The Price is Right

Doubling your store count is the type of growth most retailers seek. So 38-unit, Louisiana-based grocery retailer Rouses didn’t complain back in 2007 when it upped its store count in Louisiana and Mississippi from 15 to 32 by purchasing the regional Sav-A-Center chain from A&P. However, for a family-owned business that had previously grown organically, this sudden spurt in its number and distribution of stores created a few issues.

“Our homegrown price optimization system was not sophisticated,” said Allison Rouse, managing member of Rouses, Thibodaux, La. “We were going into new areas with a larger amount of stores, higher sales volume and new competitors. It was more than our system would handle.”

Flexible Approach: Rouses began investigating different types of price optimization solutions that could handle its suddenly increased requirements. In 2008, the grocer selected the cloud-based, hosted price optimization system from Revionics to aid center store pricing. The solution’s flexibility as a SaaS-based application was a key draw.

“We didn’t purchase a package, but a subscription service,” Rouse said. “It was pricey, but the biggest value to us was there was no installation. The solution being cloud-based helped us integrate it with our internal systems. We like to do our own pricing and take control of different aspects of the system to make sure it does what we want it to do.”

Implementation of the hosted service was fairly straightforward, but there was a lot of preparatory work involved.

“There was intense data integrity work before implementation,” Rouse recalled. “We had to create a data import/export infrastructure in our IT system, upload item cost and movement information and apply suggested changes to our host platform for signage and tags.”

Optimal Experience: While there were no dramatic changes in any individual prices, Rouse said the retailer went from optimizing prices for 200 to 300 SKUs to optimizing prices for 16,000 SKUs across five big competitors.

“We roll out pricing changes every six weeks and have a lot more good data,” she said. “There were categories we were not looking at as much as we should have, like slow movers and seasonal items, that the system helped us get a handle on.”

Since initially subscribing to the Revionics price optimization service, Rouses has expanded its use beyond center store to departments such as perishables and more fully integrated the solution into its back end operations and management structure.

“We have integrated cost files, price files, tagging and signage solutions, and promotional systems on the back end and given them item cost and movement information,” said Rouse.

“The pricing manager reviews recommendations and makes the final call.”

Rouse added that Revionics’ recommendations are always good but sometimes not applicable to a specific area or product. As proof of the overall quality of the solution’s recommendations, she offered that since the grocery chain started using it, the retailer has sustained growth of both sales and gross margin and also heard fewer customer complaints about prices.

“It’s easier than ever for customers to tell you what you’re doing wrong with the Web and social media, but complaints about prices are low, even compared with the level before all the new technology was available,” Rouse said.