Since the outbreak of COVID-19 in 2020, retailers have experienced sustained market turbulence, and many businesses have been forced to adjust their strategies to adapt to an e-commerce-first shopping environment. Today, retailers also need to contend with evolving tariffs and trade policies, supply chain challenges, and shifts in consumer behavior when formulating pricing strategies.

However, despite ongoing uncertainty, Bob's Discount Furniture CFO Carl Lukach said that when it comes to pricing, "certain mathematics" have not changed.

"The core of the math is elasticity," Lukach said during a panel discussion at a virtual event hosted by CFO Dive on Wednesday. "When you change a price, what happens? Not just for the product you're adjusting or considering, but also for other products... How does the entire purchasing behavior change?"

Lukach, along with Shikha Jain, Partner and Head of the North American Consumer Goods practice at Simon-Kucher, explored the pressures of the "prolonged crisis" facing consumers and retailers during a virtual panel discussion last week. The discussion was the opening segment of an event co-hosted by the editorial teams of CFO Dive and Retail Dive on April 22, themed "Is the Price Right? Understanding Consumers and the Economy."

Targeting 'emotional' price points

Lukach noted that another consideration that has not changed for retailers is the approach of "pricing by category." "You look at whether it's good, better, or best. You treat entry price points as emotional price points—those price levels that truly matter."

Lukach has served as CFO of the Manchester, Connecticut-based furniture retailer since June 2023 and helped the company complete its initial public offering in February. CNBC reported at the time that the listing valued Bob's Discount Furniture at $2.2 billion.

Before joining Bob's, he served as CFO of Noodles & Company and held senior finance roles at Equinox, Abercrombie & Fitch, and Credit Suisse, according to his LinkedIn profile.

For Bob's, one emotional price point is the company's $399 sofa, which has been offered continuously for four years, Lukach said.

"When you walk into the store and see that price point, it really... makes you think, what kind of value can I get across the entire store?" he said, describing how consumers view the $399 product.

But that doesn't mean the company hasn't reconsidered its pricing strategy over the past few years. Since Lukach joined three years ago, Bob's has been on a "pricing journey."

This includes introducing zone-based pricing technology, which allows for adjustments in different regions, as well as building a "best-in-class" team that leverages new technology to make more granular pricing decisions.

Lukach pointed to the steady advancement of technologies such as artificial intelligence as an evolution in the pricing space, enabling retailers to be more "precise" when making such decisions—for example, allowing the use of geographic heat maps or price segmentation by SKU (stock keeping unit).

Despite the growing capabilities of such technologies, Bob's still tends to "lock" these emotional price points across its various geographic regions, even when "we adjust prices (whether up or down), we like to keep these price points unchanged," he said.

"This sets the tone for how our customers perceive price and value across our entire product assortment," Lukach said.

The pricing sweet spot

As retailers seek to attract and retain consumers, the ability to quickly readjust pricing has become increasingly critical, especially as consumers face persistent inflation and other economic challenges.

"I use the term 'whiplash effect' to describe consumers over the past five years," Jain said. "They keep swinging between being cash-rich and having to save, dealing with inflation, geopolitics, and uncertainty."

To meet consumer needs in real time, "you can't use a one-size-fits-all strategy," said Jain, who has 13 years of experience at Simon-Kucher advising leading brands on pricing and commercial strategy. "You have to get into the details—looking at it SKU by SKU, region by region."

Retailers seeking growth and prioritizing cost management need to leverage detailed consumer data to find the right price points for today's budget-conscious customers. For example, raising prices is difficult to get exactly right without alienating some prospective buyers.

Citing data from a Simon-Kucher survey, Jain said that across many categories, including furniture, apparel, and personal care, consumers typically accept price increases of around 5%.

"When price increases reach 10%, they start to consider whether they should look for cheaper alternatives," she said. When price increases hit 20%, many consumers simply abandon the purchase altogether, she said.