OnDemand WTP Pricing Research

The Importance of Pricing for UK Retailers | The Market Mogul

Importantly, offering discounts must be combined with an effective digital marketing strategy – and this is where Debenhams went wrong despite the price cuts. Brick-and-mortar shops have been closing, including those of Marks & Spencer, Toys R Us and Forever 21. Retailers must become more flexible and adapt to consumers who are offered more choice than ever before.

Morrisons, for example, sold more than expected. Morrisons‘ online sales are operated by Ocado – a solely online supermarket – which allows Morrisons to sell more products and deliver to more locations. Morrisons strategically invested in a premium range to customers who are willing to spend more and are more price inelastic, but maintained the exact same prices for everyday goods, despite food inflation.

By sacrificing margin for some goods, and recovering the loss from elsewhere, Morrisons attracts a larger customer base and had its sales rise by 2.8% in the past 10 weeks compared to an estimated 1.7%. This is a similar pricing strategy that Amazon introduced after its acquisition of Whole Foods Market – a failing premium supermarket – which had resulted in 25% more customers in-store one week after the takeover. Amazon is constantly innovating, and has set the benchmark for retailers to match.

In the background to all of this, real wages are falling as inflation rose to 3.1% in November. Food inflation in particular hit 3.6%, and emphasises the risk Morrisons took in maintaining the same prices as 2016 for everyday goods; brussels sprouts and Christmas puddings were both 8% more costly than in 2016.

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The Importance of Pricing for UK Retailers | The Market Mogul.