Around 96,000* UK retailers are putting their business at risk by failing to grasp the importance of an effective pricing strategy. The figure was published in a report by pricing and automation specialist, Omnia Retail, which questioned retail businesses on the scope and efficacy of their pricing processes.
Although almost all (96%) of the organisations surveyed said they have a pricing strategy in place, 30% said they don’t see it as an central part of their business. Amongst this group, 7% of retail organisations said they view their pricing strategy as “unimportant”, with 13% even saying it’s “very unimportant”. This suggests that their model doesn’t work, or that they do not dedicate enough effort to pricing in order to maximise its potential.
Only a quarter (27%) of the total retailers surveyed said they see pricing as a very important part of their business.
Omnia Retail also looked at whether retailers feel their pricing is always accurate. The research found that, despite the fact that the majority of businesses don't believe a pricing strategy is important, almost half (46%) admitted that a poorly-executed approach has damaged business in the past.
This is particularly pertinent given the widespread stock discounting and price slashing seen in the lead-up to Christmas. In an effort to meet consumer demand, many retailers indiscriminately cut their prices, resulting in lost profits and margins. However, certain models, such as dynamic pricing, can increase revenue and margins by helping retailers to price more intelligently.
Sander Roose, CEO of Omnia Retail, said: “Pricing strategies are nothing new; in fact, there are numerous pricing models in today’s market. At its core, every approach aims to meet business objectives; for example, maximising profit or increasing market share.
“However, many retailers don't understand just how vital pricing is to marketing and sales, and too many retailers overlook the power that pricing can have on their margins and profits. Overall, the research suggests a clear disconnect for retailers between simply implementing a pricing strategy and actually using the pricing strategy to it's full potential."
*The UK government estimates that there are 319,000 registered retailer businesses in the UK. Omnia Retail found that 30% of the 150 retailer sample thought their pricing strategy was “neither important or unimportant”, “unimportant” or “very unimportant” – equating to 95,700 in total.