{"id":30839,"date":"2019-03-18T19:32:01","date_gmt":"2019-03-18T19:32:01","guid":{"rendered":"http:\/\/www.ufcw.org\/?p=30839"},"modified":"2020-09-08T17:24:37","modified_gmt":"2020-09-08T17:24:37","slug":"should-we-be-worried-about-dynamic-pricing-in-retail","status":"publish","type":"post","link":"https:\/\/www.ufcw.org\/should-we-be-worried-about-dynamic-pricing-in-retail\/","title":{"rendered":"Should we be worried about dynamic pricing in retail?"},"content":{"rendered":"
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Ever go to tell a family member or a friend about a great deal you found online, but when they go to buy it too, it\u2019s no longer there? Or maybe it costs way more than you paid for the same thing?<\/p>\n<\/div>\n\n

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While you got a great deal, what you\u2019re experiencing is the phenomenon known as \u201cdynamic pricing\u201d or raising and lowering prices many times a day, a week or a month to drive sales but still ensure a consistent profit. This is often paired with what is called \u201cpersonalized pricing\u201d or \u201ccohort pricing\u201d where each shopper gets their own price for a product – what\u2019s my price isn\u2019t yours and vice versa. These are marketed to consumers as a benefit – deeper discounts just for you \u2014 but in the end, may actually end up benefiting the retailer at your expense.<\/p>\n<\/div>\n\n

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One paper <\/a>from MIT\u2019s Sloan School says that \u201cImplementing DP can improve revenues and profits by between 8% and 25%.\u201d<\/p>\n<\/div>\n\n

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So if everyone is saving, how are retailers making money? In the case of things like groceries, people tend to buy the same items over and over again. Since you\u2019re not the only shopper, companies like Amazon sometimes charge one shopper triple what another one pays<\/a> for the same item.<\/p>\n<\/div>\n\n

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Companies are able to get away with doing this because as customers, we don\u2019t actually have a single price we\u2019re willing to pay, we have what\u2019s called a \u201clatitude of price acceptance.\u201d That\u2019s a band of prices\u2014from a steal to a little pricey\u2014that we\u2019re willing pay for an item. According to McKinsey & Co., that price variance can be as much as 17%<\/a> , which is a lot of extra money to be made if you move to the top of the band.<\/p>\n<\/div>\n\n

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The Impact of Artificial Intelligence <\/strong><\/h4>\n<\/div>\n\n
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While price fluctuations aren\u2019t new and dynamic pricing has been around since the 1980s,<\/a> having those changes determined by Artificial Intelligence, or AI, is uncharted territory. As retailers battle it out to find that exact pricing sweet spot that maximizes both sales and profits, evolving technology raises concerns about what the effects are on both consumers and smaller businesses when large companies like Amazon use AI and algorithms to enhance profitability with little oversight.<\/p>\n<\/div>\n\n

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Data is King<\/strong><\/h4>\n<\/div>\n\n
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AI-driven personalized pricing relies on tracking and retaining information on customer behavior. That means whoever has the most information on you has a competitive advantage over their rivals. Beyond the security and privacy concerns of big data, this also means that the playing field is tipped even further in the favor of large companies like Amazon, who reached over 100 million Prime members in the US in January.<\/p>\n<\/div>\n\n

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According to Amazon’s Privacy Notice page, the retail giant collects and analyzes everything from purchase histories and products viewed or searched for to reviews, wish lists and length of visits to certain pages. This huge pool of data on its customers\u2019 shopping habits can help Amazon better understand what shoppers are looking for, what they buy and what prices they are willing to pay.<\/em> <\/em><\/p>

Increasingly, company leaders are recognizing that a dynamic pricing strategy supported by big data and artificial intelligence (AI) can help them gain a competitive pricing advantage over rivals. <\/em><\/p>

– Forbes<\/a><\/em><\/p><\/blockquote>\n<\/div>\n\n

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With deep insights into the personal preferences and online behavior of about a third of the US population, not even including the shoppers who are not Prime members, Amazon isn\u2019t just a retailer, but a data company.<\/p>\n<\/div>\n\n

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Pricing based on who you are<\/strong><\/h4>\n<\/div>\n\n
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While the law prohibits assigning prices based on protected characteristics\u2014like race or gender\u2014personalized pricing is by its nature nontransparent, meaning you can\u2019t see everyone\u2019s prices<\/a>. That means you may not know that women, for example, are charged more for the same item, because the only price you see is the artificially high one. If we know companies have information on your race or gender, and we also know the AI-driven dynamic pricing responds to your unique set of data and characteristics, how would anyone know if the law was being violated?<\/p>\n<\/div>\n\n

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What comes next?<\/strong><\/h4>\n<\/div>\n\n
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We don\u2019t know\u2014and we\u2019re not sure anyone else does either. But we also believe that honesty and transparency are essential. Lawmakers should be wary of technology evolving faster than our laws, or the ability to enforce them, can keep up with, especially if that technology is skewed to benefit powerful retail industry players like Amazon.<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

While price fluctuations aren\u2019t new and dynamic pricing has been around since the 1980s, having those changes determined by Artificial Intelligence, or AI, is uncharted territory. <\/p>\n","protected":false},"author":3,"featured_media":30841,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[49,37,15],"tags":[],"class_list":["post-30839","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology","category-retailfood","category-retail"],"acf":[],"yoast_head":"\nShould we be worried about dynamic pricing in retail? - The United Food & Commercial Workers International Union<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ufcw.org\/should-we-be-worried-about-dynamic-pricing-in-retail\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Should we be worried about dynamic pricing in retail? 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