Retail technology priced to sell

Software that can help figure out why consumers buy a particular product has become the latest battleground for Oracle and competitors.

A correction was made to this story. Read below for details.
Apple Computer has the marketing savvy to deliver the Mac, iPod and other consumer hits. But when it comes to pricing its products, the company sometimes needs help.

In order to find a pricing strategy that can quickly adapt to shifting consumer trends--and translate into millions of dollars in new sales--Apple earlier this year said it turned to Rapt, a maker of specialized pricing optimization software.

Apple "came to us to build a more rigorous pricing strategy; essentially these companies are saying they've hit a wall...on pricing," said Tom Chavez, Rapt's chief executive.

Predicting sometimes fickle consumer buying habits is becoming more science than art, said analysts. "It's a lot harder to understand why you might have sold more of one color T-shirt than another color, versus some other kinds of products, but that's exactly what this software is trying to tell you," said Laura Preslan, an analyst with AMR Research. "To the extent that retailers can eliminate guess work, they'll usually see results very quickly."


What's new:
Consumer-products and retail companies are turning to sophisticated pricing tools to help see beyond the data in their ERP and CRM systems and figure out subtle trends that directly affect how their products are purchased.

Bottom line:
With Oracle buying into the market via its acquisition of ProfitLogic, and smaller companies such as Performance Retail and Notiva merging operations, the pricing-software landscape is undergoing significant changes. With other major applications makers such as SAP and Siebel Systems hot to compete closely for deals in the retail space, experts are predicting that there will be even more consolidation in the so-called pricing optimization sector.

So it should come as no surprise that Oracle, a giant in the market for business software, has pounced on pricing optimization as the next big thing. The company bought ProfitLogic--a Rapt competitor--last month, effectively planting its flag in what analysts see as one of the fastest-growing areas in the retail software industry. (CNET Networks, publisher of, is also a Rapt customer.)

Pricing optimization is a market that Oracle couldn't afford to ignore, co-president Charles Phillips told CNET Pricing software "is really the high ground in retail right now."

Preslan and others say it's only a matter of time before Oracle's rivals, such as SAP and Siebel Systems, follow suit. And consolidation among the handful of pricing-software specialists will likely follow, she said.

"Oracle, SAP and Siebel have all identified retail as a market where they want to compete for more deals, and building out pricing applications is at the top of their list of goals," said Preslan. "These companies have built the underlying systems needed to power this kind of complex retail technology; they're looking to piece-in the sort of specialized retail expertise that a ProfitLogic can bring."

As further proof of the consolation trend, earlier this week two smaller companies in the pricing optimization space, privately held Performance Retail and Notiva, announced that they would merge operations. Executives at the companies cited competition from larger players, including Oracle, as a primary motivator for the merger.

ProfitLogic marked the second significant retail-technology acquisition made by Oracle in the last six months alone. In March, the company bought out Retek, a provider of retail supply chain software, for roughly $700 million, but only after engaging in a bidding war with rival SAP for control of the company. Oracle has said publicly that it will use the products acquired via Retek and ProfitLogic together as part of its push further into the retail sector.

Preslan said the market for more-specialized software is heating up as Oracle, Siebel Systems, SAP and others look for new ways to build revenue. Where those companies once specialized in applications designed to meet the needs of any type of business, the dearth of big deals continues to press the enterprise players to invest in specialized tools that appeal to smaller groups of customers.

A number of companies with pricing expertise could be on the radar of Oracle's rivals. Applications makers including Rapt, Retalix and Zilliant  

Correction: This article incorrectly identified Laura Preslan. She is an analyst for AMR Research.
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