AI revolutionises seasonal pricing for retail & eCommerce

AI-powered pricing solutions are changing how retail and eCommerce businesses respond to seasonal changes and evolving consumer demands.

Vijeta Soni, Co-Founder and Chief Executive Officer at Sciative Solutions, outlined how artificial intelligence (AI) tools are influencing price management in an article addressing sector challenges and opportunities amid fluctuating market conditions.

Soni noted that the traditional methods for setting prices are no longer effective in the current digital retail environment, stating, "With temperatures rising and consumer behaviour rapidly changing, the challenge is that retail and eCommerce businesses know what needs to be done- price it right every time- but the real challenge is figuring out how to do it. Traditional pricing strategies fail in today's fast-paced, hyper-competitive digital workplace because they rely on static, manual models that can't keep up with real-time market shifts, dynamic demand patterns, or ever-evolving customer expectations."

Highlighting the growing influence of AI startups, Soni commented, "As a result, startups across the globe have flourished by leveraging the power of AI, the pillars of a pricing revolution that is transforming the way retailers handle seasonal demand humps - especially in summer - in the quietest parts of the economy. We are seeing these agile innovators thinking about price management as a numbers game, using cutting-edge algorithms, real-time data analytics, and machine learning, thinking about what it might look like to eventually reimagining it as a dynamic, predictive science."

AI-powered Software-as-a-Service (Saas) platforms enable businesses to adapt their pricing in real-time, taking into account variables such as weather trends and customer purchasing patterns. According to Soni, "From weather trends to purchase patterns, AI SAAS systems are enabling businesses to adjust prices in an instant to give customers just the right incentive to buy, drive more profit marginally, and keep them coming back. Selling smarter is not about making more sales, it's about selling better."

Explaining the impact of automation, Soni said, "Dynamic pricing driven by AI is about harnessing smart automation. These include highly advanced robots learning and analysing massive datasets, including market trends, competitor's pricing, and consumer behaviour. This analysis generates actionable insights that empower retailers to respond swiftly with price adjustments based on shifts in market demand and supply, giving retailers the ability to adjust prices in real time. They can respond quickly to changes in demand and supply."

She described a typical scenario by saying, "For example, during early summer months, products like ice-cream makers and portable coolers might see a subtle increase in demand as people prepare for warm weather. Based on these trends, AI systems can detect them and adjust pricing to increase sales and profits."

Beyond immediate pricing changes, Soni pointed to broader business benefits from deploying AI solutions. She said, "AI provides numerous benefits in the implementation of AI in pricing strategies. Additionally, apart from dynamic price optimisation, it can deliver up to 10 percent more profit to businesses through the optimisation of inventory and reduction of stockouts through AI."

AI technology enables businesses to personalise experiences for customers, an approach that Soni views as crucial for fostering loyalty and increasing conversions. "Hyper-personalisation is the future; the AI system can utilise customer information data, such as customer purchase history and browsing behaviour, in tailoring the pricing strategies. This personalisation strengthens customer loyalty and increases the conversion rate. For example, an AI might recommend a specific discount to frequent shoppers, such as during demand seasons, to make their shopping more enjoyable and to encourage repeat purchases," she explained.

According to Soni, small to medium-sized enterprises (SMEs) have obtained improved market access through AI. She wrote, "Small to medium-sized enterprises (SMEs) benefit the most because of the scalability of AI solutions. In the past, sophisticated pricing strategies were available only to large corporations that could afford them. However, with a boom in technology, AI startups are democratising access to advanced pricing technologies, and now SMEs out there are more easily able to compete more in the markets."

Soni further noted the increasing application of AI-driven dynamic pricing beyond retail. "The adoption of AI-driven dynamic pricing extends far beyond retail, emerging as a growing trend across various industries. For example, in travel for real-time fare adjustments, and hospitality for optimising room rates. The strategy essentially enables better management of customer traffic and improves workers' conditions while following the adoption trend of the AI-based pricing strategy across industries."

She added, "Overall, AI startups are disrupting the pricing management in retail and eCommerce with tools to orchestrate real-time, dynamic pricing. In turn, these innovations enable businesses to react swiftly to market needs, especially at times such as the summer season, and increase revenue and customer satisfaction, which will be an essential element to the success of retailers and their eCommerce."