Almost half of the UK’s stationery retailers have damaged their profit margins due to errors and inaccuracies in product pricing, according to new research.
The findings were published in a report by pricing and automation specialist, Omnia Retail, which questioned 150 retail businesses on the scope and efficacy of their pricing strategies.
The study, Retail Pricing Wars, found that 48 per cent of stationery businesses have jeopardised margins in the past due to pricing decisions significantly missing the mark. Just 39 per cent of businesses said they feel confident that their pricing levels are always accurate.
Almost a fifth (19%) of those surveyed also confessed that the previous implementation of an incorrect pricing strategy has not only led to lost revenues, but negatively impacted their entire business.
Many brands, in a bid to remain competitive ahead of the seasonal sales period, attempt to stand out by simply offering the lowest prices. However, this ruthless competitor undercutting could be costing millions in lost margins.
Almost a fifth (19%) said that competitor price undercutting is a key strategy for their business, with a further 26 per cent of retailers saying that they are usually the first to cut prices ahead of their competitors. However, more than a quarter (26%) said they have had to lose out on margins due to price cutting in the past.
Sander Roose, CEO of Omnia Retail said, “price is a key factor in consumer purchasing decisions. However, many brands have taken this too far; price-cutting to the extreme and becoming embroiled in a damaging ‘race to the bottom.’ This not only damages margins but can have a detrimental effect on reputation, as constant discounting could cheapen a brand or cause consumers to question the quality of product on offer.
“Price cutting was thrown into particularly sharp focus by John Lewis’s recent announcement of a 99% profit slump, which the brand largely blamed on its ambitious ‘never knowingly undersold’ pledge.
“As we head into the busiest shopping period of the year, organisations must find the balance between being undercut by competitors and a strategy whereby constant price-cutting destroys profits.
“Essentially, it’s important to remember that staying ahead of the competition is not just about cutting prices; it’s about pricing intelligently. That’s why investing in agile IT infrastructure - that can gather market insights and automate decision-making on a large scale - can be so effective.”