FOCUS 25 New Models
Collaborative consumption (Collcon) is another trend I see that will grow, fuelled by social media and new models of distribution. There are now many models where people have built networks to share or swap possessions or aggregate buying power, with well-known examples such as Zipcar, AirBnB and Kickstarter.
In addition, I expect to see more retailers employing bidding models, in line with the traditional auction model of eBay or the reverse action model of travel site Priceline, where buyers name their price for fl ights and sellers either accept it or reject it.
Bidding models can be an effi cient mechanism for matching buyers and sellers, adequately satisfying the requirements of both buyers and sellers. Over time, auction models enabled by technology will become more prevalent as sellers get more creative. A few years ago, there was a bidding frenzy for reservations to eat at a popular new restaurant in Chicago where the top bid hit $3,000.
There are many more scenarios where capacity or stock is limited, for example, tickets for a concert or popular fashion items. Depending on popularity, they can sell out quickly. That means the price wasn’t high enough given the value placed on it by the customer.
CONCLUSION Prices and promotions are critical
drivers of profi tability in retail, but they must always be aligned to bottom line rather than volume based, which is unpredictable and ineffective.
Consumers have benefi ted enormously online – from new e-tail competitors to price transparency and collaborative consumption. Pricing analytics, dynamic pricing and auction models enabled by data and technology will
even things up. Retailers that don’t get it right are unlikely to survive.
Robert has over 20 years’ experience helping companies around the world develop and execute pricing and sales strategies that drive growth. Originally from Ireland, he started out in the telecoms sector as an economist in the early 1990s. Since then he’s worked as a consultant and advisor across a wide range of industries including automobiles, newspapers, food ingredients, chemicals and software. Based in Chicago for ten years, he returned to London in 2005. Today, he is a Partner in KPMG’s Strategy Group and leads our pricing practice in the UK.
Robert Browne Partner T: +44 20 7311 8962 E:
robert.browne@
kpmg.co.uk
© 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative, a Swiss entity. All rights reserved.
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PRICING
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