The world of online retailing is one that keeps growing by the year. In today’s world, you can buy anything you want online. The need for physical stores is virtually none existent and it would seem that food is the only type of product we need to physically buy.
The world of retailing is closely tied with pricing. It would seem that one cannot talk about retailing without adding in pricing into the conversation. Since price means everything in the world of retail, it is the most important metric for measuring success.
In today’s world, retailers are required to be flexible on pricing and adaptive to such strategies in order to satisfy the dynamic needs of the industry itself.
A retailer’s pricing is influenced only by his competitors. Other factors that further contribute to the equation are consumer behavior, inventory threshold, sell-through goals, cost-based margins, and seasonality. While this all might sound unfamiliar to you, pricing engines combine all of the above-mentioned factors in order to calculate the optimal price for a product. If a pricing engine doesn’t add all of the factors, then the pricing engine will most likely cause damage to your finances.
In the past, retailers used various methods to calculate the optimal pricing for their products. But most of the time, these methods of calculation had some degree of mistakes in them due to the diversity of factors involved. If not all factors are taken into consideration, then you will most likely eighter lose money, or lose in sales to your competitors.
In today’s time, there are algorithms that automatically identify patterns which are used to determine the price of an item. Such are strides in machine learning that all it needs is a few variables, and a database to operate, and it will calculate the best prices for a product. Stuff such as purchase history, competitor pricing’s, inventory, product demands and product preferences, all play a key role in determining the price of a product. These pricing engines are carefully developed by specialists in the fields of advanced analytics and data science. By combining both, pricing engines are a technology that can be of great use to retailers.
Pricing engines offer retailers a unique option of completely covering all costs of the entire streamline process, in order to come up with the best possible prices that will allow retailers to compete in the vast market. Since key factors such as price elasticity, purchase history, inventory levels, and seasonality play a vital role in determining the price, users can carefully switch between strategies. Retailers can use pricing engines that monitor their own progress, and their competitor’s to come up with the optimal price for their products. What’s more interesting is that internal data such as liquidation and sales velocity also play a role in determining the final price of the product.
In the world of retail, the lowest price is not always the best price. Since retailers are competing with a lot of other competitors, having competitive prices determined from a host of factors will allow you to stay flexible and escape the deadly clutches of mark-downs.