Aaron Cowper: We were spending over a million dollars to send humans into our competitors stores to check their pricing and range and things and I thought there must be easier ways to do this. You need to understand the purpose of each product in your range. Is it driving traffic? Is it driving profit? Is it a cross shop type product that people will add to their cart? Suddenly we're tracking 2000 20,000 50,000 products and they look at the data and they go wow.

[Voiceover]: Welcome to Add to Cart, Australia's leading

Nathan Bush: e commerce podcast that express delivers all you need to know in the fast moving world of online retail.

[Voiceover]: Here's your host, Bushy. Welcome to another episode of Add to Cart. I'm Bushi and I'm joining you from the land of the Terrible People otherwise known as Brisbane, Australia on Add to Cart. We welcome everyone to share and listen to e commerce stories. The more diverse the better. I want to especially welcome the traditional owners and the original storytellers of the land that we are on, our indigenous and Torres Strait Islander listeners to join us in our e commerce conversations and our community as we dive into 2024. There is a common theme that I am seeing already emerging and that is pricing. Many retailers that I'm speaking with are tracking okay with sales flat or slowly increasing, but profit is a big issue. This inevitably leads to questions around pricing. Should we add another discount to attract more customers? Should we raise our pricing? These aren't easy and are often nervous conversations because we don't want to risk scaring away customers or giving away margin for no reason. This week's guest is on a mission to help retailers optimize pricing. Aaron Cowper is the founder and the CEO of Shop Grok, a pricing and range analytics platform for retail and consumer brands. Aaron was formerly the head of price strategy and analytics at Woolworths, and while he was there he had the idea to develop an alternative to sending humans out to gather data on competitors pricing and in 2018 he set up ShopGrock. That's Shop Grok. ShopCrock has now worked with clients such as KFC, Supercheap, Auto and Oriton. In this chat, Aaron shares his thoughts on dynamic pricing. He gives his top pricing tips for anyone looking to overhaul their strategy in this space and gives us the lowdown on data collection. So many actionable tips here. If you have questions around your pricing strategy. Now before we dive into this week's episode, I want to do a quick shout out for Thread together. As you know, I'm a big supporter of the work that they do for all corners of the community. They work with retailers such as RM Williams, Havianas, the Iconic to take excess

Nathan Bush: stock and distribute it to those in need.

[Voiceover]: Now, these people could be flood victims, domestic abuse victims, homeless or anyone wear a new wardrobe could make a massive impact to a person's quality of life. I was speaking to Anthony, their CEO last week and he said that the demand has never been greater. He is asking for any retailers with excess stock to get in touch and he will share how Thread Together works. If you are a retailer and want to get involved or have questions about Thread Together, I'm more than happy to intro you to Anthony or answer any questions that I might have some insight to, email me@nathanadica.com au it's an absolutely brilliant course. All right, let's get into today's ep. Thanks to our partner Shopify. Plus here's our conversation with Aaron Cowper, founder and CEO of of Shop Croc.

Nathan Bush: Aaron, welcome to Add to Cart.

Aaron Cowper: Hi, Nathan, how you going? Great to be here.

Nathan Bush: Good, thank you. Good, good. We are going to dive into pricing strategy today. It's not a topic we've obviously touched on a lot in Add to Cart, but not gone deep in it, so I'm really looking forward to that.

Aaron Cowper: Yeah, it's. Yeah, something I've been doing now for not my whole career, but definitely at least the last five years at Shopgock and probably the five years before that. So definitely a topic that's close to my heart now.

Nathan Bush: I reckon you've perked up the ears of a few listeners when you've said the word Shop Grok. It is not your traditional name, especially for a company that is high in analytics data. It's a bit of fun, It's a bit out there. Why the name Shop Grok?

Aaron Cowper: Yeah, it's a funny one. So the word grok was actually coined by a science fiction writer in the 1960s in a book called Stranger in a Strange Land. To be honest, I've not read the book, but it's become a bit of a nerdy engineering term that people use to mean comprehend or solve. So you'll hear engineers say we've grokked it, like we've solved the problem. But I came across it. There's a book called Chaos Monkeys which is like a Silicon Valley tell all by a guy called Antonio Garcia Martinez. It's quite a good book, worth a read. But his company AD Grock, was acquired by Facebook maybe, I don't know, 15 years ago or something. And so I liked the word and at the time all the, all the socials and all the handles were available, so I jumped on it.

Nathan Bush: Oh good. Facebook haven't made an offer yet.

Aaron Cowper: Not quite. Not quite. So to take us back a bit,

Nathan Bush: you've had a number of professional roles. The one that caught my eye was that you were the head of price strategy at Woolworths and I read that one of the reasons that you started Shopcruck is that you found that the data and the tools available to retailers were often error prone and required a lot of manual effort. And even just reading that, because on the outside you're like Woolworths. They seem to have their stuff sorted.

[Voiceover]: They seem to have it and if

Nathan Bush: anyone was going to master pricing, it feels like the big supermarkets are the masters of manipulating pricing. Are you telling me they don't have it all together?

Aaron Cowper: Yeah, I think you'd be. You've given them way too much credit if you thought big corporate like that could really get away with manipulating prices. But certainly they, in fact when I joined Woolworths in 2013 13, they were really actually in a bit of a tough time. I think Coles were smashing them. I think there was 20 plus quarters of slower growth against Coles and that was mainly because they had actually pushed prices up too much and lost trust with customers. And so it takes a really long time to regain that. And Coles had their, and still have their down down strategy which has been very effective. So it was an interesting time to join Woolies. Actually it was when so Brad Banducci came in as CEO and he's done a really, really great job over the last almost a decade now of steering the ship in terms of pricing. We're able to, I was able to be involved in a full pricing strategy reset. We launched low price always and prices dropped as our two kind of key mechanics. And yeah, it was a very interesting period. But yeah, definitely the tools and data they had available were expensive and error prone. So you know, we were spending over a million dollars to send humans into our competitors stores to check their pricing and range and things. And I thought there must be easier ways to do this. So eventually built some of that while I was still at Woolies, but then eventually decided to start a company and do the same for other retailers.

Nathan Bush: That's funny, I do remember I did during my high school years I did

[Voiceover]: a bit of work in the paint

Nathan Bush: section at Big W, which is fantastic when you're a colourblind teenager.

Aaron Cowper: But I do remember we even had

Nathan Bush: staff meetings at the time warning us to keep an eye out for competitors who were coming through the store with like notebooks, jotting down prices. And this is like pre mobile phone cameras and all that sort of stuff. So I kind of remember that and it's fascinating that that's still a memory and that that's part of the story. And how you came up with Shop Gro?

Aaron Cowper: Yeah, absolutely. I think I came across web crawling as a thing while I was at Woolies and I was a bit. I was pretty fascinated by the fact that you could. You could collect pricing and so that was sort of where it all came about.

Nathan Bush: Yeah, you must be a fascinated onlooker at the moment, especially with all the pricing conversations that are happening in the economy in general, obviously with inflation, but especially with supermarkets in the limelight, with customers about having the price of groceries. So obvious at the moment, the one that comes to mind is the feed your family for $10 meme that's going around with Curtis Stone, where the ad,

Aaron Cowper: you know, what was it 10 years

Nathan Bush: ago you could buy all these things at Woolies and now people like, yep, I bought a block of cheese for $10.

Aaron Cowper: Yeah, exactly. It's an interesting time for sure. I mean, the last five years have been really interesting. Covid was really interesting in retail because you had these really strange spikes in different areas and then drops in others. You know, people were buying barbecues and baking a lot more and, you know, make at home cocktails and all these different categories were going absolutely crazy. And then obviously you had lots of other categories that were really struggling and then coming out of that and then now going into this sort of inflationary period and retailers are kind of cycling, finding it hard to figure out how to forecast because they're cycling big numbers in some categories and small numbers in other categories. And it's starting to even out, but not quite. So it's going to be an interesting period over the next 12 months, for sure.

Nathan Bush: Absolutely. And I want to dive into that and some of the strategies that retailers can use around pricing to move through some challenging times. But first, I think it's important that we set the scene by uncovering a little bit about what you've built with Shop Grok and understanding the data and the services that you offer. So can you give us the overview of what Shop Grok is and some of the features that your retailers are using in it?

Aaron Cowper: Yeah, sure. We're very privileged to have quite a number of retailers and also consumer brands. So we have a use case for retailers, also a use case for. For consumer product manufacturers or brands who are wanting to understand the retail price of their products. And so we help them in a number of ways. We have the scrappy E Comm startup through to the big box major retailer ASX 100 retailers. But the common thread is that we're basically benchmarking their product range and their pricing to the market to allow them to make better decisions and so more informed decisions, more data driven decisions and also in some cases more automated decisions. But that could be for a small econ player. It might be as simple as picking my Super Kvi products and making sure that I'm competitive on those and maybe optimizing my marketing spend on those. For a big box retailer that has a price guarantee, it might be scouring the market for 50 plus competitor retailers and literally matching the price on all of them. And then we have other brands like Oryton who are a premium womenswear brand who are not necessarily using it for price so much explicitly. They're using it to really inform their range strategies to understand what products are out there, that their competitors arranging what materials they're using, whether it's cotton or silk or linen, et cetera. And where should they position their range in terms of price and different product attributes. So it's quite a varied suite of products that we've built. It's been an interesting couple of years finding out all the new use cases can be used with the data.

Nathan Bush: And was that the start of the idea was around when you found the ability to scrape pricing off different sites and do real time competitor comparison pricing?

Aaron Cowper: Yeah, the actual original idea was for it to be a personal shopping companion, so more of a retail product, not a B2B product. And the idea was that we would collect this data plus we would bring in consumers own shopping history from all the different online accounts they have and bring it all into one place and and then help to recommend deals and ways to shop better and things like that. And then the revenue stream would have come still from aggregating that data and building data sets that retailers and brands would want to would be interested in. But it realized it was going to take a very long time to get to a data set that was meaningful and would require a lot of investment. I didn't want to go the venture capital route so we bootstrapped it. We ended up through some strategy, price strategy work that I did, had a couple of great early clients who needed a tool and I built them a tool and. And it sort of just grew from there. So that became the product and it's just really developed from there. So it's sort of a was a pivot but was just driven by customers telling me what they wanted really.

[Voiceover]: Shopify have put together their version of the Australian e commerce avengers. 10e commerce experts, including me. Unfortunately I think I'm the horse Hawkeye of the group to give you tips on how to set yourself up for success this year. You'll even recognize some of the contributors from past Add to Cart episodes. Mark Bartzer, Kelly Slessor, Paul Waddy, Lisa Jones and more will share tips from how to create great discounts, how to boost conversion rates, optimize email and sms, even use AI to drive sales. It's all in there. I share how to set up your team for success. I can guarantee you will take at least two to three tips that you can use to optimize your sales this peak season. So put on your Spandex and join the E Commerce Avengers with Shopify's free Peak Season Playbook. Download it at shopify.com/guides peaksalesseason2023 or just follow the links in the episode show notes from the device you're on.

Nathan Bush: And did those retailers come to you? Because that so often happens, you build something for customers and retailers or other businesses go, actually I could use that.

Aaron Cowper: Yeah, I was leaving Woolies, I decided I was leaving and I was about to start building this ShopCrock product and then a mate of mine had left Woolies to go and be the head of the My1 program in Melbourne, the loyalty program. And he rang me up and said I need we need some help on price strategy in Melbourne on Admire. So went down there and built them a tool and then they subscribed to the tool, became the first customer and kind of just all went from there.

Nathan Bush: Great. And you mentioned that you do have such a range of clients from smaller retailers all the way through to ASX 100 listed companies and some of the ones that you have on your website. You know, it's kind of a who's who on there. You've already dropped a few in there, which is great. But super cheap Auto KFC pet stock. I saw Rebel Michael Hiller in there. So it's a bit of a who's who of retail in there.

Aaron Cowper: Yeah. Yeah.

Nathan Bush: What do you find is the pain point that you're solving for them initially and then can you kind of take us on a journey of the most common problems you're solving and then how they kind of flow out from there?

Aaron Cowper: Yeah, sure. Well, I mean I think if when we're talking about the core use case would be the pricing, setting your pricing strategy and then executing a pricing strategy. And really in really simple terms, I suppose there's really two ways that you can leave money on the table with pricing and it's either you're pricing too high and to try and earn higher margins, but you're going to lose sales because people will go elsewhere to buy the product, or you're actually chasing the market and pricing down, or chasing the market down on absolutely everything unnecessarily. And then obviously at worst case you're going to be unprofitable. And best case you might be running on really razor thin margins. So we're essentially trying to help retailers navigate the happy medium in the middle, the sweet spot where you find those really core KVI products, where you do need to be really on the ball. Maybe you do need to be line priced with the market and maybe you do need to be either if not loss leader. But you know, you might be have to accept lower margins on those really core KVI where the brand carries, you know, like an iPhone. You know, you're never going to make a very high margin on an iPhone. So. But that'll drive traffic to your store. So you need to understand the purpose of each product in your range. Is it driving traffic? Is it driving profit? Is it a cross shop type product that people will add to their cart? Excuse the reference, but yeah. So we help our customers kind of segment their range and then figure out what's the objective of each product in the range and then how do we help them make decisions on pricing, promotions and then also new product development based on those different strategies.

Nathan Bush: Great. And are most retailers comparing like for like products or are they creating kind of almost like substitute sets that customers might be assessing alongside their product even if it's not exactly the same?

Aaron Cowper: Yeah, it's a good question. So a lot of our customers will have a big portion of their range which is identical branded products and those ones we match. So we have a proprietary matching set of models that we use to take their range and match it to identical products in the market. But then we also often are matching either their private label range or their exclusive range to the market as well. So Michael Hill's a good example where all of their range is bespoke. So we're trying to benchmark them to the market to products that are equivalent or if they may not even have a direct equivalent. So it's more just finding benchmarks in the market that are useful to them when they're doing Their planning. So yeah, definitely there's two groups of products that we're trying to look at and then we're also looking at things like do you have in the supermarket retailer, for example, do you have something at the entry level and at the middle and at the premium level, you know, in each category. And so if you have a gap somewhere, it might be worth finding a product to put to place in that gap.

Nathan Bush: What's your position on products priced in the middle? Because there's a school of thought that if you've got products priced in the middle, they're essentially there for show to get people to buy either the more expensive or the cheaper option. And it's more profitable either at scale when you've got cheap products or premium when you might sell less. What's your view on that?

Aaron Cowper: Yeah, I think it depends on the category. I mean, if your category is too crowded and you don't really need three tiers of good, better, best kind of tiering in a category, then you might actually be trading customers down unnecessarily. So it might be better just to have. I think it's usually good to have some sort of entry level product unless you're a premium retailer or a boutique fashion retailer or something like that. Generally it's good to have, you know, an entry level product. But yeah, having something in the middle can drag people up or. But it could also have the impact of dragging people down depending on how you set up your pricing, how you set up your marketing and your promotions as well. So depending on how you're promoting, you might have your entry level products at more of an ADLP strategy. So an everyday low price strategy where you're not promoting very often the products in the middle, you might have a couple of brands that are kind of going up and down depending on the week. And so like in a supermarket environment that happens all the time, you might be one of two brands that you're sort of each week you're substituting. But for like an apparel retailer, that also happens because you've got so many different brands. But then in other categories it might not be useful to have that many brands. So sometimes it's better to rationalize and just have a pretty narrow width of products.

Nathan Bush: Makes sense.

[Voiceover]: And in terms of the functionality of

Nathan Bush: Shop Grok, there's obviously lots of insights coming through and historical data and trends. Retailers setting prices within Shop Grok or are they taking those insights and then using their existing tools, whether that be an E commerce platform or an ERP or a PIM to set prices in there.

Aaron Cowper: Yeah, so we cater for all those different options. So the first step is really to create transparency. So that's really taking their range, matching it to the market and then providing them insights on. We generally will build a price index which will index at an aggregate level their pricing to the market and, and we can see the trend over time and use that to help set their price strategy. But then in terms of actually making price updates, they can do that through our platform as well. So we have an automation module where we can recommend prices based on different rules, different products you can use. Say I want to benchmark this group of KVI products to this set of competitors and always be either on the market on the mark or within 5% of the mark and then apply rounding rules and things like that. And those suggested prices can then be pushed either to a workflow tool or directly into your into Shopify or whatever ecom platform you're using. But not all of our customers will want to go that complete automated route. So some of them are just using the data to then make decisions, whether it's in a weekly trade meeting or the meetings throughout their week where they're taking the data, figuring out what needs to be tweaked and then making decisions from there.

Nathan Bush: Gotcha. With such good great clients on now and such a range of clients, where do you find. Retailers usually have their first aha moment like the. Oh yes, this is the data I've been looking for.

Aaron Cowper: Yeah, it's usually happens very quickly like week one, week two, as soon as we create this price index and it's usually including they might have tracked tens of products before manually by checking websites and Suddenly we're tracking 2,000, 20,000, 50,000 products and they look at the data and they go wow, we're either way off the mark or we're way too cheap in certain areas or we didn't even know that this competitor existed or that they were so price competitive or things like. What we also do is we show each competitor's promotional strategy. So we take their full range and we can show you how often they promote on what categories in more of an aggregate way to see how deep their discounts are and how frequently they are by brand and by category. And so you can use that to really understand what strategies your competitors are using. And so that's often an eye opener as well. So oh, this competitor, they're more edlp. This one, they're clearly doing really heavy kind of mid season sale and then the rest of the time they're not promoting as much. So yeah, it's usually that first couple of weeks is that the transparency phase is a good opener. And then once we start getting into it, then it's usually the category managers who are saying, well, it's just taking so much time out of my work week now where I used to be manually checking things or just going with gut instinct and now I'm just able to get the data that I need and make decisions easily.

Nathan Bush: Yeah, nice. And do you pull in anything from the business around margin in terms of GP or net profit to be able to understand the levers or the thresholds that they have available to them?

Aaron Cowper: Yeah, so we have our set of dashboards as well. Some of our customers actually have their own internal dataviz teams or data analytics team. So we also have a data as a service version of our products. So some of our customers simply just take our data and we can share that to them directly and they might build that internally. So in some cases they might blend their internal sales data with our data internally. In other cases they might share it with us and we can show it alongside our data. The other key area where we do show customer data alongside is in the performance marketing space. So often the Ecom team will be interested to know how traffic compares to price competitiveness. So is price a factor in the ups or downs in traffic by product or by page or by brand, et cetera? So that's usually another area where we gauge early with the E Comm team to figure out what their objectives are and how we can blend our data with theirs.

Nathan Bush: And do you find in that social paid performance space the pricing messaging actually drives a huge amount of ROI or click through?

Aaron Cowper: Yeah, for sure. I mean I think the conversion definitely price is a major factor in conversion. So you can get people to the page through great creative or paid marketing, et cetera. But customers are savvy, you know, they'll still go and do a Google search on the product and if you're not competitive then they'll click away pretty quickly. So yeah, so you need to have all the elements there to get the customer to the page. But then you also need to be on the ball in terms of terms of price. So it just goes to show that you really need to have a really good cross functional team. You can't just have category managers and buyers working independently of the pricing team, working independently of the E. Comm team. And then if you've got a store team then working independently, everyone needs to work together. And also your marketing team needs to be in sync with the buying team so that you can tell customers when you're actually making price changes, particularly when you're moving prices down. You don't want to do that without getting some credit from customers. So you need to kind of make sure that's built into some sort of campaign that you can tell customers about.

Nathan Bush: And what's your view on having different pricing potentially for different channels? We've in the past obviously seen different pricing for online versus physical stores, but even some retailers now putting different pricing up for different customer groups or times of day. Do you feel that's realistic and how does that impact the customer experience?

Aaron Cowper: Yeah, I think you can't really get away these days with having a different price online to offline, just your standard kind of visible effective price. If it's different online versus offline, you're just going to drive customers away. Because I think the stat, even when I was at Woolworths ten years ago, the stat was something like 70% of in store purchases start with some sort of online view. So if customer's looking at your mobile app or your website, seeing a price and then they go into store and it's different, customer trust is going to erode pretty quickly. But then there are definitely things that retailers are doing to try to optimize in that space. So you mentioned time of day that that is something that we have seen in the QSR in the quick service retail space we're seeing that. So the golden arches would be one where that dynamic pricing definitely happens. You know that the bit, the price of it, you may not be aware as a customer, but the price of a Big Mac differs quite widely depending on the store you go to. So yeah, so definitely like store based pricing and demographic based pricing. That's definitely something that a lot of retailers are playing with. There's always a trade off between the complexity involved in implementing that and the benefit of improved margin, et cetera. And also the potential for customer trust to be eroded if it becomes clear that the pricing is different depending on where you are. Another thing that a lot of retailers do is have online only promotions or specials or personalized specials or member only type specials. So those things are definitely good ways to both drive loyalty and also be able to differentiate somewhat online versus offline and be a bit more nimble. So it's particularly for those retailers who have both an in store presence and an online presence and they're trying to compete against the likes of Amazon who do move prices multiple times a day. In some cases you want to be able to have that flexibility without having to make people in store, store team members have to move, put new tickets up three times a week or something which has a huge cost. Yeah, yeah. Online only promotions or member operations and different types of personalized in app offers are definitely an area where we're seeing a lot of growth.

Nathan Bush: Some great tips in there around how you might think about different pricing for different scenarios without eroding trust. I'm amazed that McDonald's have different pricing. I mean I don't go there ever really a lot but Amazon, you go. Yep. Everyone knows that prices go up and down. Qantas Everyone knows prices go up and down but I think most customers, they've done a good job McDonald's at not giving that away because they're known for consistency. Right.

Aaron Cowper: If you don't go to McDonald's it's

Nathan Bush: like consistency, that's a myth.

Aaron Cowper: Yeah, it's. I think it's a pretty well kept secret. Yeah. So you would, you would assume that, that it's very static, that the pricing but no, it's anything but.

[Voiceover]: Sorry, I'm interrupting this conversation because I have a message for any sales folk listening who are in e commerce services or tech. What if I told you that you could meet Australian e commerce decision makers in their car, follow them to the gym, even join some of them in the bathroom. Well, if you sponsor add to cart you might be able to do that legally. We have sponsorships available available for 2024 right now. Come join our industry leading partners such as shopify, impact.com convert digital and farsight in helping to bring amazing conversations, events and more to our e commerce community in 2024. Email me directly at Nathan add to cart.com for the full 2024 prospectus and in the meantime don't get any ideas ideas about bathrooms.

Nathan Bush: I think that's a really interesting area that dynamic pricing. So in terms of shop grok, how often are you getting that updated competitor data in and then how often can your retailers be updating their pricing during

Aaron Cowper: a day by default? We're usually collecting pricing once a day and in most cases that's enough. Some retailers actually once a week is okay, but it's becoming probably less common in the supermarket space. There's still pricing brochures, catalogs are still pretty common and that usually goes on a weekly basis but in most other cases daily is necessary and then multiple daily. Typically it's usually around peak periods. So around Black Friday or Christmas and things like that, we help our customers get a better sense of what's happening in the market, maybe multiple times a day, but it's really about can you actually ingest the data and make decisions on it. There's definitely a trade off there that the more times you do it per day, the more kind of overhead there is in having to make decisions and do your reporting or whatever your process is internally to then act on the data. So there are definitely a lot of retailers out there who are doing price changes multiple times a day, typically the ones that are automated. So the Amazons of the world and a lot of the E Com startups that are really trying to compete heavily on price are automating their price changes. So yeah, as I said, it sort of depends on the need.

Nathan Bush: And who are you finding in the business? You've already talked about giving us some examples around E commerce managers, paid performance managers, product teams who are accessing this data. Which I think even that's interesting because a lot of the times it's like, oh, the product team or the merch team will set the pricing and then us as an E Commerce team, we just have to deal with what we're given and we'll try and sell as much of the stuff that we're given at a certain price. But you're saying that you're finding that a lot more teams are accessing the dashboards and the data that you're surfacing. Who do you normally see that distributed to?

Aaron Cowper: Yeah, so it's funny, but we'll come back to that. But yeah, I think it's interesting at the moment that what I'm seeing a little bit, and I don't know if you're seeing or hearing it as well, but the kind of relationship between the E Comm teams and the buying teams at the moment, the people managing the E comm versus the in store in those types of retailers, there seems to be a bit of a healthy tension, I guess at the moment because I think online penetration the last couple of years, particularly through Covid, was obviously super high. And so the E Comm or online teams are typically trying to cycle really high numbers at the moment and trying to chase really big sales numbers. And so often their objective has been to chase price. So to be really sharp on price at the expense of margin. Whereas we're seeing the buying teams, merchandise teams are pushing back on that a little bit. So there's a little bit of a healthy tension, I think between the different teams in the organization. So making sure there's alignment there is important. Typically the most common user would be the Buyer or the category manager. So the person responsible for sourcing the goods from the supplier and then choosing the price and the promotional strategy, then we have many other users who are typically in the platform. If the retailer's big enough to have a pricing function, those guys will obviously be heavily involved. If they have a strategy function, they'll usually be involved. But then there's usually there might be a promotion planning department who's interested in emotional statistics and things like that, the E Comm team as we mentioned. And then, you know, occasionally we might have marketing involved. We capture things like screenshots. So the marketing team might be interested to know what happened last year coming up, leading up to Friday or Christmas.

Nathan Bush: Yes.

Aaron Cowper: What did retailer X or Y do last year? What did their creative look like and how did that compare to the data? And also you'll see like a lot of retailers, you'll see this 50% off XY brand, but then you go and look at the actual data and there's like three SKUs that are 50% off. So we're using it in some cases to kind of get to the real facts behind competitors promotional strategies as well.

Nathan Bush: I could imagine having a scraping tool or robot like you do. You'd have to stay on your toes to make sure that it keeps functioning if you're kind of going that often.

Aaron Cowper: Yeah, yeah. I mean it's, it's definitely our core capability and something we've gotten quite good at. The data that we collect, we do it in a very polite way and it's essentially undetectable to the websites that we collect data from. And we do it usually after hours, in the middle of the night, et cetera. It's something that used to keep me awake at night, but we've gotten quite good at it over the years. In it, there's definitely a tacit understanding among retailers. I think almost everyone does it in some way, either uses someone like us or tries to do it somehow themselves. So I think there's a little bit of an understanding as long as you're not bringing down someone's website. It does happen that it happens here.

Nathan Bush: And from a commercial model of Shop Grok, how do your clients normally engage commercially and what kind of investment is usually required?

Aaron Cowper: It's a SaaS model, so you know, it's basically a subscription. But we cater for, as I said earlier, for lots of different types of retailers and brands. So at a base case it might be we just want to track our one or two biggest competitors and maybe even only a certain number of categories. In those cases, basically the cost is just based on the number of competitors that the retailer wants to track and there's no setup cost. And typically we can get started without any input really from the team. Usually some sort of range list with a bit more product detail than what's on their website is usually good. But we can collect the data from the retailer's own website to get started if needed. And then as we go usually we'll start to integrate a bit more. But yeah, so the cost is based on the number of retailers we're tracking that, the size of the range, the amount of kind of more manual matching we need to do. We mentioned private label matching before. So if there's more manual human based matching and then different add ons, things like if you want to do full price automation, there's usually a bit of an integration to make sure that that's working with your whatever platform you're using internally.

Nathan Bush: Gotcha. And in terms of those integrations, say you are on Shopify, you're on BigCommerce. Are they easy enough to set up? How does a retailer go about that?

Aaron Cowper: Yeah, yeah. For the big platforms like Shopify and BigCommerce, et cetera, their APIs are very well documented and we've integrate very well with those. It tends to be more the in house built systems that are a bit harder to manage. So in those cases it's often a file upload or there's some sort of internal process we might need to configure. But yeah, definitely the larger kind of ecom platforms are much easier to deal

Nathan Bush: with for sure as you get retailers going down the path. So I love that there seems to be a stage process here. It's like, yep, look, let's just compare like for like to start with and that's easy enough to get going. Do you find then that some retailers, once they get comfortable use shop grok to explore new categories or new product categories and understand where kind of the blue ocean might be.

Aaron Cowper: Yeah, definitely. So that mentioned before, I think that you know we have that the transparency piece is probably the starting point and then usually it comes along with an internal need to create a price strategy and then execute on that. So there's sort of a, an initial understanding piece, then there's a price strategy, kind of devising the strategy and starting to execute on it and then then you get into more of a BAU maintenance piece where we're understanding where we are against the strategy and then from there the types of things that the retailers that are a Bit further along the capability scale will get to is how do we understand new products and new trend that are popping up in the categories that we compete in or that we may want to compete in. And they might be looking at categories they don't already compete in and understanding who are the players in that market. If we launch, what pricing would we need to launch at and how would that impact margins, etc. We also work with a lot of marketplaces, so either standalone marketplaces or a lot of retailers are now launching their own marketplaces where they're just bringing on sellers who are going to sell via their platform and use that to extend their range. So in those cases, a bit of a different use case again, where we're saying, okay, we might be actually going to other marketplaces and giving them a bunch of information about what sellers are on those platforms and who they could go after from an acquisition point of view, which sellers they might want to actually talk to, get them on their own platform. And then once they do have them on the platform, are they giving you all their inventory? So are they only giving you the odds and ends that they don't have on their other channels and are they competitive with their other channels? So is it the price that they're setting on your marketplace competitive with the same product that they're selling on other. Other channels? So, yeah, there's types of marketplace products range and those types of things tend to be places that they'll go after after getting the initial transparency piece done.

Nathan Bush: Yeah, that is interesting. From a marketplace perspective, I can imagine that there are a lot of scenarios where you go, oh, They've just released 3,000 of this 2014 product and I can see that it's not listed anywhere else. We're stuck with this.

Aaron Cowper: Yeah. Or they might you list on a big marketplace that has a lot of traffic to it, knowing that customers will find the product and then maybe look somewhere else and then if the price is cheaper there, that they might get the traffic but then lose the customer. So, yeah, important to make sure that sellers are incentivized to be competitive with the products they do put on your marketplace.

Nathan Bush: Yeah. And you've thrown up so many ideas today, Aaron, around pricing strategies and how to think about it a bit different, especially for people who may have just like price is the price. We've always done this. We might increase it 2%, 5% every year. That's kind of as far as our thinking goes, whether they are using Shop Grok or not. What would be your recommendations as someone who has studied and implemented pricing strategy for so long. If you were to say here are three things that if you haven't thought about your pricing for a long time, three things that you think they should go out and do immediately.

Aaron Cowper: Yeah, it's a great question and something I think any size retailer can easily go and do. So number one would just be to really understand your own product range and the purpose of each product within that range. And it could be as simple as just two groups. So it could be 80, 20, what are the 20% of SKUs that basically give me 80% of my sales and those are typically the really important products. So the second step would be what's the strategy for those different groups? So likely for kvi known value item or key value item products that top 20%, usually the strategy will need to be I need to be competitive, I need to be within the consideration set for a consumer and that depending on the category that might be, I need to be exactly line ball, I need to be within 5%, I need to be within 10%. Really depends on the category. But what's my strategy? And then that's our cashflow product. Yeah, exactly. That's my traffic driver. That's how I'm going to earn the right to then sell other things to that product, to that customer. And then on the rest of the range that's where it gets interesting. You know, that's where you've got your private label range, you've got profit generating products, you want exclusive products. So how do I convert customers? They might come for the traffic driving product, but then they put these other products in their basket and that's where I get my margin. So. And you need input from everyone. So it's not just pricing, it's how does my E Com team help me with that with recommendation engines, et cetera. How does my store team, if it's a store based retailer, execute in store to make sure that there's cross shop items in the right places? How do I do above the line? How do I do EDM that will align with these objectives. So the third piece is probably the execution which is the cross collaboration between all these different parts of the business to make sure that you have a cohesive omni channel strategy that tells customers what you're doing and explains the value to them.

Nathan Bush: Great tips. Thank you. I think that's a great starting point for anyone who hasn't revisited that for a while. I've got a question that's been in the back of my mind actually, but I couldn't Find the right place to put it into our conversation. Obviously, studying pricing for so long, you would see your fair share of retailers displaying pricing in different ways, especially online. And it's got fairly complicated, I'd say in the past two or three years because you could have a price, discounted price, member price, Maybe pay in 4 installments price. When you're talking to clients, what's your general recommendation around how you display price to customer? Is the simpler the better or is it better to give more options?

Aaron Cowper: No, I think keep it simple. One of my favorite retailers is Kmart actually, which is very low. They're not actually a customer of ours, but I just, I like them mainly because they're so simple. They only show one price. They don't show was this. Now that. But you know that they're always competitive. So that, or at least I have the perception that they're always competitive. Maybe they're not. So I go there with my kids. They have, if they've got a bit of a budget, they've got some pocket money, they can go there with a budget. They can always get something from the toy section or whatever.

Nathan Bush: And they always pick slime. Like they always go slime, always $2. And you're like, oh, like there's other stuff for $2.

Aaron Cowper: Not the slime. Not the slime. Yeah. So I think keep it simple. I mean, obviously depending on who you are, you know, you need to probably find ways to compete. But yeah, like I think if you're going to get complicated, you need to have a reason for it and real objective in doing so. So there are some innovation out there. So like auto delivery pricing is something that we see a lot mainly in like in pet food. All the pet retailers now have auto delivery pricing that tries to, because it's such a competitive area. Pet care, the auto delivery in some ways gives you a bit of loyalty, I suppose. So you offer a lower price but you get some lock in. That's an interesting one that we've seen for products that are repeat purchase. But then, yeah, I think below the line personalization stuff. If you can get there, if you can build a good member program and collect real data about your consumers and then deliver them real personalized offers, that's obviously the holy grail. It does take a long, long, long time to get there. Not necessarily a long time, but it requires a lot of thoughtful planning to put a program in place and then have a team that can actually create offers that are, you know, using an engine that's, that's actually personalized and have

Nathan Bush: you seen any examples or come across the scenarios where retailers are working out, especially online retailers around setting a price and then adding shipping? And we all know that adding a shipping in the cart or the checkout is the number one cart abandonment tool. Yeah, I know a lot of retailers are thinking, well, how do we set up our pricing model and our margins so that we can absorb shipping in the price and offer free shipping. And that's part of the proposition. But it may make us more expensive than our competitors up there front. Have you seen retailers struggle with that?

Aaron Cowper: Yeah, definitely. And I mean we've seen retailers who have tried to use shipping as a way to increase their margin by moving shipping around. And we've seen actually a few retailers being pinged by the ACCC for doing that because it's. So I would certainly not recommend that. But there have been retailers that we've seen do that where they're trying to move shipping around day by day. Obviously it's not reflecting the actual shipping costs, but you're right. Like if you, you never want to see big shipping charge in the checkout. So you know, the obvious one is trying to build some sort of member program like an Amazon prime or a Catch or something like that. The actually the Catch one, I can't remember the name of, the top of my head. One.

Nathan Bush: One something. One pass, I think.

Aaron Cowper: Yeah, one pass. That's right. I've signed up to that actually, my wife and I. And so it does lock us in somewhat. Yeah. If you're not big enough to do that, then I think it's probably something you probably need to absorb or at least you need to have a really good returns policy and kind of offer that service so that customers can purchase and then return with no questions asked, et cetera. Especially in like the apparel space, et cetera, where people want to try things on or that change of mind or buy the wrong size, et cetera. It's definitely a tricky one because fulfillment costs very expensive and the costs are only going to get higher. So definitely something that the retailer is going to have to continue to deal with.

Nathan Bush: Any of your clients started experimenting with charging for. For returns?

Aaron Cowper: Not that I've seen and I can't imagine that would have very positive impact on consumers. But I haven't seen that actually seems to be a bit of a trend

Nathan Bush: coming out of the uk, especially at the moment.

Aaron Cowper: Right.

Nathan Bush: I think H and M and Zara have just started doing it for multiple items. It's a fee. Like if you buy a dress for $120. We'll refund you 118 just to try and stop that behavior of.

Aaron Cowper: Yeah, if it's upfront and it's known, and particularly, I suppose, at that level, the kind of mainstream retailer where you're expecting to get a value item and it's known, it's sort of like that, the Aldi model, where you expect to be treated slightly more poorly. Maybe that's a way to do it.

[Voiceover]: Aaron, what's next for yourself and the team at Shopcrock?

Nathan Bush: What do you got on the radar for the next 12 months?

Aaron Cowper: So we're really in the phase now where we're. So we're A team of 12, mainly based in Sydney. We've got a couple of people, so one in Melbourne, one in Tassie and just building out the team. We're heavily technical, so most we have, we're marketing people, but the rest of us are very technical. So over the next 12 months, we're just really trying to build out the team and do more of this sort of stuff. We've been a little bit stealth for a long time, just heads down, kind of building through word of mouth. And so now we're just really starting to go to the market to really try to accelerate our growth and accelerate our product as well. So, yeah, it's an exciting 12 months, for sure.

Nathan Bush: Very exciting. You may regret coming up for air and putting yourself out there.

Aaron Cowper: Yeah, potentially. We'll see what happens. All right.

Nathan Bush: And so if people have listened to this and would like to pick up the conversation around how they might work with Shop Grok to improve their pricing strategy, what's the best way to get in touch?

Aaron Cowper: You can check out our website, shopgrock s H-O-P G-R-O-K.com there's a lot of information in there about our different products in the suite and a couple of videos. You might see my head there or feel free to email me. Aaron. Aaron. Shopgrock.com Happy to have a chat and love meeting new people in the retail space. So even if it's not to talk about our services, always happy to have a chat about retail.

Nathan Bush: So good. Straight to the source.

Aaron Cowper: Yeah, exactly.

[Voiceover]: So, Aaron, thanks so much for joining

Nathan Bush: us on Add to Cart.

Aaron Cowper: Yeah, thanks, Nathan. Cheers, thanks for having me.

[Voiceover]: If it wasn't already, I hope that got pricing onto your 2024 radar. I think Aaron had some great tips in there. If you are on the verge of thinking about raising your price.

Aaron Cowper: Price.

[Voiceover]: Some things to think about, because as we said, that is one of our biggest levers we have, which leads us into our three tips from this episode. My number one is that pricing is never static. Too often we are scared to play with pricing, but it is one of the most powerful levers that we have. Your competitor landscape is constantly changing. They're playing with their prices as is the demand from your customers. Make sure you you price appropriately to maximize your potential margin.

Nathan Bush: Don't do it once every couple of years.

[Voiceover]: It is something you should be looking at and looking at together throughout the organization on a regular basis. Number two, you need pricing consistency for trust. While it's not always simple, having consistent pricing across all of your accessible channels such as website in store, Apps Marketplace is so crucial to build trust and encourage immediate conversion. You know yourself, if you have an inkling that there may be a cheaper price out there, you'll go searching. This distraction can lose a sale immediately if a customer trusts that this is your best price. When they land there, you're more than

Nathan Bush: likely to get the immediate sale.

[Voiceover]: And number three, don't be afraid of hiding prices. At the same time, don't be afraid to offer gated discounts. These are targeted, usually at your best customers. As Aaron said, think in app discounting. Loyalty offers unique codes. The more targeted the better, especially if they aren't for new customers that would

Nathan Bush: have converted regardless,

[Voiceover]: thanks for joining us today on Add to Cart to listen to all our e commerce conversations now in the hundreds. You can head on over to addtocart.com there you can also join up to our free private Slack community to share e commerce ideas, tips and questions with other listeners. You can also subscribe to the Add to Cart weekly newsletter and browse some of the video highlights from our chats. There is a lot there that's add to cart.com and if I can ask you one thing before you go. If you enjoyed today's episode, make sure you share it with a friend or a colleague who could benefit or leave us a review. It really makes a difference. Thanks again for listening. And until next time, keep those customers adding to cartoon.