OS: Hello, and welcome to the #Pricing_Heroes podcast by Competera. This is a series of interviews with the best and class retail pricing experts driving their companies' bottom metrics and the retail industry as a whole. Today's guest is James Tenser, Retail Tech Marketing Strategist, the President of VSN Media, and a Top 100 Retail Influencer for 2023 by Rethink Retail.
JT: I'm very glad to be here. Thank you for having me.
OS: Great. So first things first, and I'm here with my first question, which concerns rising eggs prices. Of course, the increasing price of eggs is on everybody's mind here in the U.S. this month. So how are FMCG retailers responding? Can they preserve a positive price image while still finding sufficient margins across the entire assortment?
JT: Egg prices have increased significantly due to factors such as avian flu, higher production costs, and energy costs. Retailers have tried to maintain prices while adjusting markups and seeking alternative sources, but the reality is that there are fewer eggs on the shelves and at a higher cost. Retailers have had to communicate with their shoppers about the price increase, and some may have sacrificed margins to maintain the bigger picture, including the linkages and interaction effects of selling eggs. Retailers have to think strategically about what price changes mean for the whole shopper and the basket and avoid increasing prices on shoppers as much as possible to avoid impacting baskets and trips and possibly their image on the way shoppers perceive them.
I think that prices may not go back down to what they were a year ago, as shoppers have gotten used to a different ceiling on price, and general food inflation is also a contributor.
OS: How do you imagine the future of pricing? As AI (thanks to ChatGPT) has had its second limelight over the last decade, retailers are even more determined to employ it through the first-hand customer experience: we already see digital fitting rooms, digital clothing, and stores in Metaverse. This year NRF experts widely discussed the implementation of AI/ML to the margin drivers (and savers) like pricing and inventory management. Do you think this trend will stay with us, or will some companies never outsource such things?
JT: The use of artificial intelligence (AI) in pricing decisions is a promising trend that can make routine decisions easier for human workers. AI can be trained to make a large percentage of routine decisions while freeing human beings for the decisions that require judgment and experience. It is important to train AI with the same sets of considerations that human beings use. AI decision tools can help make many of those routine decisions better and improve the quality of the job. However, human workers should not be replaced by AI as they are needed to train and monitor AI. Retail pricing decisions are complex and are bound by rules and algorithms. Changing one price may impact how other products sell, making it overwhelming for human workers to make decisions. AI can help automate pricing and make it more efficient, but human workers are still necessary to ensure that the AI is trained properly and monitored. The adoption curve of AI in pricing decisions will resemble that of price optimization, which was once regarded with skepticism but is now widely used in retail.
OS: There is an important linkage between price optimization and inventory accuracy. This is a bit more technical, but in the wake of recent supply chain challenges, on-shelf availability has been under duress. What limitations does this place on our pricing decision processes? How does superior inventory accuracy enable better pricing decisions?
JT: As someone who has worked with both price optimization and inventory management, I see them as inseparable. Poor on-shelf availability can distort demand signals and make it difficult to determine pricing. On the other hand, superior inventory accuracy can enable better pricing decisions because it reflects actual demand rather than distorted demand caused by poor availability. It also enables more accurate measurement of demand impact and better category decisions. These disciplines need to be locked down, viewed as an ecosystem, and prepared to work together to make better choices and be more resilient when external forces intervene. Retailers should not focus on just one area but manage their business as a whole.
OS: And more broadly, there is much industry activity around "personalized pricing" - deals offered within the context of a loyalty program or digital shopping encounter. This is a form of stealth pricing that can be difficult for competitors to track. What advantages does this practice bring? What guardrails need to be in place?
JT: Personalized pricing is a powerful tool for retailers to build trust and loyalty with their customers. By tailoring prices to individual shoppers based on past behavior, preferences, and traits, retailers can create a more meaningful relationship with customers and drive sales and profits. Personalized pricing is often used in the context of a loyalty program or digital shopping experience, where shoppers can see deals and promotions that are specifically targeted to them. This approach allows retailers to identify shopper behaviors that they want to encourage and develop, while also guarding against practices that erode trust, such as frequent price changes and overly aggressive deals. However, guardrails need to be in place to ensure that personalized pricing is used ethically and transparently, and that it does not discriminate against certain groups of shoppers or lead to anti-competitive behavior.
OS: And my last question here: what literature, media, and podcasts about pricing and retail do you recommend to anyone interested in the latest retail and pricing trends?
JT: For literature, media, and podcasts about pricing and retail, I recommend RetailWire.com and the Rethink Retail platform. RetailWire.com is a discussion website with a Brain Trust of over 70 unpaid commentators who offer their perspectives on a curated set of articles each morning. Rethink Retail focuses on podcasts, video interviews, and trade show coverage and has a strong focus on personal interviews and trade show coverage. Other publishers covering the retail industry include RIS news, and the Retail Dive group. It's important to stay informed about the retail industry, as it's a complex and vast industry that affects the entire planet. Being informed will help you make better business decisions.
OS: I guess I'm out of questions here, so I really want to thank you for being my guest today and joining us and giving all of those insights. So thank you once again.
JT:You're quite welcome. This is a privilege for me, and I'm grateful to you for making it possible.
As you can tell, I really enjoy sharing insights on these subjects.
It's my favorite thing. So thank you very much. Been quite a pleasure.
OS: Thank you, James.