Zonal pricing is the process of setting prices for goods and services based on the location where they will be offered for sale to consumers. Such practice has long been commonplace in bricks and mortar, but as e-commerce becomes ever more competitive, offering different prices based on a user’s location is a trend that’s only set to increase.
Zonal pricing, where a retailer sets its prices based on location, hit the headlines in the UK recently with Poundland cutting its prices in selected stores to 97p in a bid to undercut rivals charging 99p. The retailer has introduced the 97p standard price at three of its shops so far – one in London and two in the West Midlands – locations where rival 99p stores have opened up.
Pricing based on geography is commonplace in the United States, where a company will usually raise its prices within zones that are further away from its manufacturing facilities to help account for higher transport costs. However, the practice of setting online prices based on a zonal strategy has attracted considerable attention following a report in the Wall Street Journal. The report revealed that some websites such as Staples, Target and BestBuy use variable prices based on a user’s location and proximity to a competitor store, leading some commentators to question whether these tactics are ethical as they essentially discriminate users based on their geography.
However what some commentators call price discrimination arguably just makes plain business sense. Basing online prices on geography, from shipping costs to the local popularity of a particular item, is widespread in bricks and mortar stores. Also, one person’s willingness to pay more for a product. Such price segmentation already exists in travel where business travellers pay more for flights, for example.
Profitero believes that as online retail becomes ever more competitive, dynamic pricing based on a user’s location is only set to increase – therefore multichannel retailers need to gain more effective insights into their competitors’ pricing strategies.
By analysing competitor pricing data on an ongoing basis and using it to adjust their own prices, retailers can optimise sales and also use it as a tool to fight the growing showrooming trend. Just as consumers use price comparison websites to provide transparency into prices and products, retailers can benefit from price intelligence tools such as Profitero to get near real-time intelligence into prices, product assortment and stock availability information of their competitors. This critical insight allows retailers to make informed, timely and valuable pricing decisions in order to drive sales and increase margins.
Profitero monitors both nationwide as well as zonal prices, helping multichannel retailers stay one step ahead of the ever increasing competition. To find out how we can help your business achieve smarter pricing and grow sales, contact us at sales@profitero.com.
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About Profitero
Pricing intelligence company Profitero provides retailers with actionable price intelligence data, monitoring over 50 million products across 4,000 eCommerce retailers every day, observing pricing, promotions and stock availability. We work with the world’s leading retailers, enabling them to acquire new customers and grow profit margins by monitoring and responding to changes in competitor pricing and promotional activity as they happen. For more information on Profitero price intelligence and competitor monitoring, visit www.profitero.com or email sales@profitero.com