The complexity of today’s retail environment is daunting: sharpened competition from a range of traditional and new entrants, from online behemoths to fast-moving pop-ups, while always-on shoppers command complete price transparency and expect highly relevant pricing and promotions. The multichannel retailer striving to be relevant to the growing online shopper segment faces even more daunting challenges.
Yet a recent Revionics-commissioned global study conducted by Forrester Consulting reveals sharp shopper-retailer disconnects. For example, 76% of retailers market their price-matching guarantee, yet only 17% of shoppers demand price-matching on products they want to purchase. Similarly, only 17% of shoppers say “I only buy products at the cheapest price,” yet 76% of retailers believe the majority of their customers are looking for the cheapest price.
For multichannel retailers, there are additional points of disconnect. A long-held assumption among many retailers is that shoppers expect complete price consistency across online and in-store channels. Yet in reality, when comparing products by retail category, more customers are far from expecting consistency and in fact expect products to be less expensive online than in stores (with the exception of grocery, where they felt it should be less or the same as online). For example, a full 71% of shoppers expect lower online prices for electronics, while only 21% expect in-store and online prices to be the same, according to the Revionics/Forrester study.
How AI can help
Fortunately, there are proven solutions in the market that leverage AI [artificial intelligence] to help retailers craft relevant, engaging prices and promotions on the items that matter in the channels where customers want them, all while enabling retailers to recover margin elsewhere for sustainable business impact.
AI-driven solutions are designed to balance multiple factors that are too complex for humans to juggle in spreadsheets, including competitive price elasticity, shopper price sensitivity and perception, and product cannibalization and halo effects—across channels and all down to the item and location level. The result is the elusive but all-important win-win model: highly targeted prices and promotions for shoppers, and measurable ROI and an enhanced bottom line for retailers.
While many disconnects remain between retailers and their omni-shoppers, there are critical areas of agreement, one of which is the growing use of AI science to deliver fair prices while protecting and growing margins. 76% of retailers believe AI-driven pricing would have a positive impact on shoppers. Shoppers are equally ready to embrace up-to-the-minute technology, with an overwhelming 78% of shoppers think it is fair to use data science to increase and decrease prices as long as they are presented with prices they’re willing to pay.
Given the proven value of AI-based pricing at the new speed of retail, multichannel retailers are jumping at the chance to harvest low-hanging fruit in applying these capabilities in one of their most critical business functions. In fact, as the October 2018 study noted, “In total, 82% of retailers selected either remaining competitive, responding to mega-retailers, or dynamic pricing as a challenge… these all require AI.”
The time for pondering whether to use AI for business success is long past – the question is where to apply AI for the most rapid ROI and to regain competitive advantage. It’s gratifying to know that price- and promotion-optimization options are readily available and proven in the market. In fact, many retailers have adopted a self-funding implementation that builds on the gains of the previous phase of adoption to fund a subsequent phase of adoption.
Revionics provides price-optimization software for retailers.