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Is the future all about dynamic pricing within the store?

Instore dynamic pricing

Dynamic pricing has become a normal part of our everyday lives – and we’ve hardly noticed it. Sure, when you pass by a petrol station and see that the price has gone up or down a tiny bit, you could link that to the fluctuating price of oil on global markets, but you don’t expect the same thing to happen when you’re shopping for food for instance. Could they be subject to hour-by-hour price changes driven by data optimization?

They are. Online. Amazon’s prices change constantly. Sophisticated algorithms track general as well as specific prices by looking at a range of factors: competitors’ prices, supply and demand, levels of interest… any kind of data that could make a difference between making the sale (at a profit) or not. In February 2017, during our Connected Retail Webinar which we ran together with research specialists Planet Retail, a great question came in on the subject: will we see dynamic pricing in traditional retail stores?

I think we will. And it will happen before your eyes as you walk around the store. It could even be linked to who you are and what you’re doing with your mobile devices. The UK department store, John Lewis, has long had a powerful strapline: ‘We Never Knowingly Undersold.’ They base their relationship with a very loyal customer base on the simple idea that their prices react to what’s happening in the marketplace, and they work hard to offer the best price available – or at least match it. Behind the scenes employees track competitor prices and then adjust them in store – by hand. You often see a notice saying something like – ‘reduced to match a competitor’s price’. It’s often on big-ticket items like a TV.

Accenture recently made the point that machine learning techniques would be used to predict ‘price elasticity curves’. That sounds complicated, but it isn’t really. You match today’s conditions (events, conditions, levels of competition, even traffic congestion) with today’s constraints (stock levels, margin targets etc.) and the algorithm sets a price level.[1]

I think we’ll get to a stage when the price tickets will be digital and they will change over the course of a day based on what analytic engines are doing somewhere out in the cloud. I don’t think it will happen to tins of beans or apples – but it will be the norm in car showrooms and furniture stores; maybe even clothing stores, especially at the high end. The technology to do it isn’t quite there yet, but it could make a big difference to retailers, especially if it empowers staff to make compelling offers at the right time.


 

[1] Dynamic Pricing: A Major Key to Retail Success: By: Sumeet Mahajan & Neil Fernandes Accenture March 2016

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