Retailers have faced consistent upheaval since 2020, when the onset of the COVID-19 pandemic sent many scrambling to adjust their strategies for an ecommerce-first shopping world. Today, retailers making strategic pricing decisions need to navigate changing tariff and trade policies, supply chain challenges and shifting consumer behavior.

Despite continued uncertainty, however, one thing that hasn’t changed for retailers regarding pricing is “some of the math,” Carl Lukach, CFO at Bob's Discount Furniture said.

“The math is really about elasticity,” Lukach said in a panel discussion Wednesday during a CFO Dive virtual event. “What’s going to happen when you change the price? Not just with the product that you're changing or considering, but also your other products...what changes across the whole buying behavior?”

Lukach along with Shikha Jain, lead partner for the consumer sector North America at Simon-Kucher, tackled “perma-crisis” stresses confronting consumers and retailers during a virtual panel discussion last week. The session kicked off an April 22 event co-hosted by the editorial teams of CFO Dive and Retail Dive: Is the price right? Understanding consumers and the economy.

Targeting an ‘emotional’ price point  

Another consideration that hasn’t changed for retailers is approaching “pricing by categories,” Lukach said. “You look at whether it's good, better, best. You look at opening price points as emotional price points, price points that actually mean something.”

Lukach has served as CFO for the Manchester, Conn.-based furniture retailer since June 2023, and helped to shepherd the business through its initial public offering this February in a public debut that valued Bob’s Discount Furniture at $2.2 billion, CNBC reported at the time.

Prior to Bob’s, he served as CFO for Noodles & Company, and has held top financial executive roles at Equinox, Abercrombie & Fitch and Credit Suisse, according to his LinkedIn profile.

For Bob’s, an emotional price point would be the company’s $399 sofa, a product it has offered for the past four years, he said.

“When you walk in and see that level of price, it really…sets you up for, what kind of value am I getting across the whole store?” he said of how consumers tend to view the $399 product.

That’s not to say the company hasn’t reconsidered its pricing strategies over the past few years. Bob’s has been on a “pricing journey” since Lukach joined three years ago.

That’s included introducing zone-pricing technology, which enables shifts across different geographies, as well as hiring a “best-in-class” team that is utilizing new technologies to help make more detailed pricing decisions.

The steady advancement of technologies such as artificial intelligence is one area related to pricing that has evolved, Lukach noted, allowing retailers to be more “surgical” when it comes to such decisions — allowing for geographic heat maps or the ability to break prices down by SKU, or stock keeping unit, for instance, he said.

Even as the capacity for such technology grows, Bob’s still tends to “lock in” those emotional price points across its geographies, even at times when “we're adjusting price, whether that's up or down, we like to hold those constant,” he said.

“It just sets the tone for how our customers think about price and value across our entire assortment,” Lukach said.

The pricing sweet spot

The ability to recalibrate pricing quickly is only becoming more critical as retailers look to engage with and retain consumers, who also face persistent inflation and other economic challenges.  

“The word that I use to describe the consumer these last five years is ‘whiplash,’” Jain said. “They’re just constantly back and forth between being flush with cash and then having to conserve their wallet, dealing with inflation, dealing with geopolitics, dealing with uncertainty.”

To meet consumers where they are in real-time, “you can’t have umbrella strategies,” Jain, a 13-year veteran of Simon-Kucher who has advised leading brands regarding pricing and commercial strategy decisions said of retailers today. “You’ve got to get into the details — look at things SKU by SKU, geography by geography.”

Retailers that are seeking growth and prioritizing cost management need that detailed look at consumers’ data to find the right price point for today’s budget-conscious customers. Pricing increases, for example, can be difficult to get exactly right without alienating some future buyers.

Consumers across many categories — including furniture, apparel and personal care — are generally okay with about a 5% price increase, Jain said, citing data from a Simon-Kucher survey.  

“When you start to get to a 10% price increase, that's when they'll start to evaluate, should I look for a cheaper alternative?” she said. When the price hikes by 20%, that’s when many consumers will simply walk away from the purchase, she said.