Feeling The Need for Pricing at Speed!

28 February 2019 | 6 minutes

How real-time pricing can help reverse the retail decline


by Tom Hill


Brand failures, CVAs, declining footfall and the over reliance on deep discounting at Christmas continue to highlight the challenging environment in retail.  As retailers adapt to the changing landscape there is a continued struggle to balance sales growth with margin in order to survive.  Real-time pricing can be the answer.

Over the last 12 months, I’ve heard the following phrase in retail many times: “we don’t need to be real-time”.  You couldn’t be more wrong.  Retailers that deem real-time unimportant to them will fail over the next 3-5 years, as evolving technology and advancements in IoT means that the principles in capital markets are now exactly the same in retail.

I’m going to my friend’s wedding on Saturday and the buffet promises to be a classic, but right now thoughts of cheese and pineapple sticks are on hold as I plan what I’m going to wear.  I realize I need new shoes, and fast.

I open up the browser on my phone and scan numerous websites, finally settling on a nice pair of mid-priced branded shoes. I now search for this specific line and pick the store selling them for £10 less than other stores.  I avoid the advert selling them for £4.50 due to a “massive over-stock issue” at the warehouse, as I’m aware this is probably a scam!!!

Real-time doesn’t matter?  It did, and you just lost a sale to your competitor who is using it.  That competitor was able to leverage multiple real-time data points to calculate that the current price of the shoes was optimal to win my custom, and the sale.

Real-time does matter.  In any moment, knowing the demand for your product and your margin can enable you to price to win that transaction and potentially recruit a new customer to your brand.  Amazon continue to set the bar enabling its low price reputation through millions of data-driven price changes each day.  Leveraging data enables Amazon to deliver great prices on key perception changing lines, whilst protecting margin through the long tail of products in their vast assortment.

Amazon’s success and speed of data processing has ensured that dynamic pricing is critical to retailers wanting to compete.  This isn’t just restricted to e-commerce; technology in physical stores is similarly enabling high street retailers to catch up. So how do you beat Amazon?  Easy, you just do things faster than them to stay one step ahead.

Real-time dynamic pricing it doesn’t have to be complicated.  Simply understanding demand, inventory and competition in the KX platform can enable you to improve margins and boost sales whilst reducing over-stocks and waste.  Our processing capability combines consumer intent and propensity to shop in real-time to enable retailers to better manage margin, availability and markdown.

But real-time dynamic pricing will cause us to lose consumer trust, right? Wrong.  Customers just want value for money and if dynamic pricing helps deliver this, it will be brand enhancing, not the other way around.  Dynamic pricing can be valuable in driving trust:

  1. Where there is a fixed level of stock – pioneered by the holiday industry, consumers expect to pay more for the popular flight times and hotels, and this is no different in any other market when inventory is finite
  2. When managing waste on products that have a shelf life – customers love the markdown section in food stores and understand the trade-off between price and use by date
  3. Where demand can fluctuate – Uber being the obvious example here where riders are given the choice of paying a premium at peak times or waiting for surge prices reduce

Now let’s be clear at this point, I’m not a fan of personalized pricing and having led pricing teams, I believe in transparency and its importance. Brands can enhance short term profits by pricing based on personal and behavioral data, especially in a world of streaming services such as music and gaming, but ultimately this behavior will be detrimental to trust and lead to longer term challenges as transparency becomes easier to access. Price comparisons are far too easily found in this connected age.   However, as long as your pricing decisions are accessible to all who want them, and consumers understand your pricing model, trust is something that can be improved by dynamic pricing decisions, not eroded.

Emerging capability through IoT unlocks intelligent pricing opportunities in Retail.  Tracking all items through the supply chain, and knowing real-time consumer demand delivers the data required to make intelligent supply based pricing decisions.  Reduced cost in technology such as eSEL will remove the operational cost barrier to making price changes in physical stores.  These technology advancements are being driven by operational efficiencies, but as a by-product unlock the real-time pricing opportunity.

Price continues to be a critical reason to innovate for brands, with our Retail Innovation Index (KX RII) revealing that 76% of UK consumers use technology to help them find value when shopping.  As brands adopt data driven intelligent pricing, and begin “bidding” to win share of wallet against every customer decision, leveraging the most data at the fastest speed will win. Instant analytics to optimize price will become the norm.  Connected data and speed of analysis to deliver real-time personalized experiences to shoppers will be critical.

Retailers embracing real-time pricing capability will succeed, and I will be wearing their shoes to the wedding.  Retailers that do not embrace real-time will be left fighting for the dry sandwiches at the end of the buffet.

KX bring the principles of time critical price optimization from capital markets to retail. KX is the world’s fastest time-series database and is synonymous in capital markets for one key reason – speed.  Nanoseconds are critical to spot a trend and act instantly.

To find out more about how we can help you optimize your pricing decisions faster than your competitors, please reach out to sales@kx.com.

Tom Hill is a Senior Vice President – Retail Services at KX.


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