Pricing with Artificial Intelligence
Retail Pricing with Artificial Intelligence
Possibilities and potential in today’s environment.
The perfect price for every product is a moving target. The ideal price should match the value a consumer is willing to pay for the given product and this depends on factors which change continuously. No customers wants to pay full price for a produce that is not fresh.
Banana: Changing Value and Price
To make this more complex, the factors which matter the most for one product-location are very different from the factors that matter to another product-location. While it is humanely impossible for any category or pricing manager to match the price of products to its ever-changing value continuously, the machines have begun to approach the ideal price in a more feasible manner.
There are several reasons why Artificial Intelligence is the next frontier in retail pricing:
#1. Availability of Data
Retail data at the granular level is now stored, processed and utilized more easily than ever before. The technology allows for efficient processes that can securely utilize input data from sources such as IOT devices, mobile data, camera/image recognition, store traffic and customer data while respecting the local laws for privacy and data regulations.
#2. Intelligent Algorithms
We no longer have to have highly paid mathematicians writing code and algorithms to utilize retail data. Intelligence and learning are available to use as “methods” and “weights” that become the base of an Artificial Intelligence based algorithm to help with pricing in retail.
#3. Instant Output
Retailers now have many installations inside the retail stores such as Electronic Shelf Labels (ESLs), smart displays, employee devices and beacons that can facilitate the output of an algorithms instantly in a store environment. Added advantage is the “feedback” these devices provide back to the algorithms to help decipher if a price is working or if it needs to be improved through “learning”.
The technology has been ready for a few years and now we have the solution that can reap the benefit of these new technologies. However, the new system of pricing is not an incremental innovation, it is disruptive. This means the retailer willing to leverage this will need to do so with a futuristic vision to integrate new approaches for the entire pricing organization. The current situation with rapidly evolving markets will force the adoption in some ahead of the others.
Possibilities with an AI-based Pricing System
The possibilities and the potential benefits of retail pricing is huge with a fully connected AI-based system. While price, promotion and waste reduction increase revenues, the automation reduces costs both at the headquarter and store levels.
Potential benefits of an Artificial Intelligence based Pricing system.
The RapidPricer pricing solution today is not built to replace the process of pricing as done by retailers. Instead, RapidPricer implements a framework on which future data sources can be consumed using Artificial Intelligence to automate the world of retail pricing.
If two people can control a Dreamliner aircraft, there is no reason why two people cannot control pricing at a large retail organization.
Although our solution can handle the entire retail assortment, our implementations often begin with one of the best use cases for Artificial Intelligence pricing which is food wastage reduction through dynamic pricing. With a goal of wastage reduction and profit, we leverage artificial intelligence to pursue the moving target of the perfect price at any point in time.
Our solution reduces retail food waste by atleast10% and increases gross margins benefit by 4% or more.