Before we dive into the subject, let’s establish what ‘list price’ is just so we are on the same page. In very simple terms, list price or manufacturer’s suggested retail price (MSRP) is the full price for which a business entity is willing to sell its products, without applying any discounts or special offers. While the manufacturing and distribution costs are taken into account for arriving at the list price for consumer goods, it’s the demand vs supply dynamics and level of competition which dictate how much profit margin can be applied.
Retailers often communicate the merit of shopping with them by offering discounts and deals on list prices of thousands of their products. Effectively, possible savings that can be made on those list prices are used for promoting sales. It can be argued that list pricing is a promotional tool that is inbuilt within retail commerce. Those who shop online or subscribe to loyalty programs are routinely inundated with sales promotions in the form of text messages, emails, flyers.
These days, the quantum of promotions is so high that consumers have become immune to them and have started distrusting them. Lately, list prices have become the focal point of scrutiny and criticism. Negative sentiment about them stems from the fact that consumers have no certain way of ascertaining the authenticity of list prices. List prices are, after all, used by sellers as a basis for boasting about super saver deals and bumper sales. And we all know that sellers sell to make a profit. This begets the question: How should consumers trust millions of deals being offered on millions of products available in the retail universe?
In March’16, we sifted through the North American catalog and discovered that 45% items were list priced. This indicates that sellers are being selective about using list pricing for promotional purposes.
Earlier this month, Yahoo and The New York Times ran negative stories that question the validity of list prices. To build its case, Yahoo cited the case of a branded gas grill that was sold for varying prices on multiple sites. Interestingly, all retailers had mentioned different list prices for the char grill in question. Yahoo also highlighted lawsuits being filed against Macy’s, J. C. Penny and Kohl’s for advertising misleading list prices. The New York Times on the other hand made its case against list prices by enlightening the readers about the various list prices of a skillet. While all the retailers identified by NYT including the brand that manufactures the skillet sold it for $200, the list prices of that skillet varied from $250 to $285. Thus bringing the focus on the controversial practice of using list prices to mislead consumers into believing that they are getting a bargain. The NYT article cited cases filed against Amazon and Overstock.com for such misleading practices.
In March’16, we sifted through the North American catalog and discovered that 45% items were list priced.
Old habits die hard and it’s highly probable that we are going to witness more such cases in the near future. At the same time, it should also be noted that on account of being bombarded by discounts and deals, more and more consumers are bound to be sales-fatigued and inclined to dismiss such manipulation of list prices as gimmicks. Savvy shoppers look for the lowest prices anyways. For them, potential savings on account of listed prices are insignificant. They shop till they spot the best price.
While retailers have always faced the dichotomous situation of pricing competitively and maintaining profitability, their future pricing strategies would have to be intelligent and agile. In other words, their prices will have to adjust according to real-time price fluctuation, visibility fluctuation and in-stock situation on competitor sites. iNCompetitor and iNOptimizer are two of our future ready SAAS products that deal with these eventualities with ease.
Rules based automatic price adjustments are at the heart of our pricing intelligence capability. Our products put retailers in complete control of how their prices adjust to real-time market intelligence. Retailers can choose between:
– Always being on par with the competition
– Always being x% cheaper than the competition
– Optimizing prices as per the competitor’s in-stock situation
Basket based pricing is our must’ve feature that by-passes the gimmickry associated with list pricing by rolling out customized offers. Here’s a snapshot of what basket-based pricing does:
– Let’s you choose the discount you are willing to offer across the marketplace or restrict it to a category
– Runs on top of your recommendation engine to inflate the basket size through predefined discounts on recommended products
– Increases profitability by recommending discounted products from brands that offer higher margins
If this sounds like something you would like to get more information on, then get in touch with us.