Welcome to my marketing focused blog series, the clean Tusk!
Department stores have had a long history in the retail industry, their biggest attraction being that they offer multiple products under one roof. The rise of e- commerce has pushed their presence online. This meant they had to adapt their pricing strategies to cater to both in-store and online shoppers to maintain brand experience consistency. Today we examine a list of pricing strategies commonly employed by an industry that is heavily dependent on both physical and digital realms.
1. EVERYDAY LOW PRICING (EDLP)
Physical Stores: EDLP used to attract customers who seek consistent and competitive prices. In place of sales, these stores maintain a consistent low price.
Online Platforms: Online platforms can clear out inventory and attract traffic by offering additional discounts on top of EDLP.
2. HIGH/LOW PRICING
Physical Stores: This strategy involves offering frequent promotions and sales. It creates a sense of urgency among shoppers to grab the deal.
Online Platforms: E-commerce are known to use flash sales, daily deals, or “online only” discounts to generate sales volume.
3. DYNAMIC PRICING
Physical Stores: Lately these are less common in physical stores due to logistical and cost challenges involved in frequently changing prices.
Online Platforms: Prices are easily edited in real-time based on demand and sales targets and competitor prices. For instance, during a holiday season, certain in-demand products might see a price surge whilst others may be discounted.
4. BUNDLE PRICING
Physical Stores: Items are grouped together and sold at a lower price than if purchased separately. For example, a linens section might bundle blankets and cushions.
Online Platforms: Online shoppers may notice options like “Frequently bought together” offering bundle deals.
5. PRIVATE LABEL PRICING
Physical Stores: These products are priced lower than national brands as they are mass sourced under the stores name, offering a value proposition to customers.
Online Platforms: Private label products are often heavily promoted on websites, with exclusive online discounts.
6. PRICE MATCHING
Physical Stores: Some department stores promise to match the prices of competitors if a customer finds a lower price elsewhere. This is especially true for electronic goods.
Online Platforms: The rise of price comparison tools and plugins has allowed prices to be matched online as well.
7. GEOGRAPHIC PRICING
Physical Stores: Some stores vary based on the store’s location, due to factors like rent, demand, supply, transportation costs and local competition.
Online Platforms: Online prices can change based on the user’s location, shipping costs, and regional promotion events.
8. TIERED PRICING
Physical Stores: Different versions of a product might be priced differently depending on its features and complexity.
Online Platforms: Tiered pricing is common for products with digital attributes, like software or extended warranties. For instance, a home, student, and professional versions of software.
9. LOYALTY-BASED PRICING
Physical Stores: Loyalty program members might get exclusive discounts or early access to sales. Like Nordstrom’s Nordy club.
Online Platforms: Online shoppers can often accumulate points faster or get exclusive online deals as part of loyalty programs.
10. PSYCHOLOGICAL PRICING
Physical Stores & Online Platforms: Prices are set to a specific amount to make the product appear cheaper. For instance, pricing an item at $9.99 instead of $10.
Summary
Department stores utilize a mix of these pricing strategies to maximize profits, cater to diverse customer segments, and stay competitive. With the integration of online platforms, these strategies have evolved but only slightly. As the retail landscape continues to change, department stores will continue to adapt their pricing strategies to meet the demands of the modern consumer.
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