February 10, 2004, 12:00 AM

Duane Reade increases sales 14% using web-based price optimization system

In a pilot of a web-based price optimization system, drug store chain Duane Reade increased unit sales of baby formula by 14% without sacrificing margins, the retailer says.

In a pilot of a web-based price optimization system from DemandTec Inc., drug store chain Duane Reade Inc. increased unit sales of baby formula by 14% without sacrificing margins, Gary Charbonneau, senior vice president of sales and marketing, tells Internet Retailer. He also notes that baby diapers sold at an increase in unit sales of 10%, also without cutting margins. “The forecasting turned out quite accurate,” he says.

Duane Reade tested the DemandTec 3 price optimization software suite in 20 stores, using another 20 stores as control sites for comparison, over four months from December 2002 to April 2003. With the pilot’s success in terms of forecasting accurate prices to sell the most products at the best margins, Duane Reade plans to roll out the system to all 250 stores this year, Charbonneau says. “It worked very well, close to what we had expected,” he says.

Charbonneau notes that the DemandTec system is helping Duane Reade deal with the difficulty of making price changes that will move products at the best margins without upsetting price-sensitive customers who by certain products frequently, such as baby-care items.

Before using the DemandTec system, he adds, it wasn’t possible to come up with effective price strategies for thousands of products in each store. Duane Reade stores carry an average of 18,000-20,000 SKUs, he says.

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