Why Dynamic Pricing is Retailers’ Answer to Tariff Hikes
A new survey about the impacts of product tariffs from Intelligence Node, a proven innovator in retail analytics technology, reveals that consumers are concerned that retail prices will soon be on the rise. More than 1,000 respondents took part in sharing their sentiments on impacts to retail pricing as a result of new tariffs going into effect. The results underpin key strategies and lessons for retailers, specifically on how a best-in-class pricing analytics system can keep them in the “green” through the holiday season.
In this interview with Sanjeev Sularia, co-founder and CEO of Intelligence Node, he discusses the survey results as well as the potential for dynamic pricing to be a solution to retailers’ tariff-related pricing concerns.
Total Retail: How does dynamic pricing help mitigate tariff concerns for consumers?
Sanjeev Sularia: Currently, consumers are primarily concerned with the impact tariffs will have on their wallet. Dynamic pricing capabilities allow retailers to be more agile in their pricing strategy. Therefore, instead of blanket price hikes or discounts, retailers can get more granular by automating their pricing to be more responsive to market changes, stock movements, product visibility, and many other forces that influence the consumer’s buying intent. If they cannot afford to go above the competitive price in one category, they can compensate for it in another with the right competitive insights. Dynamic pricing technology also enables retailers to accurately forecast demand and plan timely inventory moves, ultimately enabling brands and retailers to avoid inventory waste and reinvest profits into new goods they know consumers want, delivering a better price point and overall experience.
TR: How can dynamic pricing help retailers continue on a growth trajectory in light of the tariffs?
SS: Dynamic pricing can empower retailers to stay competitive in the long term by relying on sophisticated analytics rather than being driven by fear or gut feeling. The technology helps them with facts and foresight informed by historical and current trends to plan future orders in a more scientific manner. Optimizing inventory with accurate demand projections is critical to a retailer's bottom-line growth. Any slowdown in sales stemming from tariffs could negatively impact retailers’ supply chains and their ability to procure new merchandise for 2020 and beyond. In this light, having a better grip on what’s working in the assortment — both their own as well as their competition’s — can help retailers reduce the burden on their supply chain and cut costs.
Our survey data found that consumers don’t usually wait around for the big calendar deal days before making a purchase. However, they do look for competitive pricing. Dynamic pricing helps retailers offer better prices on a day-to-day basis, therefore they don’t have to offer deep discounts on limited calendar days to meet revenue targets. It also helps in perfecting the targeted outreach to consumers in the form of ads and personalized promotions. To continue growing despite tariffs, retailers must optimize prices to win cost-conscious customers. Retailers that are able to quickly adjust pricing on goods by using price optimization tools that utilize unique product SKUs from across e-commerce sites, online marketplaces, brick-and-mortar stores, direct marketing, and consumer social media will be best able to identify and act on pricing gaps.
TR: In light of the fact that consumer confidence in the economy (and thereby spending) is waning, how can breaking down silos across the organization between merchandisers and those responsible for pricing help retailers continue to grow profitably?
SS: Our data reveals that over 54 percent of consumers are concerned about tariffs, which will ultimately impact spending. If retailers want to continue making a profit, they must work towards becoming a single, unified team with open channels to view inventory. Breaking down silos across the organization will allow retailers to quickly reprice and act on unpredictable scenarios, like tariffs, by communicating the number of available products at a given price to achieve the highest possible profit margin. Every department of every business generates a lot of data. Unifying business intelligence will differentiate those merely collecting data from those capable of extracting actionable insights.