Matthew Pavich is the senior director of retail innovation at Revionics, an Aptos Company. He specializes in pricing and retail strategy, corporate strategy, and customer focused solutions. Matt has a strong merchant background, including a career at Target, as well as 20-plus years of retail experience, including consulting, buying, pricing, and marketing across a variety of retail verticals, industries, and regions.
As we head into Easter, I decided to round up my thoughts on grocery retailer best practices when it comes to gaining maximum market share this holiday season.
Here are three thoughts around optimal spring pricing and promotion strategies for grocers:
- What’s driving the record demand for Easter spending and other spring holidays: Determining demand for the spring holidays can often pose a bit of a challenge due to shifting dates, shifting holiday proximities and how they interact with other retail events like March Madness and the start of the growing season, etc. Having said that, a few factors indicate that this year should have strong demand. To begin with, despite numerous economic challenges, retail demand has remained high and consumers continue to spend at high levels. On top of high demand, inflation is driving higher revenues on similar sized baskets leading to stronger sales. Around this time last year, consumers were still struggling with a sizable Omicron wave while also contending with much higher fuel costs due to the rapid market impact of the war in Ukraine. Both factors led to less travel, fewer family gatherings and ultimately less spend for spring holidays.
- How grocery retailers can best meet shoppers’ needs during this spring holiday season as it relates to pricing/promo/markdown: Consumers are dealing with inflation and although spending is still strong at a macro-economic level, at the household level, consumers are being very calculated with their budgets. Not only should grocery retailers be focused on offering value, but they should use the opportunity to promote high-quality private label products. On top of this, many retail promotions are ineffective or ‘one size fits all’ which is clearly a mistake during the spring holidays. The savviest grocery retailers are avoiding promo pitfalls by leveraging analytics to understand what customers want and how to optimally promote those items to the right shoppers across channels. As always, markdowns are most effective when consumers are still shopping in those categories, so it is critical to not start marking products down when it is too late for consumers to benefit from those lower prices.
- And here’s how AI tech can help grocery retailers increase market share: AI is essential to understanding consumers and how their preferences evolve over time. Offering the right pricing and promotions to consumers during any holiday requires a robust understanding of those consumers and the right analytics and algorithms to delicately balance meeting the needs of those consumers while maintaining or growing margins. Over the past year, the most sophisticated grocery retailers in the market have leveraged AI pricing solutions to very effectively outgrow the market and gain share while also increasing profits and offering lower prices to consumers (a true win-win). Without AI, retailers are at a fundamental disadvantage vs. their competitors and may offer some good prices and promotions to select consumers, but ultimately will not be able to solve the complexities and dynamic shifts that exist within a market in a way that serves their customers and their bottom-lines.