In food and beverage, there are 3 billion prices in the market; chains use more technologies

12/16/2022

---

The tenth-largest consumer market worldwide, and with a middle class of 100 million, Brazil has created in recent years one of the main industries of pricing in the world. The colossal volume of data analyzed in this field helps determine, at the end of the day, how much a pin or a R$30,000 refrigerator, the most expensive one on sale here, costs.

This department within retailers (called “pricing”) grew even more in relevance after online marketplaces consolidated in Brazil, and brick-and-mortar stores of all sizes invaded the digital world, increasing the complexity of managing the information that circulates in the market.

Today, the same store (and it doesn’t matter its size) sells on several websites and with different prices for the same product.

In crucial periods for the year’s sales, such as Christmas, and when retailers try to protect their profitability, as it happens now, when chains have emphasized more rational sales policies, getting the price right is key. “The pricing area has the greatest potential to generate more results in the short term in terms of profitability and market share,” said Fernando Nagano, director of data analysis at Magazine Luiza.

“We have had an evolution in terms of technology in recent years, the sophistication of algorithms, which allows us to be more accurate, and also allows us to constantly provide sellers with more data,” said Marcio Cruz, CEO of Americanas’s digital platform.

There is an impact in this scenario of the rapid advance of foreign platforms in the country (such as Shopee and Shein) from two to three years ago. There was an invasion in the sites and applications of a large amount of micro and small partner stores, and with them, the volume of retail price data increased even more.

The volume of stores hosted in Magazine Luiza, Americanas, and Casas Bahia has tripled since 2020. Combined, they have more than half a million shopkeepers (without discounting duplicates). At Mercado Libre, consultants estimate that there are six million stores.

The same scenario has been repeated on supermarket delivery platforms, which also host shopkeepers, such as iFood, Rappi, and Cornershop. “Pandemic drove many companies into the platforms, so the amount of information about products, prices, and conditions skyrocketed,” said Eduardo Martinelli, CEO of Thima Consultoria, who previously worked for Via and Walmart.

“Defining if the product will cost more in the store than on the website, or if the chain will position itself above or below the market average, are topics on the agenda now. And they gain more weight in periods of high competition and greater search for profitability, as today. Pricing is crucial in this, along with commercial and category management, which operate together,” he said.

“Digital has transformed the way retailers define prices,” said Mr. Nagano, with Magalu. “At the same time, the capture and analysis systems have evolved, data quality has improved, and it is possible to track prices much more easily and much more frequently than years ago. The current phase is to go more in-depth with the analysis.” Robots are involved in this data search process, in addition to in-house work and outsourced consulting.

In this scenario, there is still the effect of the high volatility in prices caused by inflation, which made Brazilians lose reference to values. This requires companies to better manage data to see if it is not too far off the average and align it with the margin policy adopted at the time.

A survey obtained by Valor, conducted by InfoPrice, a leading consulting firm in the area, shows that in November there were 3 billion prices available in the food and beverage market, a number three times higher than in June. In September, there were 2 billion — the rise reflected the addition in the consultancy’s coverage of online marketplace companies.

Paulo Garcia Neto and Vanessa Shigekiyo — Foto: Silvia Costanti/Valor

To calculate the 3 billion prices, Infoprice counts one price for each product in a store. If new items are added or the price changes, the account is updated. Information from the finance departments (which collect invoices) is used, and there is a direct collection in leading retailers’ stores and platform applications. According to Paulo Garcia Neto, CEO of the consulting firm, the analysis variables have grown.

“It is not only about price definitions by the place where you are and by the fact of having a competitor nearby. Today we have the ‘click and take’ and the ‘super apps,’ for example, and the conditions differ. These are cost structures that may or may not affect the price. This can only be solved with a lot of technology and structured analysis processes.”

According to Vanessa Shigekiyo, product manager at InfoPrice, research shows the channel pricing strategies in the country today. “When we compared food and beverage marketplace pricing for example, with invoice and point-of-sale pricing, we got 57% equal pricing,” she said.

“We thought we would get even more equal prices. The data shows how companies still have different policies for the channels, something that may be related to the separate costs of each one [store has a more ‘expensive’ structure than website] or with the pricing and margin strategy adopted in the period.” Integrated operations (store and website) dilute the cost of the store as a whole.

The most expensive items on the online marketplaces than in the stores were 11% more expensive, and the cheapest was 17% cheaper, reinforcing the aggressiveness of digital. Mr. Martinelli recalls that there are tax issues in this account. “If the store has tax advantages in the locations where it is, this affects the value,” he says.

Mr. Cruz, with Americanas, says that the company begins to provide this week access to the platform storeowners to a set of data from the products sold by them, in a kind of “dashboard”, which allows comparisons and better understanding if it is competitive against the market.

The platforms do not interfere with the sellers’ pricing policy, but rather guide them. Since the marketplace accounts for more than half of the large chains’ online sales, this shopkeeper needs more constant attention.

According to Mr. Cruz, the advance in the pricing model brings challenges. “The first is communication to the customer because there are many options of products and prices, and the second is to know the consumer much more and offer something tailored to their profile. We have discount campaigns for those who use the Ame card, for example, which generate benefits.”

He also cites partnerships with universities for the development of better pricing algorithms and states that, in larger retailer clients, Americanas works with alerts for any relevant variation in price conditions in the market.

Mr. Nagano, with Magazine Luiza, reinforces that in the work to guide pricing decisions it is possible to cross data from suppliers and public information from competitors to compare the company with the average and check if it has been gaining “share.”

When there is a price definition in the app or site, and it is identified that it is too far out of a certain level, with the identification of some fault, there are “locks” in the system that can be triggered — a common tool used by the market.

The company says that they supply them with information, with courses on finances, commercial policy strategies, and training, which help to guide them.

Ricardo Ramos, CEO of the consultancy Precifica, recalled that one of the conflicts in pricing in the world, which was the target of recent debates in the U.S. market, is that platforms seek ways to have more aggressive prices through contract clauses. In 2021, Amazon was sued by the attorney general for the accusation of always undercutting its retailer, to sell more than its own partners. In Brazil, sellers heard by Valor say that contracts do not have this clause.

On the consumer side, Mr. Ramos says that customers have started to use many more different sales channels to purchase in recent years. And this scenario has generated higher expectations of getting bargains, especially on strong commercial dates. This, many times, generates communication problems, and customer frustration.

“It is common today for consumers to look at the website, come to the store with the price in mind, and when they see that it is more expensive in the store, they tell the salesperson. But there is no clear answer to that question. The salesperson just says that’s not the price in the physical store,” said Ricardo Ramos, CEO of Precifica, when reinforcing that this is more common in medium-sized networks, without integration of online and brick-and-mortar stores.

*By Adriana Mattos — São Paulo

Source: Valor International

https://www.rkladvocacia.com/