Price Points by Omnia Retail

A few days ago, we shared the first part of our insightful conversation with one of Europe’s top e-commerce and digital marketing minds, Antoine Brouwer. We’re excited to share the second and final part with you today....

A few days ago, we shared the first part of our insightful conversation with one of Europe’s top e-commerce and digital marketing minds, Antoine Brouwer. We’re excited to share the second and final part with you today. Omnia Retail: We’ve previously touched upon Dynamic Pricing earlier but let’s discuss more. Could you tell me more about your view on pricing for the retail industry? AB: Pricing has really evolved over the years. In the beginning, it was just checking the price of your competitor, then the second phase was to know your price and needing to automate the strategy. Nowadays, there are more and more competitors and you can't compete with everybody. If you take consumer electronics as an example, you might have 200 competitors on the same SKU. You can’t say you want to be the cheapest in the market, because you can’t afford it, even Amazon can’t always do that. Also, you really need to get smarter. You now see strategies differ on a category-level but often even down to SKU level, in order to really maximise effect. The next phase is price elasticity, because following what the effect is, whether you follow the price of your competitors up or down, is important to see what it does to your volume. Therefore, measuring price elasticity shows you what happens, if you increase your price but your volume stays the same it means you can make more margin. Or the other way around if you decrease your price but your volume goes up and your cash margin goes up in total, it becomes more interesting. You see how important the strategy is. The first time I used Omnia we only made a few rules and when I now look at the last implementation I was involved in, we made pricing rule, after pricing rule, after pricing rule to really manage it. I think you also see that we take far more things into account, like the logistical cost and the marketing cost to measure what you make per SKU. It’s the same idea behind integrating data from Google to really see, okay, I have this page with a lot of visitors, but a low conversion. This either means that you don’t have stock or that your price is not correct, because apparently your customers are not interested. Feeding this information into a pricing tool is extremely interesting. This way it’s becoming more of an ecosystem with more and more data getting involved and actually looking at more things than just competition alone. That is also what Omnia does with “Market Conditions”, as users can set all these rules to actually determine what should happen with their pricing if they have one competitor, and what happens if they don't have any competition. Omnia Retail: Pricing has indeed become a lot more complex than it was some years ago. AB: Yes, sometimes it’s also necessary to be able to explain your pricing strategy to customers. If you look at products in the same family, is it acceptable to price them differently? Online it often is, but explaining to a customer in store why the same coffee machine is standing next to each other but in different colours differs in price can be difficult. How can it be that a 60-inch TV is cheaper than a 40-inch TV? It's really difficult for customers to understand, but market conditions can determine exactly these differences in prices. That’s why it makes sense to gradually change things. It will for sure be better than pricing manually, because then your prices are always wrong. Omnia Retail: Do you think that the need for pricing strategies to become more complex is mostly due to the increasing competition or did the behaviour of consumers also change? Are they doing way more research than they used to before, with much more information being available? AB: It's a combination, there's more competitors, and there's more customers comparing. In the early years, everything was focused on growth and now the focus is also on being profitable. These are completely different things. With every sale you make, that you actually make money on, you have to be far smarter, and also look at all these things to actually drive profitable growth. I think that has changed, in the beginning, it was growth and now it's profitable growth and that is far more complex. For this, you need far more rules, than just following the competition. Omnia Retail: Based on your experience, what is your opinion on investing in Dynamic Pricing from a retail perspective, and why (if so) do you think it's essential? AB: If you think about it, whenever you have more than 1,000 SKUs, you can never do it manually. One thousand you can't even handle per day, let alone your competition changes their prices up to 4 or 6 times each day. In that respect, it is never possible and that means your price is always wrong, period. It doesn’t even have to be that you have complex rules. You could also just say I want to be number three in the market, or I never want to be more expensive than 5% difference to my competitor, or you want to have the average price in the market. That is also fine, at least you set a rule and can implement it. But manually, that's not doable. Or if you for example only get the competitor data rather than look for yourself on every single website ten times a day. That already really improves the accuracy and saves time spent by valuable category managers, who can make more money by buying correct products. I think that's the key. What I normally see when we do price changes is that it’s almost equal to 50/50 price increases and price decreases. Decreasing a price doesn't have to mean you make less money. A lot of retailers look at it old fashion and buyers are targeted on gross margin. And yeah, your gross margin will drop, but your value of your company is not based on gross margin but the money that you make. There is a saying: “Maybe you prefer to earn 11 times a dime than four times a quarter.” That’s the idea. Omnia Retail: Looking at the market today, most companies are making use of Dynamic Pricing tools, as they can’t compete without it. What do you think still holds some companies back? AB: I agree, you will hardly find any large retailers that don’t have a pricing tool and do their pricing manually. To be honest, I don’t know of any. The ones that might be hesitant are probably retailers with huge stores, with a large store assortment or low-value priced items in stores. This makes it a bit more complex, but there are always ways around it. Omnia Retail: Do you think a lot of companies take the approach to have different prices in stores than they do online? AB: No, generally not. I think a common mistake is when comparing prices in store with online prices people compare them excluding shipping costs, whereas the in-store prices should be compared to online prices including shipping costs. Then it often becomes a different story if a company is asking €2 shipping costs on items below €20 then a pencil for €2 online suddenly becomes €4. I think you should add that if you have a store and then you have a lot more room to increase your prices in stores as well. Omnia Retail: Interesting, you think they should add that to in-store prices? AB: Yes, I do think so, especially in these price ranges. In my experience starting at above €30 to €40, people start comparing prices by going to comparison websites, Google shopping or visiting several different sites to see what it costs. But this also depends on the homogeneity of the product and if you actually want to see the product physically. I saw this a lot in the toy market, when you see a Playmobil box in a store, you see a carton box with an image on it. You can’t open it, you can’t see more than what you see online on an image as well. This is different from shopping for a TV, where you can actually see the screen in real life if you go to the store. I was shocked how quickly the online shoe market changed. Buying shoes online was not at all big in the Netherlands and then Zalando came and it got a huge boost. Suddenly everyone was buying shoes online and just sending them back if they didn’t fit. Omnia Retail: Now, I have to admit, when ordering shoes online I make sure they have a good return policy. AB: Exactly, and you see that the companies are really getting smarter. If you return an item and indicate the wrong size they use this data to determine fit for others. That’s when you’ll see fit recommendations based on other shoppers. Where Zalando will for example recommend to go a size up for a certain item. Omnia Retail: You often also see size guides, where based on a few answered questions they will give you size advice. For example, if you know that a Puma shoe fits you in a 40 then they might indicate that a Nike shoe should be ordered in size 41. AB: And that really helps the companies, because free online returns most of them can’t afford. At fonQ if customers returned items complaining that a certain piece of furniture was a different colour in real life than it was online, we made sure to note these types of feedback and change the pictures accordingly. This will make the experience better for the customers, who are happy with what they bought and the companies save money on not receiving returns. Omnia Retail: How do you foresee the future of dynamic pricing and why is automation important in this process? AB: I think in the future more and more variables will be added. I think more and more focus will be on sales data, trends, promotions, calculating what the effect of a promotion will be and capturing the history of a product. There is definitely a future for artificial intelligence, and I mean not so much for the products that you can recognise on an EAN because it’s comparable. But more for products that are new and where there is no competition and then you can use AI to see if that product is comparable to anything we’ve seen before. Does it belong to a product group or a category in order to set a price? You also see a trend for more and more white label products at retailers because they want to be less comparable, but then how do you set the price and compare your product? Because it’s a different brand and a different product but it’s often really comparable to another branded one. So you need to compare based on attributes and features opposed to EAN and product name. This is something that is becoming a lot more relevant lately. This is a far more complex way of matching products. The technology will need to evolve in order to cover these kinds of aspects. Omnia Retail: Interesting, staying on the topic of change, which vertical within the retail industry would you say has changed most over the past years? AB: I think a big trend we saw was brands starting their own webshops because they were hit by the covid-related lockdowns and backlogs. If you look at the furniture business for instance, furniture is still a business where the majority, around 80%, of purchases are still made offline. Whereas in most other industries this is the other way around, for instance compared to consumer electronics. The furniture business was really hit hard because people were sitting at home and wanted to invest in a new interior, but if you can’t go look at a new couch, most people won’t just purchase it online. For a lot of brands it was really noticeable that if the retailers don’t sell their products anymore they don’t sell anything. In response to that a lot of manufacturers and brands started their own D2C channels in order to be in control. Another trend that we’re seeing is that more and more luxury brands are moving away from the marketplaces. For example, if there is an A brand and they are selling on any platform like Amazon or Bol.com and the customer searches for “chair”, they will see your designer chair of €3,000 next to a cheap chair of €20. Whereas offline, they would always be selling at an exclusive store. You would not find a designer chair in a LeenBakker store. However, online on marketplaces you can suddenly find these two items next to each other. Hence, a lot of the luxury brands are moving away from the marketplaces. Omnia Retail: But apparently some luxury brands have tested it out and were represented on the market places. AB: Yeah, but that was definitely related to volume, it seems like a great idea at first, it’s an easy channel and you can ship a lot of products easily anywhere. But what does it do to your brand image? Omnia Retail: Since we're already talking about the marketplaces, what is your vision on marketplaces in the future? AB: In general, I think there will be more and more marketplaces. If you look at the Netherlands, five years ago there was only Bol.com. Then I started with Blokker and Intertoys with the second marketplace in the Netherlands. And look at how many marketplaces there are already now. It’s really a trend that more and more retailers see a marketplace has a place in their category vision. Because if you believe in having the best assortment in your vertical you can’t afford to have everything and can’t manage it. So, a marketplace just makes most sense. Omnia Retail: Sounds like even more of a reason to have a Dynamic Pricing tool if you need a different pricing strategy for the marketplaces than for other channels. AB: Definitely. That’s why we see customers with several portals, so they can follow up on their marketplace offering and on their own channel. Omnia Retail: This was very insightful, thank you so much. Rounding off, I would like to know what you like to do for fun, what excites you outside of work? AB: BBQing is a passion of mine. And I really love to go out for dinner with friends and family. I love sports a lot, so I'm playing hockey three times a week and right now I'm training five days a week every morning. Plus I really enjoy a round of golf. Omnia Retail: Thank you so much for this interview, Antoine. It was really interesting speaking with you and getting your expert opinion. That concludes our interview with Antoine, who has given us and our followers plenty to chew on regarding pricing and strategy. Omnia Retail will be chatting to other experts in the field in the future, so keep posted to our LinkedIn page.

We sat down and spent some time with one of Europe's greatest minds in e-commerce and digital marketing. Antoine Brouwer, he shared his thoughts with Omnia Retail on e-commerce in 2022, his forecast, thoughts on trends...

We sat down and spent some time with one of Europe's greatest minds in e-commerce and digital marketing. Antoine Brouwer, he shared his thoughts with Omnia Retail on e-commerce in 2022, his forecast, thoughts on trends and challenges in retail and the importance of pricing. Omnia Retail: Thank you for joining us for this prelude into the world of e-commerce and retail. We would like to kick off with an introduction of yourself. AB: I’m Antoine Brouwer, 49-years old and I live in Amersfoort. I studied International Business in Den Hague and Advertising and Marketing in Pforzheim, Germany. I started my career at Ben in the Netherlands. I was one of the first 40 people that joined the company and started there with wholesale marketing. The company was bought by Deutsche Telekom and became T-Mobile. In 2003-2004, we needed to integrate a webshop and that became my first experience with e-commerce, in telecommunications. I built this up for T-Mobile in the Netherlands and then I was asked to move to Germany to the headquarters in Bonn. I lived in Germany for two years and set up the entire digital marketing strategy for T-Mobile, T-Home and T-Online Germany. After two years, I moved back to the Netherlands and then I became director of e-commerce for UPC; currently Ziggo. I started there on my own and built an e-commerce department for about 3-4 years. After ten years, I wanted to do something else, I moved to retail and I went to work for MediaMarkt and became responsible there for marketing and e-commerce. Omnia Retail: What triggered your move to the retail industry? AB: I had already done everything in telecommunications and in my field of marketing and e-commerce. I thought, okay, what are the other interesting segments that are big in e-commerce? Retail and specifically MediaMarkt were a great opportunity for e-commerce. I developed the whole marketing department and e-commerce side there and this was my first touch-point with Dynamic Pricing in 2011. I then went on to work for Blokker holdings (a large non-food retail chain in NL), back then they had 11 retail chains and around 125 people managing e-commerce for the whole group. We grew revenue in four years’ from €30 million to €300 million, which was a huge success. There were so many brands and there was a real need for dynamic pricing. I had built everything myself for MediaMarkt and thought to myself, ‘I don't want to do that again’. So I reached out to Connective Power (today Omnia Retail) and that’s how we became one of the first big multi-portal customers, with brands like Bart Smit, Intertoys, Blokker, LeenBakker, and Xenos. After I left Blokker, I was then asked to become CEO of fonQ. We had fonQ NL, BE and DE and I was there for two years, which was an even wider role. Then, I decided it was again time for something else. So in May 2020 I left the company in the midst of covid-19, and moved to Greece for a year. I became the executive director of two main plays in Greece, Public and MediaMarkt and again, set up the marketplace, e-commerce strategy, and team organisation, the proverbial life of a consultant. Omnia Retail: It’s clear that you know the need for Dynamic Pricing well. Related to all your experience in the retail industry, what is your view on this field is for the future? AB: I see a number of shifts. On the one hand, you really see the platform economy growing, so you really see the Amazons of Europe, on a global level, becoming bigger and bigger. In the Netherlands you see it with Bol.com and on the other side, there are a lot of verticals that are coming back. An example here is Coolblue, in the past they had like 100 different URLs I think, and then they merged it all into Coolblue. But they started with all kinds of specialist verticals which was mainly because of SEO. Now you see a lot of specialists coming in, which have a broad and in-depth assortment of a specific category, and they have the best content, the best pictures, the best advice in order to really specialise in one thing. The other thing that you see is that e-commerce is becoming more cross-border. In the last year, 14.9% of all e-commerce in the Netherlands was already coming from other European countries; an interesting prospect because you have omni-channel players competing with each other in different markets where they're not in the same offline market, but they are competing online over country borders. Hence I believe it's becoming more and more important, especially also due to covid that e-commerce grows in terms of data quality. Meaning, getting the best prices right but also creating the best content in terms of pictures,specifications, and attributes. It has become more and more important that all these things are correct because the more competition you have, the more you can't compete on price alone anymore. Omnia Retail: Do you think this is heavily impacted by the situation we were in over the past two years with the COVID 19 pandemic? AB: I saw a report over the whole of Europe that you actually see a lot more growth. Especially if you look at the Netherlands, there was hardly any growth in e-commerce revenue in 2020 with only 4%. However, if you take out online purchases within travel, e-commerce revenue was up 30%. I think it made a big step forward, but the bigger question is now, how will this remain? Do you really attract new customers who have never bought online before? In an evolved country like the Netherlands, U.K. or Germany, especially not that many people have never been online before and there might have been a small bit of an uplift, the key here is what are all these e-commerce companies going to do with the data they were able to collect across the ‘new’ customer base that they attracted. Can they continue to target them? I don't believe there will be a big shift from offline to online, with people suddenly not going to stores anymore.There will definitely be an increase in the future split between online adn traditional stores, but nothing as big as we’ve seen over the past two years. The growth will not be linear. Omnia Retail: You described some changes in e-commerce that we saw over the last two years. Do you foresee any challenges with these changes? AB: That depends whether you are an omni-channel, pure player or offline entity. If you're mostly offline, and there are many companies that hardly have any online presence at all. Then the bigger the shift to e-commerce the more difficult it gets. But overall, competition online has gotten tougher over the last year and that will have its effect that people compete more on price. Omnia Retail: So the largest overall challenge for retailers that you see, is the large competition in the market? AB: Yeah, it's the competition. In 2021, you really saw the difficulty in that there was a limit in the supply chain. Couriers couldn't handle the volumes anymore, suddenly having to scale up for almost a year without any planning or warning. It really has shown that there's a limit to the volume that can be handled in terms of infrastructure, transportation options and the volume of deliveries that can be delivered to people’s homes, so scaling up overnight is not an easy or viable solution. One that also has an effect on sustainability, something I see myself that I have way more boxes at home than I used to before, because everything is delivered in a carton box. Omnia Retail: That is something I noticed as well. Would you yourself say that your behaviour has changed a lot when it comes to online shopping, compared to pre-pandemic? AB: Not for me, as I’ve always been in e-commerce, hence I like to buy online, also due to my curiosity, to see what other check-out processes look like, for example. Omnia Retail: Of course, there is also a difference for people living in cities, compared to rural areas. AB: Yes, indeed. When I was living in Athens, for instance in 2021, the couriers there couldn't handle our packages anymore. So we decided to hire taxi drivers. We had around 500 taxis driving around delivering our packages to customers. We built software and we gave it to the drivers, which they could use on their phones, and then we agreed on rates for the delivery service. Omnia Retail: That sounds like a smart solution, win-win for everyone. AB: The drivers were happy to earn money, we were happy our packages were delivered and the customers were happy to receive them on time. In part two (here) we continue our conversation with one of Europe’s top e-commerce and digital marketing minds, Antoine Brouwer.