Automatic pricing is changing the retail environment

Their software sets prices automatically to increase profitability: “The whole e-commerce is changing”

When the e-retailers range of products increases and the competition is sharp, it will not be enough to set prices like before. It should be done data-driven and preferably automatically, says the price analysis company Priceindx. “Amazon sets new demands on the Swedish companies,” says Jan Tallroth and Curt Luks.

Pricing is not an easy task in a competitive market. Identical or comparable products obviously need to be handled both strategic and tactical level – a lower price larger turnover but also lower margins. And vice versa. And what does it say about your brand and position.

All these considerations need exact and accurate data. But how should one really put the right price on an online market where customers with a few quick clicks can choose and choose between a myriad of local and foreign sites that constantly change their prices? Some even several times every day.

These are issues that the Swedish price analysis company Priceindx works with. Their solution is a software that provides the basis for manufacturers and retailers to manually – or automatically – set the price that optimizes the margins based on, among other things, their own inventory balance and proactively instead of reactively following what their competitors do.

“We can read in virtually any site in the world so that you can see how the competitors’ prices develop every day,” says Curt Luks, who is the sole founder of the company that started in 2006 and has companies like Komplett, Sony, Qliro and Byggmax in the customer list.

“The whole trade and e-commerce is rapidly changing. Previously, a typical customer might have some thousand products. Now it is sometimes up to half a million, in a combination of own brands and others, ”he says and notes that the number of competitors that e-retailers need to keep track of is increasing.

One of Priceindx’s customers follows how prices change at 140 designated competitors and takes decisions every morning around the most important products products. “It is about being able to make as much money as possible while retaining customers. Then it is required that you always understand what others are doing, ”says Curt Luks.

At the end of last year, Jan Tallroth came in as growth manager at the price analysis company. He is a veteran of the advertising agency world with a background from eg Ogilvy and Jung von Matt and has previously been the marketing and sales manager at Hong Kong based train operator MTR Express.

Being a marketing or product manager today is difficult, he says: “It is a series of new challenges. To monitor competitors and strategically adjust prices manually is to dispose their time wrong. Its better to focus on business and assortment objectives”.

As Curt Luks sees, the emergence of large marketplaces such as Amazon is another factor that pushes traders to keep track of competitors and automate functions.

“The trend is that the big marketplaces are becoming more and more dominant and there all the players are compared and analyzed. As a result, competition is intensifying for all. But since they have the traffic it is also where you find the customers and therefore it is important to be seen there,” he says.

What can you do when you have a close look at the competitors’ prices?

“You match the data with your business strategy and assortment strategy. Of course, it’s not just about lowering the price, but about increasing the total shopping basket, getting your own brands and working with the interaction between the volume and the price. On their own brands, they often have the best margins. Then one can use known brands as a lure,” says Jan Tallroth. Having own brands, that is, brands that are unique to the company, is a trend that is growing in importance as the market becomes more transparent, ”so that it will not be so easy for customers to compare,” states Curt Luks.

“We work throughout Europe and see how it is in countries where Amazon exists. This places new demands on the companies, ”he says. How do you compare your own unique brand with another company’s unique brand in the same category?

“Comparing two similar products is easy. With own brands, it becomes more difficult. We have a function that goes into the specification level and matches so that the comparison can be made, ”says the Priceindx founder.

Another feature goes through which products are popular with the competitors, based on clicks, but which are lacking in their own product portfolio.

“Then you can see which big sellers you should put into your own range,” says Jan Tallroth. Whoever keeps watch will also get an indication of the competitors’ strategy, he says: “If someone lowers the price dramatically, it can be a temporary campaign or for the product to be replaced. With the tool you can see that and get help on how to handle their own product.”

With two recently launched features, regulatory pricing and dynamic pricing, Priceindx aims to automate part or all of pricing.

Rule pricing means that the customer can set conditions for how the prices should be in relation to the competitors. If someone raises or lowers the price, you get recommendations on how one’s own prices should then be changed and can choose whether to act, or automate the process.

The step thereafter is dynamic pricing that can be made fully automated and reacts and responds to things that are without their own company. One example is how the taxi service Uber’s travel prices change in real time according to supply and demand.

So far, few Swedish companies have embraced the concept. “Today, there are only the pioneers who have dynamic pricing. But the trend points to it. As the market becomes tougher, the need for these features will increase, ”says Curt Luks.

Priceindx has 15 employees and, in addition to the Swedish company, also subsidiaries in Estonia and England. So far, larger companies have dominated the customer list. But recently, the Swedish price analysis company has integrated its service with Prestashop in southern Europe, whose e-commerce platform is used by some 200.000 small and mediumsized online stores.

Why haven’t giant companies already built the functions you build? “When I started in 2006, I was worried that the big dragons would kick off and build modules that could be connected directly to the business systems. But it’s not that simple. To get the max required, a fine adjustment is required with each customer. A standardized solution is technically very much more complex and will probably cost more than it tastes, ”says Curt Luks.

Would the benefits you see with price monitoring and automatic pricing disappear in a market where it was standard?

“Then the fight becomes a bit tougher of course. But everyone is working and thinking in different ways already today. There are many levers to pull in, such as the packaging, ”says Curt Luks.

He takes as an example that someone sells a coffee cup, along with a barrel and a spoon. “Then maybe you sell the cup cheaply, but take it back on the dish and spoon. But some products will surely be squeezed and this will benefit the consumer. Basically, it will always be about sales technology and the creative ability to see what the outside world does and place itself in a strong niche, ”says Curt Luks.

Facts dynamic pricing

Dynamic pricing is a pricing strategy that has gained ground in the global market in recent years, and means that prices can be updated in real time, for example, by supply and demand, or by their own costs, time of day or competitors’ prices. Used by, among other things, Airbnb and Uber. E-commerce giant Amazon can update its prices every ten minutes using the method.