Published on 04-Oct-2012

"The retail consortium has experienced a total transformation of our pricing strategy. We’ve become more profitable, agile and competitive, even as margins tighten and consumers have more options for shopping." - Vanni Chioccoloni

Customer:
PAC2000A

Industry:
Retail

Deployment country:
Italy

Solution:
Application Design-Build-Manage, BA - Business Intelligence, Business Performance Transformation, EMM - Price / Promotion / and Product Mix Optimization, Smarter Commerce, Smarter Planet, System z Software

Smarter Planet:
Smarter Solutions for Retail

Overview

PAC2000A is a retailers’ cooperative and member of the National Consortium Conad. Founded in 1972, PAC2000A is a market leader throughout central and southern Italy (in Umbria, Lazio, Campania and Calabria).

Business need:
While still a powerhouse in the Italian retail sector, this retail group was experiencing difficulties in positioning itself against the competition and setting its own price objectives, as demand fluctuations and other trends were challenging the company to react more quickly. Its price management process was highly manual and complex and very reactive. The consortium needed a new price optimization strategy that would better segment and optimize prices, and market different products to different customer segments in alignment with market demand. Its ultimate goal was to raise profit margins.

Solution:
As the number of sales channels increases in retail, adopting an optimized pricing strategy is critical. This consortium implemented a price optimization solution that collects daily sales data for 35,000 items from its 450 stores, and then combines it with weekly market analysis and data on consumer behavior. The solution analyzes and simulates different scenarios looking at consumer demand and competitive pricing to flexibly manage prices. For example, PAC2000A can raise prices on high-demand products, offsetting losses on less-demanded ones, maintaining margins and sales volumes.

Benefits:
Reduces the time needed to react to market fluctuations from 18 days to three, an 83.5 percent improvement Product turnover has increased by 2.7 percent thanks to better pricing Improves profit margins by creating more competitive pricing positions, increasing market share for key categories and optimizing the profitability of promotional campaigns

Case Study

PAC2000A is a retailers’ cooperative and member of the National Consortium Conad. Founded in 1972, PAC2000A is a market leader throughout central and southern Italy (in Umbria, Lazio, Campania and Calabria).

The Opportunity
While still a powerhouse in the Italian retail sector, this retail group was experiencing difficulties in positioning itself against the competition and even setting its own price objectives, as rapid demand fluctuations and other market trends were challenging the company to react ever more quickly and accurately. Its entire price management process was highly manual and complex and very reactive. The consortium needed a new price optimization strategy that would better segment and optimize prices, and market different products to different customer segments in alignment with market demand. Its ultimate goal was to raise profit margins.

What Makes It Smarter
As competition and the number of sales channels and promotions increases in the retail sector, the need to adopt a flexible, optimized pricing strategy is growing ever more critical. This retail consortium has implemented a price optimization solution that collects daily sales data for more than 35,000 items from its 450 stores, and then combines it with weekly competitive market analysis and data on consumer behavior. The analytics solution analyzes and simulates different “what-if” scenarios looking at consumer demand and segmentation, along with competitive pricing, in order to flexibly manage and optimize prices. For example, PAC2000A can raise prices on high-demand products or for a particularly high-selling customer segment, helping offset possible losses on less-demanded products, or where the competition has lower prices, helping maintain margins and sales volumes.

Real Business Results
· Reduces the time needed to react to market fluctuations from 18 days to three, an 83.5 percent improvement
· Product turnover has increased by 2.7 percent thanks to better pricing
· Improves profit margins by creating more competitive pricing positions, increasing market share for key categories and optimizing the profitability of promotional campaigns

Products and services used

IBM products and services that were used in this case study.

Software:
WebSphere Application Server, DemandTec Price Optimization

Legal Information

© Copyright IBM Corporation 2012 IBM Corporation Software Group Route 100 Somers, NY 10589 Produced in the United States August 2012 IBM, the IBM logo, ibm.com, Global Business Services and WebSphere are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at ibm.com/legal/copytrade.shtml This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The performance data and client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.