As mobile shopping, the demand for omnichannel experiences, and the number of products increases across retail categories, so does the need for dynamic pricing to manage it. With roughly 20% of all retail purchases in the UK made online, it’s obvious that the retail landscape is becoming more digital.
Curious about which industries can benefit the most with dynamic pricing? Keep reading. In this post we’ll examine 4 different categories where dynamic pricing is on the rise and give insights on how companies can harness the power of data for better prices.
Fashion continues to grow significantly online, and is a category to watch in 2019. This shift is largely driven by a few major factors:
The connected consumer
Traditionally powered by in-store sales, the fashion industry is currently struggling with the shift towards online. In particular, the industry has a hard time grappling with the fact that consumers are always “on” — they can buy products whenever they like, wherever they like. Technology makes consumer shopping unpredictable, which makes it hard to please customers.
The result is that retailers slash prices without strategy, which drives a (perfectly avoidable) race to the bottom.
Additionally, the concept of seasonality is changing within retail. In the past, consumers could only purchase whatever products were in-store at that moment, most of which were dictated by the season. Sundresses and swimsuits were typically sold in the summer, while coats and parkas were sold in the winter.
In an online store though, consumers don’t need to wait for a change of season to buy a product. Instead, consumers expect retailers to have every product available at all times.
Rise of sports fashion
Finally, the trend towards “athleisure” means that the entire fashion marketplace is shifting as the definition of “fashion” changes. New players can now enter the market with a bang, and sports retailers can edge further into a realm that’s traditionally eschewed “sporty” looks.
Fashion brands and merchants are losing the power to set the prices on their products outside of their own stores. Instead, retailers are taking control and working within the market to set a price. Zalando, for example, use price as one of its spearheads to achieve their exponential growth. The company forgoes the traditional pricing strategy of sale (for example, a 50% discount on swimsuits at the end of the summer). Instead, Zalando, and other retailers with huge footprints online, continually adjust prices dynamically.
Major fashion retailers have a first-mover advantage if they act fast enough in adopting dynamic pricing. And if you have a brick-and-mortar store, you have an opportunity to create a unique omnichannel experience for consumers in an industry does still command a lot of footfall.
2: Health and Beauty
Health and Beauty is another category that’s growing rapidly online in 2019. In the UK alone, this category is set expected to grow at 16.5% each year until 2023, and this mirrors similar growth in the Netherlands as well.
But the larger, traditional players are shrinking in their market share. This is because there is a new wave of Health and Beauty retailers on the rise: pure online players who offer the same products as brick-and-mortar stores through an internet shop at a dramatically reduced price. This pulls price-sensitive shoppers away from the more expensive retailers like Boots or Tesco.
Like Fashion, the introduction of new players on the Health and Beauty market means that price cuts, and the resulting race to the bottom, are a very real threat for retailers. The market is now ripe for fluctuating prices, and as consumers become more aware of price differences, retailers need to be able to respond accordingly.
Dynamic pricing allows you to plan for these changes and gives you control over your assortment in a market that is in a constant state of flux. It also lets you set a strategy at the product level, so you can protect your brand’s price perception while also meeting consumer demands for different prices.
3: Home and Garden
Home and Garden is our third category that’s ripe for dynamic pricing.
Historically, garden and do-it-yourself articles were advertised in leaflets. However, just like with the previously mentioned categories, the shift to an online store has opened up a new, unpredictable consumer market online.
However, Home and Garden consumers are limited by locality. If someone is renovating their kitchen, for example, they might buy the tools they need online, but will purchase lumber at their local hardware store.
This means that home and garden retailers can count on a certain level of in-store footfall, and use that traffic to drive more sales. The easiest way to optimize for both offline and online sales is by connecting your offline and online sales data in one portal, then using the insights to create a strategy.
While it sounds surprising, GFC figures show that in the Netherlands, food is the fastest-growing category in terms of consumer online spending. The days of visiting your neighborhood grocery store are quickly eroding as more and more companies offer online purchasing and grocery delivery.
Several supermarkets already apply dynamic pricing: Jumbo mainly determines the price through close competition and uses the pure player Picnic the lowest price guarantee. In this respect, the UK is ahead of the Netherlands, where it is already possible to compare the price of a shopping basket between different retailers.
This is a trend that many industries follow as dynamic pricing becomes more mainstream: as the frequency of price changes increases, consumers begin comparing prices online. Comparison shopping engines like those previously mentioned spring up.
The growth in online spending and the increasing frequency of the number of price changes means dynamic pricing is more relevant, and sometimes even necessary, in an increasing number of product segments. And while it might seem scary to switch to a dynamic pricing model in the beginning, the reality is that dynamic pricing gives retailers a first-mover advantage.
Omnia can help retailers set up pricing strategies for success with our Dynamic Pricing module. Curious about how software can help? Reach out today, and get a two week trial of Omnia for free!