The tools to optimise your retail pricing and promotions

Itim is a specialist service provider to the retail sector of optimisation tools for pricing and promotion, delivering end-to-end multi-channel retail applications and insights, which help retailers optimise their business for 21st Century retailing. Itim’s solutions fall into two major categories – optimisation solutions, led by their Profimetrics suite, and an end-to-end Multi-Channel software platform called “The Retail Suite,” which delivers ERP in the cloud, and is the first solution of its kind.

Itim is driven by a passionate desire to help retailers improve margins, reduce costs and improving profits, and increase sales. Another Itim solution, Didos is an invoice matching and supplier payments solution ensuring accurate supplier payments, so you only pay suppliers what you owe them, and track your costs of sale more accurately. Itim also supplies supplier billing software, which helps identify whether retailers hit volume thresholds and dovetails with Profimetrics on price and promotions. Howard Langer, Head of Pricing & Promotions at Itim, spoke to The Grocery Trader.

The Grocery Trader – Howard, can you tell us what your role involves?

I talk to retailers about the opportunities for improvement in their pricing, promotions and markdowns and take them through the process. It can be quite difficult for people to get their arms around this area, so we’ve developed a health check process in which we talk to them, point out their problems and go in with tailored solutions. It’s very consultative, going back to our roots as a consultancy.

GT – Are you personally responsible for Profimetrics?

I’m responsible for Profimetrics in the UK. I’m also involved with our Profimetrics teams in Iberia and South America.

GT – Who else is involved in marketing Profimetrics and your other solutions to the UK retailers?

We have 25 people here and in Portugal working on development, accounts and project management, who are all retail specialists.

GT – What were you doing before Itim?

I started as an accountant with PriceWaterhouseCoopers, then moved to Superdrug, working on product location, space planning and marketing analysis. From there I moved to B&Q to head up their pricing. At B&Q I had a team of analysts and price checkers, and worked with the main board and the commercial and operations directors. I devised and implemented the pricing strategy and worked closely with the buyers and category managers: as a £4billion business pricing was a key ingredient in the mix of the major functions. After that I worked as a consultant, then joined ITIM. I’ve been here six months.

GT – When was Itim founded, and who by?

Our CEO, Ali Athar, founded Itim in 1993. Itim started out as a retail consultancy business, working with a lot of big players in grocery and nonfood retailing, and around 10 years ago it became a specialist software company. A major part of our revenues are derived from the Profimetrics suite of products: effectively we are now a retail software company with a consultative approach.

GT – Where is Itim based?

Our head office is at Marble Arch, in London.

GT – Where does the name Itim come from? Is it an abbreviation? What does it stand for?

It originally stood for Introducing Transformation in Management. “Transform X/R/M” was Itim’s methodology for re-engineering.

GT – Can you tell us who your clients are, and what you do for them?

Our grocery clients include Sainsburys, the Co-operative, One Stop and Musgrave. The non-grocery list includes Halfords, Argos, John Lewis, House of Fraser, McDonald’s and Costa Coffee.

In Iberia & Brazil we work with grocers and wholesalers like Makro, Angeloni, Eroski, Sabeco, Caprabo, Miquel and Sabeco.

To generalise, our healthchecks evaluate retailers’ processes on promotions and markdowns and whether their margins are leaking, and play back the findings. We then talk to retailers about our toolset, and from there implement solutions and plug gaps. We don’t put in place massive programmes: it’s more a case of ‘do-learn-do.’ Flexibility is key, and we work as effectively with individual categories or across the business as the client needs it.

GT – Were you personally involved in developing Profimetrics?

No, Profimetrics was developed in Portugal by the inhouse team at Enabler, a subsidiary of Sonae, then the business was spun off and Itim bought it. These days the ongoing development happens in Portugal, and I work with the team there on bespoke solutions for clients.

GT – Do you have any clients in other countries besides the UK?

Yes, we do. Under Itim’s control, Profimetrics has been taken up by lots of retailers in Spain and Portugal, and now also in Brazil. Profimetrics is a big story for us in South America overall.

GT – In non-technical terms what does it do?

Profimetrics completes the cycle of margin optimisation. There are many ways retailers can leak margin in pricing, promotions and markdowns: a lot of promotions are very tactical, and targeting could be better with different discount levels. Profimetrics helps manage the process: all the decision makers see one screen at all times, and it allows you to see current promotions easily. It allows lots of buyers and merchandisers to nominate products for promotions across the different channels, and have promotions going at the same time or different times. You can also use it to simulate what’s going to happen: this is information that is often lost. You can make predictions against the calendar of previous promotions and sales uplifts.

GT – Different retailers have different rules about promotions. Does Profimetrics allow for that?

Yes, it does. Some retailers have rules, for example about never selling below cost price. These can be built into the system, so if you do a promotion you don’t need to worry about conflicts, and all the information is in one place. You can see potential money losers and areas of conflict, and sort them out in good time.

GT – Does Profimetrics enable you to set up and implement a promotion?

Yes, it does. With Profimetrics you can take the signoff process to the highest level in the business and then once it’s approved, press go and the system sends it to whoever’s going to execute it. It’s all very safe, secure and password protected.

GT – How do you use Profimetrics?

We can host it here at our offices, so if retailers want us to do the work, we can. Or retailers can have the system on site in their offices. Our solutions integrate with the retailer’s sales, stock and computer data feeds, and as a supplier we are very familiar with the various areas of concern, including multi-channel retailing.

GT – What comes ‘in the box’?

The Profimetrics screen looks like an Excel spreadsheet but on many dimensions: you can see sales information, cut versus other brands, and so on. Profimetrics only stores information retailers want to use. You many not want to see all the departments in the business, just specific categories: one click and retailers can use it all.

GT – What are the quirks of UK retailing that Profimetrics is ideally placed to help with?

The UK is quite advanced in multichannel retailing, and we’ve made sure Profimetrics can deals with the complexities of a multichannel environment, for example with promotional prices on line first and the same prices in store later on. We’re gearing up for a multichannel world. Profimetrics also has a multicurrency capability, if you’re trading across territories.

GT – Who do you see as your nearest competitors?

There are some competitors on the software front: Oracle and SAP have some capability in their ERPs, but we have developed an application that can easily adapt as business models change. Having been in retail a long time we know what retailers want to do and have built that in, and we know that retailers value someone helping them fine tune what they do and coming back to check they are getting the most out of the system.

GT – Pricing sounds a very specialist area, involving very skilled people. Can technology like this make the process simpler?

Yes, it can. Profimetrics lets you learn at your own pace – crawl, walk, run, rather than bang and you’re in the race. We’ve set it up to start simply and get people using it, then see what they can use it to do next. If they have well honed processes, they can start further in, but we believe bursts of 10-12 weeks, which we call sprints, are probably best. We make sure retailers are happy with the system they have.

GT – Don’t the major retailers already have IT systems in place to manage their pricing? What difference can your solutions make?

Retail has lagged behind other industries in terms of managing pricing. The airlines are managing seat prices on a daily basis, and hotels and petrol forecourts are doing much the same. Pricing is the most powerful lever in retail. It’s not as difficult as it sounds or as mysterious and magical – if you have the right tool sets, like the ones we provide, the margins you can get back are enormous. The decision, though, must always stay with the buyers and merchandisers. The systems will provide recommendations, do the heavy lifting and show you want is likely to happen but ultimately it is up to the commercial teams to decide what they go with. It’s not a black box, it’s a white box where everything is open to see.

GT – Is this problem any worse now?

Yes, it is. It’s a crucial issue in the current retail environment. Retail is a bloodbath with retailers doing more and more promotions, because what else can they do? Consumers are hooked on a diet of low prices, and the retailers are caught in a pincer movement: with our current economic problems consumers don’t want to spend, so retailers cut prices. Then competitors see what they’re doing and react, and you have a downward spiral. On top of that consumers can compare more and more prices so the tendency is to keep reducing prices.

GT – Presumably this needs buy in at the top of a retail organisation. What do the senior managers in UK grocery retailing think about your solutions?

Profimetrics delivers significant margins and returns for our clients, and growing numbers think it’s the silver bullet they’ve been looking for! If you deconstruct retailers’ promotions and put our process in place you’ll be surprised how much profit you have been leaking. Many retailers use Excel spreadsheets in different parts of the business to run their promotions, and it’s very hard to get data. Also Excel can’t take into account what happened last year, include all your promotion and pricing principles or deal with multichannel prices. The process is more involved than that.

GT – What kind of difference can your tools make?

Profimetrics helps achieve margin increases of anything from 1% to 4%, and in some categories you can recoup significantly more. Retailers have pricing strategies, but it can be hard to implement them faithfully in store. Profimetrics closes the gap between what the consumer sees and what the retailer originally said they wanted to do.

GT – How flexible are your solutions? Can you do different pricing at different times of day?

Timing can be to the hour. We’ve carrying out a big piece of work with a leading UK department store, with different prices on loyalty cards and so on. It was all previously done on Excel spreadsheets. We bring all the information together. We also have execution engines to send the prices to the tills.

GT – Can you also use Profimetrics to do regional pricing?

Profimetrics is used in regional pricing in Spain and Portugal, but is less relevant here. The opportunity in the UK is in differential markdown. With Profimetrics you can see faster what’s selling out and spot local demand and mark down correctly for each store. The savings are huge.

GT – Do you take retailers’ existing data?

Yes, we do – sales, stock, competitor prices. The data we take is a small proportion of the total. We’ve spent a lot of time building Profimetrics, and making sure it interfaces with retailers’ systems simply and effectively.

GT – Can busy managers cherrypick what they need from Profimetrics?

Yes, they can. Profimetrics incorporates Active Intelligence. It works like a radar system: we can sweep daily and send back alerts so people only focus on the things they’re interested in. If you have no alerts you know everything is OK.

GT – How much can Profimetrics predict the outcome of promotions?

Profimetrics has wizards to calculate price sensitivity, and you can create your own tags for products that make sense for you, or import your own numbers. Forecasting the success of promotions and the likely demand they create for those products is a difficult one in any case. This tool makes retailers’ lives a lot easier, but forecasting still involves judgement and is something of an art. What we’ve done is free buyers and merchandisers from having to create their own data factories so they can spend more time being creative. Promotional history is available at the touch of a button; often this sits on various spreadsheets and you can’t find it when you need it.

GT – What size of retailers is Profimetrics aimed at?

Retail organisations or people managing categories worth £100m or over will benefit significantly. Smaller categories will benefit too, but the real benefit is seen in the big categories.

GT – How does this tool help retailers negotiate with suppliers?

The manufacturers are pretty clued up on what deals work, and in many cases have decent information. This tool can build extra intelligence on the retailer’s side, so both parties are well informed. This presents a big opportunity for retailers to go into conversations with suppliers armed with as much information as they have, if not more. The retailer can see tracked products in the context of others and see where to withdraw or gear up on promotions. They can also make different strategies for specific categories, including taking a lower margin temporarily because they know how the market will react.

GT – How long does it take to show a return with your solutions? What sort of returns do you show?

The results are almost instantaneous – after a few weeks you begin to see changes in volume and changes in margin. The returns are significant: price is the most powerful lever in retail. If you improve prices 1%, your net profit improves 11%, and if you reduce your variable costs by 1%, you improve net profit 7 or 8%. Improving prices is 50% more effective than cost cutting.

GT – Can you also tell us about Didos, and who this is designed for? What about the Supplier billing software?

Didos involves matching invoices and payments, an area where automation can deliver big increases in efficiency. Supplier billing software ensures that what you are owed, you collect. Volume and value triggered deals get struck by buyers and don’t always get followed through. If you store the details electronically with the supplier billing software, you log them coming in and Didos sends them out.

GT – Do you have any other solutions that are relevant to supermarkets, Co-ops and convenience store chains?

We also offer a product information management tool, to store and code data assets such as product cataloguing information.

GT – Do you have ‘entry level’ versions of these solutions for small retail groups?

Everything we do is scaleable up and down. We offer flexibility, not a huge, rigid, long term solution.

GT – What is involved for a retailer that wants to implement your solutions? Who do they need to contact at Itim to get things moving?

They can contact me initially, to discuss where they are in the process. We believe we have a different approach, to help them get the most out of their pricing and promotions.

GT – How quickly can you design and implement a pricing solution?

Each project’s different, but there are only so many interfaces that clients need, and it’s a lot quicker than you might expect. We have a great team, who sit with the client in the development stages. We get a handle on the issues in a matter of days and make our recommendation in a few weeks.

GT – How much training do staff need to work with your systems?

Generally, people using it have a day or two of training. After that they learn on the job as they use our kit to do promotions and go through the steps. They know what they want to do, and we make it easier.

GT – As retailers’ operations become bigger and more complex, can your solutions keep up? How scalable are they?

They can be very scaleable. We’ve built our systems to be totally flexible, with different offers in different stores, territories, channels or for different customer segments.

GT – What do you see as the biggest areas of opportunity for people to use your solutions to make their margins bigger?

Because the grocery market is so competitive, prices are converging on the big brands, and it’s harder to make money on standard selling prices. There are still lots of opportunities in better management of promotions and markdowns in food, and there are big opportunities in non-food where margins are generally higher.

GT – Besides this interview how else are you getting the message across to the retailers?

We’ve got good contacts already, and the approaches we are making are more direct. Retailers’ needs vary widely, and in our experience talking to individuals is the best way to get the message across.

GT – Finally, where do you see Itim and Profimetrics going from here?

The UK is a rich seam for us, particularly in the current climate. Because of the state of the economy, pricing, promotions and markdowns are of huge interest. Profimetrics works for big and medium sized retailers across different departments and categories, and is really taking off in other territories, so it’s about time the UK benefited from it too!

Itim

Tel: 020 7598 7700

www.itim.com