Improved price integrity means fewer merchandise pricing errors
It is no secret that retailers struggle with price accuracy. Unfortunately, determining the cause of pricing errors is not easy. The entire process – from buying to selling – needs to be examined. Several types of pricing errors occur, each with varying causes and solutions. Scanning Errors occur when shelf prices and register prices are not consistent. Controller Errors arise when register prices do not match host prices, often because increases are not updated to the store POS controller. Not-On-File (NOF) Errors occur when items are not in the computer file.
The cost of these errors has ramifications that include:
Diminished customer confidence – Consumers are demanding more than enhanced service – they are more price and value conscious than ever before. Incorrect and inconsistent pricing procedures adds to shopper discontent.
Lost revenues – Grocers, for instance, are losing an average of 7 cents per pricing error. In addition, a common overcharge policy is to give the first item to the customer at no cost. Less obvious losses stem from an unproductive use of time, such as balancing under-rings and over-rings.
Increased regulation – As a result of consumer litigation, standards are being developed by various state and federal agencies, including the National Conference on Weights and Measures.
Regulatory fines – Civil penalties, due to price integrity violations, are increasingly impacting retailers nationwide.
To help your organization deal with this challenge, we recommend that you evaluate your existing pricing systems and sample pricing in select locations. Determine the depth and cause of the errors you encounter and develop a process to correct them. This should be accomplished by employing store visits, pricing audits, interviews with store managers / pricing coordinators, operational observations and operational data collection and analysis.
This process should include an examination of several areas to achieve optimal results. These include:
- The Price Coordinator Position – Review job responsibilities, performance standards and training materials
- Store Reports – Ensure they are user-friendly and contain pertinent information
- Pricing Cycle Timing – Implement adequate lead times for various tasks
- Operating Policies – Ensure they are up-to-date and in use. If not, policies are refined for efficiency and practicality
- Communication Process – Establish effective communication between all levels
- Buying – Review policies and procedures for new-item set-up, price changes, DSD, special deals and ad breaks
- Distribution – Identify and correct unauthorized items and inaccurate UPC codes before ‘products arrive at the store
- Systems – Evaluate file synchronization on store price files. Review time cycles for new items and item corrections from buyer to store. Determine system gaps
- Management Philosophy – Determine if and how each employee is responsible for price integrity
Typical Results that can be realized by utilizing this advice includes:
- A 98 percent pricing accuracy level
- Improved training procedures and performance standards for the store price coordinators
- More user-friendly reports that provide useful and actionable information
- Enhanced communication throughout the organization, and
- A price integrity corporate focus that leads to better customer service and enhanced profitability