New revenue management systems already paying off for retailers, AMR says
A new crop of web-based retail revenue management technology is already improving profit margins for merchants, says Greg Girard, vice president, retail strategies, AMR Research Inc. "It has the opportunity to change the basis of competition," Girard told attendees today at AMR`s Retail & Consumer Goods conference in Chicago.
Girard said several revenue management pilot projects, including some that recently ended, are leading to improvements in overall revenue, gross and net profits, and inventory turnaround. He said that a price optimization system in one pilot program for a mid-size retailer with revenue under $10 billion resulted in a 3.5% increase in gross profits, while a price optimization pilot program at a small retailer with revenue under $1 billion resulted in a 9.7% increase in revenue, a 16% increase in gross profits, and a 6.2% increase in number of units sold.
Retail revenue management encompasses optimization technology, typically hosted on web servers, that applies mathematical algorithms to sales, pricing and inventory data to produce recommendations on what merchandise to sell and at what price in order to produce the highest margins within a scheduled selling period.
Although Girard said he was not at liberty to mention the retailers behind particular revenue management projects, he noted that retailers in the lead with using revenue management systems include J.C. Penney Co. Inc., Radio Shack Corp., The Home Depot Inc. and Payless ShoeSource Inc.
Girard added that web-based pricing optimization systems from a vendor like ProfitLogic are helping retailers plan their merchandising and pricing strategies based more directly on customer demand. "ProfitLogic could revolutionize seasonal planning," he said, "making it more bottom-up and less top-down."
Back...
