GNC Addresses Its Prices Crisis

The Wall Street Journal: “In October, the acting chief executive of GNC Holdings Inc. made a confession: The big vitamin retailer had ‘a badly broken business model.’ Its prices were too confusing and constantly undercut by online competitors. Sales were plunging. Behind the scenes, executives had decided the only way to fix things was to start over. So on Wednesday, GNC will close its 4,400 U.S. stores to overhaul its pricing system, which featured as many as four different prices on some labels.”

“When the stores reopen the next day, labels for GNC’s protein powders, herbal remedies and nutritional supplements will feature just one price. There will still be discounts, but about half of the company’s products will start at lower prices than before, while a quarter of the prices will be higher … While heavy promotions, especially during the holiday period, have become a sophisticated calculus, the nature of setting retail prices has become more complex. Online stores can set algorithms to change prices by the hour and nearly every shopper is armed with a smartphone, making the market transparent.”

“At GNC, executives gathered input from outside consultants, ran tests in 10 markets and had to get the support of outside vendors as well as its franchise owners. The company eliminated gaps between web and store prices, moved to end a discount-card program and determined new prices by comparing products it carried against similar ones at competitors.”

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