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Price Points Podcast EP 9: Which Categories Experience the Most Price Pressure on Black Friday?

Which categories experience the most price pressure on Black Friday? Hidde Roeloffs Valk explains his data analysis in this month's episode of Price Points. [00:00:09] - Grace Welcome to Price Points the podcast that...

Which categories experience the most price pressure on Black Friday? Hidde Roeloffs Valk explains his data analysis in this month's episode of Price Points. [00:00:09] - Grace Welcome to Price Points the podcast that examines the changing world of e-commerce one episode at a time. I'm your host Grace Baldwin. And today we're looking into the holiday season. We've officially entered to the busiest months of the year for retail with Black Friday just a few weeks away and the holidays right around the corner. So to help make the holiday season more profitable for you, we wanted to put together some content that will help you be more strategic in your game plan. This month you can expect a couple of things including a holiday Playbook a blog post about pricing for Black Friday and more. That all starts with the following interview, which I conducted with our consultant and pricing expert Hidde Roeloffs Valk. If you came to our REINVENT event a few weeks ago, you heard the news that Omnia started to excavate a gold mine of price market pricing data that we've had for the last several years, but haven't been able to access. We're starting to gather the first few insights from this huge data set and heeda has been instrumental and analyzing this data and turning it into actionable insights that help retailers and Brands understand the market a new way. For this interview I asked Hidde to run an analysis on some Black Friday data and the results were fascinating. It was really cool to see what hit a learned about Black Friday as well as hear more about what he thinks this year's holiday season will look like so let's just jump in and hear more about the date. Please enjoy this interview with Hidde Roeloffs Valk. Alright. Well, thank you Hidde for joining me in for squeezing minute me in before you go to New York. How are you today? [00:01:40] - Hidde Pretty good, and you? [00:01:41] - Grace I'm doing great. Um, so I wanted to talk to you a little bit about Black Friday and then also about our this new data project. So let's start with the data. What is this project? Where does this data come from? And why do we have access to it now as opposed to in the past? [00:02:00] - Hidde Yeah. This is historic data from all public sources that Omnia connects to. Of course, we have a lot of retailers and brands asking or requesting pricing data across multiple countries, but this was always processed in a daily sense to do Dynamic pricing to do Dynamic marketing to do some analysis on a daily basis, but not so much on a long-term multi-year basis. So our previous data structure was completely different and we took all this old data and restructured it in a new way for us as consultants, as marketing department, and sales department to look at this and provide more value in analyses, true analyses for our prospects and clients and anyone basically interested in retail for free to show yeah how important pricing and marketing is really for everyone. [00:02:57] - Grace Yeah. This has been a huge project that's been going on for the last six months, right? Or even longer? [00:03:03] - Hidde Yeah and during REINVENT we finally showed the first insights really the kickoff of doing more and more data-driven insights for for anyone related to to Omnia. I have to say it's all public data. All public sources that's been gathered over the last few years. There's no sensitive data. In here of anyone so that's an important thing to know. [00:03:26] - Grace Good, good to note that for sure. And so as a bit of a data data geek are you excited about this? [00:03:33] - Hidde Yeah. This is like a gold mine for us. We need to work on this obviously you need to. Have the proper tooling proper hypotheses to really grab the value out of this but this finally enables us to do so much more with the data that we have. Also thinking forward in the future is running new elasticity algorithm. Hopefully testing some machine learning stuff on this data as, yeah, the more data you have the better your algorithms can work and that's beneficial for for all of our clients, of course. [00:04:06] - Grace So what is actually possible with this data? [00:04:09] - Hidde Most notably for now, it gives really the ability to zoom both in so really digging deeper into certain categories or brands or clusters of retailers and Brands and seeing what's going on there. But also zooming out instead of looking at one day or a month. We can find a look at multi-year trends which really gives you a perspective on the retail market and there's insights in there that can you can also use in your strategy. So both both of those are really handy and that would be the first thing we're going to look at the easiest part just uncovering the top of the iceberg basically and after that we'll dive deeper and deeper of course, into this data. But there are so many possibilities that yeah, we haven't discovered them all but we can think of a lot of data-driven insights for our clients, automated advices and new algorithms in terms of price advices. [00:05:09] - Grace I know that I personally am really excited about it to start writing some reports and really create content that's really interesting and unique in that shows a whole lot more about what's happening in the entire retail spectrum. [00:05:23] - Hidde Yeah, yeah, so that will definitely be interesting. As we grow, this data will also grow so the more clients or the more our clients in terms of data request the bigger data warehouse or database becomes and the more we can give back to our clients. And also as a consultant of course is extremely interesting to finally test your thoughts or hypotheses you had about the retail market and test whether they are actually true and so far most of the hypotheses were actually true. So that's been pretty cool. [00:05:56] - Grace That's really exciting, it shows that you've sort of have an idea of what's happening. I guess. [00:06:00] - Hidde We somehow think we're we seem to be right. Yeah. [00:06:04] - Grace So I asked you to use some of this data and give some sort of analysis about Black Friday. Can you explain a little bit about what you actually did when I gave you that request? [00:06:15] - Hidde Yeah. So what we did was looking at certain categories. I did it all high-level. Just just for now we can probably give a deeper dashboard where you can click through the data yourselves in a blog post, but just for now we have gone on a highest level of category. Looking at how is the pricing pressure different in those categories and how have certain categories being reacting differently during Black Friday. So we can see exactly how many price changes were there on Black Friday compared to a week before that. And we also know whether it is a price increase or price decrease. Price decrease, of course, probably promotion. Price increase probably a margin optimization even during Black Friday. And what we see overall, is that more and more retailers and more and more price points, that's what we call a product of a retailer changing in price, more and more of those are changing and more and more retailers are reacting to these price changes. So that creates kind of a snowballing effect in in your data. and Overall this has been increasing but some categories have been increasing more than others. [00:07:31] - Grace Which categories is that increase really really? [00:07:34] - Hidde Most notably it's been the baby category and it's a very wide category. Of course. There's baby hardware, baby strollers, and everything in there. But also Beauty category. And that fits exactly with what we see in the markets that retailers see this pricing pressure is also increasing. These are also categories where consumers seem to be more aware of these price changes that it's that has benefits them to check prices, but also we can tie it towards Millennials who are having babies currently and are more aware of price and maybe yeah, maybe also less willing to pay the highest price. So this creates a urgency at retailers to really change their prices as often as they can. [00:08:26] - Grace So for babies it's there's more babies in the market. And do you think that for Health and Beauty there's something similar where more people are shopping? [00:08:35] - Hidde More people are shopping online for these these product categories. Yeah, that's definitely what we see are across the board and it might be interesting but we don't have that data, of course to see consumer data in this but our feeling is that definitely the growing part of the Millennials is causing this effect.. [00:08:53] - Grace So when you looked into this data, was there anything that surprised you actually? [00:08:59] - Hidde Yeah. Overall what surprised me is that there's also a lot of price increases during Black Friday. So this this can be due to multiple things. It can be that some retailers really price upwards during Black Friday. So they seem to have some margin optimization strategy that they think hey Black Friday already has a huge impact people will shop anyways, this is an incentive for me to grab more margin than normally, more than last week actually. On the other hand. It could also be that there's some automation strategies in here where retailers price upwards when others are out of stock, which makes sense with we've seen the summer, of course again with air conditioners and cooling fans whereas some reason retailers price upwards when stocks were limited. Makes complete sense from an economical point of view, of course where it's always supply and demand [00:09:56] - Grace Yeah, basic supply and demand. Yeah, and so the and that happened this summer actually? [00:09:59] - Hidde That happened this summer. And the last two summers but also seems to happen during Black Friday. Of course overall still price decreases are one to two times more often, but it's not necessarily that it's all price decreases during Black Friday. So also for your strategy you should take that into account and look at that during Black Friday as you might leave money on the table if you're not increasing with the market. [00:10:04] - Grace That's pretty interesting. It's a pretty interesting idea. I hadn't even really thought about that. Do you have any sort of numbers about how these categories are changing so like what the percentage of price changes are? [00:10:36] - Hidde Yeah, so these baby and beauty categories, they changed more than 27 percent of the of the products changing price. [00:10:45] - Grace And that's across the whole market? [00:10:47] - Hidde Across the whole market. Yeah, so it specifical retailers can be high of course, but the price points so if specific product of a retailer about yeah 27 percent change in price in the week of Black Friday. And that's quite interesting. It was more than toys actually, which is traditionally a very important category in in this Black Friday to to Christmas and in the Netherlands of course Sinterklaas, but these categories have catched up [00:11:14] - Grace Were there any numbers about health and beauty? [00:11:19] - Hidde So yeah both were 27 percent this last year. More than toys which was 25%. [00:11:26] - Grace Okay. So these are obvious. This is obviously from the last two years. Correct? Yeah. What is what do you think that means for this year's [00:11:36] - Hidde Yeah, so I expect really to have these categories even more increasing. There's a clear trend over the last two years that they they've increased in the amount of price changes also in the percentage of price changes. Computer electronics is always the highest and all over data. It seems to be the most pressured in pricing and has the most price changes. So I expect that to increase a bit more last year. They they increased from 32% to 36% in in price change, which is huge as more than one in three products change in price across the board. [00:12:11] - Grace And that's consumer electronics? [00:12:12] - Hidde Yeah, and there's millions and millions of products, of course in there. So that's that's very interesting but not surprising. [00:12:18] - Grace And just that's just the number of products that change that's not a number of products that go up or go down. They just change. [00:12:25] - Hidde Yeah, yeah. [00:12:26] - Grace So you expect more you just expect there to be an increased number of price changes this Black Friday. [00:12:32] - Hidde Yeah. Yeah. Definitely I expect these these categories to continue catching up with electronics. So some categories might even hit hit above 30% currently only electronics above 30% but could be that baby and and sports and beauty could hit this 30% which is crazy. Instead of one in four products it's one in three products almost. this is interesting for retailers and consumers as they need to be aware of this for their strategies and buying or for their own prices, of course. [00:13:04] - Grace Are there any other categories that you expect to see high number higher than average number of price changes? [00:13:11] - Hidde Yeah, one other is sports travel outdoor category, of course with the winter coming up, but also overall this is an increase in category in the amount of price changes that we see. [00:13:25] - Grace But so the price. The increase hasn't been so drastic as baby and health and beauty? [00:13:31] - Hidde No. [00:13:32] - Grace And so thinking about increases versus decreases you what's the let's what do you mean by this 20% of the prices decrease? [00:13:43] - Hidde Yeah. So all in all, we've seen that a lot of prices decrease during the Black Friday week. Of course, you do promotions heavily promote it so across all products. It was around twenty percent. So all categories and some categories higher some categories lower but overall one in five products change in price. [00:14:03] - Grace That's insane. Yeah, like that's a real and it's... How can retailers actually stay on top of that? [00:14:12] - Hidde What is very important is make sure you have the right data for your site and you make sure you have the right data sources where your consumer is looking for these products, but also where your competitors are active. So choose to right data sources. Also during this this Black Friday some prices go up some prices go down . So some competitors go up some competitors go down. So on a product combination level with the competitor you need to know where to react, where to pick your battles. Basically maybe sometimes you don't want to go down maybe sometimes you want to go up and sometimes you need to go up or the whole market is going up. Then you need a high frequency of these updates because during these these days or weeks, every hour products can go up, products can go down, and you need to know whether you want to go up or down. So you need full automation and you need a higher frequency than normal, I would say yeah. [00:15:09] - Grace And do you have any advice on knowing where to react and when not to react. So how do you actually choose that battle? [00:15:16] - Hidde Yeah, you need to decide that in your strategy in these weeks. So maybe particular sub categories where you don't have a focus leave that out. Or maybe make combination deals that nobody has. So combining products or it's hard for the consumer to compare but also hard for your competitors to compare. So it's more and more steering your assortment that's going to be very important together with the right price strategy during these weeks. And it really helps to already think about that now instead of on that day, of course. [00:15:49] - Grace Especially considering there's this new Google data that's showing that 40 almost 40 percent of people have bought gifts already before Black Friday for the holiday. So even the weeks leading up to Black Friday are really important. And so if you're a customer of Omnia, for example, they can also reach out to you and say hey, can you help me a little bit? [00:16:07] - Hidde Exactly exactly. We can definitely talk about getting them to right data in order to be successful during this Black Friday. [00:16:14] - Grace Perfect. All right. Well, I think it is there anything else that you think that we've missed? [00:16:19] - Hidde No, not for now. We're going to dive deeper into the Black Friday data and hopefully afterwards to do a little summarization. [00:16:30] - Grace Well, thank you Hidde. I'm really excited about all of the hard work that you've done and took into analyzing this. I'm really excited about the future. And then if anybody wanted to reach wants to reach out to you, I will leave your information in the show notes. [00:16:44] - Hidde Awesome. Thank you. [00:16:44] - Grace Great, thanks! So wow. Thanks again for listening to Price Points. I really hope this episode gave you some inspiration on how to tackle your Black Friday game plan. If you'd like to talk to Hidde, you can reach out to him at hidde at Omnia or via LinkedIn. He has a wealth of knowledge about this topic and is happy to talk data and pricing with you at any time. Even if it isn't about Black Friday. If you'd like to chat with me, you can also find me through the same channels. That's Grace at Omnia or via LinkedIn. For now though. I hope you have a great rest of your day and a fruitful holiday season. See you next month on Price Points SHOW NOTES: Omnia was founded in 2015 with one goal in mind: to help retailers take care of their assortments and grow profitably with technology. Today, our full suite of automation tools help retailers save time on tedious work, take control of retail their assortment, and build more profitable pricing and marketing strategies. Omnia serves more than 100 leading retailers, including Decathlon, Tennis Point,, Wehkamp, de Bijenkorf, and Feelunique. For her clients, Omnia scans and analyzes more than 500 million price points and makes more than 7 million price adjustments daily. Website • LinkedIn Music: "Little Wolf" courtesy of Wistia TO CONTACT HIDDE ROELOFFS VALKA: Email: LinkedIn: Visit here TO CONTACT GRACE BALDWIN: Email: LinkedIn: Visit here

Price Points Podcast EP 7: Are Your Private Label Products Overpriced

Are your private label products over (or under) priced? Hidde Roeloffs Valk, Solution Consultant at Omnia, explains how a reference pricing strategy helps you optimize your private label products and keep them at...

Are your private label products over (or under) priced? Hidde Roeloffs Valk, Solution Consultant at Omnia, explains how a reference pricing strategy helps you optimize your private label products and keep them at market-level prices. [00:00:10.590] - Grace Hello and welcome to price points. The podcast examines the changing world of e-commerce. One episode at a time. I'm your host Grace Baldwin. And today we're talking about strategy more specifically we're going to talk about reference pricing. So a few weeks ago we published a blog post about reference pricing but since it's such a fascinating topic I also wanted to do a show about it to me reference pricing is a blindingly simple solution to a problem that a ton of retailers face. It's one of the solutions that's so simple it's no wonder that nobody really thinks of doing it. In short reference pricing is a great strategy for any retailer who makes a private label product and wants that product to be competitive on the market. Traditionally stores haven't been able to use dynamic pricing on products like these because the G10 for that product doesn't exist beyond that store. Reference pricing makes it possible though with a simple three step process First you need to find a product that's similar to your own to serve as a reference point. Second you need to determine the relationship you want to have with that reference product. Third you need to put the G for both products and that relationship in the form of a business rule into your dynamic pricing system. And let the tool take care of the market pricing. So see what I mean when I say it's actually pretty simple. I sat down with the author of the blog, Hidde Roeloffs Valk, one of our solution consultants here. If you listen to the podcast for a while you've already met Hidde. But if not know that he is obsessed with anything to do with pricing and is exceptionally passionate about his work. You can learn more about him in price points Episode 2 and I'll include the link to his post in the shownotes. In this conversation we talked more about reference pricing, where the idea came from, what kinds of categories it works best for and more. So please sit back and enjoy this episode. I think you're going to like it. Thank you for joining me again about this [00:02:09.950] - Hidde No problem. [00:02:10.660] - Grace And so yeah. Again I want to talk today about reference pricing. So we've talked about this in the past and you wrote a blog post about it. And I'm just curious. So what exactly is reference pricing and why would a company actually want to use this strategy? [00:02:29.180] - Hidde There's a challenge within retail or basically in pricing where no products are directly comparable and there's companies that want to have a pricing set based on their competitors. That's also in a previous blog post competitor based pricing fairly commonly used. It's easy to, use it's simple. You just need the data and the tool, obviously. But let's say I'm selling a Samsung TV as a retailer. It's easy to match that Samsung TV one to one like apples to apples to the same Samsung TV sold at another retailer. So that's competitor based pricing in a very short sense But what if you sell your own products or have products that can't be matched, can't be compared in a one to one comparison. Then what can you do? You need different data points to steer on, to base your price on, and one of those is reference pricing. So what you do is basically for a product that's hard to compare, you make it comparable. You refer the price of one product to the price of another product that's not directly comparable. In short that's reference pricing it's used a lot in private label products for instance but can also be used in matchable products or unmatched products, but for private label it's it's a very good one because it also places you in terms of value in a relative distance towards known products. Let's say I'm making my own TV. I know, yeah quality is about 20 percent difference or 20 percent less then I'd like my price also to be 20 percent less than a famous Samsung TV for instance. So I'd refer both in quality and in price towards other other products and thereby making it comparable. [00:04:29.120] - Grace And so by that you mean so you take the GTIN of your product and then you do it within the system you reference it to the GTIN of another product that's sort of comparable. [00:04:38.660] - Hidde Exactly. So there's some manual work involved there's no algorithm that I know of that can do this for you. There's a lot of factors at play. Buyers and category managers are really the product experts in this and you need their opinion on this. I don't think data scientists know the products very well they know the data very well and there's so much subjective about the quality of a product that this cannot be captured currently in algorithms in my opinion. So there's some manual work at the start involved. Every product that you want to apply reference pricing to needs to be linked to another product. But however it is applied at some of the retailers I know and they've had great results because in the end if you're selling private label products your margins are often higher there. But people forget that the price is relative. [00:05:33.290] - Grace Some people you mean by people you mean within the retailers or you mean consumers. [00:05:39.410] - Hidde Yeah consumers don't forget it. Consumers shop around they shop for advices they Google reviews and in these reviews sometimes it's referred like, "Hey, this product is better than product X," and that's kind of stuff. So why wouldn't you refer to price then towards that product. So yeah it's it's they would be the people would be buyers and category managers that would set they are experts and hopefully in accordance with the pricing manager ideally. [00:06:12.880] - Grace And then I think another thing that's maybe worth touching upon is what do you how did you come into reference pricing? [00:06:20.010] - Hidde It's basically an idea I had about three years ago working with the first pricing implementations here at Omnia. And it. Yeah. I said earlier it combines value based pricing which I did often at my previous company and competitor based pricing where Omnia is of course an expert in, and this finally combines those two worlds. I've advised multiple clients but since this year some clients have done it and that that has made us quite enthusiastic about it because their results were great. We can't disclose any numbers about that but they were really really happy about both revenue and margin impacts. [00:07:03.170] - Grace So like if you had to give a scale of 1 to 10 and happiness where would you put them? [00:07:09.480] - Hidde An 8. Yeah yeah. [00:07:11.950] - Grace And did they, did they come up with this independently or was it something you advised. [00:07:16.070] - Hidde The interesting part was they came up with this independently. So we didn't even advise it. We sometimes mention it in meetings but it's not something standard. We only mentioned it when we feel that is needed to mention it as it's quite an advanced really advance dynamic pricing strategy and it does take some time where people first want to focus on getting their grasp on dynamic pricing. But I think if you're really searching for a next phase target in dynamic pricing this would be something really ideal. Or if you're struggling with your own brand products and really having to question how do I price them what what can I do or what should I do. It might be an ideal strategy if you're having a hard time selling those basically and it's low risk because you have a lot of margin left if set up correctly you can take it within small phases and not have a huge price distance yet. So with the right guidance the right tools yeah, it will have no negative impact on on your margins. [00:08:26.680] - Grace Is this a common practice already? [00:08:29.650] - Hidde It's not really common. So I think there's multiple retailers that can benefit a lot from this, doing it on the short term as not a lot of retailers do it. So you have quite some advantage over there. It does take some time but it can be, as a margin optimizing strategy, I think it can be really really helpful. [00:08:50.260] - Grace And it just it really takes more time in the beginning right. And then once you have it set up it's pretty easy to manage as any other dynamic pricing strategy. [00:08:59.110] - Hidde Exactly. So this reference pricing in general is not something that's standardly available within pricing tools as it's very customer specific. Also the tactics around it are customer specific. Am I gonna refer to one or more products? Which products? And how do I implement that? On which which frequency do I want to update those prices? Those are very very customer specific but in the end the rules can be made fairly simple you just need quite some data and quite some qualitative analysis from the experts. [00:09:37.950] - Grace The experts being the Category Managers and Buying Managers. [00:09:41.390] - Hidde Yes exactly. So it's working together of both maybe even data scientists pricing managers and the buyers and category manager who know the products and the market more than than anyone. So yeah and that's interesting to see. [00:09:56.690] - Grace What sort of products does this work well for? So we've talked about and the example you used in the blog post was about light bulbs. Are there any categories that this is especially useful for? And are there categories where it's not useful? [00:10:12.310] - Hidde I would say categories with, where people do extensive research. It's really really powerful because they're, the consumer's more aware of these differences and it's more transparent. So in lighting one light bulb might not be a huge purchase but in this particular example these are purchases where a company buys a thousand light bulbs and then these price differences add up. And then you look for quality differences perhaps and then these these things pop up. But I would say more expensive products where it definitely matters more for food people agree that it's just less quality and that's more fast moving so I would say for slow moving consumer goods as this works really very well. Of course it can work for both ends but I think the impact is higher. What I see across Europe is with more expensive products [00:11:10.250] - Grace More expensive slow moving consumer goods. [00:11:12.650] - Hidde Yeah. [00:11:13.030] - Grace Can you reference more than one product at a time. Or does that have to be one. So if I have my computer here can I also reference it to a Macbook and then also to a Samsung computer or do I have only pick one of the two? [00:11:27.300] - Hidde No definitely there is multiple ways to go around it. And I've seen different stuff. It's it's more of a tactic really and the implementation that you apply towards it. For instance you could map it to words several products and maybe take the highest or the lowest depending on that day's information that you have or maybe the most popular one according to some data. So yeah if you make if you have the data and you make a choice then you can automate that within your reference pricing strategy definitely. [00:12:01.410] - Grace So you can say okay I want to be between computer X and computer Z? Like I want to be exactly... [00:12:08.190] - Hidde Exactly, that can also be done. In theory you could also take the average of those three or maybe 10 percent of that and 20 percent of that. [00:12:17.760] - Grace It's a value gap analysis is the term correct. Determining okay. My I want to be price X compared to Competitor A. Like I want the price difference to be 20 percent. How do you actually go about building this analysis and determining this gap? [00:12:34.770] - Hidde So one way to look at it and that's some of my my previous work at Simon Kucher. Where they do lots of projects about value based pricing. And basically reference pricing is, in my opinion, one of the few pricing methods where you combine both. [00:12:50.520] - Grace So just to clarify at this point when Hidde says "both" he's referring to both value based pricing and competitor based pricing. [00:12:58.300] - Hidde And value based pricing starts off then with mapping out your assortment based on some characteristics. So first you look at what are the most important characteristics according to to consumers or consumer segment that I'm looking at. I would order those and maybe take the first five and order my product categories within value of those characteristics. For example something fairly simple a TV Samsung sells three TVs of the same product type for instance but it has a 50 inch screen, a 60 inch screen and 70 inch screens. Those are characteristics so you can already map out the value the 70-inch screens of course worth more than a 50-inch screen. So in that way you already see as sort of value map within your own product assortment and then it's key that for every step in that value map you can have a reference products where you'd say OK that 70 inch TV needs to link towards a 70-inch TV of a competitor. [00:14:06.170] - Grace OK. So you're just basically you just rank it sort of what consumers care about most. [00:14:11.770] - Hidde Yeah. And that would be the way to go. But in the end you need to do one to one pricing so you map out the most important characteristics and you'd look for those characteristics at a relative products and then refer to those in price so maybe the 70 inch TV screen of my competitor is made of plastic and mine is made of glass. Well that would be in my opinion a 10 percent price difference for instance according to the to the expert. [00:14:41.100] - Grace So you come up with this 10 percent and that's just based off of kind of you know the two materials and where you're where your commercial objective is and what you want your pricing perception to be. [00:14:50.190] - Hidde Ideally this would be based on a consumer willingness to pay. And that's the value that we're searching for. So whatever value the consumer attaches to it you want to to optimize margins optimize revenue. You want to "exploit" between brackets. Yeah between quote marks. Actually you want to exploit that and use that to maximize the pricing. Or just take the relative price distance. Yeah. Depends a bit on the situation of course. [00:15:19.350] - Grace This gets into a little bit into price perception. And so if you're a company and you're creating a lot of private label own label things. But the quality. So how do you manage your price perception if the qualities of say you make TV but also candles you're a big sort of overall retailer and the quality of TV is is lower than your reference product but the quality of like your candles are higher than whatever you're referencing. How does how do you manage that price perception? [00:15:50.040] - Hidde Well what you could have is those private label brands can have other names so maybe you're selling the private label really under your own name but selling the candles under a different name which has more of a premium feel and look to it. So that that's one way to manage it but also of course in terms of pricing. But ideally in pricing consumers get a feeling attached toward a certain brand. Same example of it in the car industry, you have Volkswagen and BMW everybody knows BMW is more expensive, more quality, high quality and Volkswagen is less expensive. So that's very deliberately done. And the same should be done by brands. It also fits into your marketing strategy your customer service et cetera et cetera. [00:16:41.540] - Grace Yeah. So it's really more of a it's a broad thing. [00:16:43.850] - Hidde Exactly. That you and you have. You have to consider a lot of different elements of it exactly as is as is known of course and pricing it touches so many subjects. That's why it also makes it a very interesting topic for people to work in. [00:16:56.310] - Grace And what are some KPI is that people can use to measure the effectiveness of this strategy? [00:17:01.530] - Hidde It depends a bit on seasonality but you can always take year year analysis of your own brands. You can check the cannibalization so what if I change the price of this products. Does it hurt the reference price product. So that's one thing to look at but as a standard we always advise to take into account year on year revenue volume and margin next to that. You can do some quantitative analysis asking your consumers what what their price perception is currently. So yeah on a regular basis asking your consumers for feedback. I don't think that's a that's something bad. And you know take the price perception for that into account. [00:17:42.230] - Grace And so do you have any tips for it. So if somebody wants to just get started with this what would you what would be? [00:17:48.120] - Hidde Step 1 start simple with just a few products and get the process working and get some initial results in fast. Because if you want to start with too many products you'd get lost and maybe the implementation then doesn't work and you don't know why the implementation because there's so many products involved. [00:18:09.770] - Grace Would you recommend starting with your high runner products or late or long tail? [00:18:13.790] - Hidde I would say long tail because they're probably not priced correctly. So yeah my advice would also always be to start fast as every day in pricing that you're not on your ideal strategy is day loss often in revenue and margin. [00:18:31.490] - Grace Anything else that you want to communicate about reference pricing? [00:18:34.520] - Hidde Anyone interested in this reference pricing can contact us and we'll be happy to help you set this up. [00:18:42.170] - Grace Perfect and if they if anybody has questions they can just send you an email or Linkedin, right? [00:18:46.130] - Hidde Yeah. Drop me an email. That's perfectly fine. [00:18:49.060] - Grace Perfect. All right. Well thank you so much. This has been really helpful and enlightening. [00:18:56.550] - Grace Thanks again for listening to PricePoints. I really hope you enjoyed this interview with Hidde. If you'd like to learn more about reference pricing check out the blog titled How Reference Pricing Keeps Your Private Label Products Agile on our website. If you'd like to get in touch with Hidde, feel free to reach out to him at or by LinkedIn. You can also reach out to me at the same channels and my email is all the contact details as well as the blog post link are in the show notes. In the meantime though I hope you have an excellent rest of your day. SHOW NOTES: Omnia was founded in 2015 with one goal in mind: to help retailers take care of their assortments and grow profitably with technology. Today, our full suite of automation tools help retailers save time on tedious work, take control of retail their assortment, and build more profitable pricing and marketing strategies. Omnia serves more than 100 leading retailers, including Decathlon, Tennis Point,, Wehkamp, de Bijenkorf, and Feelunique. For her clients, Omnia scans and analyzes more than 500 million price points and makes more than 7 million price adjustments daily. Website • LinkedIn Music: "Little Wolf" courtesy of Wistia TO CONTACT HIDDE ROELOFFS VALK: Email: LinkedIn: Visit here TO CONTACT GRACE BALDWIN: Email: LinkedIn: Visit here

Price Points Podcast EP 2: Why Should Brands Differentiate Their Assortments

How important is a brand's assortment to its D2C strategy? In this interview with Hidde Roeloffs Valk from Omnia Retail, we dive into assortments and uncover how they are an essential tool in a modern e-commerce...

How important is a brand's assortment to its D2C strategy? In this interview with Hidde Roeloffs Valk from Omnia Retail, we dive into assortments and uncover how they are an essential tool in a modern e-commerce strategy. [00:00:10.580] - Grace Hello and welcome to price points by Omnia Retail. I'm your host Grace Baldwin. And today we're continuing our conversation about brands in the direct to consumer, also known as D2C, channel. More and more brands are making the move DTC in order to gather more data, build better relationships with consumers, and ultimately earn more sales. But this move presents an issue to brands' relationships with their biggest customers: retailers. By moving direct-to-consumer brands can quickly become direct competitors to the retailers who also buy and sell their products. So how do brands avoid this channel conflict.? In an interview with our partner A.T. Kearney a few weeks ago, which I'll link in the show notes, Jean-Paul and Roger told us that a differentiated assortment was one of the key things for brands to successfully move direct consumer. But what does that mean, and how do brands actually go about doing that? To answer that, I asked Hidde-Roeloffs Valk, one of our consultants here at Omnia. Hidde has been with Omnia for two and a half years. But before he worked as a consultant at the leading pricing consultancy Simon Kucher and Partners and has a master's degree in finance from the University of Amsterdam. Hidde loves pricing and knows everything there is to know about it and would happily talk for hours about any aspect of the practice. It's because of him that I started on this whole journey about brands in the direct to consumer market. So without further ado let's dive in how brands can differentiate their assortments as a way to voice halacha. Please welcome Hidde Roeloffs Valk. [00:00:10.580] - Grace So I think to start would you mind introducing yourself a little bit and your background. [00:01:39.660] - Hidde Yeah I'm Hidde a Solution Consultant for already two and a half years now here at Omnia. Before it is I was at Simon Kucher, a strategy consultancy with expertise and pricing where I did projects for the German brand Miele for instance the paint manufacturer AkzoNobel. So I took a particular interest in consumer goods and retail so which is why I also joined Omnia where I help retailers and brands improving our pricing and marketing with our software. [00:02:08.730] - Grace So this month we're talking about brands and how they're starting to move to direct to consumer and more specifically we wanted to talk about why their assortments and should brands differentiate their assortments and why they should. So why should brands differentiate their direct to consumer assortments if they're going to make this move is they're going to reason why they should make that difference. [00:02:27.510] - Hidde There's a few reasons and most of times they would like to improve the brand experience. They can manage more of the brand experience by differentiating their assortment across these channels. Of course sales is always important and they can get increased to sales obviously because they're increasing the amount of ask you use. They're eventually selling. Another thing that's really important for basically all companies nowadays of course is get data to the retailers they often do not get any or some sales data. But selling directly consumer they can get way more data they can see on their website which products are people interested in maybe not buying or are buying. They just have way more information they can manage on and maybe improved our products even more. Not only for themselves but also for their retailer. So it's also beneficial for the retailers in the end by improving that. [00:03:19.920] - Grace So it's less about sales and more about experience in product innovation not always about sales. [00:03:26.310] - Hidde It's always about sales. So yeah but it's a way to to capture more sales. [00:03:32.310] - Grace And so what are some examples of companies that are already differentiating their assortments? [00:03:36.780] - Hidde The biggest one I would say nowadays is Nike. It's a huge example of mass personalization where consumers can in fact make their own product. True easy to use website. And they have some great manufacturing process for that to easily make those it only takes two weeks to get shoes in your colors and your style. It's pretty cool. The prices are a bit higher of course but there's just a lot of margin to capture there. There are these these water bottles you see every day in the office which can can personalize. So it makes it easier to recognize for people so there's a lot of there's a feature benefit for people there. Otherwise everyone has the same color and you just be confusing drinking other people's water bottles so those are two two examples. But there's also another example where brands make unique SKUs. That's one thing I saw at Miele. They may make for specific retailers or maybe for one large retailer they make a special product special SKU where maybe one feature is added or the color is a bit different that people might like so that this retailer has a unique EAN code and the product is less matchable and it can increase their sales and their relationship with these retailers. So that's what we call a different kind of differentiation strategy. So on the one hand with Nike mass personalization which is really the consumer level and on all the side you have the uniqueSKUs for a specific channel or specific retailer which is not present personalized but different in some way. Yeah. [00:05:17.550] - Grace So yeah. What is the benefit actually from creating a differentiated assortment if you're going direct to consumer? Is it like how does it affect the relationship with the retailers. I'm thinking about the shoes for example. Why would Nike want to have to have something different that you can buy directly for Nike versus something you can buy at every at any given retailer that also carries Nike? [00:05:41.190] - Hidde So in terms of Nike it would mostly be building a relationship with consumers which they didn't previously have. Let's say Nike used to sell a the retailers they had no way to build a relationship with these consumers by now having a unique product. They got all this data they can send them emails they can manage their brand experience more and pull them directly to their website and also the margin is of course way higher if they sell directly to these consumers. So that kind of change is also with the unique SKUs. It's mostly about bettering their relationship with the retailer as that unique SKU is sold nowhere. So they have some benefit and they can incentivize certain consumers to get to that retailer so the retaile'rs happy also and they probably won't sell that unique SKU directly. So that's a channel conflict you might have. So you need to manage that correctly and that's where a lot of consultants coming also. [00:06:44.150] - Grace So are there any categories where differentiation won't be a good strategy? [00:06:48.620] - Hidde Well products where it's hard to differentiate as they're substitute products basically. So there's just no way to make it more unique. Shoes of course. It's very personal with laundry machines. You can easily cut down on features and that kind of stuff with razor blades. Yeah you can. You just need to give the best razor blade as otherwise. And other brands will pick up your slack. So you just need to give the best one. Also they're fast selling. So yeah use it one time twice and throw it away so people don't really care about color and anything so so there's there's not a lot of features where you can differentiate basically. So that would be mostly hardware and FMCG, but food for instance in FMCG you can differentiate and do it like the laundry machine. We're talking about you can have specific flavors of Coca-Cola for instance for a specific retailer where you can do as a brand by giving a unique flavor to a retailer from a certain product you have is really give a token of appreciation you have a good relationship with then you can improve it more and more by giving these unique products so that consumers will go towards that retailer because they have this particular flavor. So with food it's more easily doable give them some special test some new flavor with them as the first ones and maybe role that out afterwards towards other retailers or maybe you have a unique contract with them for this flavor. So that's what you see sometimes with Coca-Cola for instance. [00:08:21.860] - Grace So going back to the razors example again the differentiation there wouldn't necessarily be in your assortment it would be more in your branding and your kind of or your service so the differentiation would be in your service not necessarily the product. [00:08:35.780] - Hidde Yeah like the Dollar Shave Club. Yeah. For instance. Yeah. That would be a direct to consumer service. Philips have also done it with basically leasing a electronic razor for women which was a was a great success. So these ranges were high in costs to buy a lot of women one to buy them it was really premium razor so they figured out if we do it on a monthly basis like software as a service we just use a product as a service as they asked I don't know something like 10 euros a month and they could just replace it if it break down and whatever and after a certain amount of time it was just yours. So it is enabled a lot of people that were not willing to pay it but were willing to buy it or very interested to buy this product finally and it increased the sales for this product more enormously of course and they made much more profit because they skipped the retailer in the end. But at the same time retailers were happy but because there were not cutting into their group of consumers because they were hitting a different target group which had less money to spend but we're willing to buy it and they wouldn't normally buy through to retailers. So both types were happy. [00:09:45.770] - Grace So what are some of the different ways brands can differentiate their assortment across different channels? [00:09:52.580] - Hidde So as we talked about this mass personalization that's that's one way of selling directly to consumers. I think that's one. Second was the unique products. And third one is maybe a different service offering so selling on a monthly basis instead of one huge thing and having some unique customer service or unique brand experience where people can maybe have additional features over the air maybe some software updates which they can pay for. Those are different ways that brands can differentiate across these different channels and sometimes in collaboration with with the retailer of course. So in-store personalization or special customer experience through the store a new product release where sort of retailer stocked with the product and other retailers get the product later for instance is maybe a time-based unique SKU. There's all different ways to manage relationships with both the retailers and the consumers at the same time [00:10:54.070] - Grace Can price be a differentiator for brands? [00:10:57.410] - Hidde So price really important topic here at the same time the brand should should set a price from the recommended retail price towards their own selling price which might be the same might not be the same. And at the same time the retailer needs to set a price for their in their stores online. They might differ might not differ. So there needs to be some way for brands to manage that and price is always relative, products are highly comparable nowadays some unique products might not be but always in some way comparable. And price is always transparent in the retail market nowadays so consumers will always look up the best price or mostly look for the best price and will always compare products versus other products or substitutes. TV for instance. Yeah that might differ with a few features and it's important to know which feature is valued by certain consumer. Anyways the price can be viewed in two ways. Either you will compare it with a retailer as a brand, so I'm Samsung and I might compare my prices of my direct to consumer channel with MediaMarkt for instance. Or I'm Samsung and I'm comparing my price or setting my price towards or in relation with another brand such as LG. So I might say Oh I'm always 10 percent under L.G. and I would differentiate on that in the end. It's a way to increase your sales. It's not the only way but it can definitely help. Let's say if you're selling directly to consumers your retailers are also your competitors but also your clients so need to manage that very well obviously. And yeah for now it can harm your price perception but it can also benefit your pride perception if managed correctly and it also has a lot of things to do obviously with your supplier conditions which is not a topic I will dive into this month. [00:12:57.800] - Grace So it's really more about using price but using it and like thinking about it very cautiously and using it strategically rather than just trying to price yourself will be the lowest price in the market? [00:13:10.670] - Hidde I would say it's it's not a differentiator but it's a it should be a fair price. It shouldn't make you different compared to the retailers but it can make you different compared to other brands. It's more about having a fair price to relative to these to these retailers like it's um it's a checkbox for consumers. [00:13:34.830] - Grace So it's like an anchor point. [00:13:36.650] - Hidde It's definitely an anchor point for the whole retail market. So what can happen is your prices say I'm lowing my prices as a brand, might be that triggers a price decrease over the whole market. So it's definitely an anchor point. It's sometimes always the highest price in the market that that's available and as a retailer if you're above the brand then you won't sell anything off easily. And compared to these other brands it can be a differentiator. Definitely. If your TV is of a higher quality and all also a better price and it's a huge differentiator. But if your TV is for instance same quality and a higher price then you haven't differentiated and doesn't make sense. That's where the comparing towards other brands really is really important. You need to always have this sanity check. Like is my value of the product in line with the price towards other products of other brands on the market on the market. Yes. [00:14:39.770] - Grace So that's a good that's a good transition into dynamic pricing. [00:14:43.040] - Hidde So how can dynamic pricing dynamic pricing isn't a differentiator per say it's it's it's a tool it's an enabler to manage these prices and the price perception that comes with it in an automated way based on large amounts of data. So again the data of both the retailers and other brands can fit into the system and uses all of your strategy to to manage it is thereby saving quite some hours making decisions or in an automated way. That really helps so you can use both your resources internally to focus on other stuff. So to ask that brand experience such as analyzing data and figuring out where to improve that assortment we were talking about. So in the end it's it's really an important tool to manage all this to enable you to have an automated way in setting the price based on so much data [00:15:39.880] - Grace So dynamic pricing can also help brands avoid market collisions? [00:15:43.430] - Hidde Yeah definitely. For instance it can quickly pick up when the price is decreasing in overall market and you might be the one that set off that decrease. And that way you can always increase the price again to get the over market up. That's one way to look at it but also managing stock for instance that would have been done by hand and these algorithms could pick up when you were having trouble with your stock and have an automated way of managing the price for a troublesome stock for instance. [00:16:13.730] - Grace Well thank you for chatting with me about assortments. If people have questions how can they get in touch with you. [00:16:19.460] - Hidde People could reach me via my email hidde at omnia retail dot com or connect with me via LinkedIn and then send me a message. [00:16:27.820] - Grace Perfect and I'll include all of that in the show notes. So thank you. [00:16:31.370] - Hidde Thank you. [00:16:37.040] - Grace Thanks again for listening to the second episode of price points. I hope you enjoyed it as much as I did. If you'd like to get in touch with him. You can email him at hidde at Omnia Retail dot com or visit his LinkedIn profile which I've linked to the show notes. As always if you're a retailer or brand and want to try dynamic pricing free for two weeks with your feeds you can connect with us here on our website or by calling +31 0 85 208 3140. Finally if you'd like the show let us know. Send me an email at Grace at Omnia Retail dot com and let me know what you thought or if you have any suggestions for the future. In the meantime though have a great rest of your day. SHOW NOTES: Omnia was founded in 2015 with one goal in mind: to help retailers take care of their assortments and grow profitably with technology. Today, our full suite of automation tools help retailers save time on tedious work, take control of retail their assortment, and build more profitable pricing and marketing strategies. Omnia serves more than 100 leading retailers, including Decathlon, Tennis Point,, Wehkamp, de Bijenkorf, and Feelunique. For her clients, Omnia scans and analyzes more than 500 million price points and makes more than 7 million price adjustments daily. Website • LinkedIn Music: "Little Wolf" courtesy of Wistia TO CONTACT HIDDE ROELOFFS VALK: Email: LinkedIn: Visit here TO CONTACT GRACE BALDWIN: Email: LinkedIn: Visit here

Take Control of Black Friday with These 3 Pricing Tips from the Experts

Is Black Friday even worth it? That’s a question that many retailers and brands ask themselves around this time of year. Is it worth all the trouble? The early starts. The late nights. The number crunching. The price...

Is Black Friday even worth it? That’s a question that many retailers and brands ask themselves around this time of year. Is it worth all the trouble? The early starts. The late nights. The number crunching. The price watching. The long days and the short rests in between...Black Friday is stressful and resource-consuming... So is it even worth it? The answer is a resounding yes — if you’re strategic about it. People are primed to buy on Black Friday, and as a retailer, it’s a shame to discount the psychological power this holiday has on consumers. Many consumers will surf the internet just to see if there is a deal available, and even if they don’t intend to buy, many will walk away from the day with one or two items. There are plenty of ways to infuse strategy into your Black Friday game plan. But as pricing experts, we wanted to talk about what we know best: how to price effectively on Black Friday. We ran an analysis of all of our market data to uncover some trends about Black Friday for you. In this post, we’ll discuss the data, highlight important trends, and give you tips on how you can make Black Friday more profitable with the information you have. Black Friday pricing pressure: should you change your prices? When it comes to Black Friday, your price matters. A lot. In fact, according to Google, pricing and promotions are 13% more influential in the week leading up to the last Friday in November than at any other time of the year. But just because people expect discounts doesn’t mean that you need to slash prices for every product in your store, nor is it what the market actually does. We analyzed the top 100 Amazon bestsellers in 300 categories to see how different price points reacted during Black Friday 2017 and 2018 and looked at a few things. First, we looked at trends over the last two years and determined if there were any categories where pricing pressure was growing. Second, we compared the number of price changes by category for the week before Black Friday to the number of price changes in the week of Black Friday itself. The results were interesting, and the analysis proved our hypothesis that the number of price changes is increasing across the board each year. And that number of price changes shows no sign of slowing down. How to win this Black Friday How can you make Black Friday a success? The key is to use data strategically to build strategies ahead of time. Here are our top tips for getting the most out of this Black Friday. Pick your battles To build a battle plan, you need to consider two questions: 1. Do Black Friday promotions match my commercial strategy? You won’t be able to respond to every price change that occurs on Black Friday...nor should you, necessarily. You need to know when to react to the market, but you also need to know when to not react because it will be detrimental to your brand perception. To figure this out, go back to your commercial strategy. If you want to be seen as a premium brand or retailer, for example, you might not want to cut prices the same way someone who wants to be the kind of shop with the lowest-price-for-everything would. You could unintentionally drive the overall market price down, and no matter what, you’ll always be undercut by competitors whose goal is to be a cheaper alternative. 2. Where should I apply promotions? With your commercial strategy at the top of your mind, consider how Black Friday can actually help you achieve your company’s goals. One of the easiest ways is to narrow down which categories you want to focus your time and energy. You can’t realistically tackle every category with the type of energy it requires to maximize profits on every product (that is, unless you’re using an advanced dynamic pricing software). Your team isn’t a machine that can work 24/7 without losing their sanity. To be effective, you should be selective in where you target your team’s energy. You might want to run a promotion on all Consumer Electronics, for example, or on any other subset of your assortment. You can then focus wholly on running that promotion effectively. Price increases and decreases You don’t always need to decrease your prices on Black Friday (or in the week leading up to it). Our analysis uncovered that many shops actually increase prices during Black Friday week, though price decreases were still 1-2x as common. There are a couple of explanations for this. One is that retailers and brands might run a margin optimization strategy to capitalize on increased consumer willingness-to-spend around Black Friday. These price increases could also be a response to supply and demand. If one shop sells out of a popular item, other shops in the market might increase prices as the supply shifts. Finally though, many of these price increases might just be the result of a lack of data. Shops might not even know their prices are higher during Black Friday than the week before because they can’t keep track of their price changes. Whatever the reason these price increases occur, you should watch out for them in the week of Black Friday. They are an opportunity for you to react. You could lift your prices with the overall market to capture more margin, for example, or you could decrease your price to stay underneath the competition. Use the right data Every year countless news outlets publish “exposes” that show Black Friday deals aren’t as steep as most consumers believe. But does that stop consumers from buying? Definitely not. Black Friday brings in more and more sales each year. For the most part, retailers and brands aren’t trying to take advantage of consumers during Black Friday. It’s actually because shops don’t have the proper data to know whether a product’s price was lower in the last month than what they advertise on Black Friday. Data like historical trends help you know the long-term market price for popular products over the course of several months, so you can make sure your Black Friday price is lower than the historical average. You need roughly three months worth of historical data to understand what the lowest price of the product has been. Historical data also shows which products people search for in the weeks leading up to the holidays so you can guess which products will be popular on Black Friday itself. Another data source that’s interesting to use is price elasticity. If you understand how different products and categories respond to changes in the market, you can prioritize which categories need the most attention. Finally, competitor pricing data is always useful, but especially so for Black Friday. Without competitor pricing data delivered directly to you, you can’t monitor the market effectively. You can take that data a step further with automation tools like automated price checks and automated price updates. These tools save valuable time so you can focus more on strategy. Increase the frequency of your price changes Black Friday is one of the most competitive days of the year, if not the most competitive day. To stay in the game, you need to shift your prices as quickly as the rest of the market. Our analysis of the top 100 Amazon bestsellers across 300 categories shows we’re headed toward a Black Friday standard where of one in every four products experiences a price change. That’s roughly 7,500 products from that analysis alone. Some categories have already surpassed that 25% threshold. We discovered the most competitive categories in terms of price are: Consumer electronics (36% of products experienced a price change in Black Friday week 2018) Toys (28% of products experienced a price change in Black Friday week 2018) Baby (27% of products experienced a price change in Black Friday week 2018) Health and Beauty (27% of products experienced a price change in Black Friday week 2018) There are also a few categories that are showing significant upward trends. Shops in the Sports, Travel, and Outdoor categories will quickly pass this threshold as well. It’s impossible to keep up with these price change frequencies if you don’t use some form of pricing automation tool. More companies realize this and switching over to dynamic pricing as a result. Final thoughts Black Friday might not seem worth all the trouble. But when you use data to build strategies that serve your company’s goals, the retail holiday offers the potential for excellent sales growth.

How Reference Pricing Keeps Your Private-Label Products Agile

For most products sold across multiple retailers, the process for dynamic pricing and market monitoring is relatively painless. All you need to do is provide the GTIN code for these items, then your dynamic pricing...

For most products sold across multiple retailers, the process for dynamic pricing and market monitoring is relatively painless. All you need to do is provide the GTIN code for these items, then your dynamic pricing system can search the web for that GTIN code. And while you probably have plenty of these “matchable” products — products from different brands that you can “match” based on GTIN codes — what do you do about the private label products you produce and sell exclusively in your stores? When the system can only find the GTIN for a product in one store, how can you make sure the price of that product still stays as agile as the market? This is where reference pricing becomes a crucial part of your dynamic pricing strategy. And if you’re a retailer who sells these products, this post is for you. Keep reading to learn more about reference pricing, how to implement it in your dynamic pricing tool, and how to reap the benefits of this powerful tactic. What is reference pricing? A reference pricing strategy uses the prices of similar products on the market to help you determine the price for your private-label products. If your company sells private label light bulbs, for example, which can’t be found elsewhere on the market, a reference pricing strategy lets you monitor the market prices of similar light bulbs across other retailers so you can adjust your price to market levels. Why is reference pricing important? Any retailer who creates unique products in-house can use a reference pricing strategy. And the benefits are numerous, such as letting retailers: Sell more private label products Keep private-label products competitive online Protect brand image and online price perception Control market positioning for private-label products Keep price in line with relative value towards comparable products In short: it’s a sensible strategy that lets retailers (and brands, in some cases) manage the prices of their private-label items online. How does reference pricing work? Reference pricing starts with deciding which products on the market are most similar to your private label products. If you make a smart light bulb, you will need to decide which manufacturer produces a lightbulb that is most similar to yours in terms of features and overall value. This is the hard part because it requires a certain amount of manual labor. But once you determine which products are most similar to your own, the process becomes much easier. All you need to do in your dynamic pricing system is link your product’s GTIN codes to the other product’s and determine how you want your private-label item to relate to this product. Your pricing system will then follow this branded product one-to-one, and whenever the price changes on that branded product it will update your own product price. Some systems (like Omnia) will take it a step further and even update your product prices automatically. This saves you the stress of manually doing the price updates and makes sure your products are constantly aligned with the branded product online. How to set up a reference pricing strategy Creating a reference pricing strategy is relatively easy, but it does require a certain amount of “grunt work” before you can fully benefit from the practice. Though we briefly described how reference pricing works above, in this section we’ll dive deeper into the steps you need to go through for a successful strategy. Step 1: Determine which branded products are most similar to your private-label products, and collect the GTIN codes of these products To start, you need to uncover which product you want to use as the reference point for your private-label price. This is the hardest part of the process because it involves manual labor. Think about what your product does. Consider your product features. If you have a private label smart light bulb, features you might consider are: The type of bulb Light power Energy efficiency Average lifespan Number of colors Security Connectivity Weight Size Voltage The more specific you can get, the better. The above list is by no means exhaustive for a lightbulb manufacturer, but it does provide a good starting point for determining the important factors that you’ll compare your product on. Once you’ve decided which features you want to use as a reference, you need to go through competitor products to determine which one is most similar to yours. This will be your reference product. Once you know which item will be your reference point, you can find the GTIN code for that product. Step 2: Determine the value gap between products After determining which branded product you’ll use as a reference point, you’ll need to decide how you want your private label product to relate to it in terms of price. For example, say you want your private label product to be seen as the more cost-effective alternative to a name-brand product. You’d then obviously price yourself slightly lower than the reference product. But the degree to which you price yourself lower depends on your commercial strategy, the nature of the product itself, and the capabilities of your dynamic pricing tool. Read more → How to Build a Pricing Strategy To decide this, you’ll want to get all relevant product stakeholders in the room. Here are some questions to help facilitate your discussion. What is your commercial strategy? What is your desired price perception? How does your goal price perception relate to your reference product’s price perception? Step 3: Create pricing rules in your dynamic pricing system So you’ve determined your reference product and how you want to appear in the market relative to that product. Now you need to turn those ideas into concrete rules in your dynamic pricing tool. Every dynamic pricing tool will be slightly different in this approach. If you already have a software provider, you should ask the company how to set this up. If you’re still shopping around for a solution, this is something to consider in your purchasing decision. Step 4: Implement, test, and improve your strategy Once your pricing rules are in place, you’re ready to go live with reference pricing! Let your system run as normal, then update your prices accordingly, whether that’s by hand our through automated price updates. Final thoughts Reference pricing is critical for retailers (and some brands) who produce their own products and want to keep those product prices aligned with the overall market. And while it might seem intimidating at first, after the initial task of deciding on your reference prices and setting pricing strategies, your dynamic pricing solution can easily manage your prices. Curious about reference pricing, but want to learn more from a human expert? Reach out to Omnia today to chat with one of our consultants. Click here to get in touch today.

5 Benefits of Electronic Shelf Labels

Retail is one of the most innovative industries out there. In recent years, one of the most interesting changes to hit the industry has been Electronic Shelf Labels (ESLs). These “electronic” versions of price tags use...

Retail is one of the most innovative industries out there. In recent years, one of the most interesting changes to hit the industry has been Electronic Shelf Labels (ESLs). These “electronic” versions of price tags use e-ink to display a price and are connected to a computer database. This labelling technology makes changing in-store prices as easy as typing a new price into the software and clicking “send”. These digital price tags have numerous benefits for retailers. But ultimately, the greatest advantages of electronic price tags for retail are the ability to engage in real-time dynamic pricing in-store and build an omnichannel experience to enhance customer loyalty. Interested in learning more about the benefits of these price tags? Here are 5 reasons brick-and-mortar retailers should consider the investment in retail label shelf holders. 1. Accurate pricing across channels The internet has completely transformed how people shop, and it’s not uncommon for consumers to price check an item while they’re standing in a store. Shoppers lose trust in a company if the in-store prices don’t align with the online data display, and unfortunately this is often the reality they encounter. An electric labelling system, however, completely change that interaction. With one standardised pricing system, your customers won’t be disappointed by price differences anymore. Instead, your company can immediately reflect any online price change in-store. Digital shelves also allow you to align your promotion prices, audit trails for your headquarter to check changes, and fix any pricing errors. Each of these keeps your prices accurate across the board and ensures your customers see your optimal price. Image courtesy of DisplayData 2. Shelf edge influence The shelf edge is one of the most important sales influencers. Most purchases are made at this point — so you want to make sure your pricing information is accurate. A price label is prone to human error. It’s also a slow process, and by the time you finish re-labeling, prices might have changed again online. This is especially true in regards to pricing electronics in an attempt to compete with online and offline competitors. With ESLs though, these changes are easy, so you can capture more sales at the shelf edge. You can react competitively to price changes, enable instant promotions, track what promotions work, and protect margins on time-sensitive stock. You can even create offers based on where a specific customer is standing in the store with just a few clicks. 3. Enhance your omnichannel experience It’s no secret that omnichannel is the future of retail. According to Planet Retail, 56% of consumers feel that technology improves their shopping experiences. Image courtesy of DisplayData How do ESLs help you build a successful omnichannel experience? ESLs enable you to interact with your customers in ways that were previously impossible: Display stock levels so customers know whether the supply is limited Display online prices of competition so consumers can trust you when you say you have the best price Enable simple ordering with QR codes Display reviews of products, so shoppers can understand what others like or dislike about a product And these are just a few examples of the opportunities in using retail pricing tags! 4. It’s not as expensive as you think Here’s the thing: ESLs do require an initial investment. And if you’re unsure about whether you will use them, it’s understandable why you might be skeptical of moving forward with the technology. But with the shelf edge being the last — and most powerful — point of influence on a sale, the ability to control what a consumer sees at the push of a button is priceless. And the process of installing and configuring the electronic shelf labels isn’t as hard as you think: Minimal construction and installation: Electronic shelf labels are easy to install and can be set up with a simple screwdriver. They’re also easy to configure using the provided software High security with low maintenance: ESLs operate on an unused WiFi network for maximum security from interference at low maintenance for retailers Easy to use: Most ESL softwares are easy to use and learn. Just drag and drop the information you’d like to display and you’re done! After installation, your employees no longer need to monitor the price tags each day. The centralized system makes it easy for one person to control all pricing changes on the shop floor. 5. Payback is quick According to DisplayData, the payback for ESLs is high. The company reports in-store sales typically increase by 6%, with a typical margin increase of 2%-3%. The payoff in transitioning shelf labels is also fast. One of DisplayData’s customers, a major European retailer with over 800 stores, secured a payback on their investment in just 16 months and predicts over 170% ROI in the next two years. If you zoom out to 5 years, the retailer expects their ROI to increase by 400% Conclusion Creating an innovative omnichannel experience is all about connecting stores and online. And the shelf edge is no exception. Retailers should carefully consider this key moment in the omnichannel buyer’s journey and recognize that electronic shelf labeling is one of the easiest ways to connect the two domains. Read more: The Ultimate Guide to Dynamic Pricing Omnia can easily connect to ESL systems like DisplayData, which allows you to create a cohesive omnichannel experience based on the most up-to-date pricing and marketing information. Want to learn more? Get in touch with Omnia today. Click the button below to sign up for a demo and one of our consultants will be in touch.

Five Steps to Successfully Implement Dynamic Pricing

Getting started with dynamic pricing can feel overwhelming. There are loads of options and functionalities, which can lead to choice overload. A successful dynamic pricing setup relies on 5 core steps: Define your...

Getting started with dynamic pricing can feel overwhelming. There are loads of options and functionalities, which can lead to choice overload. A successful dynamic pricing setup relies on 5 core steps: Define your commercial objective Build a pricing strategy Choose your pricing method Establish pricing rules Implement, test, and evaluate the strategy In this post we'll cover each step briefly, but for more information be sure to check out the corresponding blog post for each element. Step 1: Define commercial objective To start, define what you want to achieve with your company or category. This is called your commercial objective, and it’s an explanation for why your company exists and what customers can expect from your organization. Some shops have a clear market penetration strategy to capture market share as their company objective. Other shops offer value-added services such as free quick delivery, great customer support, or long payment periods. Regardless of what your offer is, you should understand it thoroughly before starting dynamic pricing. The commercial objective is, in many ways, a compass for your business, and will help you form a dynamic pricing strategy that helps you reach your specific goals. Take time to develop your commercial objective, and make sure all stakeholders have the same understanding of your goals. Read more: How to Define Your Commercial Objective Step 2: Build a dynamic pricing strategy The second step towards dynamic pricing is to determine your pricing strategy. A pricing strategy uses your commercial objective to make smarter pricing choices. In other words, it makes your commercial objective possible through the power of your product pricing. For example, if your commercial objective is to increase visibility but also capture profits, you might want to follow the “high-runner” strategy commonly used by Amazon. In this strategy, you draw traffic to your store through extremely competitive prices on a small selection of your most popular products while capturing margins on your less-competitive products. It’s counterintuitive, but once visitors are in your store for one specific product, they’re less likely to navigate away for a smaller, less popular product. At Omnia, we advise users to have a clear pricing strategy before fully implementing Dynamic Pricing for two reasons: Easier to implement. When you know what you want, and how you want to achieve it, it’s easier to get started with dynamic pricing. Easier to evaluate. If you know your goal, you can keep track of how your dynamic pricing strategies move you towards that goal. Think about what you want to achieve, and how you want the public to view your company, and how it’s linked to your prices. Read more: How to Build a Pricing Strategy by Omnia Partner Johan Maessen Step 3: Choose pricing method(s) As a third step, you should choose how you will achieve the formulated pricing strategy. There are a multitude of methods to choose from, but three of the most basic are: Cost-plus pricing, in which you take the cost of producing a product then add the desired margin on top to find the sale price Competitor-based pricing, in which you follow your competition’s prices Value-based pricing, which considers the consumer perception of the product in the pricing process These pricing methods aren’t mutually exclusive, and it’s likely you’ll use a combination of these methods to create your own unique strategy. Choose what is necessary to implement the chosen pricing strategy. For instance, with a price penetration strategy you could undercut certain competitors (competitor-based), while staying above a certain margin level (cost-plus). Read more: 3 Dynamic Pricing Methods and How to Implement them in Omnia Step 4: Establish pricing rules Following on from selecting the pricing methods, we now create implementation ready pricing rules. If you choose to price based on elasticity, you let the algorithms make most of the decisions and there is less to set up in the pricing rules. In general, there are two steps involved: 1: Choose the products: Choosing the products can be anything from a category, stock, or whatever data you have. For instance: “for OLED televisions with a stock >10, apply pricing rule X”. 2: Formulate the pricing rule Now that we have the products, we can make an applicable pricing rule, which would fill in “Pricing rule X” in 4.1, for example: “follow average of competitor X & Y” or “price based on price elasticity”. Step 5: Implement, test, and monitor dynamic pricing On completing steps 1 to 4 for all products under your management, you are ready to implement them into your pricing system. For validation purposes, be sure to ask colleagues to check the implemented pricing rules and make sure they match the pricing strategy and methods. Before going live, you should go through a robust testing phase to verify you have implemented the correct pricing settings. It is important to check whether your pricing strategy is applied correctly, so you can be sure the system is actually doing what you intended to do. A good automated pricing system should never be a black box, all decisions should be transparent in order to trust the system. After going live, it is important to monitor the pricing strategy and evaluate if it is helping you reach your objective. If your goal is to capture more market share, but are not able to increase your volume of units sold or your overall sales, it might be time to re-evaluate the objective. Read more: How to Test the Effectiveness of Your Online Pricing Final remarks To conclude, a clear commercial strategy and objective is essential input for a good Dynamic Pricing implementation. It helps setting goals and keeping track of reaching those goals. We recommend a five-step approach to go from your commercial objective to a successful dynamic pricing implementation. However, it’s worth noting that you should create different dynamic pricing strategies for different categories because the nature of consumer shopping changes across products. This is where a software like Omnia is useful: it helps you manage every product in every category and intelligently adjusts prices when the market changes. Want to try out dynamic pricing for free? Click the button below to sign up for a free two-week trial of Omnia.

Tips & Tricks - Easily Analyze Marketing and Pricing in Omnia

Due to complete price transparency in online comparison shopping engines and marketing channels such as Google Shopping, consumers can directly compare prices between competing retailers. It’s even possible to sort by...

Due to complete price transparency in online comparison shopping engines and marketing channels such as Google Shopping, consumers can directly compare prices between competing retailers. It’s even possible to sort by price! In such a situation, it becomes very hard to convert the products which are relatively expensive compared to competitors. As a retailer, you can ask yourself why spend marketing budget on products which are outpriced if it’s so clearly visible for consumers? As such, pricing has become the most important factor in determining online marketing variables such as views, conversions and eventually return on ad spend. It is crucial in online marketing to take into account what the pricing situation is for your product, by answering important questions. For example: Which products get the most views and what is my pricing situation for those products? Where am I the cheapest in the market and how is my conversion there? These questions are not possible to answer via standard tools such as Google Analytics & AdWords. With Omnia, you can answer these questions and much more. A unique and powerful feature of Omnia is the combined automation of marketing and pricing. Moreover, it also offers valuable insights in these two fields via the Reports functionality. With this functionality you can set up a data extract of the current situation at the product level. With these insights you can re-evaluate your current pricing & marketing strategy to get better results. In order to analyze pricing & marketing in a fast and easy way via Omnia, you need three things: Omnia Dynamic Pricing Google Analytics Connected Google Analytics with Omnia Consult the set-up guide or ask our customer service on how to set this up. After you're set up you can get started and create a valuable report in minutes with five steps: Step one: set up the necessary variables in “Mapping” You can copy paste the following mapping / calculation (2nd column) including the brackets [brackets] into your mapping. Also see the screenshot as an example. EXPORT FIELDS MAPPING/CALCULATION EXPLANATION OMNIUNIQUEID ID Product ID within Omnia EAN [EAN] EAN / productcode which matches with competitors Top_category [Top Level Category] Category level Brand [Brand] Selling_price [Selling Price] Current price PriceRatio [Selling Price] / [Average price competitor(s)] Price ratio: your price divided by the average price in the market Minimum_market_price [Minimum Price of Competitors] Distance_to_minimum [Selling Price] – [Minimum Price of Competitors] Distance between your price and the minimum (lowest) in the market Views_L4W [# of UPV PDP last 4 weeks] Unique pageviews of last 4 weeks Total_sold_L4W [# Omni-channel Unit(s) sold last 4 weeks] Total amount sold in last 4 weeks Conversion_Perc [# Omni-channel Unit(s) sold last 4 weeks] / [# of UPV PDP last 4 weeks] Conversion rate (%) If possible, you can also take online sales instead of omni-channel sales. We recommend you include at least these variables. It is always possible to add others if you like & the data is in Omnia. For instance, if you want to analyze a low-level category, add that to the report. Step two: Add a filter to exclude products without competition As products with no competition have no price ratio or minimum price in the market, be sure to filter these products from the report by excluding them from the report. A product has no competition when the price ratio is equal to zero (because Omnia is unable to compute a market average) You can choose to include only the category and/or brand of your interest. This decreases the amount of products in your report and makes it easier to analyze. As in the example below, the report will only include Brands named “Omnia”. Step three: Sort your data on the interested variable The Top-X functionality allows you to sort and mark/take the “Top” products based on a variable and in a group. For example: only take the top 3 highest selling (sorting variable) products for every brand (grouping variable). If you take only the top 3, this works like a filter: the total number of products will be limited to a maximum of 3 per brand, making the report smaller. You can use this functionality in three ways: Sort and take (filter) or mark the “top” products per group Sort and mark the “top” products per group Only sort the products based on the sorting variable The difference between the 3rd and the first two is that in the 3rd way you sort on a number of products which is larger than the largest group or assortment (for example 100.000 products per group): thus you include every product in a group and effectively only sort the products based on the sorting and grouping variable. For this report, it might be handy to sort on the amount of views per category: from highest to lowest (descending). This way, you can analyze which products in a category have the most pageviews and directly compare it with the conversion rate and pricing situation (e.g. priceratio & distance to the lowest price in the market). Certain products might have lots of views but are priced too high compared to competitors. You can reconsider your pricing strategy based on this information. Step four: set-up the export In this step, you can set-up the export of the report, for example: have it emailed to you every Tuesday at 9AM. We recommend you to set up the CSV settings according to your Excel settings. So check which kind of decimal separator your Excel uses (comma or dot) and how fields are quoted and delimited. This way, the file will instantly open in Excel and be ready for analysis. Standard English uses a comma decimal separator and semicolon field delimiter with no quotes around values (see screenshots). Tip: You can always click “Run Now” and download the file in the “Preview” screen to get a fresh report. Analysis: This is what your Excel file will look like, I have colored some products which might be of interest and formatted the conversion percentage to show percentages. Green rows show products which seem to be doing well: high number of views and high conversion rate, while the pricing does not seem be extreme, meaning there are no extreme values of the priceratio. It might be a certain brand or model which is popular and you could discuss whether to increase the price for that, depending on the market. Try to find a common link between products that are getting good metrics and evaluate the strategy. Red rows show products where action or at least further investigation is needed: there are a good number of views (>300) but the conversion rate is relatively low or even zero. For instance, the first red row is a relatively cheap product with a price ratio of 0.86 (i.e. 14% cheaper than market average), but it does not convert well. Could the content of the product page be insufficient? Is the product targeted well in the marketing campaigns? Was the price lowered very recently? Are my main competitors cheaper? For the other two red rows: the product is priced at the minimum of the market (distance to minimum is zero) and there are no conversions. It indicates something is wrong and further investigation is needed. This simple report shows that by combining dynamic pricing and marketing with automated reports you could choose to only focus on “problem” cases. This saves you time, which you can spend in pro-actively changing your strategy instead of reacting only to market changes. Closing remarks This example report shows how you can combine pricing and marketing data in one report to give you valuable insights for your strategy. As the Omnia reporting functionality is very flexible, you can always add data, create formulas, add new filters or different Top-X groups to your reports. This helps you to zoom in on problematic products instead of your full assortment at once. If you have any questions regarding this topic, don’t hesitate to reach out to customer service.

3 Dynamic Pricing Methods and How to Implement Them in Omnia

The rise of e-commerce has led to a greater assortment of shops. In addition, the internet has greatly increased price transparency in the market, which in turn has increased the frequency of price changes. The...

The rise of e-commerce has led to a greater assortment of shops. In addition, the internet has greatly increased price transparency in the market, which in turn has increased the frequency of price changes. The combination of these two factors made dynamic pricing a necessity in today’s retail market. And as part of the Five Steps to Successfully Implement Dynamic Pricing, shops need to choose a pricing method that makes sense for their organization. Dynamic pricing is often equated with a purely competitor-based pricing method. For example, “Always adjust the price to the lowest of the three competitors X, Y and Z”. Competitor-based pricing, however, isn’t the only dynamic pricing method, nor is it the most recommended pricing method. Three dynamic pricing methods are outlined in this blog post. Pricing method 1: Cost-plus The most straight-forward pricing method is cost-plus pricing. The starting point is the cost per product, where the desired margin (percentage or € amount) is added to calculate a selling price. If the cost per product changes daily or even hourly (due to changing suppliers or dropped shipping for example), it is necessary to implement this method dynamically. Main advantage: Easy to understand & implement Main disadvantage: Takes only internal factors into account How can I apply the cost-plus pricing method in Omnia? This method is easily implemented in Omnia. Create a new variable with the formula editor. Start with the purchase price and add all other product costs from your feed plus a desired margin, possibly at the product-level. Include this variable in your strategy settings as a lower & upper limit and you are set. Read more: The Ultimate Guide to Dynamic Pricing Pricing method 2: Competitor-based With competitor-based pricing, products are priced relative to (direct) competition. For instance, a company might want to undercut a certain competitor. Or, a company might want to maintain a certain price position in the market. It is a common strategy for shops to match prices with their most important competitors for certain products. Stores specialized in electronic products have the highest frequency of price changes and other product categories are likely to follow with an increasing frequency. Therefore, it is essential to implement this method dynamically to not lose any market share. Main advantage: Takes external factors (competitors) into account Main disadvantage: Assumes your competitors have the right price How can I apply competitor-based pricing method in Omnia? Two steps are involved to implement this method in Omnia: 1. Create an action, which is the concrete formalization of your strategy. Some examples: Never price higher than competitor X Never price lower than position 2 in the market Set price equal to most occurring price Etc. 2. Apply this action in the Strategy settings within Omnia to a part of your assortment based on a variable, such as: brand, category, color or even stock. An example: raise price above the average of the market when stock is below 10. Pricing method 3: Value-based By far, the most recommended pricing method by experts is value-based. Value-based pricing is a dynamic pricing method based on the economic principles of demand and shows the best results in additional sales and total margin. As the true value of products is difficult to uncover, consumers’ willingness-to-pay functions as a proxy for the perceived value. Omnia calculates the price elasticity of products to uncover consumers’ willingness-to-pay for the combination of product and seller. A product with high price elasticity is very sensitive to price changes as consumers value the product less than a product with low elasticity (keeping all other things equal). Over time, Omnia learns how much consumers are willing to pay for the product at each price point relative to the competition. You can use this data to further optimize your pricing strategy and create rules for maximum profit with the given price elasticity. Main advantage: Combines external and internal data Main disadvantage: Most complicated pricing method How can I apply this method in Omnia? After a few months of gathering sales data and comparing prices against those of the competitors, Omnia has sufficient data to determine the price elasticity of products and categories. You can then use those insights to build pricing rules that capitalize on the price elasticities of different products or categories. Ending remarks While value-based pricing in theory is the best pricing method, Omnia recognizes the importance of having complete flexibility in automating pricing strategies. Omnia gives the power to (online) retailers to use all three popular pricing methods at the product level and even combine them according to your strategy. For example, the strategy in Omnia for a specific product could be: Begin with value-based pricing through price elasticity Never price higher than competitor X Never price lower than 10% margin To conclude, there are five main benefits when you use Omnia’s integrated pricing methods: Omnia brings internal product & sales data together with external market & consumer data Omnia’s proprietary algorithm automatically determines the price elasticity of products and categories Easily combine all three pricing methods at the product level Automation of the pricing process, multiple times per day No "black box": Omnia is completely transparent about the decisions of the price setting process. For more information about our dynamic pricing & marketing software or guidance on how to implement these pricing methods, please contact us via or call +31 (0) 35 699 02 22. Curious to learn about other pricing strategies or interested in our Amazon guide series? Check out some of our other articles below: 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 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. 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. 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. The Strategies Behind Amazon's Success: Learn how Amazon became 'the place' to buy products online. The Complete Guide To Selling on Amazon: In this guide we answer some of the top questions we hear about Amazon and give helpful hints on how to succeed on the platform. How Does Amazon's Search Algorithm Work: Find out how Amazon connects their shoppers with relevant products as quickly as possible. Price, The Most Important P in the Marketing Mix: In this article we'll look at the relevance of the 7 P’s in today’s online marketing context.

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