Dynamic pricing: What is the real price of a product?

Posted on by digitalthinkers

What is dynamic pricing? Fairly simple to understand this concept, when a retailer (assume seller), keeps changing price of commodity/product with regards to demand and supply (and add a mix of competition, which essentially again translates to demand and supply).

Dynamic pricing is not a new term and existed in the era of pure days physical stores, it started getting visibility and momentum in online world in early half of last decade.

Remember those old days, when you could see same item being sold at slightly different price on the same street, especially during sale days?

With the revised approach to Dynamic pricing, retailers use online channels to monitor prices across the board round the clock and manifest their own prices accordingly. Classic examples of it is when a retailer sees its sales dipping and want to hit sales, at the cost of margins would drop pricing, or if there is surplus stock.

Another element to dynamic pricing is offering prices based on segmentation (User segments) and channels. I.e. a user coming from US may be offered lower prices, vs from EU, so that retailer can start getting footprint in US.

Benefits:

Dynamic-pricing

Dynamic Pricing example (img reproduced from WSJ)

Study suggests that pricing intelligence softwares, like web scrapping tools are being used by about 20% or retailers, and is an increasing trend. This offers retailers to be competitive and becomes must for retailers like amazon and ebay who have market place. Retailers can learn a lot about the market trend and in turn implement different price levels and observe price dynamics before finding suitable market price.

Retailer: How do I do it in already existing mix of pricing strategy?

There are primarily 4 pillars and you can mix and match all of  these based on your own circustances

  • Segmented pricing: Offer users different prices based on which segment you want to target. Segmented pricing is part of almost all the decent ecommerce stack providers. The segments can be based on location of request origination, type of user, also can be offered based on users shopping trend (Low spending customers being shown a lower price)
  • Demand pricing: Analyse the demand and supply, then adjust the prices.
  • Exploration pricing: At the time when a retailer would like to introduce new product, and with out really knowing what the ideal asking price should be, they can use dynamic pricing.
  • Newness Pricing: Item that is relatively new in market is offered at premium price, however something that has been in market and likely to be phased out is offered at lower tier prices. Example of this would be iPhones, like now with iPhone6 in market, market for 4 and 5 has taken hit. Having said that 4 and 5 remains a hit in other geographies when apple does not go soon enough, so segmented pricing is used there.

Concerns?

It sounds all good with dynamic pricing, so there is no drawbacks? This is not entirely true, one of the side effect is brand image, which can take hit if retailer keeps changing prices, in a geography very so often. It also puts puts focus on returns, if prices are dropped too soon, too often, and consumers line up to return items to get again at lower prices.

Ways to implement dynamic pricing?

There are numerous dynamic pricing tools that retailers can use to leverage this, but sometimes they may be costly to implement. So based on a retailers appetite, this can also be easily achieved by offering promotions/ discounts/ coupons.

Is this bad for customers?

It is not entirely bad, if you play it right. yes it does means that there is no fixed / ideal price for an item, all you need is to hunt for deals, and understand the dynamics of product with market to see how/ where you can find the product cheaper. Chirstmas decor will be costly in lineup to Christmas, however as it gets very close to Christmas, prices would go down for same decor. Market gets dull in Jan and any retailer who wants some focus on sales revenue, will offer items for lot cheaper price in January. At the end of the day it also costs a retailer to stock good and not sell it. There is site camelcamelcamel which tracks prices of amazon, and you can use similar price tracking sites to take benefit of drop in prices.

Future?

Dynamic pricing is the future of retail and is going to stay here for years to come. It is a very easy and yet powerful tool for retailers to achieve what matters most~mullah!

Black Friday and system resilience

Posted on by digitalthinkers

Last Friday just happened to be black Friday with retailers offering massive bargains. Traditionally the concept was accepted in EU in 2010, and records suggest that Amazon UK had the busiest day with about 64 items sold per second and sales of about 5.5million goods. Most of the retailers traditionally have been building sites with a view to offer uptime ranging 95%-99.7%, and someone like amazon aiming for 99.9% availability.

Now when we talk about availability, we talk about resilience and one of the finest quote that I read is “Resilience is all about being able to overcome the unexpected. Sustainability is about survival. The goal of resilience is to thrive. – Jamais Cascio”.

While big names in UK retail like John Lewis, Tesco and Argos struggled with traffic, and Currys provided some sense to the traffic by introducing a virtual queue. Realistically speaking, if we see it all boils down to how well is the infrastructure defined for these sites. As a no brainer, all of decent retailers have some level of SOA based approach to the services they use. When I talk about services, nothing better occurs to me than the netflix model “Hysterix”.

In my view one should consider using Hystrix as a framework with guided principles to implement on the solution. The image below which is reproduced from netflix, tries to explain in simple terms.

Screen Shot 2014-11-29 at 21.32.58

Hystrix

The design principle is fairly simple:

  • You want maximum uptime.
  • You want system to automatically correct itself after failure.
  • You want a view to understand how system is performing at any point in time and over any period.

Depending on your existing system, you can implement Hystrix model by either using the codebase (open source) provided by netflix, which I think has its own drawback, since then you end up tying lot of dependencies on numerous jars of netflix. (hystrix code depends on some jar and then another and other). Flipcart (an indian competitor of Amazon and ahead in indian market), has also used a version of Hystrix, by tweaking the api. You can search for Flipcart’s api, which is available on github.

Or you can treat hystrix a purely a principle and introduce bunch of things which lets you fulfil the objective.

Lets take two cases, one of address service, which is very common in any implementation and is not critical in customer journey, other one can be bank card service, which is absolutely a must.

So first thing you can do is build a generic framework of error handling and service call management, where your custom code calls this facade, which delegates call to third party provider (or your internally hosted service, which calls 3rd party e.g. QAS) This facade keeps track of how the service has been performing, and manages a thread pool for requests, and knows what is the average thread response time, and in case it notices any deviations, it know there is an issue with service and can “Fail Fast” to trigger your alternative option (in this case a manual address entry interface). Next thing you can do is using the same guidelines of hystrix, configure service retries and time-outs.

If you take a more critical service like bank card, you use same steps as outlined above, however, have additional cushioning with set of business processes in place e.g. offering customer to leave the details so that customer service can call and complete the order, or offering them alternative payment methods e.g. Paypal, which would not be via the same bank card service provider, hence at least you will have mechanism to take payments online if one option faults.

If I look at what Currys did on the sale was clever and very basic. It expected a surge in traffic and also knew its infrastructure capability, hence introduced a virtual queue, and wait time was purely governed by the traffic. This is probably the cheapest solution one can build. It does not allows all the users on the site at same time, however it lets each user to buy the items and maintains the credibility of not being down.

Till now I have talked about services and bringing resilience to systems via them, however a site compromises of core technologies apart from services.

Tesco, John Lewis are build on Oracle ATG and Argos on WCS. Both these products are market biggies, however being in the world of Oracle ATG, I will advocate one need to think of infrastructures differently and consider the deployment topology in an untraditional fashion, as much as a banking system will demand. If we talk of ATG specifics, you need to think how can you have Storefront instances which are countless, but start up only on the need. This then should let you think how you package the ear, how do you get server specific configs, so that an ear can be deployed on any ATG standalone server and it still works same as on any other instance. As long as you have a virtual farm of servers, you can create such ears and deploy them as per the need, what it would not offer is flexibility around BCC and all associated activities, however BCC is a back end operational tool, and if you have defined your business processes well enough (i.e. not tying everything too tightly to merchandising server), you have the choice to offer continuity to outside customers/users, though you may have offer a degraded service i.e. product details may be out dated for a few product which is not able to get pushed due to BCC being down, or you may think of not using BCC at all.

There are numerous ways to slice this cake, important is that retailers start thinking of resilience with all seriousness and create an eco-system of products and services that can work seamlessly. Amazon is already there, its an undisputed leader, are you there?

Sneaking around

Posted on by digitalthinkers

All of us know about search engine crawlers which sniff into websites and collect the data (primarily) for organic search. There has been surge of tools / portals which have came up which use crawler capability to offer “compare’ capability or in an open market it is via exposed API/ RSS feeds one such good example is http://www.mysupermarket.co.uk

While a host of crawlers exist (http://scraping.pro/software-for-web-scraping) and they let you configure the interface so that you can direct it to read data from a specific site (read urls), there is serious lack of ones which can pretty much go all out in world wide web to get the data. I.e. how about a portal/tool that gives an end user an interface where they can go out and say I want to buy a gold coloured iPhone 6. I know lot of people will say Google shopping can do it. Yes, you are right, however it can not do for each and everything. More over it is not so much business friendly where it can let a competitor know what other competitor is doing with prices/ content, etc.

With regards to crawlers available, it is so painful to be able to configure each and every term that you need to monitor. Further to that issues would be if a site has enabled Captcha these crawlers will fail or if webmaster notices traffic peak from a given ip, then that ip gets blocked. Some providers suggest that they generate dynamic ip and keep themselves anonymous, however that is not full proof either.

Another massive drawback with crawler approach is that it can not take into consideration any effect on pricing due to promotions or coupon codes.

I reckon there is a need to build such system, only to be transparent, competitive and open to user community. A system which is able to access data in a fair transparent and in open API based approach, that will help not only the end consumers, but also bring vendors on a competitive “fair trade” platform.

 

Accepting Payments on your website

Posted on by digitalthinkers

paymentMethods

There has been a thrust of retailers who are lining up with online presence in last decade and half, however it is shocking to see not all of the retailers have got the payment facilities online. So what it means, retailer has not really geared to harness to beauty of e-commerce. One of the biggest reason for a retailer to shy away from payments is fear of unknown, apart from other reasons that they probably do not value need of selling online, or may be they just perceive online presence as an enabler for their brick and mortar stores, or perhaps retailer value the need of taking payments online but they believe its  just too costly for them to implement the solution.

As a retailer you do not need to go full board and have all the possible payment methods. You need to understand what your audience is and then map it to the payment options you wish to provide.

If we categorise ways to accept payment online, it would boil down to a handful few, i.e. Merchant Accounts (i.e. Verifone, Cybersource, etc), paypal, google checkout. All these have their own benefits and concerns. i.e. Paypal has a transaction surcharge which is non-refundable, while it has got a higher fee structure as well (compared to merchant accounts). But at the same time it easy to integrate to paypal, rather than to a merchant account.

There is no one solution that solves problem to all retailers, however generally speaking, study suggests that a merchant account is very likely going to be customers choice. On an average if a retailer has paypal, google checkout and merchant account set up as payment options, merchant account adds to more than half of transactions.

If I could think of reasons for merchant account being more popular with customers, I would say:

  • Merchant Account offers facility to pay be phone, so indirectly it gets upper hand in terms possible transaction for a retailer.
  • Customer sees a good reason to use specific card to earn credit card points. Technically this is possible via paypal as well, however overtime user has to change paypal settings to add/remove cards.
  • Customer considers his personal data being shared via mediator sites (paypal).
  • Perhaps bad integration with paypal, google checkout, etc. I myself felt gutted using paypal when the integration between paypal and retailer was not very user friendly and I ended up getting goods delivered on my old address (that’s what paypal account had) even though on retailer site I specified the address I wanted goods.

Anyways, as I said above, there is no silver bullet as to which method is best, lot of younger audience like newer payment methods. Important thing to takeaway is having some decent means to accept payment, and that would boost your sales significantly.

Cross-Channel, Multi-Channel, Omni-Channel What is it?

Posted on by digitalthinkers

While working in retail industry, I remember way back in 2007-2008 I heard of a buzz world Multi-Channel, and since then have been hearing all sort of terms Cross-channel and omni-channel. Interestingly enough all these terms cross boundaries, which is easy enough to confuse naive users.

Here is my take on these three terms to make them hopefully little more clearer.

Multi-channel is the experience of a customer who shops using the different channels made available by a company, such as brick-and-mortar stores, catalogues, web, mobile/tablet application, TV commercials, and call centres. This is not a new concept, we have had consumers shopping via desktops, tablets etc. However the emphasis is growing number of channels and how the technology should be flexible to accommodate these new channels (e.g. a possible smart car with shopping capabilities).

Cross-channel suggests of a user journey where user starts on one channel/device and moves to other device/channel and then to another channel. Classic example is a user does research for product via mobile/tablet while travelling, then uses Call centre to get some queries answered and eventually does a purchase using web channel (to take web exclusive promotions).

Omni-channel suggests simultaneous use of two  or more channels, like using a mobile phone while in-store, or web while calling call centre, a tablet while watching TV. The term is also used to describe the consistency between different channels that facilitates and streamlines customer interactions.