How Brick-and-Mortar Stores Are Becoming More Like Online Retailers

While dynamic pricing has mostly been associated with online vendors, one consulting group says that brick-and-mortar retailers can now join in with this game-changing strategy thanks to new technologies.

Apr 25, 2014 at 12:09PM

Between the confluence of the Web and e-commerce and the rise in hours at work for U.S. workers, brick-and-mortar visits are becoming worryingly infrequent. Online shopping is rapidly overtaking high-street sales with the U.S. Department of Commerce spotting a 3.4% quarterly pickup in e-commerce sales compared to 0.6% for brick-and-mortar retailers during the fourth quarter of 2013.

However, thanks to modern technology, traditional retailers now have a chance to fight back. Strategy consulting firm Control Group put together a thorough report examining several emerging trends in retail technology. Especially, state-of-the-art technologies that make dynamic pricing for brick-and-mortar retailers could indeed enable them to turn the tide in the battle of clicks versus bricks.

Changing prices in a jiffy

One of the most glorious things that the Internet brought to bear is dynamic retail pricing. With the ubiquity of connectivity and the power of algorithms, online vendors were suddenly able to instantly alter the prices of their offerings. In this way, online vendors not only managed to keep up with market changes faster than traditional retailers, but also were able to set prices based on customer-specific factors, such as historical buying behavior. Therefore, they always remained a step ahead of their brick-and-mortar peers.

For instance, analysis from retail consulting firm Profitero has shown that Amazon (NASDAQ:AMZN) implements over 2.5 million price changes per day, while Wal-Mart (NYSE:WMT) changes the prices in its physical stores around 50,000 times per month.

Overall, as Jonathan Spooner, the man responsible for conducting Control Group's report, explained to me, "dynamic pricing is a specific tactic that can adjust the price of items to supply and demand in a more real-time manner; another approach can be applied on an individual basis for personalized offers."

Embracing emerging technology trends and using the right tools

While carrying out dynamic pricing online has been much easier than offline, brick-and-mortar retailers can get the hang of it and catch up with e-commerce giants by using the pricing-intelligence tools now available. Key technologies, including data analytics tools, dynamic display signage, and context-aware applications, can significantly lessen the cost and time needed to adjust pricing proactively.

First and foremost, dynamic pricing does not work unless retailers have access to and can manage a wide variety of data, such as supply chain timetables, real-time inventory levels, and customer purchasing preferences. Data analytics tools do just that. Predictive analytics solutions like Predictix take it a step further, enabling users to generate sales forecasts by accounting for any new promotional pricing activity within seconds.

Secondly, for brick-and-mortar retailers to get the most out of this strategy, they need to embrace the "dynamic display signage" technology trend, just like Kate Spade (NYSE:KATE) did. Dynamic signage refers to a specialized form of slivercasting, in which multimedia content is displayed in public places for advertising and informational purposes.

Spooner points out that instead of employing salespeople to physically change prices on products, retailers can adopt dynamic display signage solutions that make this task seem effortless, among other handy and exciting functions.

Kate Spade, for example, turned heads when it decided to replace paper signage with iPads in its flagship store in Tokyo. The iPads were strategically positioned, featuring high-quality content relevant to items for sale that were in close proximity as well as style suggestions designed to boost customer engagement. A little bit of digital signage enabled Kate Spade to create an entirely reimagined retail environment.

More importantly, Kate Spade's marketing team provided Japanese customers with easy access to real-time product information and was able to perform price changes based on real-time insights without leaving the New York offices. This would have been impossible if it had sticked to outdated pricing methods. Everything was monitored from one centralized location, simply by leveraging Amazon Web Services' global footprint and a custom information management system. Not to mention, the retailer saved thousands of marketing dollars that would otherwise be spent on printing, shipping, and trashing the constantly changing paper signage.


Kate Spade Saturday store in Tokyo, photo credit: Kate Spade

Last but not least, context awareness is the final technological piece of the dynamic pricing puzzle. In plain language, context awareness translates into having information about the immediate situation -- the people, places, times, activities, devices, and software that define that situation. Context-aware applications blend this kind of information from mobile, social, digital, and physical world sources, providing retailers with more targeted, efficient, and less costly communications. This technology is expected to influence $96 billion in annual consumer spending by 2015 while as much as 15% of all payment card transactions will be conducted on the back of contextual information, according to technology research firm Gartner.

As Jonathan Spooner stresses, brick-and-mortar retailers now have access to a variety of context-aware applications, which match big data analytics with specific customers and thus can be used to target these customers on a sales floor and then pitch personalized discounts at them in real time.

Final thought

Dynamic pricing could indeed enhance customer loyalty and eventually fuel sales growth along with huge cost savings. For this strategy to work, retailers need to set their sights on properly integrating the three technologies mentioned with each other as well as with their legacy systems, Spooner told me.

Slowly but surely, technological advances are blurring the lines between online and offline commerce while laying the groundwork for the emergence of a whole new retail environment. 

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Jun 12, 2015 at 5:01PM

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