Tuesday, October 06, 2015

Will Electronic Price Tags Allow Retailers To Use Yield Management Pricing Strategies?

I remember as a business school student to have worked on case studies where companies were using yield management pricing. It was especially the case for airplane companies, changing their pricing depending on the demand and the filling of aircraft. The purpose was simple for those companies: maximizing profits while securing a rate of filling close to 100%. 

In retailing, E merchants tend to use the same techniques. They are indeed able to benchmark prices in real time in order to keep competitive prices upon competition. It is key for merchants as price search engines are numerous, and shoppers tend to compare prices more than in brick & mortar world. Actually, in the brick & mortar world, most of the time, shoppers tend to check prices online, either to get a discount in store, or to purchase what they found online, the infamous "show rooming" trend.

  • It secures more accurate pricing in store
  • It saves on operational costs while there are perequations happening
  • It also provides a better customer experience, with better naming of products, and more information.
But the article also outlines that this new technology allow brick & mortar retailers to compete with Amazon, and other e-retailers. I agree on the fact that electronic price tags allow faster changes in terms of prices. But the article goes beyond, and believe it could empower stores to change their pricing depending on the time, the day of the week, to maximize profits and to compete with Amazon.

I believe indeed pricing will evolve fast, in order to maximize profits, and automated pricing moves could for sure happen soon enough, thanks to big data. But I don't really believe that stores are actually adopting electronic price tags to do so.

But the article remains interesting, because the potential is there, and it would be interesting to test the technology, to see if it is really accurate.

Now, on FMCG products, it seems difficult to twist so much the prices, because you might loose your customers in such complexity, which will eventually be figured out.

What do you think about it?