| Retail Express’ Ed Betts highlights the importance of a transition to rules-based pricing, and the benefits that retail price optimisation software can bring to retailers struggling to keep up. |
| The ever-changing retail landscape feels more chaotic than ever. Persistent cost inflation, supply chain volatility, changing customer behaviour and fierce competition mean retailers are fighting to stay on course. Tariffs have only added to the uncertainty with the markets now more unstable than ever. Retailers need agility which aligns with their core strategy.
Against such pressure, traditional retailing techniques are proving less effective and more difficult to maintain – but the way forward is clear. AI-based retail pricing solutions power up core processes, helping retailers stay competitive and providing the freedom for novel innovation. They provide the flexibility to react to market deviations and potential recession, while helping to cement and stay loyal to one’s pricing strategy and prevent knee-jerk reactions. Retail’s move to embrace the benefits of algorithmic methods has already begun. Most large retailers have already incorporated at least some form of AI retail management software into their back end. For those now ready to make the leap, their transition likely begins by using retail AI to optimise pricing. There is nothing more important in such a competitive landscape: price optimisation directly affects revenue, is the core of profitability, and influences customer perception like nothing else. Balancing profit and perception Developing and acting upon a competitive pricing strategy is a major ongoing exercise. A retailer cannot simply set a price and sit back. There are countless variables to consider, from forthcoming promotions to supplier negotiations, seasonal demand, loyalty card pricing, market fluctuations, and so on. Brand perception might be the most vital of all: pricing is a powerful psychological tool, useful to build repeat custom and engender trust. A retailer’s approach to pricing optimisation essentially anchors its position in the market. Without the right pricing strategy retailers might aim too low, leaving money on the table or adversely affecting the perception of their products as low quality. Pushing too hard, on the other hand, may drive customers away, tarnishing one’s brand in other ways. Today’s market is dynamic – savvy consumers can, and do, compare prices instantly online. If a retailer cannot act quickly to adjust, they have lost an opportunity. And given today’s razor-thin margins, drawing on every opportunity is vital. Simplicity through data complexity Research from McKinsey[1] suggests that a 1% increase in price can lead to an 8% increase in profit, but that kind of impact can only happen if applied to the right product at the right time. The costs of supply, logistics, and inflation fluctuate constantly, so pricing must protect margins while remaining fair. This is, frankly, a monumental task for humans to tackle – considering a typical retail assortment is over 10,000 items for a medium sized supermarket – but one which retail price optimisation software can help simplify. At its core, AI retail pricing solutions allow retailers to turn data into insights, and use what they have learned to drive strategic change. The high volume of data which makes agile pricing innovation difficult for humans has the opposite effect on algorithmic tools: the more such software knows about a business, the market at large, supplier offerings and so on, the more it can simplify the task of maximising a customer’s willingness to pay, and their likelihood to return. A step-by-step transition It is not necessary to do everything at once. The transition to AI is a journey. In retail, this often means beginning by establishing a foundational pricing structure which embeds strong pricing strategies and the oversight required to deliver on them. From there, retail AI can contribute to a semi-automated pricing system, providing prices for user approval. And when the time is right, retailers can fully realise the power of AI and algorithmic retailing, exploiting full rules-based pricing. The journey is one of alignment, of integrating AI with one’s go-to-market strategy, not the other way around. It is about putting the tools in place to make strategic pricing decisions at the category management and store level that are right for both the retailer and its customers. Price intelligence software can leverage sophisticated predictive analytics, allowing retailers to anticipate market trends and consumer behaviour, incorporating real-time data from sources like social media, economic indicators, and competitor pricing activities. This drives dynamic, personalised rules-based pricing adjustments to support broad product categories, individual customer segments, or even individual customers based on their purchase history and known preferences. Once an established method of price optimisation is in place, its influence can drive innovation in other core areas of retail, like promotion management, supplier planning, and personalised marketing. Honing a competitive edge Price optimisation software is a core component of tomorrow’s seamless, highly responsive, cutting-edge retail ecosystem. The transition to using this new generation of pricing management software has already begun; retailers that fall behind face a significant struggle to match the activities of those that can react at the speed of AI. Moving to an algorithmic model is minimally disruptive, and provides immediate benefits to those who can offer such systems the data they need to thrive. In return, retailers gain access to options they have never had before, and the freedom to put the minds which might otherwise have been fighting to keep prices in line onto the vital task of innovating. AI pricing software isn’t just about getting prices right – it’s about making headroom, clearing the way to take the next steps in one’s retailing journey with a new level of agility, and gaining the knowledge and confidence to remain level-headed in an ever-changing market. Learn more about pricing optimisation with AI: https://www.retailexpress.com/solutions/pricing/ Edward Betts, COO, Retail Express  Ed has worked in the retail industry for over 20 years and joined Retail Express in 2019 where he is Chief Operating Officer. Ed has extensive and specialty knowledge of retail category management, pricing and buying requirements having worked with several UK retailers, including 8 years at Asda where he developed and launched a standalone online wine service. Following this, he worked for Distell, a large international drinks manufacturer, where he managed strategic accounts across several major UK grocers including Morrisons, Asda and Marks & Spencer. Ed is also Retail Express’ Head Consultant helping clients make more effective use of the products and services as well as providing consultancy on the effective use of pricing and category management.
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