Advanced Computing in the Age of AI | Friday, March 29, 2024

Dynamic Pricing: Here to Stay? 

Electronic displays are everywhere, from billboards to airport flight directories. Despite their cost, these displays are ideal for situations when their content frequently needs to be changed. So why hasn’t this caught on in places such as supermarkets, where item costs fluctuate on a daily basis?

In the past, retailers have explained that the cost of electronic shelf labeling simply wasn’t justified since any employee could just replace the price sticker instead. But as real-time shopping data helps these stores to adjust price moment-by-moment to meet demand, we could be looking at a paradigm shift.

And according to Ian Cheshire, CEO of the British retail group Kingfisher, there is no doubt as to the growing role that real-time analytics for price adjustment is playing.

“Dynamic pricing will become much more common [in retail],” Cheshire says. In recent years, drops in the cost of such tools along with advancements in their capabilities have led more companies to see the tool as something they can count on to drive profits, rather than an expensive gamble.

Even at its slowest, demand forecasting can help retailers in fashion bump up a garment’s price for a few weeks if a celebrity happens to be seen wearing it. But at the opposite end, it can help to detect when competitors drop their price and enable other retailers to lower theirs only moments later to help their prices remain the lowest on the market.

Already Kingfisher has adopted electronic shelf labels, but Cheshire says that the next generation of their stores will use dynamic pricing as well to make the most of it. He notes that in addition to keeping prices competitive minute-by-minute, the change would also save employees time that would otherwise be spent updating shelf labels.

Aside from Kingfisher, several other European retailers including Tesco and Argos have adopted dynamic pricing models, but there is yet some skepticism over how effective it will ultimately prove.

For instance, Ian Middleton, managing director of jewellery retailer Argenteus says that unlike airlines and hotels, where consumers can’t change when they need to make their purchases, retail shoppers have the freedom to simply change the times when they decide to spend money to avoid times when retailers bump up their prices.

“Changing prices during the day or week will just shift peak periods around,” Middleton says.

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