How Retailers Are Using Customer Data to Determine Pricing
Shoppers have an unfathomable number of options at their fingertips.
What are best practice data collection and applications for department stores and fashion retailers (bricks and mortar and online)? originally appeared on Quora, the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on Twitter, Facebook, and Google Plus.
The challenge of pricing has entered a new era -- and every industry should learn from what’s happening in fashion right now.
While competition with Amazon often gets a lot of attention, industry upheaval due to the rise of e-commerce is much broader than that. Retailers need to embrace external market data, in real time, in order to succeed.
Consider this the ultimate cautionary tale for modern retailers, whether they sell pencils, groceries or cars.
It wasn’t all that long ago that shoppers avoided buying fashion online. When you’re picking out clothes, you often want to see how they feel, see how they look on you, and try different options. This relationship between consumers and clothing helped draw shoppers to stores, even as e-commerce grew. People purchased what was available to them locally, within driving distance.
Now, buyers can easily have the best of both worlds. They can go to a store, find the items they want, then leave and buy those items online. This idea, “showrooming,” has been around for years. But new technologies have given it massive new power.
Shoppers have an unfathomable number of options at their fingertips due to the rise of e-commerce, including cross-border shipping. They’re using it -- 82% of consumers do research online -- to inform their purchase decisions. So ultimately, their money goes to whoever gives them the best deal on the best merchandise.
Take, for example, this designer dress. It’s available at different prices from retailers all over the world, and within the United States. (Image credit: ragtrades.ai)
This helps explain why some European fashion e-retailers like ASOS, Net-a-Porter, and Farfetch, as well as traditional bricks and mortar retailers like Selfridges and Harrods who now ship across borders, are stealing U.S. market share from department stores like Neiman Marcus and Saks Fifth Avenue. Many Americans haven’t heard of competitors like Farfetch that don’t have physical stores in the U.S. But when shoppers look for prices online, they discover these international websites. Every day, less market-aware companies lose customers, while more digitally savvy businesses optimize prices and products to be globally competitive.
In a 2018 report from the Business of Fashion and McKinsey & Company, fashion designer Tory Burch noted how big of a change this is for the industry. “It used to be the department stores who were in charge; now the customer is charge because technology has really given the customer access to so much information,” she said. Today’s buyers have high expectations, including with cost, since “they can go on an app and compare pricing, globally, instantaneously.”
Sixty percent of executives surveyed in the report said a priority for their spending this year is in “omnichannel integration, e-commerce, digital marketing,” while only 26% said in-store experiences were a priority.
The same principle applies to just about anything that still brings shoppers to stores. While bricks and mortar will never die, e-commerce data grows every year.
So the best practice is for retailers is to use these same emerging technologies to their advantage. They should implement data solutions that provide them with the information to see prices of the same or similar products they’re selling, and to make decisions every day based on the competitive marketplace. Sellers also need to know why prices are fluctuating worldwide, including factors like global premiums and exchange rates, as well as discounts.
With the right technology in place, retailers will empower themselves to be every bit as smart and well informed as their consumers. They’ll adjust price points to remain competitive.
For today’s retailers, in fashion and beyond, these kinds of data-driven partnerships are a crucial best practice. But they’re also more than that. They’re a survival issue to compete in the digital era.
This question originally appeared on Quora. More questions on Quora:
* Fashion: How do designers set prices for dresses?
* Big Data: What are the top algorithms that every data scientist should have in their toolbox?
* Retail: Why are there so many dead malls across the US?
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