It isn't news that independents struggle to compete with the big EDLP players and stay relevant to shoppers. The latest data shows that each year 1% of the independent consumer base is walking away in favor of big national chains offering the perception of better value.
Oddly, the generally accepted response from independents to this full-frontal, decade-long attack has been to surrender the low-price perception high ground. Instead, independents nationwide are seemingly all-in for non-pricing ways to create excitement or theatre for guests.
Stores are boosting theatre in the Fresh, Deli, and Bakery departments. In addition, they are investing heavily in destination theatre - making stores places to meet, connect, and shop. But for various reasons, as an industry, independents have stopped believing they can meaningfully compete in the most critical arena of all: pricing theatre.
Unfortunately, ceding pricing theatre to Walmart, Aldi, and Lidl in favor of more boutique, higher-value theatrical offerings only reinforces to guests that they can find better value elsewhere. The big EDLP players do not compete in special fresh zones or destination theatres. Instead, they compete on the hard-core perception of lower prices, which trumps everything else every day of the week. So it is no wonder independents need help to compete.
But is it true that independents can no longer compete on price? What if it were possible to compete on price, improve profitability, and grow revenues simultaneously?
At Puzl, we believe it is time to return to pricing theatre.
Pricing theatre is logical because it responds directly to human nature. It is something innate in all of us. Hunting for and finding great buys generates excitement and relevance. It's why eBay became eBay and why TV shows like Storage Wars, Fixer Upper, or Antiques Roadshow are massively popular.
At the same time, guests' emotional connection with store brands seriously diminishes when they can't find deals. Stores that can't create this emotional connection struggle to stay in business.
The critical question is how. Independents live in a world of too much data and too little actionable intelligence. Independents understand their margins only 6-12 weeks after the fact, meaning they hesitate to take risks with pricing. What can be done?
In our experience at Puzl, stores don't need wholesale pricing reform to get back into the pricing theatre, at least not initially. If stores can understand where their gross margins will be 6-12 weeks in advance, they can model how aggressive they can be on 7-10 front-page ad items while still being able to hit their target margins.
Puzl gives independents a hyper-accurate understanding of their full-blended gross margins in advance and the ability to game out various aggressive pricing and promotional scenarios.
And the results so far are extraordinary. Stores using Puzl are experiencing 0.7-1.5% improvement in profitability while at the same time changing shopper perception of their price image and growing revenue, too.
There is hope. There is a path toward transformative profitability, beginning with pricing theatre.
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