How AI is Driving Dynamic Pricing in Online Retail
Updated: Feb 10, 2021
There is no denying the fact that AI is finding its way into every aspect of modern living.
From cars to healthcare to our homes, AI is progressively getting embedded into our
technological functioning. AI in retail is an emerging trend today, with retailers now moving to predictive commerce. With AI on its backbone, retailers are now catering to various aspects
of customer satisfaction while leveraging technology to upgrade their business operations.
E-commerce heavily resorts to dynamic pricing in order to provide the best deal for the customer. Here, dynamic market forces result in the wide range of price fluctuation incurred by online businesses. Up until now, prices were governed by the laws of supply and demand, but with AI entering the playing field, the sellers and service providers also have to take into account the consumer’s perspective. How much a customer is willing to pay for a certain product or service. This calculation is not done by you, but by an algorithm.
Artificial Intelligence is now Predicting Prices
The core of AI is machine learning (ML), which works on the principle of adjusting its algorithm and working according to the new data patterns. Simply put, analytics software creates algorithms to identify patterns from the data and predict prices based on that information.
But since the parameters in these algorithms are always in a state of constant change, one needs to be able to keep up with the transient scenarios. This is where machine learning comes in, which adapts its algorithms to accommodate to the ever growing pool of information and fix prices accordingly. This is the magic that lets you give your consumers a personalized experience while shopping online.
This system has been around for a very long time. In 2014, Amazon came up with a revolutionizing algorithm, for which it was granted predictive stocking patient. It allowed retailers to reduce their delivery time and cost by simply predicting which customers were going to buy what before they actually brought it. This allowed the retailers a better control on pricing and their marketing strategy.
AI: A Boon for Retailers
The benefits of AI in retail are numerous. Most notable are:
Price prediction and optimization
No more all-nighters. Gone are the day where one will need to sit in front of a screen for hours, determining prices based on the info from a market research. The best prices can now be determined by the algorithms, taking into account the various market forces. This is one of the most effective guides for retail life cycle decisions.
Automation and saving time
Less time and more efficient results, automated solutions are the future of online retail. Automation saves a huge amount of time and effort and lets the retailers and managers think
more about their strategy and business development.
With the amount of data that is analyzed, it would be naive to think that pricing is the only benefit retailers will get from it. A lot can be inferred by glancing at a person’s browsing history and search patterns. The product choice of a customer becomes a viable prediction. This can lead to a big spike in profits if executed cleverly. Now you know how those pop-up ads you see on various sites show things you find hard to resist.
The neck breaking pace at which technology is developing, it is impossible for one to survive without amalgamating it with one business and marketing strategy. This is the time for retailers to step out of their comfort zones and start behaving, a little, like tech companies, using the online environment to its fullest, not to just predict prices, but to also take care of their customers.
Wish to know more about how Artificial Intelligence can transform your e-commerce business? Contact Datahut: your AI and data experts.