Retail T
he ever-changing retail landscape feels more chaotic than ever. Persistent cost inflation, supply chain volatility, changing customer behaviour,
and fierce competition mean retailers are fighting to stay on course. Tariffs have only added to the uncertainty, with the markets now more unstable than ever. Retailers need agility that aligns with their core strategy. Against such pressure, traditional retailing techniques
are proving less effective and more challenging to maintain, but the way forward is clear. AI-based retail pricing solutions power up core processes, helping retailers stay competitive and providing the freedom for novel innovation. They offer the flexibility to react to market deviations and potential recession, while helping to cement and remain loyal to one’s pricing strategy and prevent knee-jerk reactions. Retail’s move to embrace the benefits of algorithmic
methods has already begun. Most large retailers have already incorporated some form of AI retail management software into their backend. Those now ready to make the leap will likely start their transition by using retail AI to optimise pricing. Nothing is more important in such a competitive landscape: price optimisation directly affects revenue, is the core of profitability, and influences customer perception like nothing else.
Balancing profit and perception Developing and acting upon a competitive pricing strategy is a major ongoing exercise. A retailer cannot simply set a price and sit back. There are countless variables to consider, from forthcoming promotions to supplier negotiations, seasonal demand, loyalty card pricing, market fluctuations, etc. Brand perception might be the most vital of all: pricing is a powerful psychological tool, useful for building repeat custom and engendering trust. A retailer’s approach to pricing optimisation essentially anchors its position in the market. Without the right pricing strategy, retailers might aim
too low, leaving money on the table or adversely affecting the perception of their products as low quality. Pushing too hard, on the other hand, may drive customers away, tarnishing one’s brand in other ways. Today’s market is dynamic – savvy consumers can, and do, compare prices instantly online. If a retailer cannot act quickly to adjust, they have lost an opportunity. And given today’s razor- thin margins, drawing on every opportunity is vital. Research from McKinsey suggests that a 1% increase
in price can lead to an 8% increase in profit, but that kind of impact can only happen if applied to the right product at the right time. The costs of supply, logistics, and inflation fluctuate constantly, so pricing must protect margins while remaining fair. This is, frankly, a monumental task for humans to tackle, considering a typical retail assortment is over 10,000 items for a medium-sized supermarket, but one which retail price optimisation software can help simplify.
www.pcr-online.biz At its core, AI retail pricing solutions allow retailers to
turn data into insights and use what they have learned to drive strategic change. The high volume of data which makes agile pricing difficult for humans has the opposite effect on algorithmic tools: the more such software knows about a business, the market at large, supplier offerings and so on, the more it can simplify the task of maximising a customer’s willingness to pay, and their likelihood to return.
A step-by-step transition It is not necessary to do everything at once. The transition to AI is a journey. In retail, this often means beginning by establishing a foundational pricing structure that embeds strong pricing strategies and the oversight required to deliver on them. From there, retail AI can contribute to a semi-automated pricing system, providing prices for user approval. When the time is right, retailers can fully realise the power of AI and algorithmic retailing, exploiting full rules-based pricing. The journey is one of alignment, of integrating AI with
one’s go-to-market strategy, not the other way around. It is about putting the tools in place to make strategic pricing decisions at the category management and store level that are right for the retailer and its customers. Price intelligence software can leverage sophisticated predictive analytics, allowing retailers to anticipate market trends and consumer behaviour, incorporating real-time data from sources like social media, economic indicators, and competitor pricing activities. This drives dynamic, personalised rules-based pricing
adjustments to support broad product categories, individual customer segments, or even individual customers based on their purchase history and known preferences. Once an established method of price optimisation is in place, its influence can drive development in other core areas of retail, like promotion management, supplier planning, and personalised marketing.
Honing a competitive edge Price optimisation software is a core component of tomorrow’s seamless, highly responsive, cutting-edge retail ecosystem. The transition to using this new generation of pricing management software has already begun; retailers that fall behind face a significant struggle to match the activities of those that can react at the speed of AI. Moving to an algorithmic model is minimally disruptive and provides immediate benefits to those who can offer such systems the data they need to thrive. In return, retailers gain access to options they have
never had before, and the freedom to put the minds which might otherwise have been fighting to keep prices in line onto the vital task of innovating. AI pricing software isn’t just about getting prices right – it’s about making headroom, clearing the way to take the next steps in one’s retailing journey with a new level of agility, and gaining the knowledge and confidence to remain level-headed in an ever-changing market.
May/June 2025 | 7
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