Is Today’s Consumer Ready for Dynamic Pricing While Grocery Shopping?

Is Today’s Consumer Ready for Dynamic Pricing While Grocery Shopping?

You were going to lower the price on turkeys the day before Thanksgiving, but suddenly there’s a rush and you decide, instead, to raise the price a hair, meaning more profit on the turkeys you sell today than you made in the first week of selling them. Meanwhile, one brand of stuffing is behind on its turns and your back room is filling up, so you drop that by 5% in order to move it. And your last five pumpkin pies go for nearly twice what they were yesterday. Welcome to the world of dynamic pricing. And what used to seem like some futuristic idea is now a reality with the wave of new disruptors like AmazonFresh to the retail grocery brick and mortar space. The biggest question though is today’s shopper ready for it?

What Industries Use Dynamic Pricing?

It used to be that very few industries, such as airlines, changed their prices on an hourly basis, while prices for most goods and services were relatively static. But now that consumers can use the internet to hunt for the best price of the moment, retailers are responding by using their own data streams and the power of electronic shelving labels (ESL) to eke out higher profits.

The Logic Behind Dynamic Pricing?

In fact, according to a Wall Street Journal article, everyone from taxi companies to sports complexes, to retailers like Kroger and Kohl’s can change prices from minute to minute. They base the price changes on demand shifts, but also on other external data points, like the weather. On a balmy day over the summer, for example, prices might go up for baseball games, zoo tickets, and picnic baskets, while on a day of inclement weather prices for the baseball game drop and prices for taxi services and hot chocolate rise. The result has been double-digit revenue increases once a dynamic pricing strategy has been implemented.

E.Leclerc, a French retailer, the article said, uses electronic shelf tags in about one-third of its 600 stores, making more than 5,000 price changes a week.

“This is not a passing fad,” Peter Fader, co-director of the University of Pennsylvania’s customer analytics initiative was quoted as saying. “It’s going to become imperative for the brick-and-mortar players to figure out how to do this.”

How Dynamic Pricing Would Work In The Retail Grocer Space

That may be the biggest question. How should grocery retailers, for example, handle price changes during shopping hours? If consumers put an item in the cart at one price, can it change before they get to the checkout? While consumers have gotten used to a certain amount of this happening with certain commodities, it can turn them off from shopping at a particular store. Some consumers have voiced that services like shelf checkout and online ordering take more time and are more labor intensive then they care for. Asking consumers to scan each item before they put it in their basket could be asking too much  of some shoppers

Are Retail Grocers ready for That Much Data?

Also, how data savvy is your retail operation? In order to use dynamic pricing to your advantage rather than driving customers to other stores, retailers are going to have to get very good at collecting and analyzing data streams from many different sources, not just pricing. This is a competency that hasn’t been required in the past.

But then, the tech behind dynamic pricing is driving behavior both directions. Some turnpike systems use it to control traffic and the Indianapolis Zoo used it to get more traffic on weekdays. Ultimately, the capability of instant data is going to change the way everyone makes business decisions—no longer strategizing about months or weeks ahead, but hours. The only question is will the shopper accept dynamic pricing at their grocery store?

The following two tabs change content below.
Seth Nagle, Senior Marketing Manager at RW3 Technologies understands the power of innovation but also its limitations. Attending Salve Regina in New England, starting his career in Silicon Valley, and now living in Austin, Texas; Seth provides a unique tech perspective to a complex CPG and Retail Grocery Industry that is in constant disruption.

Comments are closed.