Retailers feel the pressure to balance profitability and customer satisfaction at all times. As the cost inflation grows, changes in customer spending continue, supply chain volatility lingers, and the pressure of competitive pricing stays; the need for using a disruptive pricing solution becomes more serious for retailers.
The current pricing issues in retail that look common now could take a problematic turn in the future. We studied closely the pricing challenges in retail that our clients have faced. In this blog, we’ll share some of them and discuss their solutions.
10 Pricing Challenges in Retail
As a pricing software company, we looked at the problems our clients faced before our partnership. Some of them were quite obvious, while some were not. Here’s a list of pricing challenges that retailers face. If you encounter at least 4 of them, we recommend you prepare to onboard a powerful pricing software.
1. Managing 20,000+ SKUs Across Multiple Countries and Marketplaces is Tough
Retailers with large product portfolios face complexity in maintaining consistent, competitive, and profitable pricing across a multitude of sales channels and regions. Managing over 20,000 SKUs while ensuring each product’s price aligns with local competition, purchasing power, and operational costs can be overwhelming. For example, a retailer managing smartphone cases across various countries may need to adapt prices on third-party marketplaces like Amazon while simultaneously controlling prices on their website—a task often requiring full-time attention and robust systems.
2. Challenge to Maintain Profitability and Growth
Staying profitable while growing is perhaps the ultimate goal but also a fundamental pricing challenge in retail. Retailers today face a hyper-competitive market, where finding that “pricing sweet spot” is increasingly difficult. This challenge is further complicated by thin margins and the constant pressure to balance competitive pricing with profitability. With an effective retail pricing strategy, businesses can attempt to increase profit margins without losing their customer base.
3. Manual Pricing with Excel Limits a Smart Pricing Strategy
Excel has long been a go-to tool for small and large retailers alike. However, in today’s fast-paced retail environment, relying on spreadsheets limits pricing agility and introduces inefficiencies. Manual adjustments based on static data in Excel make it nearly impossible to react swiftly to competitor price changes or sudden demand shifts. A retailer needing to update prices for various types of smartphone cases, for instance, will find Excel’s limitations stifling when aiming to optimize their pricing strategy for retail businesses effectively.
4. Race to the Bottom: Competing with Repricing Engines and Margin Pressure
The new age of digital retail may lure retailers to price every item low- to attract more customers and keep up with competition. This only puts you in a race to the bottom.
Retailers constantly battle against competitors using automated repricing engines, which drive rapid price changes and erode profit margins. In the struggle to stay competitive, retailers may find their margins compressed as repricing battles escalate. Retailers using outdated manual systems are particularly vulnerable in this scenario, unable to keep up with the fast-paced price wars that automated repricing tools provoke.
5. Balancing Revenue from Platforms and Your Website
For many retailers, a substantial portion of sales comes from third-party platforms like Amazon, which take significant fees, cutting into profits. Striking a balance between optimizing revenue from platforms and their online store is tricky. Each channel has unique cost structures, and keeping profitability high across channels demands a strategic, dynamic pricing approach in retail.
6. Incentivizing Loyalty with Promotions
Promotions can boost traffic and customer loyalty, but if not handled carefully, they can diminish profitability. Retailers may find themselves needing to set clear price boundaries to attract customers without drastically impacting margins. This is especially challenging when handling price-sensitive items or launching targeted promotions to encourage purchases on their webshops.
7. Rising Marketing and Inventory Costs
Retailers face rising costs in marketing and inventory management, which must be factored into any pricing strategy for retail businesses. Balancing price increases to cover these costs without impacting customer demand is challenging. If marketing expenses rise due to a new campaign or increased ad competition, for instance, these need to be integrated into product pricing, which is rarely feasible without dynamic pricing in retail.
8. Pricing with ERP System Leading to Manual Work and Errors
ERP systems are often rigid, particularly when handling nuanced retail pricing strategies that require flexibility and quick adaptation. The reliance on ERP systems often means exporting data to Excel for additional adjustments, leading to time-consuming manual work. This manual process risks errors and inaccuracies that can harm the company’s reputation and profitability when trying to execute a consistent retail pricing strategy.
9. Inability to Implement Smart Segmented Pricing for Specific Brands or Product Groups
Retailers with diverse product groups need differentiated pricing strategies to cater to unique consumer segments. Unfortunately, traditional pricing methods limit retailers from creating distinct pricing strategies for specific brands or groups. This missed opportunity for smart, segmented pricing hampers the ability to increase margins on high-value products or brands where price sensitivity is lower.
10. Multi-Country Legal Pricing Requirements
When operating across borders, retailers face a maze of legal requirements to protect consumers. Pricing compliance in each country is necessary but challenging to manage, especially when adhering to regional tax laws, discounts, or advertising guidelines. Failure to comply can lead to costly fines, making it essential for retailers to implement a legally compliant retail pricing strategy that adapts to local laws.
How to Overcome Pricing Challenges in Retail?
Addressing these challenges can seem overwhelming. The amount of market complexity present calls for an AI-powered dynamic pricing tool for retailers. It’s tailored to overcome these complex pricing issues. By using algorithmic pricing solutions, retailers can automate and optimize their retail pricing strategy, enhancing profitability and efficiency. Here’s how retailers can focus on overcoming the above challenges and using an AI pricing tool to augment the results quicker with more accuracy:
- Dynamic and Segmented Pricing
A dynamic, segmented pricing approach helps retailers optimize for multiple goals, like margin, price perception, and market share while addressing different customer journeys (e.g., impulse buys and researched purchases). This strategy should focus on the categories most important to the retailer’s objectives.
One of the powerful strategies includes product bundling pricing that helps increase sales and customer satisfaction. It provides more value at a strategically- discounted price which is a win-win for both parties.
Watch our full webinar: The Underestimated Role of Product Segmentation for Price Optimisation
- Refine and manage KVC and KVI lists dynamically
Retailers should continuously update their Key Value Categories (KVCs) and Key Value Items (KVIs) based on real-time data and changing market conditions. This involves leveraging new data sources, such as online reviews, search behaviour, social media trends, and advanced analytics tools. By doing so, pricing decisions will be informed by the latest consumer insights and market shifts.
- Implement dynamic price collection and optimization tools
In today’s digital retail landscape, pricing must be adaptable. Retailers need systems that can automatically track competitor prices and adjust their own in real-time. Dynamic pricing systems ensure they can quickly respond to fluctuations in demand, competitor pricing, and market conditions, maintaining an optimal pricing strategy at all times.
This accelerates your pricing affairs with AI precision. It helps both B2B and B2C businesses take control of pricing.
- Expand the competitive set and refine pricing strategies
Retailers should broaden their view of competition by considering a wider range of industry players, not just direct competitors. This includes defining more advanced pricing rules for regional price differences, seasonal shifts, and promotional activities. Continuously refining these pricing rules will help retailers stay responsive to market dynamics and maintain a competitive advantage.
- Advanced SKU Management
Manage large SKU assortments using the power of AI pricing tools by setting optimized, competitive prices that consider each market and channel’s unique cost structures. Retailers can set different price rules for various SKUs, ensuring consistency and profitability across multiple countries.
Read More: How AI is Transforming Profitability for Retail and E-Commerce Brands
How Symson Helped Team Outdoors' Pricing Process
SYMSON transformed Team Outdoors' pricing strategy with significant improvements:
- 96% Reduction in Manual Work
SYMSON automated repetitive pricing tasks, freeing up valuable time for strategic decision-making.
- Profitability Amid Price Wars
Using SYMSON's intelligent repricing system, Team Outdoors avoided a race to the bottom. By dynamically adjusting prices and leveraging competitor insights, they stayed competitive while protecting their margins.
- Real-Time Market Insights
SYMSON's competitor pricing tool gave Team Outdoors a clear view of market trends and competitor prices. This enabled them to strategically position their products and make smarter, data-driven pricing decisions.
How Symson Helped the Personal Care Brand, DA with Precision Pricing
SYMSON enhanced DA's pricing strategy with impactful improvements:
- 95% Accurate Competitor Pricing Data
SYMSON's precision pricing tool delivered over 95% accuracy in daily competitor price monitoring, ensuring DA always had reliable, up-to-date information for informed pricing decisions.
- Comprehensive Market Coverage
With SYMSON, DA gained full visibility of relevant competitors, capturing crucial data and eliminating gaps in market awareness.
- Aligned with Brand Values
SYMSON's solution supported DA's Fresh, Healthy, and Beautiful brand by optimizing pricing strategies that reflected their core values while maintaining competitiveness and market alignment.
AI-powered pricing strategies are transforming retail by automating complex processes, predicting profitable price points, and ensuring compliance, all while maintaining competitiveness. Adopting AI intelligence for retail pricing enables businesses to break free from traditional constraints and excel in a competitive market. In a world where staying ahead in pricing challenges in retail determines profitability, dynamic AI pricing becomes the strategic edge retailers need.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!
