In the world of e-commerce retail, many of us have current strategies that can fall under the dynamic pricing model. For example, most eTailers will constantly monitor their competitor’s prices, and price accordingly. Some do this manually, and some have complex algorithms, constantly moving prices up and down, sometimes by increments of pennies, to find the perfect and most competitive price.
Sadly though, it often ends there. A retailer will price according to their competitor and their basic KPIs such as cost and profit margins. But the reality isn’t always that simple, and too much money is left on the table if your only strategy is that of beating your competition.
For example: Your competitor drops their price in half, and begins selling out their stock. What do you do? Basic strategy would have you rushing and slashing your prices as well, in order to stay competitive. But what if that’s wrong. What if this item is trending, and in just a few days, your competitor will have sold out all their stock at a discounted rate, while demand for the product will continue to increase. By holding out, you will be the only one left with stock and have the opportunity to sell your stock at full price, resulting in greater profits.
But how would you know if an item is trending? Sure, some items are easy, like say fidget spinners, which picked up steam quickly and became a worldwide sensation among children and teens. However, as merchandising managers, or purchasing agents, we all know most items never get to that viral point. Instead, we have hundreds and thousands of items we need to make decisions on daily, just to keep our businesses afloat.
That’s where Dynamic pricing platforms come in. Simply put: a technology stack that gives you a command center for everything related to pricing and profitability. By utilizing massive amounts of data, and intelligent algorithms, the platforms give you the ability to make these decisions in real-time, on every single product. By plugging into your inventory systems, ERP, website, reporting and analytics, as well as 3rd party data sources such as competitive intelligence providers, and other big data platforms, it has the ability to find correlations for why products are selling or not selling. It can then offer suggestions for price changes, that you can either choose to ignore, automatically update, or simply receive a daily feed of pricing suggestions.
Pini MANDEL, CEO&Co-Founder of Quicklizard