Uniting two technologies for powerful efficiencies and ROI
Pricing is a battlefield upon which retailers clash every day. Retail organizations have to equip themselves with the best strategies and latest technologies to get ahead in the pricing war. Yet, so far, few retailers have capitalized on the advantages offered them by leveraging data-driven price optimization coupled with electronic shelf labels (ESLs).
In the current retail landscape of digital disruption, aggressive competition and price-aware shoppers, obtaining the right tools to unlock dynamic pricing is more critical than ever.
The retail pricing environment
Today’s consumers are demanding. They are unpredictable, fickle and well-informed. They don’t “go” shopping anymore – they are always shopping. Consumers want transparency around what things cost, where to go, and how to get the best deal. And with more free time on their hands due to COVID, consumers have more time to be all of these things.
The complex and changing nature of today’s consumers just cannot be managed by systems built for another age. Buying and merchandising teams using spreadsheets and disjointed pricing tactics are missing margin opportunities and losing market share. This is why it’s imperative to have the right technologies to support your business decisions – technologies that help you interact more effectively and efficiently with your customer.
And when it comes to pricing, the right dynamic price optimization tools can help retailers leverage real-time market, competitor and demand signals to set prices that meet fickle consumer demands, enabling them to get the best returns while at the same time respecting customer perceptions of both brand and products.
Consumer perceptions around pricing
Often retailers have reservations about frequent price changes, due to concerns about how customers might react. However, current consumers are more accepting of dynamically changing prices than you might think.
Indeed, it’s not a new concept. Other industries, like airline tickets or rental cars, change prices all the time depending on seasonality, events, even the day of the week. Amazon, who in many ways set the standard for the retail and ecommerce shopping experience, changes millions of prices throughout the day. In short, consumers largely have come to expect it.
What really matters more to customers is the perception of fair pricing. As long as they believe a price is fair, and nonarbitrary, consumers will perceive it well. Of course, what they perceive as fair varies by channel, location, consumer-base and more, so settling on those fair prices is easier said than done.
And while consumers are more accepting of dynamic pricing these days, it is very important that retailers understand exactly how to introduce this new pricing approach in order for it to be profitable and relevant to their customers.
Consumer-centric dynamic pricing
It’s not simply about changing prices more often. It’s about understanding your consumer signals in real-time and translating those signals into intelligent pricing decisions. And of course, doing so in the greater context of your business strategy and existing processes.
This is where a data-driven price optimization becomes crucial, not just for interpreting but also anticipating customer demand. That is how retailers both deliver and generate value with pricing.
“Often when we start to apply the data science and artificial intelligence to a retailer using a rule-based process, we see a completely different ball game in terms of financial results and profit uplift,” said Anastasia Laska, VP, Business Development & Partner Alliances at Revionics. “The more they lean into the AI, the greater the ROI.”
Electronic shelf labels and price optimization
Of course, once retailers have real-time pricing insights, they still have to execute. The benefits of dynamic pricing are limited by how often price changes can be taken. Which is where electronic shelf labels come in.
Even without dynamic pricing, printing and replacing price tags is a tedious, manual task, so at a minimum electronic shelf labels present considerable cost and labor efficiencies. But coupled with AI price optimization, the opportunities compound.
When a retailer leverages ESLs to remove the manual limitation on how many price changes they can take, they can realize a much faster ROI and substantially higher profit potential – up to 33% more profit value potential, as our research shows. “The retailers who do not have this fully automated dynamic pricing capability actually leave quite a significant share of profits unrealized on the table,” Laska said.
A call for automation
There is no denying the world of retail is changing. The retailers that use the past year’s disruption as an opportunity to transform and invest in a stronger future will come out ahead.
Turning to technologies that assist automation and decision making, like AI price optimization and electronic shelf labels, will help retailers become better prepared for today and better positioned for tomorrow.
Want to learn more? Watch our webinar on electronic shelf labels and price optimization with Pricer and retail expert Chris Field.