Guest post by Matt Silver
We’ve seen a growing volume of speculation about dynamic pricing coming to the grocery retail market in recent weeks and months. And with Amazon’s acquisition of Whole Foods there seems to more interest in this topic than ever.
What is dynamic pricing? Uber’s surge pricing is the obvious iteration with which most of us will be familiar – Uber has a flat rate for each of its various services, but at times of high demand/low supply, the prices increase. This serves two purposes – it encourages more drivers to come online to service the additional demand, and forces the user to either pay more to take advantage of the service, or wait until demand (and therefore the rate) is lower.
As retailers collect more and more data about their customers, their preferences, and behaviours it seems inevitable that we will see some form of dynamic pricing make its way into grocery retail – many of the largest retailers have trialled or are trialling electronic pricing systems that can be thought of as precursors to this type of model.
But there are many questions left to be answered:
How widely will dynamic pricing be introduced?
Will we see it outside of the largest retailers?
Will prices go down at times of high supply as well as up when products are scarce?
Will this make eating more local, seasonal produce cheaper?
To what extent will this allow retail marketers to manipulate sales and purchasing behaviours?
Does this help even the playing field for bricks and mortar stores competing with online competitors?
Will consumers see most of the benefits, or will retailers use this to eek out better margins?
It will be an interesting trend to follow without a doubt, but how willing retailers, and more importantly consumers, are to embrace dynamic pricing remains to be seen.
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