Retail is constantly evolving and retailers are always seeking to adapt their pricing strategies to reflect these changes. Retailers are in an interesting predicament when it comes to balancing prices between brick-and-mortar stores and online shops. By understanding pricing techniques in either scenario, it will allow a retailer to compete well in both settings and sculpt their prices.
The Challenges of a Physical Store
Brick-and-mortar stores are embarking on more challenges than ever before. Online shopping has a stronghold on the market; some physical stores are truly struggling to compete. Stores are taking drastic measures and slashing prices of their inventory stock by 10-15% to remove unsold goods. Other brick-and-mortar stores are calling it quits and closing their doors for good. Once their store fronts are closed, they are purely focusing on developing their online presence. Due to the convenience of online shopping, more consumers are opting out of physical stores. Rather, they would prefer to click and browse from the comfort of their own home. The internet can operate 24/7 and people aren’t restricted to normal store hours.
However, brick-and-mortar retail isn’t dead. It just needs a strategic facelift. Shopping in a store still has some very strong benefits. There is a sense of instant gratification that they can provide to customers. In addition, customers don’t have to risk purchases not fitting if they are there to try them on. Brick-and-mortar retailers can continue to exist if they build up their online presence and run campaigns that bring customers into the store. There needs to be added value for customers coming into the brick-and-mortar store.
How to Price Appropriately?
There is a big discussion on what pricing strategy is the right pricing strategy. If your company is losing money to other online retailers, does your online store need to match your competition’s prices online and in-store? In theory, lower prices should put you in a competitive position. However, brick-and-mortar stores have significantly higher overhead costs. They need to pay for rent, staff, cleaning, power bills and the administration costs of operating a business in a physical location.
Taking this into account, prices need to be higher to make in-store purchases a profitable exercise. However, then we stumble into this conundrum. If prices are the same in the store as online than the store won’t remain competitive against other online retailers. This is considered a one-price-fits-all-channels strategy and it is not always a very compatible option.
Although retailers are offering the same product, let’s say a pair of shoes, they are offering two different services. One service is online and the other is a physical store. Online shopping has its advantages, such as a larger inventory stock selection, competitive pricing and often free shipping.
However, a physical store allows customers to try on the shoes. If they are looking for running shoes, they can go for a quick jog around the store. They can compare the feel of different shoes in your store’s inventory stock. They can get assistance and special fittings if desired. Also, if you need these shoes for an event, you may not be able to wait for shipping from the online store. The brick-and-mortar store is offering a different experience and purchase option.Topics: pricing, pricing strategy, retail