DemandTec Wins Another Supermarket User for Pricing Software

 
 
By Jacqueline Emigh  |  Posted 2005-11-18
 
 
 
With competition growing in the price optimization arena, veteran player DemandTec Inc. has added Giant-Carlisle, a division of supermarket king Ahold USA, to a list of customers that already includes household names Radio Shack Inc., Best Buy Company Inc., and Safeway Inc.

"The [Giant-Carlisle deal] is another proof point that this software is becoming a must have in the [retail supply chain] industry. Ahold is a very large retailer, and it is very conservative in making decisions," said Mitch Kristofferson, DemandTecs vice president of marketing, in an interview.

Giant-Carlisle manages stores in the United States under the names Giant Food Stores, Top Markets and Martins Food Market.

Its parent firm, Ahold USA, is part of the European-based Royal Ahold Group, ranked by industry analysts as one of the top four retailers worldwide.

But other vendors, large and small, are also responding to current market potential in the price optimization category of retail software, said Scott Landoc, an analyst at AMR Research, in another interview.

This type of software is designed for optimizing initial product pricing, and in some cases, promotion and markdown pricing, too.

Beyond competition from longtime archrival KhiMetrics, Inc., DemandTec is now up against the likes of Oracle Corp., SAS Institute and i2 Technologies Inc., according to the analyst.

i2 is working on price optimization solutions with Payless ShoeSource, for example. SAS Institutes customers in this space include Home Depot.

For its part, Oracle recently bought ProfitLogic Inc., a vendor known for its software for markdown pricing.

Click here to read more about Oracles push into retail software.

Oracles retail industry arm is now reselling ProfitLogics product, "with an intention to integrate it," Langdoc said.

Kristofferson credited price optimization "science," first developed at Stanford University, with helping DemandTec to win major customers in the retail industry.

"Ahold has never had anything like this [software] before, and developing it [in-house] would have taken them too long," according to the DemandTec vice president.

Although recognizing the merits of Aholds science, AMRs Langdoc pointed to ease of use, a recent decision to add an ASP model as an alternative to licensed software, and growing ties with IBM as the biggest differentiators for DemandTec.

"The science is important. But still, merchants need to be able to use the software," Langdoc said.

Only about one-third of current spending on retail software goes to licensing fees, according to the AMR analyst.

The rest is spent mainly on maintenance, support, and consulting.

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