How retailers can drive profitable growth through dynamic pricing

 In International
When it comes to dynamic pricing, Amazon is still the retailer to beat. Other retailers continue to marvel at—and attempt to emulate—the e-commerce giant’s ability to rapidly and frequently change prices on millions of items. Amazon continually burnishes its low-price reputation by undercutting competitors on top-selling, high-visibility products, while protecting margins by charging more for less price-sensitive items. Indeed, the success of Amazon and a handful of other leading online players has made clear that dynamic pricing is a critical capability for competing in e-commerce, omnichannel, and even brick-and-mortar retail to drive revenue and margin growth.

But as retailers have begun to invest in dynamic-pricing solutions—whether off-the-shelf or custom-built by third-party providers—they’ve often run into the “black box” problem: none of the end users actually understand the math or logic behind the algorithms. The tools somehow crunch data and spit out pricing recommendations, which are sometimes much higher or lower than current retail prices. The pricing staff thus ends up rejecting them entirely because they don’t trust the recommendations. McKinsey – Read more…

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