Challenges

With retail assortments growing, increasing turnover and with many cases with decreasing store footprints, retailers need new ways to generate profits. Pricing for retailers has typically been driven from the corporate level by established pricing guidelines and competition. Markdowns for many retailers are driven by tried and true techniques with x% at 6 weeks, y% at 8 weeks etc. These traditional methods are insufficient to compete with new online or omni-channel competitors who are better positioned to capture profits through careful price management.

Opportunity

AI is ideal for situations where a retailer needs to optimize across a wide assortment of items based on a variety of factors. AI models can be used to determine the best price for each item using data on seasonality and price elasticity along with real-time inputs on inventory levels and competitive products and prices. The result is more careful markdowns on specific colors or versions to a very specific price to increase demand and maximize profits. Marginal price increases are also possible on some items to capture demand from trends. AI can also be used to provide reasons for pricing suggestions that indicate the key factors when making the pricing suggestion. This is helpful to retailers who want to know why particular items are being suggested for markdowns.