Retailers need to realise potential of dynamic pricing to bring efficiencies to stores

Whenever my family finds itself in the Green Park area of London on a Sunday morning we invariably make our way to a nearby branch of a major name supermarket and buy a whole bag full of massively reduced sandwiches that have nearly reached their sell-by-date.

While this is a great bonanza for us – and the other people who know about this opportunity and quickly clear the shelves – it’s not so good for the retailer or for the majority of other customers who miss out on this discount spree.

What is clearly needed here is a way for retailers selling perishable goods to better manage the way they discount; in order that they do not lose all their margins, proactively tackle the pressing issue of waste. (Did you know that 200,000 tonnes was wasted by supermarkets in 2016), and for more shoppers to share in the cut-price offers.

The obvious solution is dynamic pricing. It enables retailers to strategically price perishable items throughout the day, encouraging shoppers to purchase those items before they spoil. By having the freedom to remotely change prices on any shelf in seconds, retailers can graduate pricing based on sales velocity and inventory levels to ensure they reduce waste by the end of the business day.

So what’s the barrier?  There seems to be an unchallenged assumption that consumers would reject the concept of dynamic pricing. A recent study found that nearly two thirds (65%) of consumers would welcome price changes throughout the day if a product is reaching sell-by-date. Yet, a quarter of retailers are not convinced of consumer acceptance if they were to change prices more frequently.

The use of such a solution would enable retailers to undertake price changes in a graduated manner that is massively more effective than one-off clearance pricing strategies that instantly kill the retailers’ margin on these products.

Electronic Shelf Edge Labels (ESLs) make dynamic pricing a possibility by removing the thankless task of store employees having to manually print the labels for the discounted goods. It is simply not feasible to continually do incremental mark-downs throughout the day at anything like the scale needed across a large retail business with millions of lines using paper-based processes. When you consider that the paper label hasn’t changed for 100 years, it’s clear that efficiencies are needed in this area of retail to truly modernise the store.

The issue of incorrect pricing is certainly a serious bugbear among consumers, over 50% of shoppers believe that in-store prices are occasionally inaccurate with only around 20% of saying they would return to a store if they had previously been charged incorrectly.

The problem is that many of them will be incorrectly charged because the issue is most prevalent on discounts and promotions and up to 50% of products are on promotion at any one time in the typical supermarket. This is clearly a recipe for disaster that has arisen due to retailers’ slowness to digitally update stores.

ESLs could be a major step to eradicating this problem and dynamic pricing could be seen as the icing on the cake if you like. Either way, the solution looks like its time is now.

Glynn Davis, editor of Retail Insider

[This column has been produced in conjunction with Displaydata.]