North South Divide: Differential Pricing

The latest topic to be discussed in hushed tones around the retail industry?
Differential Pricing... Its success in Europe is causing retailers to once more ask themselves why they charge the same for a product regardess of where it is sold....

If retailers were able to differentiate on price based on location, such that your tshirt would cost more in London than it would in Manchester, they argue that this would allow them to optimise margin (well it costs more to run a shop in London..yada yada) and stock position- as products would be more appropriately priced for the region i.e. your t-shirt wouldn't be flying off shelves in Oxford St because it was cheap, and sitting on the same shelves in Leeds because it was a bit pricey.. Hmmm... I don't think so..

Despite the hopes of retailers (and the software suppliers trying to sell them price optimisation tools) Region or location based differential pricing will not fly in the UK. It is not customer facing and it places certain customers at a disadvantage simply because of the location of their nearest store, and especially in the current cut-throat climate, this is absolutely un-palatable. As a customer, I simply don't care about the local variations in operational costs- and I shouldn't have to.
A shopper in London is not automatically more wealthy than shoppers in other parts of the UK ( no sniggers please), so if they are asked to pay a higher price simply because they are closer to Westfield, where rents are higher, than the Trafford Centre, they are being discriminated against, and I can't think of a quicker way to lose a customer's trust, and yes, custom....

This is not to say that differential pricing based on channel is not possible and indeed for some sectors of the industry, probable. With regard to certain product categories, customers may be comfortable with paying a premium for the full shopping experience that buying that product in-store offers, with a cheaper price for an e-commerce channel to reflect the much lwoer over-heads of that business arm (although you will pay more for the delivery anyway). Yet in other product sectors, and probably for large national retailers also, even this is not seen as customer facing enough, and the importance of consistency across all platforms- product, pricing, brand message etc is crucial overall, to growing business and loyalty, regardless of additional margin opportunities that this may preclude.

Long and the short of it? Businesses considering this should think very carefully about what their customers will and won't find acceptable, and progress with caution indeed.

I suggest that retailers will have to find much smarter ways than this to optimise profit and stock without impacting negatively upon the all important retail experience..