Earlier this year, Oracle made a strategic move deeper into the retail distribution industry by winning a bidding war with SAP for Retek, a niche vendor of retail management software. Now Oracle is adding to its retail presence by reaching a deal to acquire ProfitLogic
. Terms of the deal are not disclosed.
ProfitLogic is one of a handful of vendors focusing on pricing and profit optimization, although many other terms are used. Essentially, these are analytic applications that analyze demand patterns and optimize pricing by SKU by selling location in order to optimize revenue and gross margins. The goal is to adjust prices downward where consumers are price sensitive, in order to increase volume, while raising or maintaining prices where consumers are not price-sensitive, in order to maximize margin. Deciding which SKU in which store is in which category is not a trivial exercise, and it is not always intuitive.
In the past, such decisions were made by retail buyers, who examined sales data and relied on gut feeling developed from long years of experience. But with the typical retailer managing thousands of SKUs over dozens of stores, an expert buyer can only deal with a fraction of the pricing decisions that need to be made in order to maximize revenue.
Retailers that have implemented these systems claim remarkable results in a short timeframe, making the ROI on these solutions very attractive. Yet, the market is fragmented, with niche vendors such as ProfitLogic, DemandTec, KhiMetrics, Manugistics, Spotlight, Connect3, and Vendavo competing in this space. Larger supply chain vendors have also added this functionality to their suites, as Manugistics did with its acquisition of Talus in 2000.
With the market for these solutions fragmented, and the ROI attractive, Oracle's bid for ProfitLogic might be the first of several in this space. Related postsSAP walks away from Retek dealManugistics V7 seeks to deliver profit optimization in small bites