Section 3
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5
Roadmap for Online Grocery Pricing Strategy
The roadmap presented here is simply a guide for grocers looking to navigate the complex landscape of eGrocery pricing. It builds upon the challenges identified in the previous section and emphasizes the importance of organization-wide input and buy-in, acknowledging that each grocer’s circumstances are unique and will require a tailored approach. The roadmap underscores the essence of strategic planning – making informed choices that align with the company’s objectives and strategies.
Roadmap – Grocers should get input and buy-in across the organization as they chart a course to pursue based on their unique circumstances.
How retailers implement should vary depending on a range of factors and considerations that will likely lead grocers to make different choices. That is what strategy is essentially about – making choices that make sense given a company’s objectives and strategies.
Stage 1: Establish Baseline
The first stage is about understanding the current situation and setting a foundation for the subsequent stages. It involves:
- Quantifying direct labor costs: Understand the cost of labor involved in the eGrocery process.
- Considering other relevant costs: This could include the retail value of special deals used to drive trial, service fee waived on first x orders, credit for product returns, indirect labor associated with supervisors, etc.
- Capturing current and forecasted sales levels: Understand the current sales performance and predict future sales trends.
- Determining the role and impact of retail media monies: Understand how retail media investments impact the overall business.
Stage 2: Model Enhancements
The second stage is about refining the pricing model to optimize costs and efficiency. It involves:
- Estimating order distribution based on a tiered fee structure: Develop a fee structure that reflects the cost and value of different order types.
- Projecting how the fee structure will lower unit cost to assemble orders: Understand how the new fee structure can improve efficiency and reduce costs.
- Setting the upper band of the fee structure and then the other tiers: Define the fee structure clearly, starting with the maximum fee and then setting the other tiers.
- Establishing a product markup to cover all or part of the remaining cost: Determine how much of the cost needs to be covered by product markups.
Stage 3: Determine Details
The third stage is about ensuring that the strategy is effectively communicated and implemented. It involves:
- Creating messaging for site/app related to changes: Communicate the changes effectively to customers through the site/app.
- Considering how to price protect advertised items: Develop a strategy to ensure that advertised items are priced appropriately.
- Establishing a pricing philosophy between 1P and 3P sites/apps: Define a clear pricing strategy that differentiates between 1P (first-party) and 3P (third-party) platforms.
It’s important to note that the journey doesn’t end at Stage 3. Grocers should consider Stage 4 as “Implement Plan,” where the strategies and actions are put into action. Following implementation, Stage 5, “Assess Impact,” becomes crucial. This stage involves a thorough review of the implemented plan by comparing actual results to expected outcomes 3 to 6 months after completing implementation. This iterative approach ensures continuous improvement and adaptation to changing circumstances, allowing grocers to stay competitive and profitable in the dynamic market.
