Two Strategies for Pricing in Online Grocery

Pricing is one of the main challenges for online grocery since many consumers are particularly price sensitive in this sector. Additionally the complex fulfillment processes of online grocery generate additional costs – from individual picking and staging of ordered products to delivering them home or to specific pick-up locations. These costs are putting additional pressure on the already low grocery profit margins. According to a study on pricing by EY consulting firm two strategies can help to offer the lowest possible prices on one hand while at the same time trying not to irritate consumers by inconsistent pricing between in-store and online:

 

#1 Same Core Range of Products while Differentiating in other Segments
Consumers do not differentiate between sales channels but rather experience the respective brand as a whole – albeit it being accessible through a number of different contact points. Thus a lot of consumers do not understand why online provides different price information than in-store. This disparity can be avoided at least in part by offering a core range of products at the same price across all sales channels – e.g. basic foods like bread, milk or eggs. To compensate for the higher cost of online sales and generate sufficient profit margins the price can be adjusted for other product segments.

 

#2 Regional Pricing
Oftentimes product pricing may not even be identical between individual stores of one grocer. Instead the stores may themselves follow their own pricing strategies on a regional level. However, in that case this should also be reflected in their online store. Online customers should be assigned to their respective store via ZIP code. Product prices will only be shown after that regionalization.

 

Additionally grocers should point out the difference between product prices and delivery cost. Since a lot of consumers are not willing to pay more for a specific product online than they would in-store higher pricing online could discourage online purchasing. However, oftentimes additional charges for delivery service will be accepted.

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