Many people know the frustrating
feeling when the holiday flight they had been watching on the internet suddenly goes up by £30 for no apparent reason. Or the annoyance when the hotel they want to book on Trivago keeps changing in price every time you go online.
But new technology might soon mean
that supermarkets and other retailers also change their prices throughout the
day according to demand.
This is known as ‘surge’ pricing or ‘dynamic’
pricing. It occurs when the cost of an item is dictated by demand at a
particular time. And while it's common in areas like hospitality and travel,
the retail sector has generally stuck to fixed prices. At least they have so
far.
But very soon digital displays along with
the analysis of customer data will enable retailers to change
the cost of thousands of items instantly, and adjust prices in ‘real time’
to attract specific types of customer at particular times of day.
For example, in the USA Coca-Cola has
been using Google's cloud platform to send discount coupons to customers'
smartphones in Albertsons’ chain of grocery stores.
Digital signs encourage shoppers to
find the soft drinks aisle, where they are then targeted with personalised
special offers and content, based on their online browsing habits and spending
profiles.
According to Greg Chambers, director
of digital innovation for Coca-Cola: "We can understand who the consumer
is and get the right content and messaging to him or her at the right time. We're
using the power of the cloud to bring a real-time, media-rich experience to
shoppers in the store."
Is this technology coming to the UK?
This location-based marketing, combined
with dynamic pricing, means that in the near future, the prices you are offered
in-store might be personal for you alone. Last year, Marks and Spencer
conducted an electronic pricing trial where sandwiches were sold at a discount
in the morning to encourage shoppers to buy their lunch early.
While M&S says it isn't currently
planning to do this more widely, it coincides with several of the large
supermarkets trialling similar ideas.
It might surprise you to learn that Sainsbury's actually ran an electronic
pricing trial two years ago - but they refuse to say what conclusions were reached.
Morrisons and Tesco are also currently trying out this system in one of their
stores, but they are keeping very quiet about it.
Electronic pricing means supermarkets
"will be able to flex their prices a lot more," according to Neil
Mason, European Analyst at the well-known market research firm Mintel.
"Retail is really tough nowadays.
You've got to be quick to respond and e-pricing is the way to do that. It's
about being more efficient and responsive to what is happening in the
marketplace.”
"They might want to increase
prices on certain products because of inflationary pressures, but also might
want to decrease prices because of promotions - so it could be good for
consumers. At the end of the day, supermarkets have to be keen on price
competition, especially now the big discounters have entered the sector."
In the UK, an intense price war
between the discounters (Aldi and Lidl) and the ‘big four’ (Asda, Tesco, Sainsburys,
Morrisons) has taken its toll on profit margins. That’s not to mention growing
competition from online retailers such as Ocado and Amazon.
In addition, food prices have been
rising recently as the weak pound has pushed up the cost of imports. But supermarkets
are reluctant to pass on the increase to their customers who are already
finding it hard to manage, as wages have failed to keep up with inflation in
the last few years.
So maybe it is only a matter of time before
electronic pricing makes the move to UK supermarkets, a sector that is constantly
looking at new ways to innovate.
Displaydata, one of the world's
leading suppliers of electronic shelf labels, confirms that electronic
pricing's newfound popularity in the UK has transformed their Berkshire-based
business.
Chief executive Andrew Dark says: "This
phenomenon has been building in Europe and America and has now arrived on our
shores. I think there are a number of reasons, not least that UK retailers are
very conscious of their consumers."
Andrew Dark estimates that if this technology were implemented in every store, 10 million prices could be changed
within 24 seconds, not only speeding up the process, but also helping to cut food
waste and making prices more accurate.
"I think most major retail
outlets will move to this over the next five years - it's a global trend, not
just a UK trend."
Electronic displays like Displaydata's
can be operated remotely using wireless technology from a single server and a
computer at the retailer's HQ. Alongside changing thousands of prices
simultaneously, shops can use the labels to communicate information about stock
availability, social media reviews and, as in the case of Coca-Cola, connect
with smartphones to send customers targeted promotions.
Toby Pickard, from the food and
grocery research charity IGD, agrees that digitalising price labels has many
benefits for big supermarkets, once they get over the initial set-up costs.
"Retailers will be able to gain
more data about the products they sell. For example, they can closely gauge how
prices fluctuating throughout the day may alter shoppers' purchasing habits, or
if on-shelf digital product reviews increase sales in-store."
He also thinks that digital pricing
could help persuade customers to buy new products: "By making fixtures
stand out more, they can encourage customers to try new products and make impulse
purchases," says Mr Pickard. “Systems like this could encourage further
customer interaction through smartphones, change messaging by time of day, and perhaps
offer dynamic pricing."