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Top Predictions For AI, Big Data, Pricing By 2025

  • Written by  Ken Ouimet, Engage3

0aaKen Ouimet Engage3I’ve been in the retail pricing industry for the past 40 years as an entrepreneur and tech innovator. I wanted to share with you where I think AI, Big Data and Algorithmic Retailing are headed in the next few years, and I’m going to make five predictions about the state of the industry and what it is going to look like in 2025.

[To view the video of Ken’s predictions, go to:

http://www.engage3.com/5-big-predictions-for-the-retail-industry/]

Prediction #1: AI will emerge as your new shopper.

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The advent of digitalization has resulted in the explosion of data available to retailers — from detailed store and online transaction logs to competitive pricing data. Companies will have more data than they have traditionally been able to handle. This is the perfect storm for Artificial Intelligence-based technologies, because the more data you feed AI, the better results it will generate. That means that AI is not only going to evaluate SELECT options — it will do what it does best — it will evaluate EVERY option.

Consumers will also have fingertip access to this data. AI will match variables like consumer preferences, location and shopping history to the stores’ product offerings. AI is going to promote price transparency. Price elasticities will go through the roof. Your old heuristic pricing rules will no longer work. Small pricing mistakes will have huge costs. Retailers will begin to differentiate themselves like hedge funds with high-speed pricing models and proprietary market data.  

Prediction #2: Pricing will be personal.

The industry has gone from cost-plus pricing to a dynamically generated model based on many factors like local demand and assortment. The next wave is for retailers to use algorithmic retailing — using advanced analytics to offer personalized pricing. Every customer will be offered pricing that is unique to her. It will be based on many factors that the newest digital capabilities have enabled. Geolocation, for example, can alert a customer to a promo that is available when she is close to her favorite store. This setup not only benefits retailers, it also presents convenience and an opportunity to the consumer to take advantage of savings she would otherwise have missed if she didn’t have access to this information.

At first, personalized discounts will be used to fly under the radar in a price-transparent world. Retailers could bring in customers without lowering prices as a reaction to their competition. Personalized pricing will be embraced as retailers realize its power — to get every price right at every transaction.

Prediction #3: Consumers will embrace service-oriented marketing.

Consumers will use pricing information that will be made available to them and will embrace retailers that listen and understand them. They will gravitate towards retailers that give them better deals on products that they want. This will not only save consumers’ limited time to pay attention to the glut of information, but also save retailers from promoting the wrong products to uninterested clients. Consumers will expect retailers to mine their historical purchases to figure out what they want. They will start to abandon, and lose respect for, retailers that continue to push mass-market offerings at them.

Prediction #4: Product attributes will emerge as the new shelf space.

Consumers are already searching for key attributes, as opposed to specific brands. Sophisticated consumers look for product characteristics like gluten-free, organic and sustainability. They are being educated about new product features that not only take care of their health and well-being, but also that of the planet. Private labels have sprung up as a consequence with multi-tiers catering to different market segments.

Manufacturers will be forced to respond by diversifying their brand investments across other attributes. They will start to compete for product attributes, the way they compete for shelf space today. And both retailers and manufacturers will learn to escape the race to the bottom by leveraging product attributes and market value, and not just compete on price.

Prediction #5: 3D printing will emerge as a new threat to retailers.

3D printing will enable manufacturers to personalize products and distribute them electronically, sometimes right into the consumers’ homes. This technology is no longer limited to small trinkets or custom products. In China last year, for example, a private construction company printed 10 full-sized houses in just 24 hours. The one-story buildings were designed to service offices at a high-tech industrial park in Shanghai.

Products that will be available will initially only be limited to the type of material needed to produce them. Retailers will be forced to figure out how to leverage their broad product portfolios using 3D technology, and stay relevant in that new game.


Ken Ouimet is the Chief Executive Officer & Founder of competitive intelligence & consumer engagement start-up, Engage3 (www.engage3.com). He is credited with creating the retail revenue management and price optimization market with his first company, Khimetrics. Khimetrics led the industry for almost a decade prior to the company’s acquisition by SAP in 2006. Ouimet served on the Board of Directors of Revionics between 2007-2011 and as Chief Scientist & VP of Innovations at SAP AG between 2006-2007.

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