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CAMBRIDGE, Mass. - Although an increasing number of retailers are adopting price optimization solutions, and these tools are evolving from standalone solutions to those integrated with supply chain offerings, a Forrester study revealed that pricing optimization is still an emerging, fragmented market, with no leader across all pricing functions.
"Although most retailers understand the benefits of a tool that can manage prices throughout the life cycle, we found that these solutions are still purchased as standalone tools to address specific needs," said Noha Tohamy, principal analyst at Forrester Research and author of the report. "For example, an apparel retailer may purchase a markdown optimization component to better manage clearance prices, while a large grocer would be more interested in base pricing. The vendors need to provide a compelling integrated offering to overcome this challenge and prove the benefits of business intelligence across the entire product life cycle."
To assess the latest price optimization solutions throughout the product life cycle, Forrester applied its "Wave" methodology -- which it said provides an unbiased and unsponsored review -- to offerings from five vendors.
The participants included firms that focus on retail (Khimetrics and DemandTec); ERP and legacy merchandizing (Retek); and supply chain planning and execution (i2 Technologies and Manugistics) providers.
Other segment players ProfitLogic, JDA, and SAP declined to participate. Forrester also said it did not get participation from retailers for the study. "Most retailers were hesitant to share direct benefits from their implemented solutions," Forrester said, which made benefits difficult to quantify.
Vendors were rated in each component of the product life cycle across three dimensions -- functionality, strategy, and market presence. All five vendors' offerings varied in each of the categories throughout the product life cycle:
• Initial pricing -- recommends category- and store-level prices to meet corporate objectives. Khimetrics edged out DemandTec in functionality.
• Promotions pricing -- analyzes results from past promotions and their effectiveness and recommends the optimal promotional event throughout different phases of the product's life. Khimetrics was the clear leader.
• Markdown pricing -- determines the best method for clearing inventory at the end of a season or end of life of a product. Here, i2 was ahead of supply chain competitor, Manugistics.
• Overall pricing -- offers overall visibility and recommends optimal pricing along the entire product life cycle. Retek led for the full suite offering.