Imagine a world without price tags.
This world already exists in the high-priced, high-end markets: crazy 24 bedroom houses with their own cinemas, moats and swimming pools list ‘Price on Application’; fancy jewellery stores or performance motor cars choose not to be as vulgar as to talk about price, reminding shoppers of the saying ‘If you have to ask, you can’t afford it’.
But ignore the wealth-gap for a moment, and think about what prices are – they’re offers to a consumer of what the retailer is willing to exchange the object for, made up of the current value of the product along with a mark-up which includes profit and overheads, translated in to your local currency, at a snapshot in time.
The reality is that the actual cost of a product varies, in real time. The cost of cotton rises and falls. Inflation is constantly eating away at the value of the pound. Fuel prices change. Currency markets fluctuate every microsecond. The value of a product is not fixed, but the offer to sell the product to a consumer rarely does. Once the tag is printed, it is static until manually intervened with a sharpie or a sale.
However, with the advent of volatile cryptocurrencies like Bitcoin, the massive penetration of mobile devices, and the speed of real-time data – fixed price tags are set to be a thing of the past.
Imagine an internet connected price tag, which sources real-time information about commodity prices, currency rates and stock performance, to present an offer to the consumer based upon these inputs. Visit the store in the morning, and your latte could be 39p cheaper than the afternoon where milk prices have soared after a collapse in the dairy farming industry. Rehabstudio has built such a device which takes the real-time value of Bitcoin to show the price of an object in that currency.
Go further, and allow individuals to see their own price on an object. Use mobile devices to read a product, perhaps with an NFC or QR code, and retailers can use personally tailored information to vary the price to help increase the likelihood of a sale. Perhaps you know they’ve scanned the same product in three other stores, and you don’t want to lose them to the next merchant. Perhaps the shopper is a loyal customer, and you want to give them 20% off. Perhaps they’re such a loyal customer so you know you don’t need to give them a discount because they’ll buy it anyway.
Pricing becomes as fluid in physical stores as it can be online, and the concept of showrooming (visiting stores to test products and then buying them cheaper online) erodes, because the price they’re getting in store right now might be better than they’ll get later today somewhere else.
It’s not a too-distant future.
Online travel service Orbitz already started tailoring its pricing based upon a user’s choice of computing platform, after discovering that Apple users generally will pay $20-$30 more for hotels than PC users, and modified their pricing accordingly and physical retailers in the US are trialling personalised pricing through online, and clearly offers and discounts through programmes like Boots Advantage Card, Nectar Card and Clubcard are all based upon huge amounts of personal behavioural data from not only shopping but a range of product lines in the case of Tesco.
In the main, consumers benefit from the use of personalisation. Better targeted advertising, discounts on products which are relevant to you, and retailers find it easy to discount products through data, but as we move to a more blended world where online and offline become one, where price-tags are electronic, and shopping online becomes the norm, the opportunity to increase pricing based upon knowledge of what a consumer is willing to accept, or market demands putting pressure on the profit margin becomes more and more likely, and again transparency becomes key.
Retailers will have to be clear and transparent about pricing, and how it is driven, else there is likely to be regulatory intervention. The Office of Fair Trading is already considering how these practises could have an impact, and what their role is.
In any respect, things which we’ve expected to be relatively static are becoming increasingly fluid, and both consumers and retailers are likely to have some interesting challenges and changes on their hands in the next three years.
Article originally posted in Retail Week