Personalized pricing is the future, but retailers are hesitant to hit the start button
Back in 2000, Amazon conducted its first “personalized pricing” test, and the public was outraged. They felt “duped” when receiving different prices on the same goods. Nearly 20 years later, the e-commerce giant still avoids the practice.
While personalized pricing may not have worked for Amazon at the turn of the century, the future of this concept is called “dynamic pricing.” Dynamic pricing allows retailers to change prices in an instant based on their data about competitors, among other factors, according to RetailDive.
Personalized and dynamic pricing is the way of the future, yet retailers are weary to hit the start button. Not only is it a costly investment, but having robots assume the roles of pricing managers makes business owners apprehensive.
But the idea of personalized and dynamic pricing is tempting to retailers. E-commerce competition grows more and more fierce every day, not to mention, customers are willing give up personal data that would weigh into pricing strategy -- their locations, IP addresses, past purchases, education levels, and occupations, to name a few.
Victor Rosenman, CEO and founder of Feedvisor, which specializes in price optimization on Amazon’s Marketplace, comments on retailers’ use of personalized pricing: “...[they] try to estimate basically your propensity to pay — if you can pay more, we should charge you more for the very same product.”
For retailers, personalized pricing gives them the option to charge what consumers are capable and willing to pay for a product, eating up any “surplus” cash from those who can afford to pay more. Not to mention, those who normally could not afford products would now be able to with online promotions and discounts.
However, just as in the case with Amazon, consumers notice when retailers change prices, and they lose trust in brands because of it. It’s even been deemed “first-degree price discrimination,” which, could pose several legal risks. That’s why Amazon now makes it clear that they change their prices to beat out the competition, “not based on a customer’s demographics or purchase behavior,” according to a spokesperson.
Finally, it’s difficult for retailers to adopt personalized pricing because they are forfeiting control of pricing strategy to robotic algorithms that are updating constantly. Santiago Gallino, an assistant professor of operations, information and decisions at the University of Pennsylvania's Wharton School of Business comments that retailers, “have a long tradition of people making the call on prices and how to run promotions, how to discount the pricing point that things need to start at, and so on and so forth.”
However, he notes that smart algorithms won’t stray too far, but they need close monitoring and detailed programming to align with company supply, demand, margins, and other factors.
While personalized pricing has the potential to boost profits substantially and serve otherwise underserved markets, retailers aren’t quite ready to pull the trigger. It’s not only complicated the execute, but puts companies at risk for discrimination lawsuits and out of control of robotic pricing algorithms. However, according to the Deloitte report "Consumer Experience in the Retail Renaissance," 40% of retailers that have adopted artificial intelligence (AI) at all use it to tailor pricing and promotions in retail time, so it’s likely we’ll continue to see personalized pricing make its way into future retail strategies.
Giant Eagle partners with Grabango to offer checkout-free shopping to customers
Giant Eagle, a grocer based in Pittsburg, has partnered with Silicon Valley startup Grabango, a checkout-free technology provider, to create a “no-wait” checkout experience, according to a company press release.
Similar to Amazon Go stores, the new technology will allow customers to fill their carts and use an app to check out traditionally using cash or credit. The technology will use computer vision, AI and cameras around the store to keep track of what customers add to their carts.
The program will be tested at a single Giant Eagle store before launching a chainwide rollout, Grabango told the San Francisco Business Times.
There are concerns, however, when it comes to the execution of this program. Amazon spent more than $1 million on hardware alone in its first Go store, and their store sizes are significantly smaller than Giant Eagle’s supermarkets. But there seems to be a lot of faith in the concept, as investors have given $12 million towards the project so far.
It’s possible that Giant Eagle may face some roadblocks backlash and government regulations against stores that don’t accept cash. In Philadelphia, state regulators instituted a ban on cashierless stores, followed by similar regulations in San Francisco and New York.
Despite the possible obstacles, the “grab-and-go” technology sector has very little competition. Additionally, Standard Cognition, which has a similar checkout-free program in a retail store in San Francisco, has raised about $50 million in total funding over the past year for their tech-savvy store.
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Perch Is Recognized As One Of The 40 World's Most Innovative Marketing Technologies
Technology continues to transform marketing by making campaigns more engaging and personalized for consumers. There are dozen’s of companies that are disrupting the consumer experience like Brightcove, Factual Inc, ReSci (Retention Science), ShopperTrak, RetailNext and others.
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Perfect Corp. launches “YouCam for Web” allowing customers to try on cosmetic products using AI
Perfect Corp. has launched “YouCam for Web”, a virtual makeup try-on tool for customers, available to businesses looking to leverage AI and AR beauty tech solutions, according to a company press release.
The self-service subscription tool is powered by facial recognition technology and is currently in use by over 200 beauty brands, including Estee Lauder, MAC and YSL. The program offers a free 30-day trial for brands to experience the benefits of allowing customers to “try on” their products before purchasing.
The program is available for integration with beauty brands’ websites, and offers a “Perfect Console” dashboard that uses analytics to create a private tracking dashboard allow businesses to track engagement, CTR, and sales.
“The implementation of virtual try-ons has completely reimagined the way consumers shop for cosmetics and we are so excited to create a self-service platform that will expand YouCam beauty tech solutions to even more brands,” shares Perfect Corp. CEO and founder, Alice Chang. “SaaS is the way of the future and YouCam for Web helps to cater to the growing needs of beauty tech solutions across all budgets.”
Besides increased sales, another potential benefit from this tool is cutting down the cycle of consumers buying, testing, and returning products, which can weigh on a beauty retailers’ supply chains.
The product will be showcased at Cosmoprof North America in Las Vegas at the end of July.
Sounding Smart by The Retail Water Cooler
Amazon is planning to open three new Amazon Go stores, according to a company spokesperson. While they have not released opening dates, one store will open in Seattle, and the other two will open in Chicago, totaling 16 Amazon Go store concepts throughout the US.
Saks Fifth Avenue opened an 8,000-square foot luxury men’s shoe space at its Fifth Avenue flagship renovation. The selection of more than 60 brands (15 new to Saks) includes more than 2,000 SKUs,160 exclusive styles, extended sizing and merchandise personalization, according to a company press release.
A recent survey buy Package Concierge, an automated parcel locker provider, found that 58% of Generation Z shoppers have used buy online, pick up in-store for a purchase, and 60% said it was a factor in deciding where to shop. However, brick-and-mortar stores are still important to Gen Z, as 60% visited a mall within the last week, and 90% said that they made an in-store purchase while they were there.
ThirdLove announced its first brick-and-mortar retail concept, set to launch on July 24 in NYC and remain open until the end of 2019, according to a company press release. The experiential concept will feature fitting rooms in over 60% of the retail space, along with product displays, to “gather information” on what customers are searching for from a physical retail experience.
Tru Kids Brands, the intellectual property owner of the liquidated retailer Toys R Us, has joined up with retail concept b8ta to open two new stores in Houston, TX and Paramus, NJ by the 2019 holiday season. The new, smaller-formatted stores will use b8ta’s model of charging product vendors for space in stores.
Kroger and Ocado have partnered up to open a second automated fulfillment center in Forest Park, GA in 2021. The $55 million, 375,000 square-foot warehouse is the second of 20 locations, called “sheds.” The staff within the sheds include 400 humans and several robots who are capable of picking a 50-items order in minutes.
Gilly Hicks by Hollister, a lingerie brand owned by Abercrombie & Fitch, is set to open four new pop-up stores in Miami, FL, Cerritos, CA, Friendswood, TX, and Tysons, VA with its new, more modern format. The stores will have a smaller format and offer more personalized customer experiences specific to each location, such as paying homage to local hot spots. While the open dates have not been set, the stores will remain open for approximately one year.
Google Cloud has brought on two new execs to lead the cloud strategies following the launch of its Google Cloud for Retail solution suite. Carrie Tharp, VP of Retail, will be responsible for creating and executing Google Cloud’s strategy throughout the retail industry, while Janet Kennedy, VP of Retail Enterprise Sales, will lead the Google Cloud retail sales team, according to Retail Touchpoints.
Retail sales spiked in June, rising 0.4% from May, and 3.3% year over year, according to the U.S. Commerce Department's monthly tally. According to the report, nonstore retailers (mostly e-commerce) were up 1.7% month over month and 13.4% year over year. Moody’s Investors SVP Mickey Chadha predicts that the uptick in sales will grow up to 4.0% in 2019 thanks to, “E-commerce players such as Amazon, off-price retailers like TJX and Ross, value and convenience oriented retailers like Dollar General and Dollar Tree, and discounters and warehouse clubs like Walmart and Target.”
Target hired a Facebook tech veteran as SVP of infrastructure and operations for its tech team. Hari Govind will oversee cloud computing, network connectivity and operations for technology at its stores, distribution centers, offices and digital channels, according to a press release.
Claire’s Stores has hired Ryan Vero, former president of Party City, to head the teen accessories retailer as CEO, according to a press release. Although the retailer almost had a brush with bankruptcy, they believe Vero has what it takes to drive growth moving forward.
Kohl’s has begun hiring for seasonal positions across 500 stores to support its back-to-school and holiday sales season, according to a press release. The company plans to hire 3,000 associates to fill several omnichannel and customer service positions, in addition to hiring for the five new stores opening in the fall.
Brad Weston, former CEO of Petco, was named president of Party City Holdco and CEO of Party City Retail Group, effective July 25, according to a company press release. Weston will "play a key role in driving the Company's strategic growth initiatives across its vertically integrated business" and will lead all aspects of Party City's retail operations, per the release.
Walmart is restructuring its leadership and uniting its supply chain team in a push for a seamless omnichannel experience, according to a memo received by RetailDive. Walmart’s EVP of supply chain Greg Smith will lead the team, in efforts to create “one, seamless Walmart experience” by integrating digital and store operations.