Increasing revenue and sales across over 100 price zones

The health&beauty retailer Kosmo used Competera’s platform to optimize pricing

Kosmo is a leading Eastern European retailer with over 100 brick-and-mortar stores across 41 regions. The health&beauty company has been operating since 1994 and has over a million members in its shopping club. In addition to dozens of global brands, the retailer also sells a range of private labels.

Kosmo utilized Competera’s platform to hit five goals during a nine-week market test:

  • To maximize revenue without losing profit margin
  • To gain control over the creation of pricing and promo strategies
  • To cushion the effect of high promo pressure in the industry
  • To stop copying pricing moves of competitors

Challenge

  • Significant promo pressure: over
    60% of discounted items;

  • Vendors call the shots in terms of promos;

  • Competitor-based pricing only;

  • Over 100 price zones with different price elasticity.

Solution

Regular demand-driven recommendations for price and promo decisions

Test group
Toothpaste

Managers used demand-based price and promo recommendations

Control group
Toilet paper

Managers used traditional manual pricing methods

The market
test featured two groups

The two groups (160 products) have similar seasonality, as well as profit and revenue patterns. What is more, these groups are unlikely to be in the same basket (therefore changes in the test category could not have a significant impact on the control category, and vice versa).

Before launching the project, the retailer provided the necessary data to Competera, which included but was not limited to historical data, competitive data, data regarding business goals and restrictions.

Results: Kosmo hit all the set goals

Kosmo has managed to maximize revenue, gain more flexibility in the creation of pricing and promo strategies, has softened the effect of significant promo pressure, and has become less dependant on competitors’ pricing moves.

+8.1%

Revenue

1%

Profit margin saving

Despite significant promo pressure

+15.9%

Sales items

+9.8%

Gross profit

Front

Retailers and vendors use promos to stimulate financial performance. However, this leads to cutting prices non-stop. Everything has its limits, though. We are faced with a question of how to satisfy the customer while keeping the prices beneficial for the business. To do so, I believe, we need to shift from price wars to predictive pricing.

quote picture
Georgy Sheiko
Georgy Sheiko
CEO of Kosmo

Challenge

  • Rule-based competitive pricing exclusively

    The company used this pricing approach for some 2,000 KVI products (out of 10,000 items in the portfolio) across over 100 points of sale and different price zones.

  • Bulky and time-consuming pricing

    The in-house ERP and Excel-based pricing systems had technical limitations to store and process pricing data.

  • Extremely competitive and fast-paced market with extremely high promo pressure

    Pricing managers lacked time to process all the necessary data and consider all the pricing and non-pricing factors to set optimal prices with necessary speed.

Solution

Some 2-3 thousand of weekly price recommendations based on short-term algorithmic predictions of demand reaction on price changes within the product portfolio.

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The health&beauty retailer maximized revenue without losing their margins

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