In today’s fast-paced retail world, staying ahead of the competition requires more than great products or low prices – it demands smarter, faster decisions. That’s why, according to Gartner, 91% of retail IT leaders plan to prioritise artificial intelligence by 2026 to drive revenue growth, improve margins and enhance customer experiences1.
AI-powered tools are revolutionising pricing strategies, enabling retailers to respond to market changes in real-time, optimise profitability and build stronger customer loyalty. At Valcon, we’ve helped leading retailers unlock the full potential of AI to stay competitive in an increasingly complex market. In this article, we’ll explore how AI can help you navigate today’s retail challenges, optimise your pricing strategies and build a competitive edge.
A new set of tools to navigate uncertainty
In recent times, the retail landscape has been profoundly impacted by a perfect storm of challenges, creating an environment of uncertainty and unpredictability. Geopolitical tensions, natural disasters and logistical disruptions have made supply chains more fragile than ever, while cost inflation and changing consumer patterns have intensified price competition and forced retailers to rethink their strategies. Even small pricing missteps can lead to lost sales or eroded margins.
Traditional price-setting tools and methods are proving inadequate to navigate this complex retail market. These methods often rely on static pricing models that fail to account for real-time shifts in demand, competitor behaviour, and external factors such as economic downturns or sudden market disruptions. Additionally, many traditional pricing tools lack the ability to process large datasets dynamically, leading to slower decision-making and missed opportunities for optimisation. As a result, there is a noticeable shift among retailers towards adopting AI-powered solutions and dynamic pricing models to remain competitive and responsive to market changes.
The AI-powered pricing framework
AI-powered tools enable retailers to consider a wide range of factors simultaneously. This will not only improve their pricing accuracy but also significantly enhance their agility in responding to market fluctuations. AI-powered pricing focuses on three key factors, all of which play a crucial role in influencing pricing decisions:
- Strategic factors define the retailer’s objectives with its pricing strategy. It includes the identification of key value items (KVIs) that drive customer interest and loyalty, the implementation of omnichannel pricing strategies that ensure consistency across various sales platforms and the establishment of localised price zones that cater to the specific economic conditions and customer behaviours of different geographical areas.
- Hygienic factors ensure logical pricing relationships that make sense to the consumer. It maintains optimal price spreads between store brands and national brands to avoid confusion and foster trust among customers. Additionally, it adheres to rounding rules that enhance customer trust and satisfaction by presenting prices in a manner that feels familiar and fair.
- Dynamic factors leverage real-time competitive pricing data and dynamic forecasting techniques to optimise prices based on various factors, including competitor moves, fluctuations in consumer demand and external influences such as weather conditions.
By continuously adapting to these factors, retailers can ensure their pricing remains competitive and relevant.
Implementation enablers
Successfully implementing AI-powered pricing tools requires more than just adopting new software. Retailers must establish the right foundation across three critical areas: teams, processes and technology.
- Drive smarter pricing with AI expertise: First, a dedicated pricing team with data science expertise is essential. This team should analyse complex data, interpret AI-driven insights and translate them into actionable pricing strategies. Collaboration across departments, such as marketing and supply chain, ensures pricing decisions align with broader business goals.
- Accelerate pricing decisions with agile processes: Second, agile processes must be established to support the dynamic nature of AI-powered pricing. Agile frameworks enable faster iterations, real-time testing and adaptability in pricing models, making them particularly effective in responding to constant market shifts. However, while agile can be a powerful enabler, other methodologies, such as lean or Six Sigma, may also contribute to effective AI-powered pricing, depending on the retailer’s operational model. These processes should enable frequent strategy reviews, real-time monitoring of pricing performance, and quick adjustments to pricing strategies in response to market changes, competitor actions or shifts in consumer demand.
- Future-proof pricing with scalable technology: Third, investing in the right technology is a non-negotiable requirement. A centralised, automated data platform is the backbone of any AI-powered pricing framework. This platform must integrate data from multiple sources, such as sales, competitors and external market conditions while supporting near real-time updates.
Without the right teams, processes, and technology in place, even the most advanced AI solutions will fall short of their potential.
Getting started
The level of AI adoption depends on the retailer’s ambition and strategic direction. Before implementing AI-powered pricing strategies, retailers should thoroughly assess their vision, feasibility and approach, and whether to build, buy or partner with external providers for the necessary technology and expertise.
As pricing complexity continues to grow in the retail landscape, investing in AI is no longer merely an option – it has become a necessity. Retailers who successfully integrate these advanced tools into their operations will gain a competitive edge in terms of efficiency, customer perception and overall financial performance.
Reach out
If you’re ready to optimise your pricing strategy and stay ahead in today’s competitive retail market, Valcon can help. Our team of experts has extensive experience in implementing AI-powered pricing solutions that drive profitability and customer loyalty. Explore our pricing insights or contact us directly to learn how we can support your journey toward smarter, more agile pricing.
Danilo Zatta, PhD
[email protected]
+49 172 6937532
Anders Worsøe Gantzhorn
[email protected]
+45 2022 5337
1 Source: 2024 Gartner CIO and Technology Executive Survey © 2024 Gartner, Inc.
