Every retailer is seeking the shortest way to the heart of customers. \u201cEverything we do is anchored around ‘What would our customers think of it?’\u201d according to Phil Jordan, Sainsbury’s CIO. Rewarding customer experience starts with setting the right prices. The reason for this is that customers care about the price of a product the most.<\/p>\n\n\n\n
Knowing this, the first thing retailers should do is to optimize their pricing. Advanced companies like Amazon and Walmart have been using next-gen technology like AI in pricing for years. In fact, 35%<\/a> of Amazon\u2019s revenue is generated by AI-enabled price recommendations.<\/p>\n\n\n\n Commenting on the potential of AI for retail, 7Eleven\u2019s VP of digital customer and store experience, Tarang Sethia, stated<\/a>: \u201cWe think AI should be like electricity, it powers everything so we can serve the customers in a way they\u2019d like to be served and to take the friction away.\u201d<\/p>\n\n\n\n Meanwhile, most retailers stick to traditional intuition-based pricing and stagnate. Despite the fact that recent market tests show a double-digit profit uplift thanks to AI-based price optimization.<\/p>\n\n\n\n Normally, pricing analysts consider up to four pricing and non-pricing factors when crafting prices. Also, they mostly base their pricing decisions on their intuition. But today it is not enough anymore. To succeed, retailers, just like the rest of the world, need to switch to data-driven pricing<\/strong>.<\/p>\n\n\n\n Obviously, retail businesses aspire to set optimal prices, or such prices which:<\/p>\n\n\n\n But reaching the pricing optimum is still a challenge. It requires huge computational and analytical power. Especially, when it comes to re-pricing thousands of products \u2014 which is the case for a great number of retailers. The situation gets even tenser as pricing analysts are always pressured time-wise: the market is changing rapidly, while the price has to remain optimal at any given moment.<\/p>\n\n\n\n Therefore, the amount of data coupled with the high speed of decision-making make data-driven pricing impossible for pricing analysts. Unless, they are enhanced with the right technology like AI.<\/p>\n\n\n\n \u201cRetailers integrating AI technologies are growing 30% faster with 50% higher profit margins,\u201d<\/p>\n\n\n\nWhat sets AI-led pricing apart from intuition-based pricing?<\/h2>\n\n\n\n