How artificial intelligence is transforming price merchandising
Price merchandising is crucial for retailers to maximise profits and stay competitive. Artificial intelligence (AI) is revolutionising price merchandising by enabling more accurate demand forecasting, personalised pricing, and faster price optimisations.
AI-powered solutions are helping retailers dynamically adapt prices in response to changing market conditions and customer preferences.
More accurate demand forecasting
AI algorithms in tools offered by providers like Retail Express can analyse huge volumes of data like past sales, seasonality, promotions, competition, events, and even weather to generate highly accurate demand forecasts. This helps retailers order optimal inventory levels and set profitable yet competitive prices. AI models become more precise with time as they process more data. They also quickly adjust forecasts in response to new data. AI-based forecasts are transforming inventory and pricing strategies across retail.
Additionally, AI can improve demand sensing by analysing real-time sales data, website traffic, search trends and social media mentions. This enables extremely responsive fine-tuning of forecasts and prices. The level of agility this provides is critical for success in volatile retail markets.
Personalised pricing
Earlier retailers used customer segmentation to personalise prices to an extent. But AI takes personalised pricing to the next level. By applying machine learning to analyse individual customer data and behaviour, AI solutions can micro-segment consumers. Retailers can then test and offer personalised product prices and promotions to each customer segment for optimal sales and profits.
AI tools also enable refinement of personalised pricing strategy by monitoring customer elasticity over time. For example, AI can detect if a discount threshold that triggered a purchase earlier is still effective for that shopper. It can accordingly advise price adjustments, allowing retailers to maximise revenues from each customer.
Faster price optimisation
Manually optimising prices across thousands of products while accounting for all demand factors is impossible. AI-based price optimisation tools use algorithms to rapidly analyse demand signals and competitive data. They quickly determine optimal prices per product to achieve revenue, profit or market share goals.
The self-learning capabilities of these AI algorithms allow them to process more data over time and get smarter. This enables continual price adjustments to react to market changes faster than humanly possible. As they process live sales data, AI tools can track outcomes of pricing decisions and refine algorithms accordingly to improve optimisation. This level of dynamic price optimisation is only possible with AI.
Wider adoption across retail
The retail industry is ramping up investments in AI-enabled pricing. Retail leaders in pricing strategy are relying on advanced AI to optimise massive product catalogues and deliver hyper-personalisation. AI adoption by small businesses has grown, with 83% of 300 surveyed saying they use AI tools, including in price merchandising.
The speed, accuracy and scale at which AI enables pricing decisions is transformational for retail merchandising. AI equips retailers to handle pricing complexity, volatility and massive data. With AI, merchandisers can focus more on value-added analysis rather than data crunching. The competitive edge afforded by AI pricing is spurring rapid industry adoption, indicating this technology will soon become an indispensable part of price merchandising.
