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Weathering the Storm: Retailers with Science-Based Pricing are Primed for Success

By Cheryl Sullivan, President, DemandTec

While grocery retailers see surging demand (up almost 30% last month over March 2019)[i], all their fundamentals are and will remain in flux: basket mix, price sensitivities, omnichannel trends, fulfillment preferences, and unprecedented volatility.

In an increasingly unpredictable world, those with science-based pricing are best positioned to predict demand, get early insights into demand signal changes, and normalize historical data to better optimize supply chain management and ultimately build shopper loyalty and drive business results.

Let’s take a look at how retailers with science-based pricing fared better on each front:

1.      The pandemic brought about a profound and rapid shift in omnichannel, including significant shifts toward BOPIS and online shopping with home delivery.[ii] Even those who continued shopping within their primary channel, whether in-store or on-line, had radically different shopper experiences in each channel. Science-driven grocers were able to respond with more agility and more proactively to these changes.

2.      With profound economic uncertainty, shoppers are more price-sensitive than ever and will remain that way for the foreseeable future. Declining shopper loyalty also means that shoppers are hyper-sensitive to any perception of retailers not offering fair, reasonable prices. Today more than ever shopper trust is fundamental, yet precarious. Retailers with price optimization are better able to know exactly where shopper sensitivities lie at any given moment and present shoppers with fair prices that will re-earn their loyalty, during the pandemic and beyond.

3.      As shoppers prepare meals at home rather than eating out, and stock up on supplies necessitated by all family members being at home who formerly would have been at schools, offices or daycares, not to mention products for cleaning and sanitizing, market baskets and demand signals change rapidly and unpredictably.[iii] This wreaks havoc on stocking, forecasting, and supply chain management. Retailers with AI-based science get much more rapid and accurate insights into demand signals, along with highly sophisticated what-if forecast modeling, to navigate these challenges more successfully than retailers still relying on manual, human-reliant processes.

The world is as chaotic for shoppers as for retailers, and they will want to do long-term business with retailers they trust to be providing fair prices in stormy times – and science-based pricing gives retailers a confident path to execute against that. Combine that with the proper forecasting and planning from the supply chain and it’s a recipe for success. Even before COVID-19, industry watchers were asserting that science-based pricing has shifted for good from the nice-to-have to the must-have business reality. In the pandemic and post-pandemic environments, that is more relevant than ever.



[ii] From an article by Jessica Dumont in Grocery Dive at “Shopping apps have seen massive download surges since the novel coronavirus hit: downloads in the U.S. hit 14.4 million during the week of March 29 to April 4, App Annie found, which was a 20% increase from the weekly average in January….Experts say the shift to online grocery could be permanent. Once customers have downloaded an app and learned how to shop online, it will become easier to repeat the process”

[iii] “Sales of household care items were up 63% during the four-week period that ended April 4 compared with the year-ago period, while sales in the meat and frozen food categories each rose almost 60%, according to figures from Nielsen. Dairy products recorded a 40% gain, produce sales jumped 24.2% and seafood notched a 14.2% increase in sales during the period on a year-over-year basis, the market research firm reported.”