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How the grocery pricing wars may impact your business

November 20, 2018

Grocery stores are beginning to seek alternatives to pricing battles, the constant struggle to beat competitors’ prices. Small and large grocers alike are striving to master big data to stay ahead in these grocery wars.

More than any other sector of retail, supermarkets need real-time, even hourly inventory planning. This is where big data and machine learning software can give grocers an edge over ever-growing competitors.

An overview of pricing wars in the grocery sector

As well as having to deal with local competitors, grocery stores in the U.S. also have to deal with gigantic online sellers like Amazon, which announced a $13.7 billion takeover of Whole Foods in June 2017. The added convenience of being able to shop from home would draw even more customers away from grocery stores.

Walmart’s reaction to this takeover was to meet with all its suppliers shortly after to announce that they would need to reduce costs by 15 percent, just so Walmart could continue to fulfill its lowest price guarantee policy.

Following this trend of the giants growing ever-more giant, European supermarkets keep consolidating.

Sainsbury’s bought its competitor Asda from Walmart for roughly $4.1 billion in May of 2018. Earlier in the year, Sainsbury’s accounted for 15.9 percent of the U.K. grocery market, and Asda accounted for 15.5 percent. Combined, these two grocery titans beat out Tesco’s 27.6 percent share of the U.K. grocery market. Sainsbury’s CEO Mike Coupe has also shared plans to lower the prices of everyday items by 10 percent.

Disadvantages of an everyday low pricing strategy

Shoppers today are smarter than ever before. Thanks to the internet, they have all the information they need at their fingertips to research and find the most accessible, convenient and affordable grocery store.

Knowing how likely customers are to go online to hunt for lower prices, many retailers begin a vicious cycle of cutting costs to beat their competition.

A major downside to this downward spiral of cutting prices is that businesses end up training customers to always expect sales and lowered prices. Price perception is critical to drawing in and maintaining loyal customers. If a business lowers prices too much, it risks lowering the perception of quality of the products it sells.

Grocery stores can offer benefits less quantifiable than low prices, but just as vital to keeping customers happy. When a grocery store falls prey to the pricing wars, they often have to cut costs elsewhere to maintain profit margins. Forced to operate on a lower budget, a grocery store won’t be able to hire the on-the-ground staff necessary to maintain a high level of fulfillment and customer service.

The consumer may be the sole victor of the price war in the grocery sector, reaping the benefits of deflated prices on everyday items.

Among competing grocery stores, though, there are no real winners in the price war. Even the strongest competitors suffer in the long-term from reduced profitability margins, job losses and overworked employees. The key to staying afloat in the price wars is to stop fighting altogether. Rather than focusing on competitors and blindly matching or beating all prices, grocers should stay ahead by using smart software to hone in on customer needs and follow industry trends.

Evo software gives retailers a competitive edge in the pricing wars

Efficiency is the key in staying out of the fray of the pricing wars. Evo software can help to determine optimal pricing and stock allocation. Let big data and machine learning do the bulk of the analytical work, so you can make the most of your human capital, allowing in-store staff to focus on making the grocery shopping experience as convenient and enriching as possible for the customer.

When you work smarter, not harder, and let software do the heavy lifting of inventory stock management, your business can focus on more intangible qualities like customer service.

Consumers aren’t just blindly crunching numbers and going where the prices are the absolute lowest. They take into account things that aren’t so easy to quantify, like convenience, store location, type and quality of services offered, as well as the expertise and friendliness of grocery store staff.

Harnessing the power of big data by using smart software — always adapting, always adjusting — allows grocers to price intelligently and focus on fostering an enriching shopping experience that no competitor, no matter how gigantic, can rival.

About the author

Joel Boland is a content expert at Evo.

He studied accounting and journalism in Sacramento, California before moving to New York City to be a freelance writer.

When he isn’t writing about Big Data, machine learning and the retail industry, he enjoys walking dogs in Central Park.

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