360pi Highlights 2013 Holiday Season’s Winning and Losing Retail Pricing Strategies

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Webinar by 360pi identifies how retailer pricing strategy and execution were integral to holiday revenues and profits.

Faced with a very competitive landscape, fickle shoppers, and an abbreviated shopping season... retailers were more challenged than ever to have the right price at the right time to convert the almighty shopper.

360pi today announced its findings on the 2013 holiday shopping season following its “Retail’s 2013 Holiday Winners & Losers” webinar. 360pi determined that well-executed dynamic pricing strategies, such as those deployed by Amazon and Overstock, led to higher sales this holiday season as opposed to all-season discounting and other strategies. Starting with Amazon’s own assortment, 360pi tracked pricing of more than 8,000 products in eight categories across 23 retailers and five marketplaces from November 15 to December 2, taking close looks at the weeks leading up to Black Friday and Cyber Monday. 360pi continued to monitor pricing strategies throughout the holiday season for trending categories, including tablets, televisions and video games.

In analyzing reported sales results, 360pi was able to distil which pricing strategies were effective, and which were not. “The good news is that 2013 holiday sales were up 3.5% from last year, according to RIS,” said Alexander Rink, CEO, 360pi. “However this average glosses over who were the retail leaders and laggards this holiday season. Faced with a very competitive landscape, fickle shoppers, and an abbreviated shopping season—which was further complicated by bad weather across large parts of the country—retailers were more challenged than ever to have the right price at the right time to convert the almighty shopper.”

360pi rated retailers’ overall financial performance for the 2013 fourth quarter on a scale from +5 (above expectations/excellent) to -5 (below expectations/very poor) based on third-party financial analysts’ overall assessments. These included factors such as year-over-year sales for the 2013 fourth quarter vs. 2012 fourth quarter, actual earnings vs. expected earnings, and profitability. For retailers that have not announced 2013 fourth quarter results yet, financial analyst predictions were used. A summary is highlighted below.

Winning Pricing Strategies

Dynamic Pricing Retailers
Dynamic pricing is central to Amazon’s strategy throughout the year – the online giant does not necessarily aspire to be the lowest price, but rather the fastest follower of the lowest price. While most retailers change prices daily on 5% to 10% of their assortment, Amazon averages 15-20%. And, Amazon ramped it up even further over the holidays, conservatively making 3 million daily price changes through the month of November, including changing prices on almost a full third of their sampled assortment on Black Friday alone. Overstock’s dynamic pricing prowess was equally as impressive and both Amazon and Overstock delivered the best holiday results with their dynamic pricing execution, earning respective 3 and 2 scores from 360pi. Retailers that attempted to implement dynamic pricing but did so erratically (such as Sears) did not perform as well according to the majority of analysts and that earned Sears a -3 score.

Black Friday Discounting
Retailers who discounted more deeply on Black Friday experienced better financial performance than retailers who maintained steady prices. Amazon (score: 3) and Overstock (score: 2) were heavy discounters on Black Friday and also received high scores from 360pi. Amazon over-discounted far more than any other retailer, which could have negatively impacted its profitability; however, the online giant still fared well overall. Walmart actually raised prices for the sampled assortment on Black Friday, and this could have been a factor in the retailer’s decreased financial performance. Walmart earned a -2.5 score from 360pi.

Post-Cyber Monday Discounting
Retailers who kept discounts in place, such as Overstock (score: 2), Home Depot (score: 1), Rakuten.com (score: 1) and Costco (score: 0) generally performed better than those who did not, such as Office Depot (score: -3), Toys “R” Us (score: -2), Sears (score: -3), and hhgregg (score: -4).

Losing Pricing Strategies

Pre-Black Friday Discounting
Some retailers, such as Target (score: -2), Office Depot (score: -3), Sears (score: -3) and hhgregg (score: -4), began discounting the week before Black Friday, and surprisingly, performed worse than the retailers who did not employ pre-Black Friday discounting.

All-Season Discounters
These retailers embraced promotions and discounts from the outset of the holiday season to its close, likely hoping incremental revenues would offset profitability erosion. hhgregg (score: -4) exhibited “all-season discounting” tactics throughout the season and reported an 11.6% decline in third-quarter holiday sales.

BOGOs (Buy One, Get One)
Toys “R” Us (score: -2) most aggressively deployed BOGO strategies in selected all-important holiday categories, including video games, and also had higher base prices. Although BOGO pricing is a well-established strategy in retail, it is not as market-sensitive as dynamic pricing, and Toys “R” Us’s financial performance results indicate this strategy was not particularly successful.

About 360pi
360pi helps top retailers compete and win in an increasingly price transparent environment. 360pi actively monitors millions of products from hundreds of retailer websites and delivers price intelligence for exact and similar matched products with unprecedented accuracy. 360pi's customer base of "brick & mortar", e-commerce, and multichannel retailers accounts for over $US100 billion in annual retail sales and includes Ace Hardware, Best Buy Canada, and Overstock. 360pi clients gain real-time visibility into the market and full awareness of the competitive pricing landscape to "right price" to consumers. Ultimately, 360pi's customers make smarter pricing decisions that drive increased conversions, revenues, margins and customer loyalty.

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Brittany Gracka
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Caitlin New
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