If any of us had a crystal ball, we would most likely be enjoying a relaxing life somewhere, as we would have foreseen the recent changes in our economy and been better prepared to weather the storm. But since most of us are not privileged to that mystical tool, let’s talk about a few things we should all have on our immediate radar and be planning for as we look to the coming months.

1. Stabilization of the economy: Even though home prices are still slumping, and the jobs picture is only seeing slight glimmers of hope on the horizon, it appears that the worst recession in 70 years is behind us. Retailers that have been able to manage inventory and pricing through this turbulent time are well positioned for the future. As the economy begins to gain momentum over the coming months it will be important for retailers to continue focusing on KEY elements of their business that have defined them to their customers. Things like value proposition, loyalty, service, and value-added benefits need to be safeguarded and used as spring boards into the future. The ability to engage in predictive analytics or Future Planning will be paramount as we exit this economy. Being able to create “what if” scenarios in a real-time environment, such as is possible with Revionics Planning will allow retailers to keep ahead of the curve.

2. Shifts in consumer behavior: According to IRI’s recent FMI Economic Trend analysis for 2010 – “Consumers began embracing a range of money-saving strategies as means to survival earlier in the recession. They have quickly become engrained, and all indications are that consumers will continue with these tactics for the foreseeable future.” Consumers have become very value oriented. It is important to remember that value is an equation, not just a price point for the majority of customers.

3. New directions for private label: More consumers across ALL income and age segments are trying private label and recognize the total value of these brands vs. name brands. In the food segment alone, retailers have enormous upside potential in private label initiatives that encourage trial and repeat purchases across food and nonfood categories.

One of the key components to future success is a resetting of their current paradigm to a mentality of leadership rather than that of a follower. This takes a forward-looking approach, using predictive analytics created from and supported by their individual consumer demand indicators. Retailers must continue to evaluate their offerings through the filter of value proposition to their customers. Brand consolidation, based on eliminating confusion within a segment, will allow for better placement of private label offerings for continued penetration and profitability. Product planning, including an understanding of the role and interaction of each product, is critical to achieving maximum success at the enterprise level. Penetration of private label offerings, as well as maximizing the national brand potential, are both tied to this very important effort. Merchandising and advertising tactics that help build the brand in-store will be needed to maximize success in the future.

4. Potential shifts in store cluster dynamics: With virtually all demographic and socioeconomic lines impacted by the economy, what held true for retail store clustering a few years ago might not be true today. Stores that have traditionally catered to an infinite flow of disposable income are today seeing higher redemption of coupons and greater dilution from ad shopping than ever before. Specialty departments are suffering or are being closed in many of these stores. Revionics Consulting group can assist retailers in determining if their current zone structure is relevant with the recent changes. We can assist in determining if current stores are in the correct clusters and if the appropriate number of zones are being used to maximize profitability.

5. A balanced approach to promotions: With the consumer focus on value, and manufacturer’s willingness to invest in promotions rather than cost reduction, we have just gone through one of the most promotionally intensive time frames in recent retail history. While price and promotion have become a bigger differentiator than ever before, a merchant’s ability to control the MIX of prices through optimization and promotional pricing tools will help keep margins on target. The ability to evaluate the effectiveness of promotional offers and their impact on lift, affinity, cannibalization, and contribution to profitability at both the category and enterprise levels is crucial. Strategic pricing, both everyday and promotional, supported by technology continues to be recognized as an enormous opportunity for retailers. An integrated approach to all aspects of the pricing lifecycle, such as is offered by Revionics, will be critical in making the most of the pivotal time ahead.

Even though the immediate future still appears rocky, there does seem to be a brighter future just around the corner. Revionics stands ready to assist retailers in navigating these emerging waters with its full suite of lifecycle pricing tools and consulting resources.

For the past 2 years, retailers’ private brands have been the topic of much discussion. In the failing economic conditions we are experiencing, many consumers look to private brands as a way to stretch their budget. Retailers have reacted by continuing to introduce additional offerings and manage favorable pricing positions that have also been one of very few bright spots in a mostly bleak sales and profit battle field.

In Europe, private brands have long held a significant position in both sales as well as overall percent of assortment. In the US marketplace, private label has been viewed as a lesser quality or subpar brand leading to a very limited penetration for many if not most retailers. But in a recent private label report, IRI has made the following observation:

1. In the shopper survey, consumers told us that purchasing a private label is a brand-driven decision that involves many factors including their own emotional connection to the retailer itself.
2. In looking at shopper attitudes of private label quality, over 78% of both lower-income and higher- income consumers believe that private label products are typically of excellent quality.
3. Four-of-five shoppers are now “sold” on private label quality indicating that product marketing during the current recession is successfully expanding the positive reputation and reach of these products.

‘IRI Private Label report

As private brands continue to grow in acceptance by the consumer as a viable substitute or replacement to the national brand, retailers will need to continue to drive private label to the fore front of their assortment and marketing plans to keep pace. Successful retailers have begun brand building on their private label offerings insuring the customer’s confidence for the banner carries over to the brand.

Now more that ever retailers are in need of insuring that they have a clearly defined strategy regarding  the relationship pricing between the National Brand and private label item. Price optimization becomes a critical component in the execution of this pricing strategy. By capitalizing on the consumer demand signals of an item, the optimum price and profit potential can be realized from this ever growing segment of the assortment.

Private Label items have gained a significant foot hold in today’s retail arena, and will continue to grow in impact and importance well beyond the recovery of this economy.   For more information, watch our webinar, “Good, Better, Best” by clicking here.  Comments are welcome!

Are you brand blocking your private label or doing the compare and save strategy?  With price optimization we tend to encourage a frequent review of base pricing, and in particular, a heavy scrutiny on private label versus national brand price relationships.

How does this impact merchandising decisions?   For example, in the past, best practices dictated that private label should be merchandised immediately to the right of the leading national brand. This is typically done during the category review process on a bi-annual or annual basis.   Some retailers are now recommending that a private label should follow the national brand with the lowest base retail to set a price gap. Does this force the retailer to change his schematic as often as he changes those relationships  or are the old merchandising rules obsolete?

Are the old merchandising rules becoming obsolete?    For example, does it not make better sense to link the private label to multiple national brands?  Items such as private label chocolate chips to both Hershey’s and Nestles’ or private label batteries to Energizer and Duracell are examples of the modification to the rule retailers and merchants need to answer for pricing considerations as well as merchandising strategies.  In this case, the decision needs to be made to select ‘the’ most relevant item to merchandise against.   I think the merchant needs to determine which brand is the most recognizable to that customer base for pricing relationships if you are still using the “to the right” positioning of private label.

Some of the most successful retailers in private label have not merchandised to “the right” for years. They have BUILT their private label into its own BRAND and can have it stand alone in many instances. (Lady Lee – Presidents choice – etc).  Some other giants like Target are still using the compare and save approach.  Which is the best strategy for the future?

I’m interested in receiving your comments.  What do you see with retail in private label pricing relationships and merchandising?  Any feedback as to best practices you are seeing?  Is it an all or nothing strategy?  Are there cutting edge strategies you are seeing or tests you are doing yourself that you can share?