Prices are changed constantly online. It will be a while before that happens in stores.
Shoppers may be facing galloping inflation, but if it weren’t for the nationwide labor shortage making it difficult for stores to find workers to mark prices higher, it might be even worse.
“On the web, you can change prices all day long. The challenge for stores is labor,” said Prashant Agrawal, CEO of Impact Analytics, which uses artificial intelligence to help retailers optimize prices and promotions. “If it’s a challenge just to get cashiers and keep the registers open, doing this other stuff is tough.”
Brick-and-mortar stores have a long way to go until they’re changing prices with the ease of Amazon and many other online sites, where prices are often toggled up or down automatically throughout the day in response to competitors and real-time supply and demand.
That’s largely because it’s still a manual process in stores, especially for chains that have thousands of products across thousands of stores. Retailers, restaurants and other companies are still trying to hire 11.4 million people, even with 6 million unemployed workers, according to the latest government data.
Workers have also become more expensive, with industry leaders like Target, Walmart and Amazon raising hourly wages to compete for workers. That makes their time more valuable and could cost stores more than they can make up in higher prices.
One pricing-software company, Revionics, said it’s helping retailers facing a labor shortage prioritize which price changes are most important. For instance, if a retailer only has enough staff to change 150 prices in its stores every week, rather than 200, it will rank them in order of importance. At the bottom of the list might be promotions that aren’t doing a lot to boost sales or profits.
“We can help retailers understand where they’re wasting effort,” said Matthew Pavich, Revionics’ senior director of retail innovation.
Retailers also face other constraints keeping them from raising prices faster or more frequently. For instance, Lands’ End publishes a print catalogue with prices. Even when it begins costing more to make a down parka or a pair of rubber boots, the company will wait until at least the next season to raise prices. “We never change prices mid-season,” said Sarah Rasmusen, chief customer officer at Lands’ End.
Changing prices too frequently can also be confusing to customers. While it’s considered normal for airline tickets or gasoline prices to change day by day, customers still expect prices on groceries and other items to be more stable.
When Walmart institutes a rollback on an item, it typically likes to hold that price for 90 days as part of its promise to offer “everyday low prices.” “You want to maintain some consistency,” said Chad Yoes, former VP of pricing for Walmart US.
Northern Tool & Equipment has been changing prices twice as often as it used to because of aggressive cost increases from its suppliers. That also happens to be twice as often as it would like, said Jeff Land, vice president of merchandising for the home improvement retailer. It takes about three to five days for price changes to be implemented across its 125 stores. “It’s still a very manual thing,” Land said.
More retailers are starting to test electronic shelf labels, which are already common in Europe and make it possible to update prices in seconds. Pittsburgh-based grocery chain Giant Eagle has three pilots underway for electronic price tags.
While the upfront cost for those electronic tags hasn’t made sense for many retailers in the past since they weren’t changing prices nearly as often, the calculus has changed. “I think you see it now becoming a little bit more mainstream,” said Ed Johnson, consulting lead for customer strategy in retail and consumer products at Deloitte.