Traceability Towards Dynamic Pricing in Retail

In today’s world of fast-growing retail e-commerce, it’s easy to fall behind competitors that adapted their businesses better to given circumstances such as trends changes or customers’ expectations. One of the crucial things when it comes to setting up a strategy to always stay ahead is “the price”.

Since the price for the retailers is so important, it has to be carefully analyzed and matched with the company’s goals and purposes. Price analyses have to include factors like costs, competition prices, customers’ price perception and finally revenue. For that, business owners need to think deeply about their pricing strategy and what approach will give them the most value.

Following the above, technology has been established in e-commerce retail stores with “dynamic pricing”.

Dynamic pricing is a tool that enables retailers to set the price of products individually. The technique takes aim at simplifying the process of price management and, as a result, allocating resources more efficiently. This method is broadly used by online and physical stores. The dynamic pricing of products based on their dynamic characteristics, such as the expiration date, is nowadays widespread in street markets as well as in e-commerce. Relevant researches show that its systematic application in retailing is initially viewed positively by consumers, while at the same time it contributes drastically to the reduction of returns for perishable products.

There are various reasons why the implementation of this method of pricing in retail is used and has helped boost the sales of retail businesses. Dynamic pricing is a retail pricing strategy that allows merchants to change the price of a product according to demand and other factors. The technique involves using software to monitor inventory levels, sales trends and competitor prices, then adjusting prices accordingly.

This strategy of pricing is often referred to as “dynamic discounting” or “demand-driven pricing.” It is different than traditional discounts because it doesn’t involve offering the same price across all customers. Rather, dynamic price changes are tailored to individual shoppers based on their shopping patterns.

The benefits of dynamic pricing include:

Increased revenue: Dynamic pricing can help increase revenue by getting more customers to buy your products at higher prices than they would have paid if they didn’t get an incentive. For example, if you’re running out of stock on a popular item and you have a limited number of discounted units left, you can offer these units at a discount for those who purchase quickly — giving them an incentive to buy now rather than risk paying full price later or not being able to find the product elsewhere.

Increased profitability: Dynamic pricing can also be helpful for companies with high inventory costs by helping them sell more inventory at higher prices than they would have otherwise been able to do with static discounts.

Better control over products pricing: Retailers have thousands of products and optimizing pricing on all those items is near impossible. Most retailers use spreadsheets with rules built in to adjust prices based on a number of factors. Those who use dynamic pricing, however, can ensure that merchandise is priced correctly. Driven by data and AI engines, dynamic pricing platforms consider competitor pricing, inventory levels and other data to recommend the optimal sales price, frequently at multiple points throughout the day.

Control inventory: The majority of retail businesses don’t connect inventory to price unless they have an overstock situation and need to reduce price to move merchandise. As a result, they rarely explore ways that pricing can help control inventory. As products sell and inventory is reduced, retailers have an opportunity to increase their pricing on the remaining items. A rightly priced SKU, at the right time, can help boost sales. This helps in keeping in the freshness of stock and the availability of sizes/variants of a product. Products that are either discontinued, near expiry, or meant to last only for a specific period, need to revise selling price as per their planned lifecycle. If a retailer is handling this manually across categories and points of sales, it can become near impossible to track and monitor. With the right dynamic markdown algorithm, prices can be tweaked to control the sales of a product.

Understand the customers:  Collecting data is a key part of implementing automated dynamic pricing. This lets retailers gain insights into the consumer’s behavior, patterns, and preferences. It can translate to more actionable data which can feed your algorithms to perform better, leading to an efficient pricing strategy.

The role of traceability technology in Dynamic pricing

Technology can play a key role in the implementation of dynamic pricing in a retail store, both in implementation and in consumer contact. Of course, though, this can be done only with the implementation of a top-quality traceability technology system.
In terms of implementation, in recent years there has been a great movement around RFID (Radio Frequency Identification) and other traceability technologies, with international chains, integrating it into their daily practices.

The use of such automatic identification technology would allow products approaching their expiration date to be identified and their price adjusted automatically. It is essential though for the retail business to This feature would save significant resources and ensure clear and seamless implementation of dynamic pricing. It is worth noting that such a possibility of supporting dynamic pricing using traceability technology is being tested within international research projects.

Beyond the implementation, however, the communication of the dynamic price of the product to the consumer is a part that the retailer must focus on. And in this area, new technologies, such as electronic cards, information kiosks with screens or even sophisticated mobile phones, can act as means of dynamic information on prices and product features.

In conclusion, the application of such pricing strategy is a new challenge in modern retailing. The ability to increase demand through dynamic price reduction, particularly for perishable products, can have dramatic effects on inventory management. Nevertheless, the possibility provided by new technologies, as well as the results of the research, show that dynamic pricing should be addressed and designed by businesses as an innovative consumer service. With this approach, dynamic pricing can build value for both the retailer and the consumer in the today’s fast growing market of products and services.