Updated: Jul 4
Kiran Gange, August 17, 2020
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 customer wants to pay full price for a product that is not fresh.
Banana: Changing Value and Price
To make this more complex, the factors which matter the most for one product-location is 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 a products to its ever changing value continuously, the machines have begun to approach the ideal price in a more feasible manner.
The machines have the unfair advantage of being able to process large amounts of input data or factors that matter and to make intelligent decisions based on artificial intelligence that come through the learnings of thousands (if not millions) of combinations of prices for each product store combination on a continuous basis.
There are several reasons for 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 algorithms instantly in a store environment. An 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. Rapidly evolving markets will force the adoption in some ahead of others.
Possibilities with an AI-based Pricing System
The possibilities and the potential benefits of retail pricing are huge with a fully connected AI-based system. While price, promotion, and waste reduction increase revenues, automation reduces costs both at the headquarter and store levels.
Potential benefits of the artificial intelligence-based Pricing system
The RapidPricer pricing solution today is not built to replace the process of pricing as done by retailers. RapidPricer implements a framework on which future technologies can be deployed.
Although our solution can handle the entire gamut of the retail assortment, our implementations often begin with one of best use cases for the Artificial Intelligence pricing. Food wastage reduction through dynamic pricing. We use various innovative technologies to find the perfect price for every produce in each store at any given point of time to reduce waste and increase gross margins benefit by 4% or more.
RapidPricer helps retailers to increase margin and reduce waste by automating pricing and promotion in real time unlike traditional consulting solutions.