Opinion: Putting dynamic pricing back on the shelf

This week’s news that Tesco had advertised expired in-store promotions – resulting in customers being overcharged – has resurfaced the debate on whether it’s finally time to embrace a technology that even though is well into its second decade, is experiencing a second wave: electronic shelf labelling (ESL).

Whereas other components of the physical retail offer have evolved over time, in-store labelling has refused to innovate at the same pace.

In an environment where margins are wafer-thin and store success is measured both daily and weekly, investment in store-based technologies with longer payback periods – historically up to 18 months on ESL was widely accepted – has typically been challenging to justify.

“Whereas other components of the physical retail offer have evolved over time, in-store labelling has refused to innovate at the same pace”

The extensive investment required to roll out a nationwide digital labelling solution and the alternative of a low cost in-store workforce, has meant ESL has slipped down the priority list.

Trialling tech

Argos, Tesco and John Lewis have all trialled systems in the past, but feedback revealed that it was easier for colleagues to manage price changes manually.

However, now many retailers are investing in overhauling their core stock management, merchandising and pricing systems. And while store infrastructure needs less space, it seems that there is ample opportunity to get it right.

Companies such as Displaydata are now producing digital labels in multiple colours.

Labels like these display not just the price, but much greater product information on provenance, nutrition and more.

But beyond the aesthetic, what are the benefits for the retailer?

“Improvements in technology are providing the opportunity to experiment with in-store dynamic pricing initiatives, following the lead of online retailers like Amazon and eBay, who flex pricing in response to demand and supply”

Considering a retailer of Tesco’s size might be changing between five and 10 million labels a week across its entire estate, there are the obvious productivity-based saving opportunities.

Time spent changing labels could be redeployed into improving customer service initiatives, for example.

From a trading law perspective, correctly labelled prices and promotions are essential as regulators are actively enforcing pricing integrity – something Tesco is no doubt finding in light of its recent unwelcome attention.

Other companies are combining labelling with intelligent shelving to highlight out of stock scenarios, and using beacon technologies to send promotions directly to customers’ mobile devices.

Store navigation is also an emerging area for digital displays, as they can help customers to navigate their way to their favourite brands.

Reactive pricing

Improvements in technology are providing the opportunity to experiment with in-store dynamic pricing initiatives, following the lead of online retailers like Amazon and eBay, who flex pricing in response to demand and supply.

Could digital display allow food retailers to experiment with the same concept for perishable goods?

In a supremely competitive environment, retailers should use their labs and pilot stores to experiment with real-time data from their competitors to ensure customers get the best deal – granted this is potentially more troublesome on a bunch of bananas compared to a widescreen TV.

In an era where retail differentiation is shifting from price to experience, digital displays may be an area retailers can win.

On a more fundamental level, customer trust is a delicate thing, and if this technology can help reassure shoppers that they are getting the deal they think they are, then surely that’s worth the time and money?