - and one of the most expensive. The Millenial and Gen Z age groups are currently the largest living generations alive today, and by 2029, they will make up 72% of the world’s workforce. This makes them the number one focus group for retail leaders spanning the globe. However, people from all generations and age groups have, at some point, shopped online and experienced the various delivery and shipping methods on offer. Now that consumers are used to Amazon’s industry-setting standard of same-day delivery and even two-hour delivery in over 2,000 US locations, how willing are shoppers to pay more for fast delivery? How has delivery changed the relationship between consumers and retailers? What could we see take place in the realm of delivery advancements and technology? Will consumers pay more to get faster shipping methods? A 2021 report conducted by Omnitracs on consumer behaviour found that 65% of US shoppers are willing to spend more money to receive faster, more reliable delivery. There are three main factors that affect a consumer’s decision when choosing between speed vs cost: Their age, the urgency of the delivery and the total cost including delivery. The urgency of the purchase may involve shoppers looking to buy last-minute birthday or festive season gifts or a desirable item that the shopper has been eyeing out for some time. The total cost includes the cost of all items plus delivery. However, it isn’t just the concluding number - it’s also about the cost of delivery in relation to the cost of the item. For example, if same-day delivery is €10 on an item that only costs €30, consumers will have to weigh out if this additional cost is worth it. What’s notable about the total cost factor is that it is dependent on the first factor: Age. Statista surveyed consumers at the end of 2021 and found that depending on your age group, you’re likely to spend a certain percentage of the total order value to get faster delivery. Gen Zer’s would pay approximately 5% of the order value, while Boomers (57 - 75) would only pay 2.2%. For example, if an order totaled €100, then Gen Z shoppers are willing to pay €5 and Boomers would pay just over €2. How delivery is changing the relationship between shopper and retailer Before the e-commerce boom, when it came to getting the goods, consumers did not have a power majority. Shoppers had to physically go to the store to purchase goods, which were determined by the shop's own trading hours. In other words, retailers didn’t have to move an inch to get the consumer to come to them. Today, as e-commerce dominates global shopping with desktop web shops and mobile apps, the relationship dynamic has flipped 180 degrees: The consumer has forced the retailer to come to their homes, working shopping into their personal schedules when it suits them, or simply when they’re feeling snackish or inspired. In China alone, revenue for online retail achieved a world-first when it surpassed brick-and-mortar revenue for the first time, accounting for 52.1%. Furthermore, by the end of 2021, 54% of global sales from shopping online came from mobile apps, showing just how much the consumer has changed in the last two decades. So, with the consumer-retailer relationship evolving in such a short amount of time, retailers - from grocers to home furniture - have had to revolutionise their entire logistics and supply chains model to meet the demands of the modern consumer. When the concept of “delivery to your door” first came on the scene, consumers dealt with 3-4 day wait times, wrong or unfulfilled orders, and returns were a nightmare. However, because consumers were enjoying the convenience of home delivery so much, shoppers did not notice the mishaps and longer waiting periods for deliveries because they had nothing else to compare it to. In 2022, with next-day and same-day delivery being the norm, as well as free shipping options and a more seamless returns system, it is almost inconceivable that consumers ever patiently waited almost a full work week to receive their order. But as delivery options expanded and became more personalised, the demands of consumers grew larger. It was no longer acceptable for a retailer to not offer tracking information on a parcel, omnichannel delivery and/or pick-up options, a returns policy that benefited the consumer, and other features. Having convenience, choice, speed and customization became the crux of the choice consumers had when choosing a retailer to shop from. Because shopping from the comfort of your home not only became the norm but the law in many countries during the height of the Covid-19 pandemic, consumer behaviour and expectations shaped how retailers would survive or thrive; which has set the tone for the consumer-retailer relationship in 2022 and beyond. According to a Shopify report entitled “Future of Commerce”, 75% of consumers said that free shipping had a “very significant influence” and 60% said same-day or next-day delivery had a “significant influence” on their decision to purchase. This ultimately shows the significant power shift between the consumer and the retailer. To put it bluntly, the consumer is saying, “Show me some options I like or I’m going somewhere else.” And, in an overwhelmingly saturated and competitive market, they can. How a customer experiences delivery, either online or offline, is viewed as an extension of the retailer and is part of the personal review a customer may have when deciding when or if to shop from a particular retailer again. The same aforementioned report conducted by Shopify, which includes data from millions of Shopify stores around the world, also concludes that 74% of consumers value transparency and clarity when it comes to a store’s delivery/shipping costs and policy. A further 68% would prefer free returns and an estimated delivery time. A great way to handle this is to provide the speed, method, ship time and cost for all of your delivery options. And, notice we said delivery options because in 2022, consumers want choice just as much as they want convenience. Talk to one of our consultants about dynamic pricing. Contact us Delivery trends today and going forward Other than next-day, same-day and two-hour delivery, retailers are finding ways to utilise their brick-and-mortar stores as well as their online channels. Click-and-collect and BOPIS Because many brands and retailers have an omnichannel business model, delivery options may include click-and-collect, which is also known as BOPIS (buy online, pick up in-store) or ROPIS (reserve online, pick up in-store). These are ideal for shoppers who have ordered groceries or home goods while at work and plan on picking them up on the way home. Another new delivery method is curbside pick-up, which sees a store employee hand out pre-ordered parcels on the curb to increase convenience for shoppers and turn-around time for orders. These are all in addition to home delivery. Although consumers may not necessarily go for the option that sees them having to jump in their car, just having the option is pleasing to them. Click-and-collect may also refer to a shopper visiting the warehouse for collection as to avoid the wait time for delivery, however, this option needs to be selected before purchase so that the supply chain isn’t taken by surprise. However, the BOPIS method isn’t just a strategy to make shopping more seamless for consumers; it is also a way of increasing foot traffic. The Wall Street Journal found that 50% of shoppers opt for BOPIS and 45% of shoppers ultimately buy something else while in store. This successfully blends the demand for omnichannel shipping/delivery methods, and increases the retailer’s sales per BOPIS order. The future of delivery Consolidation after fast digitalisation is taking place at an alarmingly speedy rate, turning online stores into marketplaces into e-commerce conglomerates. There are many benefits to consolidation for big players, however, smaller businesses will need to seriously weigh out the pros and cons in the face of the company’s ethos, mission statement and long-term goals.
Faster shipping is changing demands, with retailers edging to keep up16.08.2022
E-commerce giants are using consolidation to gain market share
Mergers, acquisitions and consolidation: Three words the average consumer would expect to only hear in the sky-high buildings of the Central Business District (CBD). However, these strategic processes are more a part of...
Mergers, acquisitions and consolidation: Three words the average consumer would expect to only hear in the sky-high buildings of the Central Business District (CBD). However, these strategic processes are more a part of the everyday consumer’s life than they think. By simply opening their Zalando or Amazon app to browse anything from electronics to swimwear to makeup, shoppers in the digital age and their money are at the very core of e-commerce consolidation - a trend that’s seen exponential growth in the last few years. What are some of the motives and developments behind consolidation? How are payment apps and systems becoming part of the big consolidation? And, is Amazon Marketplace a good choice for smaller businesses? We take a look at answering these questions as consolidation climbs the ranks at e-commerce’s biggest move in 2022 and beyond. eWallets: A consolidation trend that’s an end-to-end strategy The world of retail is always changing, and with the Covid-19 pandemic slowing down, it is astounding to look back at the development of e-commerce, marketplaces, mobile commerce and social commerce that’s taken place in the last two years alone. As we know, consolidation is not a new trend within business as a whole, however, we are seeing it move more and more in the online space with the acquisition and/or rise of eWallets and e-commerce-owned payment systems. By 2031, the mobile wallet market size will be worth $16.2 trillion, according to a Bloomberg report. This is a growth rate of 22% between 2022 - 2031. When thinking of mobile wallets, one may think of traditional banks offering an online or mobile solution, however, mobile wallets have become a hot development for e-commerce retailers and marketplaces. According to Transparent Market Research, the company that provided the statistics to Bloomberg, the key players in this growing field are Apple, PayPal, Amazon, Google, Samsung, and MoneyGram. An early instance of e-commerce marketplaces jumping on the eWallet train was in 2002 when eBay acquired PayPal, only four years after it was founded. However, PayPal still owned the payments portion of eBay’s e-commerce experience. In 2022, eBay no longer offers PayPal to its sellers, who now have to opt for their in-house payments system Adyen, meaning eBay now denies sellers access to PayPal. Payments are now transferred directly from eBay to the sellers account. But, why the change? Consolidating payments gives eBay more access to customer data, they can change any part of the system at any time to benefit themselves or their customers, and they can incorporate local payment methods. The change for eBay only officially started in June 2021, so time will only tell how this affects revenue, market share and customer relations. From the US to China, Alibaba, which ranks at number one in its homeland, is arguably the world’s second largest e-commerce marketplace. Alibaba is so large - and so entrenched - it holds 51% of China’s retail e-commerce market share. JD.com, which takes second place, came in at 20%. Similarly to the eBay-PayPal relationship mentioned above, Alibaba has its own payments system, AliPay. Amazon has Amazon Pay, Apple has the same, and Google too. Tencent, an e-commerce marketplace in China has WeChat Pay and even Facebook, originally a platform created to connect friends and family, has developed Meta Pay this year. This fact alone should tell a consumer that tech and retail e-commerce giants are consolidating the entire shopping process, end-to-end. These e-commerce Goliaths have created an ecosystem for the consumer to exist in and to keep rotating between, as if there are no other options available. Using just one company and one platform to search, shop and pay also provides them with more customer data, thus fine tuning their understanding of customer behaviour and expectations. The consumer continues to turn in a revolving door fashion within the same company - and that’s the power of consolidation. How Amazon Marketplace leads consolidation, but suppresses competition Amazon aggregators, which are larger businesses operating specifically to seek out and acquire smaller businesses on Amazon Marketplace, will experience a boom in size and profitability in the coming five years, after it already achieved $300 billion in sales in 2021. Currently, there are 99 active Amazon aggregators. These larger companies, such as Perch, RazorGroup and Heyday, have been seeing the value of smaller businesses selling their goods on Amazon, even if they aren’t even close to being a household name. Why? Due to the power, influence and market value a brand can build on Amazon Marketplace. Amazon Marketplace’s authority in owning the consumer is so large, it dominates their searches on the world wide web. Of all US adults, 53% of them start their search online for products on Amazon - not a search engine. Globally, search engines are in first place at 40%, however, Amazon is in second, only trailing by a 2% difference at 38%. Only 16% of searches included a consumer going directly to a brand’s online store. In addition, Amazon reported that independent businesses selling goods on Marketplace in the holiday season of 2021 sold approximately 1 billion items, which saw a 50% increase in sales from 2019. Lastly, a New York Times report found that all the sales on Amazon Marketplace were almost double that of Amazon Web Services (AWS) in 2021. It is no wonder, then, why businesses in the business of consolidation are after the success and profits of small-to-medium-sized enterprises (SMEs) on Amazon Marketplace. Although the sound of almost instant success as a seller on Amazon Marketplace sounds enticing, competitors in the industry, as a whole, suffer the most and are being quashed. A small business with a product on Amazon and Walmart, with the latter platform having a slightly cheaper price, will see a decline in digital real estate when Amazon implements its buybox suppression strategy. The seller is then forced to raise their price on Walmart, which isn’t ideal for both the consumer and the seller. Furthermore, Marketplace sellers may enjoy the consistently high revenue and the ease of Amazon managing its shipping, but they basically have no rights as sellers over their own product. As a Marketplace seller, they also can’t sue Amazon for anything. More dominance and less transparency means Amazon is able to control the seller, own the consumer and unfairly dictate to the market. Talk to one of our consultants about dynamic pricing. Contact us What are the main motives for consolidation? Avoiding the domestic growth slump One of the ways e-commerce retailers are attempting to avoid reaching their growth limit within their home country is to expand globally. Because competition is stiff; the market is saturated, and consumers have the pick of the litter, retailers are finding that going global can avoid a domestic growth slump. Forbes reported that 76% of online shoppers have made a purchase from an online store outside of their home country. Going global is no easy feat, and even some of the more successful retailers consolidate smaller retailers in new markets to make gains in market share and to increase revenue for further internationalization. Becoming a one-stop-shop Before e-commerce exploded, brick-and-mortar retailers consolidated by adding shops within a shop. For example, you’d be able to go to a hypermarket and purchase items from food to portable speakers to pharmaceutical medication to camping gear. Today, online stores are wanting to increase their value to consumers by becoming a one-stop-shop. eBay and Amazon began this trend more than a decade ago, however, new players like Etsy, Zalando, Cdiscount, and Allegro, are disrupting Amazon and eBay’s market. Understanding, then shaping consumer behaviour By attracting and working to retain new customers, retailers can understand the needs, wants and desires of shoppers from various age groups and socio-economic backgrounds. They can collect this data and in turn use it to better tailor their product offers to consumer behaviour, for example, through intelligent pricing strategies also in combination with inventory, marketing campaigns and of course promotions. The more retailers “own” data and the better they understand their customers, the more they can curate their products and online platform to make profit. A tough decision for smaller players Consolidation after fast digitalisation is taking place at an alarmingly speedy rate, turning online stores into marketplaces into e-commerce conglomerates. There are many benefits to consolidation for big players, however, smaller businesses will need to seriously weigh out the pros and cons in the face of the company’s ethos, mission statement and long-term goals.
E-commerce giants are using consolidation to gain market share04.08.2022
The Future of Marketplaces
Of the $5 trillion global digital commerce market, $3 trillion comes from marketplaces alone. As a niche of the e-commerce industry, that’s quite an achievement, considering how many more individual online stores there...
Of the $5 trillion global digital commerce market, $3 trillion comes from marketplaces alone. As a niche of the e-commerce industry, that’s quite an achievement, considering how many more individual online stores there are in comparison to marketplaces. Some of the most well-known online marketplaces are Amazon, eBay, Alibaba, Etsy and Walmart. Instagram and TikTok: From scrolling to buying In Europe, these are all available, however, online marketplaces specific to the EU are Cdiscount, Real.de, Otto, Bol.com, Zalando, Beslist.nl and many more. Although Amazon is an American company, they are still the number one online marketplace in Europe, with approximately 1.6 billion visits per month. Another American company, eBay, stands as the EU’s second largest marketplace, however, with only 37% of Amazon’s European traffic. Nonetheless, what does this all mean for the future of retail and e-commerce? How will the landscape of marketplaces change over the coming years? Which sectors and departments of retail are leading the way in the marketplace space? As we look to the future of marketplaces. Social media and search platforms When search platforms like Bing, Yahoo and Google first came onto the scene in the late 1990’s and early 2000’s, the wonder and awe of having the world’s knowledge at your fingertips was life-changing, and this is before the addition of advertising and shopping features that followed later on. Users of the internet would never have guessed that a search engine like Google would become, in essence, a marketplace on its own. The same can be said for social media platforms like Facebook, TikTok and Instagram which started out as spaces to share photos, videos and to connect with friends and family. Looking back at their original states, it is astounding to see the growth and evolution of social media platforms and search engines. In 2016, Facebook created Marketplace, a section of the platform that provided locals in a city to buy from and sell things to one another. Instagram tested out shopping features through Instagram Stories in 2018, but by 2021, the feature was so successful that the platform created an entire tab dedicated to shopping. From clothing to swimwear, jewellery to furniture, the tab curates posts and ads from brands and retailers selling their products. The feature has become so advanced, users don’t even have to leave the Instagram app to complete a purchase. In 2022, 44% of Instagram users shopped weekly on the app and 50% of Instagrammers use the app to find new brands. According to Facebook’s own data, 1 in 3 users in the US will use Marketplace to purchase something, keeping in mind it is the 5th most popular marketplace in the country. Social commerce, as it has come to be known, is only going to get larger, with sales expected to reach $600 billion by 2027. It is safe to say that social platforms have moved from content sharing to content marketing to multi-brand, retail-driven platforms. Search engines have had a similar meteoric evolution. Google offers a “Shopping” tab, similar to their other offerings like Maps, Images, News, Calendar and more. Bing and South Korea’s Naver also offer a Shop-like section. Google’s search technology allows it to be the leading search engine marketplace as they incorporate shopping options into organic searches, including voice search. For example, if someone Googled “red triangle bikini” or “dairy-free baby food”, search results would be an intricate and deliberate blend of content and digital commerce including products from brands and retailers. The marketplace business model has come a long way since the Bazaar of Tabriz in the 16th century. Talk to one of our consultants about dynamic pricing. Contact us Second-hand apparel: A growing marketplace Shopping for vintage clothing and buying from second hand clothing stores is not new, but it is, in itself, revolutionising. Covid-19 had an impact on resale marketplaces, as families and individuals looked for ways to make money or ways to scale down on consumption and expenses during lockdowns, job losses and furloughs. By selling and monetizing fashion, instead of adding to global waste, consumers were able to maximise the circle of fashion - and ultimately drive the growth of resale marketplaces around the world. Buying clothes previously owned by others is not only becoming a multi-million Euro industry, but it is firmly finding its place on its own as an online marketplace. Also known as a resale platform, the second hand apparel market is expected to be valued at $218 billion by 2026, doubling in size from 2021 to 2025. The likes of Vinted, a resale platform in Europe, the UK and the US founded by Thomas Plantenga, allows users to buy and sell used clothing and other items through its app and desktop option. Over 65 million people around the world use the service without having to pay selling fees - a feature quite unique to most marketplaces and resale platforms. On the other end of the resale platform market is Dubai’s The Luxury Closet (TLC), which acts as an exclusive, premium resale platform in the Middle East. You can buy second hand luxury items from Louis Vuitton, Hermes, Dior, Rolex and more. TLC’s success and popularity has grown so large, it has opened up in the UK market in July. Later on in 2022, it plans to extend to Europe. Resale platforms like TLC have tapped into a new arena of the second hand market, offering consumers the chance to own designer items at lower prices than what one would pay if it were new. What makes a resale marketplace unique to shopping at a second hand store is, firstly, the experience and, secondly, the fact that major resale platforms include the products from smaller second hand apparel businesses, making it a marketplace and a retailer simultaneously. Resale platforms have a business-to-business (B2B), a business-to-consumer (B2C) and a consumer-to-consumer (C2C) business model all running concurrently. The UK’s resale platforms market already includes Mr Porter Resell, Reflaunt and Lampoo which are also available in France, Germany and the Netherlands. Vestiaire Collective is Europe’s largest resale platform, of which The Luxury Closet will have to contend with. Vestiaire Collective’s CEO Maximilian Bittner believes that the growing focus on sustainability will further drive the success of resale marketplaces. “Fashion fuels some of the world’s biggest problems: Overconsumption, overproduction, climate change, and work ethics,” he said in an interview with McKinsey & Company. He admitted that he was surprised at how much of the sustainability aspect pushed the success of Vestiaire Collective specifically: “The investors who reached out to me at the time looked at this very much as a second hand, luxury fashion business. I don’t think people were yet seeing how big the sustainable opportunity could be. And I really have to admit, I didn’t see it either. But the speed at which it came now absolutely surprised me.” Another resale marketplace that’s focused on sustainability is Depop, which encourages engagement between sellers and buyers as a part of the second hand and thrifting community. The sellers are new-age brands and the buyers are consumers mostly from the Gen Z population - approximately 90%. Depop has had $1.6 billion in purchases to date; showing just how steadfast resale marketplaces are becoming as they disrupt Google Shopping and traditional wholesale retailers like Walmart. How are traditional brick-and-mortar brands making a change? Despite experiencing store closures amid lockdowns in China 2020 and again in 2022, with a third of their stores in the country remaining closed, luxury brand Chanel is doing well globally with a double-digit improvement in sales. Global sales increased by $15.6 billion in 2021 - a 49% increase from the previous year. However, the company’s CFO Philippe Blondiaux shared in June that despite the boom in sales, Chanel has new plans to further increase profits, with some of those plans seeing major changes in how the consumer will experience shopping at Chanel. For one, the brand may begin limiting availability of certain products to instigate soaring demand, which is something they have already started doing with their Classic Flap bag. Blondiaux shares that one customer can only buy two of these bags per year, which cost $10,000 each. This will increase exclusivity of owning a Chanel item and will also curb the bulk buying that often takes place within the resale and grey market. Chanel has already seen how effective this strategy is in South Korea, where customers have lined up outside a Chanel store in the capital of Seoul to take part in what’s called an “open run” - a sprint to get one’s hands on high-demand items. Another strategy used by Chanel will be a greater move to direct-to-consumer (D2C) within the next few years, which is something we’ve seen retailers and brands do on a heightened scale since 2020. Blondiaux shares that their magnificence and perfume enterprise, which is their department for makeup, perfume and other beauty products, will mostly exist online as they prioritise e-commerce. This department has largely always relied on wholesale or brick-and-mortar stores to succeed, however, since e-commerce sales jumped 32% for the magnificence and perfume department, it will soon become the channel of priority for Chanel. Other wholesalers, like makeup retailer Sephora and high-end perfume and cosmetics retailer Marionnaud, have both seen their wholesale orders drop drastically in the US market, which can be attributed to the growth of e-commerce and a decline in American malls. Department stores are taking tips from online marketplaces Concept stores Successful online marketplaces focus heavily on the actual experience of shopping online, using beautiful imagery, video content, seamless payment processes, intuitive “you may also like” suggestions, dedicated brand pages and more. When a consumer shops on an online marketplace that focuses on the entire shopping journey, they can feel the difference from walking into a department store that’s wall-to-floor merchandise. Nowadays, we are seeing international brands take a hard look at their stores to see how they can evolve and remain interesting and relevant. The idea of the “concept store” takes the very senses and experiences you would want in a marketplace and brings it to life in physical form. Walking into an Adidas or Nike store to buy a pair of sneakers or visiting Yves Saint Laurent to purchase a coat is no longer just about the product - it’s about the lifestyle of the brand. In fact, concept stores have very little product in them, as a way to maximise exclusivity whilst providing a visual experience. Nike has created a “House of Innovation” that combines sports luxe, technology and sustainability as an experience. Each store is solar powered and made from sustainable materials, while digital technologies are used to show off the athletic capabilities of each product. Inspired by fragrance bottles, Hedi Slimane, the creative director for Celine turned their Parisian store into a luxury fashion experience. “Fragrance precedes the fashion I create,” says Slimane. The store combines Celine’s 11 new fragrances, high-end leather goods and haute couture items. Store-in-store Although the store-in-store concept is not new to retail, it has seen an increase in popularity as retailers consolidate smaller brands and businesses, and brick-and-mortar retail contends with e-commerce. Some brands have also merged, combining their products, employees, logistics and resources to stay in business. An example we all may be familiar with is a branded coffee shop like Starbucks within a clothing or food store like Macy’s; or a beauty retailer such as Sephora having an in-store kiosk for JCPenney. According to a Mastercard study, “to increase offerings to customers” came in as the top reason for stores joining forces at 33%. To consolidate resources and to increase foot traffic came in second at 25%. Marketplaces are the new ground zero Department stores used to be the original playground for consumers to search for new brands; to compare products and to enjoy the endless amounts of choice. However, an online marketplace could be compared to an entire mall with all the options of various stores and categories. Although department stores and wholesale retailers still hold a significant place in retail, the changing face of marketplaces is evolving rapidly. In 2020, 63% of all global online spending occurred via online marketplaces; a figure that increased by 29% from the previous year. With a growth rate like that, it is easy to predict that online marketplaces will be the new go-to choice for consumers around the globe. Going forward, retail leaders will need to reconsider their approach if they are yet to enter the online marketplace arena in order to further monetise their current commercial strategies, increase their relevance, as well as their global or domestic footprint.
The Future of Marketplaces03.08.2022
What e-commerce players need to begin their pricing software journey (Part 1)
When the concept of retail first began in ancient Greece in 800 BC with traders selling goods and food at markets, merchants needed to keep track of their stock in a similar way retailers do so today. It began with...
When the concept of retail first began in ancient Greece in 800 BC with traders selling goods and food at markets, merchants needed to keep track of their stock in a similar way retailers do so today. It began with writing things down with a simple book and some ink. A couple thousand years later, that book turned into spreadsheets and tables; and a few decades after that, spreadsheets turned to software and digital systems. As a software creator and provider, it is awe-inspiring to see how far systems and processes that support retailers have come since the days of paper and quills. In a four-part series, we will dive into an overview of both the technical requirements and learnings for retailers and brands looking at investing in pricing software. We will also cover some of the processes our teams drive, from data scraping, sharing potential pricing strategies to the onboarding process. Let’s start at the beginning The basis for many larger e-commerce businesses is an enterprise resource planning system (ERP) like Oracle, SAP, or Microsoft Dynamics 365. In some cases, a Product Information Management Systems (PIM) and Shopsystem like Shopify are added to this set up. Smaller and medium-sized enterprises (SMEs), especially those that started online first, might only have a Shop-system like Shopify, which can fulfil all the essential tasks in the e-commerce context that an ERP-system does. As the e-commerce market is characterised by high volatility, any online stores, striving to keep up with today’s competitiveness, cannot possibly track vital data like stock volumes, sales orders, supply chains or inventory by hand. Tim Avemarie-Scharmann, Omnia’s Head of Knowledge & Scalability says, “While my cheese trader Helmut at the farmers market might be fine using Excel for most of his calculations and data flows, modern businesses, especially in e-commerce, need to integrate advanced systems that perform specific tasks automatically. This applies to your price setting as well, while Helmut can sell his cheese at 4.99€ per 100g, sometimes taking a peek at the prices from a competitor retailer will likely find themselves a much bigger market, and in some cases identifying hundreds of competitors.” Where dynamic pricing fits in When it comes to new technology and its usage, one of the first questions in people's minds is, “Is it trustworthy?” And, if you transfer this to implementing dynamic pricing software within your business, the question most people have is: “Can I trust those automatically calculated prices?” In representing the overall setup of your business and the integration of a dynamic pricing system, we think of it as a star-shaped figure, where the segments could represent the different external software services a brand is using, and the core of the star is the leading ERP/Shop system or a combination of both. Marketing, logistics, shipping, payment and pricing are just some of the additional services one has to integrate into your data flows. Even though a brand or retailer outsources the application of pricing rules to Omnia, the retailer will be in full control of the prices, as the ERP or Shop system is still at the core of your overall set-up. In a nutshell, the dynamic pricing system will receive input from your Shop/ERP system that is the signal for calculating a new price for a product. The calculation of the new price is based on the parameters that are defined with our Customer Success and Consultancy team, based on the markets and competitors monitored and pricing strategies implemented. Thereafter, the dynamic pricing system will import the new prices back to the Shop/ERP system. This way, the retailer is always in control of their price calculation. How accessible is this data? A big part of the technical implementation is establishing a connection between Omnia and the customers' Shop- or ERP-system. While in some cases a one-time, manual upload of a product list is sufficient, for example, if a brand wants to track a stable set of products in the market, some setups do require more flexibility and automation. That is the case for most retailers, where the conditions of selling can change at any time. For this, you need at least one daily data transfer, so all systems are synchronised. This can be done via simple https-feeds or by exchanging data via FTP-servers. Most Shopsystems used in e-commerce provide the option to export data via feeds and do not require coding skills. Additionally, you need to synchronise the export and import of data via the feeds with other internal processes. For example, when the new prices are calculated at 8am in the morning, you don't want them to be in your systems at only 6pm. For users of Shop- and ERP-systems such as Shopify, Shopware, Plentymarkets, JTL, Magento, we provide plugins, which make the data transfer part much easier. The plugins are designed especially for the case of transferring pricing data to-and-from our Dynamic Pricing Portal, and have pre built-in features that allow a retailer to import price updates only for products where the recommended price actually changed or to only import the price updates for certain product groups, for example, those where you have checked the results and want to make the newly-calculated price recommendation live. These cases can be covered by transferring pricing data via feeds, but with the plugins, they are easier to set up for SMEs who may not have a dedicated pricing department like larger enterprises do. Data security Especially for larger enterprises, but essentially for all of Omnia’s customers, the question “How trustworthy is the software?” does not only relate to the aspect of how to be in control of the price calculation process which we described above, but also how data is stored and processed. For this, we are currently in the process of becoming ISO 27001 certified and aim to be ready by the end of 2022. This certification ensures that we take many precautionary measures, so that all of Omnia’s users receive the highest quality standard when it comes to security and data protection. A guided process This may sound overwhelming or time-consuming for a business who is first learning about the importance of pricing software, but the opposite couldn’t be more true. Omnia’s Customer Success team are involved at every stage of the process, providing knowledge, expertise and guidance during a structured on-boarding process. As this article is the first part of a four-part series, stay posted to our next chapter on how we collect competitor and customer data. Read now Part 2: How we collect vital data for our customers
What e-commerce players need to begin their pricing software journey (Part 1)02.08.2022
Are we seeing the rise of social commerce?
“Where did you buy those jeans from?” someone may ask. “On Instagram,” another may say. Ten years ago, that answer would’ve received a confused, eyebrow-raising expression. Today, it is met with someone picking up their...
“Where did you buy those jeans from?” someone may ask. “On Instagram,” another may say. Ten years ago, that answer would’ve received a confused, eyebrow-raising expression. Today, it is met with someone picking up their phone and logging into Instagram to get shopping. How has social media become one of our top destinations for browsing, searching for new brands and tapping “Place Order”? In fact, Forbes predicts that social commerce is set to grow faster than e-commerce to $1.2 trillion by 2025. Over the last few years, we predict that three major factors have contributed to this shift: The expansion of brands and products; the increase and ubiquity of digital marketing; and the growth of social media apps. Is social commerce proliferating to the point of taking over traditional e-commerce? And with brick-and-mortar shopping still very much holding a presence in retail, how are brands and retailers dealing with the rise of social commerce? Instagram and TikTok: From scrolling to buying The app that has led the way in social commerce up until now is Instagram. Its parent company, Meta, added some shopping features in 2016 like product tags, however, the shopping section of the app only truly flourished from 2019-2021 when features like a dedicated “Shop” tab was created with Instagram checkout; categories for various items for easier browsing; shopping stickers on Stories; and ads so that users can discover new brands. Each month, 130 million users tap on the Instagram Shop tab and engage with Instagram Checkout, showing just how valuable the platform can be to brands and retailers. What’s also interesting about the Instagram Shop tab is how its algorithm connects consumers with products. According to a Hootsuite study, 2 in 3 people say the network helps foster meaningful engagement and connections with brands. Another platform that is claiming its stake among social media sites as an e-commerce powerhouse is TikTok. Although Instagram is still the bigger platform in terms of monthly users, TikTok dominated the amount of app downloads for the first quarter of 2022, achieving 175 million downloads; totalling over 3.5 billion. The last time an app had this much global reach was in 2018 when WhatsApp achieved 250 million downloads within one quarter. Another statistic that should prick the ears of retail and business leaders is the fact that the average TikTok user spends approximately 29 hours per month on the app while the average Instagram user spends only 8 hours per month. If a potential shopper is spending this much time directly engaging with content on a platform, who’s to say that this time isn’t being converted into sales and profit for brands and retailers? These numbers have - or should have - implications for a brand’s marketing and commercial strategies. According to a Shopify survey, 21% of consumers who use social media to shop use TikTok “all of the time”, making it the platform most used for shopping. YouTube came in second at 17%, and Instagram at 16.4%. Furthermore, 67% of TikTok users say they feel inspired to shop even when they weren’t planning on doing so. What makes TikTok such a successful shopping platform is its unique algorithms, dedicated shopping features, and its focus on sharing instead of liking, which spurs the virality of a product. In addition, unlike Instagram where users primarily follow creators and see their content, TikTok users are used to receiving suggestions from the app in their stream, regardless of which creator it comes from, as long as it aligns with the kind of content they’ve already shown to like. It is therefore easier for brands, retailers and advertisers to place ads here and get into the user stream. What are traditional wholesalers doing to combat social commerce? If you can’t beat ‘em, join ‘em. Well, that’s the philosophy at least adopted by some traditional wholesale retailers like Target and BigBuy who are riding the wave of social commerce to increase sales and relevance - instead of standing idly by on the sidelines. As we’ve said before, if brick-and-mortar retail wants to remain significant to consumers, they need to adopt digital commerce strategies, and that’s exactly what we’re seeing develop. Scrolling through social media, you can now access high-traffic wholesale retailers like Target, who have their own dedicated Instagram Shop and Checkout - and they’re not the only ones. Walmart, Saks Fifth Avenue and the Net-a-Porter Group all have Instagram Shops that users can shop from directly. According to a Huge Inc study, 74% of shoppers say they are now more incentivised to shop on social media than before the Covid-19 pandemic, making the convergence a necessary strategy for wholesale retailers. However, some brands are still committing to brick-and-mortar expansion, like Spanish clothing brand MANGO who is planning to open 30 new stores in the US in the coming years. A blended network For consumers, shopping can be accessed at their fingertips, while they work, while they look for travel inspiration on TikTok, or while they lie in bed listening to a podcast. In other words, it’s more accessible than ever. For brands and retailers, keeping up with the multiple ports of shopping demanded by consumers is a must for survival. With wholesale retailers turning to social commerce, and photo-sharing platforms becoming digital marketplaces, the retail landscape is blending, blurring and converging. It is becoming a space where traditional labels and rules don’t apply in the hunt for consumer attention and loyalty.
Are we seeing the rise of social commerce?15.07.2022
A Guide to Amazon Marketing
One of the best ways to use the full power of Amazon is to tap into its advertising capabilities. With such a huge reach into consumer markets, it’s a unique channel for advertising specific products, building your...
One of the best ways to use the full power of Amazon is to tap into its advertising capabilities. With such a huge reach into consumer markets, it’s a unique channel for advertising specific products, building your brand awareness, and more. Amazon Marketing Amazon is an incredible platform on all fronts. With an massive reach (to the tune of 47% market share in the US and UK and 31% market share in Germany), it’s an incredible outlet to showcase products, earn more sales, and build brand awareness. Amazon marketing strategy Amazon uses the high runner strategy to market its products. This strategy uses data to uncover which products are in the highest demand in every category. Amazon's pricing algorithm then prices those products competitively and bids heavily on advertisements to pull people to these products. Once a consumer is on the Amazon site, they’re likely to buy accessory products at full price. Check out Omnia's Amazon Repricing Software for free Request a demo How to target Amazon sellers on Facebook Search Facebook groups for Amazon Sellers and see if there are any interesting groups to join. You can even try localization efforts and look for Amazon seller groups in your area. Note that many of these groups are intended for Sellers to form a community; as a result, many don’t tolerate any “selling” within the group. Regardless, connecting with others in this community is a great way to get in touch with potential customers and learn more about your target market. You can use this information to run better targeted campaigns on Facebook. You can discover who big names are in the Amazon Seller community, then run ads based on the audiences that like that public figure’s Facebook page. You could even reach out to the public figure and see if they would be interested in marketing your product directly to their audience. What is Amazon’s marketing service? Amazon Marketing Service was Amazon’s first portal for product advertising. It has since been retired and replaced with Amazon Advertising. This new portal is a simplified way for Sellers to control all their media, marketing, and advertising under one unified umbrella. Amazon Advertising is where you’ll find all advertising options available to you. There are currently three different types of paid ads that you can buy. Below is a great 3-minute video about Amazon Marketing Service and how it works. How Amazon uses big data to boost its performance Before getting into the logistics of Amazon’s advertising program, it’s important to understand what makes the platform different from other marketplaces: data. Consumer data may be Amazon’s most valuable asset. And Amazon has a lot of it. As Neel Mehta, Parth Detroja, and Aditya Agashe wrote for Business Insider, [Amazon has] 1.5 billion items listed for sale and 200 million users. Amazon has one billion gigabytes of data on their items and users. If you put all that data on 500-gigabyte hard drives and stacked them up, the pile of hard drives would be over eight times as tall as Mount Everest. Now that's some big data. Amazon’s goal is to learn as much about consumer shopping habits to deliver better experiences to customers. Amazon knows which products are popular, when they purchase it, how much they pay, and more. Amazon uses data to boost its performance through three main measures. First and foremost, it uses data to adjust prices and capture more margin via a high-runner strategy. Second, Amazon uses consumer data to power its advertising business. In 2018, Amazon made $10 billion USD in revenue from advertising alone. This made Amazon the third-largest advertising business that year. For comparison, Facebook made $16 billion on advertising in 2018 and Google sold $135 billion worth of ad space. This is a powerful number, and it makes Amazon nearly impossible to ignore as an advertising space in its operating markets. How does Amazon promote its products? Amazon may also use this consumer data to develop its own brands. The AmazonBasics label has been around since 2012, but in the last few years the label has exploded. Rachel Kraus reported in an October 2019 Mashable article: Amazon launched AmazonBasics, a line of everyday products like batteries and cookware, in 2009. It has been growing its private labels ever since, constructing more than 100 fashion, home, and electronics brands in the last 10 years. In 2017, private label brands accounted for $450 million in sales. And in July 2018, analysts estimated that private labels would account for $7.5 billion in sales in 2018. (Amazon has not yet released its 2018 annual report.) Amazon sells its private label products in its Marketplace, right alongside nearly identical products from independent sellers. Amazon Advertising Advertising on Amazon involves coming up with a strategy, paying for ads, and creating great product pages that drive sales. How do I advertise on Amazon? Setting up an advertisement on Amazon is easy. Just log into your Seller Central account and navigate to the “Advertising” tab. From there you can pick the products you want to promote, set up a strategy with keywords and bids, then launch your first campaign. Amazon advertising in the UK, Netherlands and USA One of the best perks of advertising on Amazon is the ability to reach a global audience. Certain Professional Sellers have the option to display their advertising listings across different marketplaces around the world. The best part? No translations. Amazon will help you get your advertisements in front of the right audiences internationally by targeting relevant customer searches. It also gives you data on these search terms so you can learn more about your audience in the country (and make more sales). To get started with international advertising, log into your Seller Central account, find eligible international marketplaces, and create a campaign for your products in that marketplace. Amazon advertising on my website Marketing your Amazon products doesn’t begin and end on the Amazon platform. You can also connect with Influencers to get your products in front of engaged audiences via the Amazon Affiliate Program. In the Affiliate program, Influencers generate unique links to your Amazon product listings. They can then place these links across all their channels, whether that’s a blog, a Youtube channel, or even Pinterest. While Influencers can pick and choose which items they want to advertise on their channels, it may be worth it to reach out to them directly and offer a partnership: you can provide free product, and the Influencer can promote your products with an affiliate link. Influencers can earn up to 10% of the profits when someone purchases through their Amazon Affiliate link. If the Influencer has a large enough audience, this can easily be a great source of (recurring) revenue for your Amazon products. Amazon a+ page examples Amazon has a premium program called A+ Content that helps you build product pages that are inspiring, informative, and conversion-focused. The program is only available to professional sellers who have been approved as brand owners. A+ Content lets you put more multimedia content on your page through the form of several different types of widgets. You can add rich text, additional images, videos, and more through A+ Content. TheraBreath is a great example of a stellar A+ Amazon page. It includes the standard of four images, a video, and five compelling bullet points. If you scroll further down the page though, you’ll see the A+ Content, pictured below. It includes a table comparing different products to each other, a note about the creator, and some unique graphics that reinforce the benefits of the product. Another nifty feature is that when you click on one of the ASIN products featured in the table, you’ll be automatically redirected to that specific product page. If your product category is especially competitive, A+ Content might be a worthy investment. It can help make your product stand out and can improve sales conversions and increase your visibility in Amazon's search algorithm. How much does Amazon advertising cost? The average cost per click on Amazon is $0.97, but advertising costs depend on a number of factors, including how many competitors are also bidding on that keyword. Amazon cost per click advertising: how much does Amazon charge per click? Amazon ads are auction-based, meaning that you pay 0.01 cent more than the next highest bid, regardless of how high your bid was. For example, if your bid was $5, and the next highest bid was $3, you’ll win the auction and only pay $3.01. What is Amazon DSP? Amazon Demand Side Platform (DSP) is a platform that enables you to programatically buy display and video ads. Launched as a competitor to Google Display Ads, DSP allows you to create advertisements quickly and drive traffic directly to an Amazon listing. Where Google ads send traffic to a website, DSP ads link directly to Amazon. Sellers can place these ads on Amazon, but also on third-party websites. Amazon launched this service to help bring more shoppers directly to the site. As the number of Sellers exploded on Amazon, the company needed a way for Sellers to pull in more shoppers as well. There are four different types of ads that Sellers can purchase through Amazon DSP: Desktop ads: display on a user’s desktop browser Mobile banners: display in a shopper’s mobile browser Mobile interstitial ads: display across mobile and desktop browsers In-stream video ads: run video ads on Amazon’s websites, mobile apps, and the Kindle Fire wake screen Why use Amazon DSP The biggest benefit of Amazon DSP is to get access to Amazon’s exclusive market data. As the world’s largest e-commerce platform, Amazon has incredible amounts of data on consumers. Buying into the DSP platform gives you access to this consumer data and lets you create tailor-made advertisements that match different audiences and different buying intentions. You can not only learn more about the people who are already buying your products, but also learn more about new audiences whose interests overlap with your existing audience. If you give Amazon a sample of your existing audience, it can automatically generate a “lookalike” audience that is similar to yours. Amazon DSP also makes it easy to reach these people. The program automatically generates advertisements based on your audience and its insights and will automatically test the performance of these ads. Learn more about what Amazon DSP can do in the Youtube video below. When to use Amazon DSP Amazon DSP is a sophisticated marketing system that can help you drive more sales, but it’s not the starting point for any Seller on Amazon. Before diving into DSP, make sure the rest of your marketing on the platform runs smoothly. This includes your PPC campaigns, but also your organic efforts through Amazon’s search algorithm. Final thoughts When it comes to marketing on Amazon, it’s really no different than marketing on any other channel. Be interesting, provide value, and think strategically, test consistently, and you’ll be able to see some results.
A Guide to Amazon Marketing14.07.2022
Antoine Brouwer: E-commerce, its challenges and dynamic pricing | Part 2
A few days ago, we shared the first part of our insightful conversation with one of Europe’s top e-commerce and digital marketing minds, Antoine Brouwer. We’re excited to share the second and final part with you today....
A few days ago, we shared the first part of our insightful conversation with one of Europe’s top e-commerce and digital marketing minds, Antoine Brouwer. We’re excited to share the second and final part with you today. Omnia Retail: We’ve previously touched upon Dynamic Pricing earlier but let’s discuss more. Could you tell me more about your view on pricing for the retail industry? AB: Pricing has really evolved over the years. In the beginning, it was just checking the price of your competitor, then the second phase was to know your price and needing to automate the strategy. Nowadays, there are more and more competitors and you can't compete with everybody. If you take consumer electronics as an example, you might have 200 competitors on the same SKU. You can’t say you want to be the cheapest in the market, because you can’t afford it, even Amazon can’t always do that. Also, you really need to get smarter. You now see strategies differ on a category-level but often even down to SKU level, in order to really maximise effect. The next phase is price elasticity, because following what the effect is, whether you follow the price of your competitors up or down, is important to see what it does to your volume. Therefore, measuring price elasticity shows you what happens, if you increase your price but your volume stays the same it means you can make more margin. Or the other way around if you decrease your price but your volume goes up and your cash margin goes up in total, it becomes more interesting. You see how important the strategy is. The first time I used Omnia we only made a few rules and when I now look at the last implementation I was involved in, we made pricing rule, after pricing rule, after pricing rule to really manage it. I think you also see that we take far more things into account, like the logistical cost and the marketing cost to measure what you make per SKU. It’s the same idea behind integrating data from Google to really see, okay, I have this page with a lot of visitors, but a low conversion. This either means that you don’t have stock or that your price is not correct, because apparently your customers are not interested. Feeding this information into a pricing tool is extremely interesting. This way it’s becoming more of an ecosystem with more and more data getting involved and actually looking at more things than just competition alone. That is also what Omnia does with “Market Conditions”, as users can set all these rules to actually determine what should happen with their pricing if they have one competitor, and what happens if they don't have any competition. Omnia Retail: Pricing has indeed become a lot more complex than it was some years ago. AB: Yes, sometimes it’s also necessary to be able to explain your pricing strategy to customers. If you look at products in the same family, is it acceptable to price them differently? Online it often is, but explaining to a customer in store why the same coffee machine is standing next to each other but in different colours differs in price can be difficult. How can it be that a 60-inch TV is cheaper than a 40-inch TV? It's really difficult for customers to understand, but market conditions can determine exactly these differences in prices. That’s why it makes sense to gradually change things. It will for sure be better than pricing manually, because then your prices are always wrong. Omnia Retail: Do you think that the need for pricing strategies to become more complex is mostly due to the increasing competition or did the behaviour of consumers also change? Are they doing way more research than they used to before, with much more information being available? AB: It's a combination, there's more competitors, and there's more customers comparing. In the early years, everything was focused on growth and now the focus is also on being profitable. These are completely different things. With every sale you make, that you actually make money on, you have to be far smarter, and also look at all these things to actually drive profitable growth. I think that has changed, in the beginning, it was growth and now it's profitable growth and that is far more complex. For this, you need far more rules, than just following the competition. Omnia Retail: Based on your experience, what is your opinion on investing in Dynamic Pricing from a retail perspective, and why (if so) do you think it's essential? AB: If you think about it, whenever you have more than 1,000 SKUs, you can never do it manually. One thousand you can't even handle per day, let alone your competition changes their prices up to 4 or 6 times each day. In that respect, it is never possible and that means your price is always wrong, period. It doesn’t even have to be that you have complex rules. You could also just say I want to be number three in the market, or I never want to be more expensive than 5% difference to my competitor, or you want to have the average price in the market. That is also fine, at least you set a rule and can implement it. But manually, that's not doable. Or if you for example only get the competitor data rather than look for yourself on every single website ten times a day. That already really improves the accuracy and saves time spent by valuable category managers, who can make more money by buying correct products. I think that's the key. What I normally see when we do price changes is that it’s almost equal to 50/50 price increases and price decreases. Decreasing a price doesn't have to mean you make less money. A lot of retailers look at it old fashion and buyers are targeted on gross margin. And yeah, your gross margin will drop, but your value of your company is not based on gross margin but the money that you make. There is a saying: “Maybe you prefer to earn 11 times a dime than four times a quarter.” That’s the idea. Omnia Retail: Looking at the market today, most companies are making use of Dynamic Pricing tools, as they can’t compete without it. What do you think still holds some companies back? AB: I agree, you will hardly find any large retailers that don’t have a pricing tool and do their pricing manually. To be honest, I don’t know of any. The ones that might be hesitant are probably retailers with huge stores, with a large store assortment or low-value priced items in stores. This makes it a bit more complex, but there are always ways around it. Omnia Retail: Do you think a lot of companies take the approach to have different prices in stores than they do online? AB: No, generally not. I think a common mistake is when comparing prices in store with online prices people compare them excluding shipping costs, whereas the in-store prices should be compared to online prices including shipping costs. Then it often becomes a different story if a company is asking €2 shipping costs on items below €20 then a pencil for €2 online suddenly becomes €4. I think you should add that if you have a store and then you have a lot more room to increase your prices in stores as well. Omnia Retail: Interesting, you think they should add that to in-store prices? AB: Yes, I do think so, especially in these price ranges. In my experience starting at above €30 to €40, people start comparing prices by going to comparison websites, Google shopping or visiting several different sites to see what it costs. But this also depends on the homogeneity of the product and if you actually want to see the product physically. I saw this a lot in the toy market, when you see a Playmobil box in a store, you see a carton box with an image on it. You can’t open it, you can’t see more than what you see online on an image as well. This is different from shopping for a TV, where you can actually see the screen in real life if you go to the store. I was shocked how quickly the online shoe market changed. Buying shoes online was not at all big in the Netherlands and then Zalando came and it got a huge boost. Suddenly everyone was buying shoes online and just sending them back if they didn’t fit. Omnia Retail: Now, I have to admit, when ordering shoes online I make sure they have a good return policy. AB: Exactly, and you see that the companies are really getting smarter. If you return an item and indicate the wrong size they use this data to determine fit for others. That’s when you’ll see fit recommendations based on other shoppers. Where Zalando will for example recommend to go a size up for a certain item. Omnia Retail: You often also see size guides, where based on a few answered questions they will give you size advice. For example, if you know that a Puma shoe fits you in a 40 then they might indicate that a Nike shoe should be ordered in size 41. AB: And that really helps the companies, because free online returns most of them can’t afford. At fonQ if customers returned items complaining that a certain piece of furniture was a different colour in real life than it was online, we made sure to note these types of feedback and change the pictures accordingly. This will make the experience better for the customers, who are happy with what they bought and the companies save money on not receiving returns. Omnia Retail: How do you foresee the future of dynamic pricing and why is automation important in this process? AB: I think in the future more and more variables will be added. I think more and more focus will be on sales data, trends, promotions, calculating what the effect of a promotion will be and capturing the history of a product. There is definitely a future for artificial intelligence, and I mean not so much for the products that you can recognise on an EAN because it’s comparable. But more for products that are new and where there is no competition and then you can use AI to see if that product is comparable to anything we’ve seen before. Does it belong to a product group or a category in order to set a price? You also see a trend for more and more white label products at retailers because they want to be less comparable, but then how do you set the price and compare your product? Because it’s a different brand and a different product but it’s often really comparable to another branded one. So you need to compare based on attributes and features opposed to EAN and product name. This is something that is becoming a lot more relevant lately. This is a far more complex way of matching products. The technology will need to evolve in order to cover these kinds of aspects. Omnia Retail: Interesting, staying on the topic of change, which vertical within the retail industry would you say has changed most over the past years? AB: I think a big trend we saw was brands starting their own webshops because they were hit by the covid-related lockdowns and backlogs. If you look at the furniture business for instance, furniture is still a business where the majority, around 80%, of purchases are still made offline. Whereas in most other industries this is the other way around, for instance compared to consumer electronics. The furniture business was really hit hard because people were sitting at home and wanted to invest in a new interior, but if you can’t go look at a new couch, most people won’t just purchase it online. For a lot of brands it was really noticeable that if the retailers don’t sell their products anymore they don’t sell anything. In response to that a lot of manufacturers and brands started their own D2C channels in order to be in control. Another trend that we’re seeing is that more and more luxury brands are moving away from the marketplaces. For example, if there is an A brand and they are selling on any platform like Amazon or Bol.com and the customer searches for “chair”, they will see your designer chair of €3,000 next to a cheap chair of €20. Whereas offline, they would always be selling at an exclusive store. You would not find a designer chair in a LeenBakker store. However, online on marketplaces you can suddenly find these two items next to each other. Hence, a lot of the luxury brands are moving away from the marketplaces. Omnia Retail: But apparently some luxury brands have tested it out and were represented on the market places. AB: Yeah, but that was definitely related to volume, it seems like a great idea at first, it’s an easy channel and you can ship a lot of products easily anywhere. But what does it do to your brand image? Omnia Retail: Since we're already talking about the marketplaces, what is your vision on marketplaces in the future? AB: In general, I think there will be more and more marketplaces. If you look at the Netherlands, five years ago there was only Bol.com. Then I started with Blokker and Intertoys with the second marketplace in the Netherlands. And look at how many marketplaces there are already now. It’s really a trend that more and more retailers see a marketplace has a place in their category vision. Because if you believe in having the best assortment in your vertical you can’t afford to have everything and can’t manage it. So, a marketplace just makes most sense. Omnia Retail: Sounds like even more of a reason to have a Dynamic Pricing tool if you need a different pricing strategy for the marketplaces than for other channels. AB: Definitely. That’s why we see customers with several portals, so they can follow up on their marketplace offering and on their own channel. Omnia Retail: This was very insightful, thank you so much. Rounding off, I would like to know what you like to do for fun, what excites you outside of work? AB: BBQing is a passion of mine. And I really love to go out for dinner with friends and family. I love sports a lot, so I'm playing hockey three times a week and right now I'm training five days a week every morning. Plus I really enjoy a round of golf. Omnia Retail: Thank you so much for this interview, Antoine. It was really interesting speaking with you and getting your expert opinion. That concludes our interview with Antoine, who has given us and our followers plenty to chew on regarding pricing and strategy. Omnia Retail will be chatting to other experts in the field in the future, so keep posted to our LinkedIn page.
Antoine Brouwer: E-commerce, its challenges and dynamic pricing | Part 213.07.2022
Meet the Team: Dennis
Name: Dennis Koschinski Company Role: Backend Developer --- What do you do at Omnia Retail? The team and I take care that our web crawlers download millions of offers every day. What is something people in your industry...
Name: Dennis Koschinski Company Role: Backend Developer --- What do you do at Omnia Retail? The team and I take care that our web crawlers download millions of offers every day. What is something people in your industry have to deal with that you want to fix? We have to monitor millions of multivariate data points every day. The analysis is a complex task that can easily overwhelm somebody. I would like to make this task easier, which could help people focus on the more important problems. What is your past experience, of working in your position? I joined Patagona (Omnia) directly after finishing university, where I studied Physics with a focus on the characteristics of solid state matter. During my studies I worked as a scientific assistant in Solid State NMR Spectroscopy, which gained me some experience in data analysis and computational quantum physics. What do you like about working at Omnia Retail so far? What I like most about Omina Retail is that I can work together with smart and funny people on challenging topics that don’t bore me. What are the values that drive you? Respect and kindness What are your top-3 favorite books? - Lord of the Rings, J.R.R. Tolkien - Modern Quantum Mechanics, J.J. Sakurai - The Glass Bead Game, H. Hesse What do you enjoy doing when you are not working? I cook tasty food or listen to music. Let’s end with your favorite quote! “The measure of greatness in a scientific idea is the extent to which it stimulates thought and opens up new lines of research.” Paul Dirac, 1968
Meet the Team: Dennis13.07.2022
How does Amazing Pricing work? A Guide for Retailers & Brands
It’s no secret that pricing on Amazon is complex, and Sellers get lost quickly in the world of Amazon pricing. To help, we created a short guide that has all the essential information about pricing on Amazon. In this...
It’s no secret that pricing on Amazon is complex, and Sellers get lost quickly in the world of Amazon pricing. To help, we created a short guide that has all the essential information about pricing on Amazon. In this post, we’ll explain how pricing on Amazon works and give some tips on how to get the most out of the platform. How does Amazon pricing work? Amazon pricing is tricky on all fronts, from how it charges Sellers to how product pricing works on the platform. Amazon Seller pricing There is an Amazon pricing structure for any Seller, regardless of how many products you have in your shop. Whether big or small, you can find an affordable way to sell items through the marketplace. Amazon pricing structure There are two ways to sell on Amazon: as a Professional or as an Individual. The Professional plan lets you sell an unlimited number of products for a $39.99 monthly fee. Individuals can sell on Amazon for $0.99 per item sold. If you plan to sell more than 40 items each month, it makes more sense to purchase the Professional Seller plan. The Professional plan also makes sense if your items have low price points; $1 per product sold is an outrageous fee if you sell a product for $3. The Professional plan also unlocks new categories for sales and has additional features that help you sell more products. Amazon seller fees If you think the costs of different selling plans on Amazon sound inexpensive, you’re not alone. Unfortunately, besides a monthly payment for your store (or payment per product for Individual Sellers), Amazon charges fees per product sold. There are several fees that individuals and professionals must pay per item sold. These include: Referral fees on each item sold: a percentage of the final price of a product sold Shipping fees (which apply regardless of fulfillment method) Closing fees Amazon’s fee structure can get complicated, so it’s worth examining the Selling on Amazon Fee Schedule. If you are an FBA Seller, Amazon will charge you additional storage and fulfillment fees. Amazon also has a calculator that can help you estimate your revenue, even with fees. Just enter the product name, UPC, ASIN, ISBN, or ASIN number and product details and you’ll get an estimate of how much revenue you can expect to earn. Amazon price changes Besides having a complicated pricing structure, Amazon also has a complicated pricing model. The company is a pioneer in dynamic pricing and makes over 250 million price changes every day. The average product’s price will change once every 10 minutes, making it difficult for Sellers and consumers to keep up. Amazon price match Amazon doesn’t have any price-match guarantee. If consumers find a product they’ve bought for a cheaper price online, there’s no way for them to ask Amazon to pay the difference in price. This is mostly for practical reasons. Amazon used to have a policy like this, but as the market became more fluid, the policy became impossible to honor. Amazon recognized that a dynamic market meant price match policies would become obsolete. With this knowledge, the company eliminated the policy in 2016. Amazon price protection 2020 Amazon also doesn’t have any price protection policy. Consumers just have to trust that the company offers the lowest price on the market. Amazon’s reputation for offering lowest prices isn’t unfounded though, and a 2018 study by Profitero found that Amazon was 13% cheaper than other major online retailers in the US. So even without this policy, consumers likely do receive some of the best deals on the platform. Amazon Repricing Software Regardless of whether you’re a Seller or a consumer, Amazon becomes overwhelming fast. Luckily, technology can help both Sellers and consumers get a better understanding of Amazon and reap the best benefits of the marketplace. Whether you want to find the best deals or prices, or understand the landscape of Amazon, there’s a tool out there for you. Amazon best Seller tools If you’re a Professional Seller on Amazon, there are several types of tools that will make your job easier. In this section we’ll cover a few of the more important tools to have. Amazon Repricer Tools Repricing tools are for Amazon Sellers who want their products’ selling prices to update with the flow of the market. In other words, repricer tools are dynamic pricing tools built specifically for Amazon. Request a free demo for our Amazon Repricing Software here. Since Amazon updates prices so frequently, this tool helps Sellers keep products relevant. A repricer will also help keep products in the Buy Box — the coveted space on any Amazon product listing page that’s responsible for an estimated 82% of Amazon sales. Increase your revenues with Amazon Repricer Software Read more Amazon's Free Repricer tool - the Pros and Cons Amazon doesn’t change prices for third-party sellers, but it has a free proprietary repricer that can adjust prices for you. This tool is called “Automate Pricing.” You can find it under the Pricing tab in your Seller Central account. Automate Pricing is easy to set up in just four steps. All you need to do is define the parameters of a rule, choose the SKUs where the rule applies, set minimum and maximum prices, then start repricing. Amazon’s repricer has both pros and cons. Some pros include: Free as long as you’re a professional seller Helps increase sales (but at the expense of profits) Does a great job of lowering prices, but not the best job at raising prices Easy to use and set up The cons of the repricer far outweigh the benefits, though. According to users, Amazon’s repricer tool is frustrating to use and limited in its capabilities. Some major cons are: Only allows you to set up repricing rules on active SKUs Limited customization on rules Doesn’t account for fees and doesn’t help you calculate for fees Doesn’t increase your price Once you get the Buy Box, it stops repricing The Automate Pricing tool of Amazon is notoriously fickle. The video below is an honest review of Automate Pricing, and the overall sentiment is that Automate Pricing is more trouble than it’s worth. Considering a stable and revenue-boosting Repricer Tool? Request a free demo for our Amazon Repricing Software here. Amazon competitive intelligence tools: How to find price drops on Amazon Competitive intelligence is the backbone of any repricing tool because without intelligence your prices have no basis on the market. Competitive intelligence tools gather the prices of your competitors on Amazon, showing you where there are dramatic price drops in the market. It should then deliver this information directly to you. With this information, you can make more thoughtful, data-driven decisions when you choose prices for your products in the store. How to hack Amazon pricing For Sellers, creating an Amazon pricing strategy and hacking your way into the Buy Box is no easy feat. But with hard work and effort, you can get your product into the Buy Box and keep it there. There are tons of different strategies you can adopt to reprice on Amazon. One popular one is the high runner strategy, and it’s the approach that Amazon uses itself. In this strategy, you focus your efforts on the products that drive the most traffic (which are usually highly elastic), and offer a competitive price on those items to pull people to your page. Once a consumer is on your product listing, as long as the product is legitimate and matches their need, they will probably purchase it. Additionally, once someone arrives on your listing, you can engage another pricing hack: bundling. Bundling helps increase the perceived value of your products, makes consumers more likely to purchase them, and helps move items through your store faster. If you’re just starting as a Seller though and want to get into the Buy Box, the best strategy is to start small and slowly raise your prices by small increments. The goal is to attract buyers to your listing through a competitive price, earn reviews and good credit in the eyes of Amazon, then raise your price. This is a key part of the pricing-marketing mix. Amazon repricing strategy Developing a strategy comes down to your company goals and the following steps: Define your commercial objective Build a pricing strategy Choose your pricing method Establish pricing rules with Amazon Pricing Sofware Implement, test, and evaluate the strategy Besides thinking of your own store’s strategy, consider Amazon’s strategy. The company strives to be the world’s most customer-centric company, and this philosophy dictates every strategic move the marketplace makes. If you factor this philosophy into your overall Amazon strategy, it will pay off. So in addition to offering a competitive price, you should also work for quality products, fast shipment, and excellent customer service. You should also build a marketing strategy that sets you up for success and optimize your listing for Amazon's search algorithm. Final thoughts Pricing on Amazon is important, but it’s not the end-all-be-all. Prices on Amazon constantly change, and it’s better to think of a product’s price as temporary rather than a fixed feature. For Sellers, this means price is an important part of your overall strategy. It’s not the only thing Amazon considers when determining the winner of the Buy Box, but it’s a good way to tip the scales in your favor.
How does Amazing Pricing work? A Guide for Retailers & Brands13.07.2022
Revolutionising graduate traineeships within the SaaS landscape
As creators of the first Dutch scaleup traineeship within SaaS, Omnia Retail is changing how newcomers to the industry can learn and importantly grow. When COO Vanessa Verlaan first pitched the thought of a scale-up...
As creators of the first Dutch scaleup traineeship within SaaS, Omnia Retail is changing how newcomers to the industry can learn and importantly grow. When COO Vanessa Verlaan first pitched the thought of a scale-up traineeship for new employees at Omnia Retail, some of her first words were, “This is not a quick fix to finding and retaining talent”. Then came the idea of an 18-month traineeship for new employees who had recently graduated with massive potential, which then became the foundation for Omnia’s talent acquisition shake-up, in 2020. In a niche industry scale-up, it has proven difficult to find candidates who are both commercially strong and have specific qualifications or experience, and more importantly, have the ability to fit in with Omnia’s core values. “The candidate needs to be able to work in pricing, e-commerce, with data, while feeling aligned with Omnia’s values,” Vanessa says. “By looking inward, we noted that we already had talented people that had the potential to grow exponentially within the company. And so, we reverse-engineered the process of hiring,” says Vanessa. As creator and designer of the traineeship, Vanessa saw that team members in the tech support department were already learning the ins and outs of the organisation and the products Omnia offers. It offered foundational knowledge and experience that would ultimately lead to chosen team members entering an exciting chapter to kickstart their careers in SaaS (software as a service). Co-building the traineeship and the organisation at the same time Each trainee will learn about different aspects of the company, including three rotations within the customer success, sales, and tech support departments. They will also work with our new Knowledge and Scalability Department as well as marketing, and will be contributing from day one. Once they have met specific milestones within each rotation, they are ready to move onto the next one, depending on the needs of each team. “We look at the desires of each rotation’s team. If the team is ready for the trainee to move onto the next phase or if there is still something to be learnt, this will be assessed on a case-by-case basis,” Vanessa added. “This is not an internship for students, but a traineeship for graduates who are co-building the traineeship and the organisation at the same time,” says Vanessa. There is an emphasis on personal development with workshops tailored towards personal effectiveness, communication, commercial and analytical skills. Martijn Crooijmans, a fairly new member of Omnia’s sales team, completed the traineeship 5 months ago and has entered a permanent role as an Account Executive. Martijn, who studied management and consumer studies and has his Masters degree in business development and entrepreneurship from Utrecht University, applied for a spot in the traineeship because of his interest in innovation management. When he first started, he admits the experience was like a rollercoaster. “I feel like I learned more in the first six months at Omnia than in the couple years studying prior. From the start I got a lot of responsibility and had a lot of coaching for all the different commercial roles I was in during the traineeship,” he says. Stemming from that point, Martijn shared that some of his most exciting and fulfilling milestones was implementing real-world strategies for Omnia. “I was able to close several enterprise customers as an Account Executive, and managed a portion of our SMB clients as a Customer Success Manager. I also ran a full implementation of our solution at several enterprise customers as a solution consultant,” says Martijn. Saskia Mueller-Herbst, who is a Solutions Consultant in the Knowledge and Scalability department, started her journey within Omnia in business development after completing her Bachelor's degree in International Business and her Masters in Marketing Management before the traineeship was established. Saskia was then offered an opportunity to join the traineeship. “I saw it as a great opportunity to get to know several sides of the business. I was further excited about this possibility as I wanted to collect as many insights as possible to define where I saw myself in the long term,” says Saskia. Saskia shared that one of the challenges she faced was learning to manage the many moving parts of a scale-up. “While I enjoy having different responsibilities and tasks to work on, I realised that it’s very important to work in a structured way. The work is never done and I needed to be good at prioritising my work,” Saskia shares. However, one of Saskia's biggest triumphs was noticing her own growth. “During the traineeship you constantly improve and all the skills you learn you can make use of in the next rotation.” Within every rotation you learn something different A new member of the Customer Success team that completed the traineeship is Suzanne Meinders, who has her Masters in Marketing. Suzanne applied to take part in the traineeship, similarly to Martijn. Because of how the traineeship is set up with various rotations, Suzanne agrees this is the best way to learn 360 degrees of a business. “Now I have completed all rotations, I feel I truly know the product really well. Within every rotation you learn something different, and I think that truly sets you up for success within any position you will choose in the end.” To new or future trainees, Martijn offers some sound advice: “When you start, you are not just learning to perform well within your role, you are also learning how the SaaS product works. This means a lot of new information is coming your way and it might feel like you have been thrown in the deep. There are, however, a lot of people around that will gladly help you out and will pull you out of the water if needed. So, don't be afraid to ask for help, and soak up as much information as possible in the beginning.” Saskia shares similar advice, saying, “It’s important to be open and communicative. If you are passionate about something, there is a good chance that you can pick up a project related to this topic and make it their own.” Suzanne says, “Be ready for the moment where you rotate and go from ‘I know this’ to ‘I don’t know anything.’” An important aspect of working at Omnia is aligning with and committing to its three core values - never stop learning; obsession with excellence; and free to be you and me - and Omnia’s traineeship is no exception. Trainees “never stop learning” by working with managers, senior team members and actual customers. They are “free to be you and me” by the fact that an applicant’s race, gender identity, or even their university is not looked at when they apply. Finally, trainees have an “obsession with excellence” when they achieve each milestone in each rotation in order to complete their traineeship. In a period of two years, Omnia has hired 11 trainees, of which three have already graduated and accepted a permanent position within Omnia. “Our goal is to hire eight trainees each year; there are no fixed deadlines and we’re hiring all year round,” shares Vanessa. Two years on, the graduates from Omnia’s first completed traineeship are working in mature roles. “I am incredibly proud of Saskia, Suzanne and Martijn who have all grown so much on a personal and business level,” says Vanessa.
Revolutionising graduate traineeships within the SaaS landscape07.07.2022
Antoine Brouwer: E-commerce, its challenges and dynamic pricing | Part 1
We sat down and spent some time with one of Europe's greatest minds in e-commerce and digital marketing. Antoine Brouwer, he shared his thoughts with Omnia Retail on e-commerce in 2022, his forecast, thoughts on trends...
We sat down and spent some time with one of Europe's greatest minds in e-commerce and digital marketing. Antoine Brouwer, he shared his thoughts with Omnia Retail on e-commerce in 2022, his forecast, thoughts on trends and challenges in retail and the importance of pricing. Omnia Retail: Thank you for joining us for this prelude into the world of e-commerce and retail. We would like to kick off with an introduction of yourself. AB: I’m Antoine Brouwer, 49-years old and I live in Amersfoort. I studied International Business in Den Hague and Advertising and Marketing in Pforzheim, Germany. I started my career at Ben in the Netherlands. I was one of the first 40 people that joined the company and started there with wholesale marketing. The company was bought by Deutsche Telekom and became T-Mobile. In 2003-2004, we needed to integrate a webshop and that became my first experience with e-commerce, in telecommunications. I built this up for T-Mobile in the Netherlands and then I was asked to move to Germany to the headquarters in Bonn. I lived in Germany for two years and set up the entire digital marketing strategy for T-Mobile, T-Home and T-Online Germany. After two years, I moved back to the Netherlands and then I became director of e-commerce for UPC; currently Ziggo. I started there on my own and built an e-commerce department for about 3-4 years. After ten years, I wanted to do something else, I moved to retail and I went to work for MediaMarkt and became responsible there for marketing and e-commerce. Omnia Retail: What triggered your move to the retail industry? AB: I had already done everything in telecommunications and in my field of marketing and e-commerce. I thought, okay, what are the other interesting segments that are big in e-commerce? Retail and specifically MediaMarkt were a great opportunity for e-commerce. I developed the whole marketing department and e-commerce side there and this was my first touch-point with Dynamic Pricing in 2011. I then went on to work for Blokker holdings (a large non-food retail chain in NL), back then they had 11 retail chains and around 125 people managing e-commerce for the whole group. We grew revenue in four years’ from €30 million to €300 million, which was a huge success. There were so many brands and there was a real need for dynamic pricing. I had built everything myself for MediaMarkt and thought to myself, ‘I don't want to do that again’. So I reached out to Connective Power (today Omnia Retail) and that’s how we became one of the first big multi-portal customers, with brands like Bart Smit, Intertoys, Blokker, LeenBakker, and Xenos. After I left Blokker, I was then asked to become CEO of fonQ. We had fonQ NL, BE and DE and I was there for two years, which was an even wider role. Then, I decided it was again time for something else. So in May 2020 I left the company in the midst of covid-19, and moved to Greece for a year. I became the executive director of two main plays in Greece, Public and MediaMarkt and again, set up the marketplace, e-commerce strategy, and team organisation, the proverbial life of a consultant. Omnia Retail: It’s clear that you know the need for Dynamic Pricing well. Related to all your experience in the retail industry, what is your view on this field is for the future? AB: I see a number of shifts. On the one hand, you really see the platform economy growing, so you really see the Amazons of Europe, on a global level, becoming bigger and bigger. In the Netherlands you see it with Bol.com and on the other side, there are a lot of verticals that are coming back. An example here is Coolblue, in the past they had like 100 different URLs I think, and then they merged it all into Coolblue. But they started with all kinds of specialist verticals which was mainly because of SEO. Now you see a lot of specialists coming in, which have a broad and in-depth assortment of a specific category, and they have the best content, the best pictures, the best advice in order to really specialise in one thing. The other thing that you see is that e-commerce is becoming more cross-border. In the last year, 14.9% of all e-commerce in the Netherlands was already coming from other European countries; an interesting prospect because you have omni-channel players competing with each other in different markets where they're not in the same offline market, but they are competing online over country borders. Hence I believe it's becoming more and more important, especially also due to covid that e-commerce grows in terms of data quality. Meaning, getting the best prices right but also creating the best content in terms of pictures,specifications, and attributes. It has become more and more important that all these things are correct because the more competition you have, the more you can't compete on price alone anymore. Omnia Retail: Do you think this is heavily impacted by the situation we were in over the past two years with the COVID 19 pandemic? AB: I saw a report over the whole of Europe that you actually see a lot more growth. Especially if you look at the Netherlands, there was hardly any growth in e-commerce revenue in 2020 with only 4%. However, if you take out online purchases within travel, e-commerce revenue was up 30%. I think it made a big step forward, but the bigger question is now, how will this remain? Do you really attract new customers who have never bought online before? In an evolved country like the Netherlands, U.K. or Germany, especially not that many people have never been online before and there might have been a small bit of an uplift, the key here is what are all these e-commerce companies going to do with the data they were able to collect across the ‘new’ customer base that they attracted. Can they continue to target them? I don't believe there will be a big shift from offline to online, with people suddenly not going to stores anymore.There will definitely be an increase in the future split between online adn traditional stores, but nothing as big as we’ve seen over the past two years. The growth will not be linear. Omnia Retail: You described some changes in e-commerce that we saw over the last two years. Do you foresee any challenges with these changes? AB: That depends whether you are an omni-channel, pure player or offline entity. If you're mostly offline, and there are many companies that hardly have any online presence at all. Then the bigger the shift to e-commerce the more difficult it gets. But overall, competition online has gotten tougher over the last year and that will have its effect that people compete more on price. Omnia Retail: So the largest overall challenge for retailers that you see, is the large competition in the market? AB: Yeah, it's the competition. In 2021, you really saw the difficulty in that there was a limit in the supply chain. Couriers couldn't handle the volumes anymore, suddenly having to scale up for almost a year without any planning or warning. It really has shown that there's a limit to the volume that can be handled in terms of infrastructure, transportation options and the volume of deliveries that can be delivered to people’s homes, so scaling up overnight is not an easy or viable solution. One that also has an effect on sustainability, something I see myself that I have way more boxes at home than I used to before, because everything is delivered in a carton box. Omnia Retail: That is something I noticed as well. Would