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The success of price optimization software drove the technology's rapid deployment among Tier 1 grocers, and they've been using the solution with strong results for several years. True to the trickle-down theory, over the past 18 months vendors have also addressed independents and small chains by developing scaled-down versions of these applications, suited to smaller budgets.
Most recently, this technology has begun making serious inroads into what is its final frontier: large regional chains, which are deploying the technology to support corporate pricing and promotion strategies among their dozens of stores?and wholesalers, which are adding the solutions to the tech offerings available to their retail accounts.
Wholesalers on board
Wholesaler Nash Finch Co. in January signed on with Sacramento, Calif.-based Revionics, Inc. to provide price and promotion optimization technology and services to its corporate stores, and offer a suite of optional price and promotion optimization services to the independent retailers and military commissaries it serves in 31 states, the District of Columbia, and select international markets.
"We realized that the successful implementation of our initiatives would require the deployment of an advanced price optimization system," says Howard Befort, s.v.p./center store services at Edina, Minn.-based Nash Finch.
Competition also factored into to the company's decision to go with the technology. "The big guys are in that ball game now," noted Larry Foster, senior director of e-commerce and retail services for Nash Finch, during Progressive Grocer's 6th Executive Roundtable on Technology and the Independent Grocer, held in October 2007, when the wholesaler was still evaluating the technology. "And if the benefits are half of what companies are saying, to really compete, you?re almost going to be forced to use it."
That same month, Supervalu renewed a license agreement with its price optimization provider, Revionics "which is also working with Nash Finch" to offer a Web-based price optimization solution to independent retail accounts, some of which compete against Nash Finch-supplied stores.
Supervalu is offering RAPS (Revionics Advanced Pricing System) to the retailers it serves via a weekly subscription model over the Internet.
While not a wholesaler, IGA Northwest Supermarkets, a collection of over 70 stores located across seven Western states that are supplied and supported by Eden Prairie, Minn.-based Supervalu, is using price optimization in a similar manner, deploying a Web-based price and promotion optimization solution that will allow its group members to act as a single, more powerful promotional entity. (The retailer group is also working with Revionics.)
"The board saw an opportunity to improve our ad-planning process, and become more competitive as a group," says Frank Cannon, board member and g.m. of Van's Markets in Helena, Mont., an IGA Northwest member.
Regionals line up
Brookshire Grocery Co. is a veteran user of the technology, adding new services and enhancements as they become available. The Tyler, Taxas-based regional chain recently renewed its license for the third straight year for Price and Promotion software developed by San Carlos, Calif.-based DemandTec, Inc., as the grocer continues to enhance its pricing strategy and drive margins for its 155 stores.
"We continue to see great results from DemandTec solutions," says Randy Duke, s.v.p. of category management for Brookshire. Their solutions deliver benefits both to our customers, in the form of better prices, and to our company, in the form of better margins.?
West Sacramento, Calif.-based Raley's Supermarkets, another regional independent, is installing price optimization software from Florham Park, N.J.-based KSS Retail for its regular and promotional pricing.
The retailer, which operates over 130 stores across northern California and Nevada, will use the pricing solution to leverage historical point-of-sale data to model and forecast consumer reaction to pricing and promotional decisions.