How retailers may wrangle cross-channel pricing in a web world

One factor complicating retail pricing in a web world is price transparency afforded by the Internet. Retailers have zoned pricing for years, offering the same product at different prices at different stores based on what the local market will bear. And what had been a small number of large pricing zones for a retailer with a national store presence has turned into a larger number of smaller zones as retailers get more sophisticated price optimization and markdown tools.

“The objective there is to get as much margin as possible. But when you have the Internet and its one price for the entire country, it becomes difficult to have a standard pricing practice across all channels,” Rob Garf, research director at AMR Research, tells Internet Retailer. “The online channel is conflicting to a certain degree with retailers’ strategies on zoned and regionalized pricing.”

Garf, who is speaking at Internet Retailer Conference & Exhibition, June 4-7 in San Jose, adds the two strategies are butting heads with retailers’ desire to not only allocate specific products to specific areas of the country but also to price them differently on one hand, versus making all products available to everybody over the Internet on the other. In the future, Garf believes, more retailers may resolve the issue of reconciling prices across channels by attaching pricing differences to an individual consumer’s purchase history with the retailer, rather than to the sales channel in which the purchase happens to be made, in a build on current retailer loyalty programs.

The technology to support access to a central database of customer transaction information from any point of sale already exists, he adds. Analytic software that sits on top of the transaction data allows retailers to create business roles on what prices or promotions are applicable to individual customers, no matter where they are shopping.

Recent AMR Research data show that 68% of retailers that have a loyalty program now are looking to revamping them over the next 12 months with moves in that direction. The trend is moving from giving discounts to everybody to providing individualized prices, he adds, forecasting “a real sea change” in retailer pricing and promotions strategies.