More than ever, customers are carefully watching the cost of their grocery runs. Nearly 90% of shoppers say they’ve switched up their habits to save money — from ditching their favorite name-brand goods to sticking to a strict shopping list.
There’s one other key way they’re keeping household costs low: investigating and comparing grocery store prices.
These commonly compared products are called key value items, or KVIs. KVIs are the staples on every shopper’s list, like bread, milk, or eggs. If your prices on KVIs are too high, customers won’t give the rest of your selection a chance.
In this blog, we’ll take a closer look at KVIs and why they matter for independent grocery stores and specialty markets like yours, outlining common KVIs and strategies for setting the right prices.
Let’s dive in!
Key value items are a small selection of products that have a major influence on how customers perceive your grocery store’s pricing.
Customers purchase some products so frequently that they have the typical price memorized. If your shelf labels seem right, you’ll earn these budget-savvy shoppers’ trust. If the sticker prices exceed their expectations, they’ll assume the rest of your products are overpriced.
Remember: They aren’t auditing the price of every single product on your shelves — they’re just doing a quick mental check of a few specific items.
Knowing your store’s KVIs and keeping a close eye on their prices is crucial if you want to win over new customers and keep your loyal customers — especially when it comes to competing against the big-box grocery giants.
In a typical supermarket, key value items tend to be everyday staples: a gallon of milk, a loaf of bread, a dozen eggs, and a bunch of bananas.
But your store’s product selection and KVIs might be more unique. Let’s look at a few examples of KVIs in different types of specialty markets:
These products have one thing in common: purchase frequency.
Your point of sale (POS) system’s sales reports are the best bet for identifying your store’s unique KVIs. Here are two metrics to look at:
For most independent grocers, KVIs make up 5–15% of total SKUs. Take the time to comb through your current and historical sales reports to identify them and analyze their pricing.
Now that you’ve found your store’s KVIs, let’s talk about how to set the right prices for them.
The downsides of overpricing your KVIs are obvious. Customers will lose trust in the value of shopping with you, they’ll spend less during each shopping trip, and they’ll turn to your competitors.
But pricing your KVIs too low isn’t the right strategy, either. Since these are some of your most frequently-purchased products, they make up a significant percentage of your revenue. Charging too little for them could make a major dent in already-thin profit margins.
That’s why it’s so important to take a smart approach to KVI pricing. Let’s explore three strategies successful grocers use to protect their reputation and profitability.
The first and most important step in setting the right KVI prices is to take a data-driven approach. Often, grocers set prices that “feel” right, rather than relying on the actual numbers.
To strike the perfect balance when pricing your KVIs, look to your POS system data. Your grocery software should help you manage suppliers, track wholesale cost changes, and calculate the margins on each of your products.
For example, modern grocery store POS systems like IT Retail include invoice scanning, which lets you instantly update your inventory counts and wholesale costs for each item. You can then use this information to make smart, timely price adjustments.
Related Read: Tariffs and Grocery Store Owners: How To Raise Prices Without Losing Customers
One way to stay on top of these constant wholesale cost changes and remain competitive is to adopt a dynamic pricing approach.
Changing prices can be slow, labor-intensive, and error-prone. After changing the prices in your POS system, you have to trust your sales associates to adjust every shelf tag and ensure items ring up correctly.
Electronic shelf labels (ESLs) make this process much easier. You can adjust the prices of your KVIs in just a few clicks, and your ESLs will automatically update to show customers the correct price.
This dynamic pricing strategy allows you to respond instantly to rising wholesale costs, supply chain issues, and competitor pricing changes.
Offering the lowest prices on key value items while protecting your profit margins is a challenge, but launching a private-label brand makes it possible. This is an especially effective strategy as more customers reach for store-brand grocery staples to save money.
Generally, you have much more control over the cost of private-label products since you’re not locked into a national brand’s wholesale pricing. You can experiment with different price points and enjoy healthier margins on these frequently-purchased products.
Here are a few tips for promoting your private-label KVIs:
Private-label products are an excellent way to keep KVI prices low and compete with well-known store brands like Great Value and 365 Foods.
Ready to build your reputation as the most affordable grocery store in town? IT Retail can help.
Our powerful, all-in-one grocery store POS software has all the tools you need to spot your key value items and find the perfect prices for them, including in-depth sales reporting and analytics, vendor and wholesale cost tracking, and ESL integration.
See these features and more in action by scheduling your live, personalized demo with one of our experts today!