You’re a major retailer or direct to consumer brand and the million dollar question is: should you build an in-house pricing solution or partner with a third party provider? By this point it has become abundantly clear that being able to change your prices in real time is a make or break aspect of a holistic retail strategy. It’s the difference between responding to market changes with intelligent price updates and scrambling the next morning when you realize that your sales tanked because your top competitor offered a flash sale overnight. So what’s the right answer to this question?
There’s no clear cut answer because no two retailers or brands are exactly the same. However, there are some factors across the board that you should take into account. To avoid the inefficient process of manual price checking and changes, let’s go over each of the factors you should look out for when deciding whether or not to invest in a third party pricing solution.
The first thing on every decision maker’s mind when it comes to a third party pricing solution vs something built in-house is: will this meet my company’s needs? You need a pricing solution that is as fast as it is accurate. Competitors are changing prices at the speed of light, consumer preferences shift over night, and your stock levels can become depleted before you know it. Without a pricing solution in place, you’re left in the dark on these issues until it’s too late.
Starting from scratch is a long process, but it’s more important to determine which method will deliver you the customized pricing solution you need. If you have to scratch your head and interpret raw data, then your pricing solution isn’t making the cut. It should provide the data to you in a way that makes sense with your team’s method of analyzing pricing data. You need a solution that presents the pertinent data in an easy to understand way and makes it actionable. The correct action will vary based on the situation, but a proper solution can automate the pricing process and directly integrate into your workflow.
Another main function of a pricing solution in retail is being able to run price tests. You don’t want a solution that merely spits out data, you want something that can help take your pricing to the next level. Finding the optimal price for each of your products should be one of your main goals. A robust third party pricing solution will help you accomplish that by monitoring the impact on demand and your bottom line.
Innovation is also core when it comes to functionality. You don’t want a pricing solution that fits in too much with the status quo. Instead, you want a system that helps you think about your pricing strategy in new ways to keep you nimble. When you are able to stay dynamic, it is much easier to get the upper hand over competitors.
The immediate question after you’ve determined it will work is: what will all this cost? If you’re building in-house, you must determine if your current staff can build something robust enough to meet your needs, or if you’ll need to hire a few extra people to bring it to life. Time and cost go hand in hand here. What amount of time will it take to create and update this system and does it fit in your allotted budget and roadmap for the year? It is important to remember that an in-house pricing solution is not a one time expense, it requires engineers and data scientists to maintain it so that it continues to meet your needs.
On the other hand, a third party pricing solution is self-sustaining. The price you agree upon with the company is the price you pay and they keep track of maintenance and periodic updates to the system. Not to mention a third party solution comes with a suite of experienced retail pricing technology experts. Keep it simple and leave the technical aspects to the companies that specialize in exactly this, and keep your internal retail experts focused on what they know and do best.
With hard work and persistence your company will continue steady growth over your tenure. That means more SKUs, more selling channels, and, likely, more competitors trying to steal your thunder. The pricing solution you choose must be able to support this growth and grow with you. As we discussed in the cost section above, pricing solutions must adapt to changes over time and either your team will have to handle that extra work, or it will be included in the cost of the third party solution you choose.
Whether you choose to build your own in-house or opt for a third party pricing solution, what matters most is how agile the platform is over time. The market, your competitors, and your business are always in flux and something as important as your pricing must be able to keep up.
Need better data to inform your decisions? Whether in-store or online, Wiser has you covered from pricing to assortment to promotions. Schedule a meeting today to learn how to turn retail data into action.