Dynamic pricing: how to optimise your prices with AI?

The context

With two years of declining volumes in supermarkets (down by 3.2% in 2023 in France, after a fall of 2.2% in 2022), retailers’ pricing strategies are at the heart of their priorities. Whereas in the past, these were based on two factors (alignment with the competition and overall margin rate), retailers are now steering prices more finely, aided by new algorithmic and AI functionalities. Depending on stock levels, weather, demand and media campaigns, they have to make strategic choices in real time, with buffeting by price sensitivity of consumers.

Driven by pricing players such as PricingHub, Optimix, Market Invaders, Clear Demand and Juicer, dynamic pricing strategies have become the norm for online retailers first, then for omnichannel players. The practice is used by both supermarkets and specialist retailers like Decathlon, Darty or Boulanger. Dynamic pricing entered public debate following the abuses of the music and cultural sector. In 2022, following strong demand, concert tickets for Taylor Swift’s American tour, sold by Ticketmaster, reached an unprecedented US$22,000 per seat.

The retail sector is now at the heart of a dynamic pricing debate. In the U.S.A., in February 2024, Wendy’s announced plans to invest US$20 million in menu display screens, in order to test AI-driven product recommendation and dynamic pricing strategies. The reaction on social network X (formerly Twitter) was immediate. Users compared Wendy’s to Uber, also criticised for pricing policies. Consumers voiced their displeasure, rejecting paying more at certain peak times. Twelve days after the announcement, C.E.O. Kirk Tanner backtracked, presenting dynamic pricing from a different, promotional angle: “Menu display screens could allow us to change the menu offerings at different times of the day and more easily offer discounts and value offers to our customers, particularly at off-peak times of the day,” said Wendy’s .