High gas prices have slowed demand, resulting in consumers filling up their tanks less often and reconsidering summer road trips. As a result, convenience store retailers need to take advantage when consumers do make a pit stop.
One way to take advantage of these customers is through dynamic pricing, which has the added benefit of improving margins and establishing a competitive advantage.
Dynamic pricing is common in the travel industry. Think about the volatility of airline tickets, hotel rooms or ride-share surge pricing. It's also popular with grocers as they work to eliminate food waste.
Similarly, c-store retailers can achieve a number of benefits from dynamic pricing. This is especially true during times of inflation, when prices are a major determining factor in whether a consumer will do business with a retailer.
Automate Pricing Strategies
It's a daunting and intensive process for retailers to keep track of thousands of prices. Not to mention, optimizing them for peak profitability.
Dynamic pricing uses artificial intelligence (AI) based technology that reacts to internal and external factors to quickly and effectively establish prices for individual products. It takes into consideration competitor prices, price relationships between products, and time of day. All of these variables are critical as consumers stop at c-stores for coffee, energy drinks, candy or snacks.
Plus, dynamic pricing can build a revenue growth strategy that not only protects the brand's value, but also its margins. With AI-driven dynamic pricing, retailers can set specific rules and deliver faster, more accurate pricing optimization based on customer and market data — something that can’t be done manually.
Create Targeted Promotions for Price-Sensitive Customers
Currently, rising prices are the No. 1 economic concern for Americans.
However, high prices at the pump don’t have to translate to high in-store prices. Based on prior purchases, demographics and local factors, dynamic pricing can optimize a product's price, as well as suggest the optimal price for targeted promotions.
For example, offering discounted promotions on essentials like tissues or diapers for consumers that regularly purchase these items in-store can foster loyalty. Incentivized to stock up on their regular products that are now marked down, shoppers might be inclined to add more to their baskets — even higher-margin items.
Minimize Food Waste & Lost Sales
As convenience stores continue to increase their offerings of fresh and prepared foods, they must consider food waste. The United States discards more food than any other country in the world: nearly 80 billion pounds every year. That is an estimated 30-40 percent of the entire U.S. food supply. Food waste not only impacts brand image and consumer affinity, but it also leads to lost sales.
Dynamic pricing can analyze best-before or sell-by dates to recognize when perishable items are likely to be sold, and can optimize the price according to demand and target date. The closer to the date, the lower the price, compelling shoppers to buy items before they end up as waste.
For example, leftover muffins meant for the breakfast rush and sandwiches made for lunch can be reduced to sell by the evening. In addition, if there's a high stock of milk about to reach its expiration date, retailers can lower the prices of paired items, such as cereal, to incentivize shoppers to purchase both.
Optimize Prices & Ensure Shopper Satisfaction
With hundreds or even thousands of SKUs in a single c-store, optimizing prices can be a daunting task. Dynamic pricing technology helps retailers find the ideal price at any given time to positively impact business figures and reduce waste.
When products are sold at competitive prices, consumers will be enticed to shop with the retailer, time and time again, fostering loyalty.
While consumer demand may slow for gas, that doesn’t mean in-store sales have to suffer.
Michael Jaszczyk is CEO of GK America, a provider of integrated store solutions. He draws on an extensive wealth of experience, both in software development for the retail sector and as a manager at international IT companies. For more information, visit gk-software.com/us.
Editor's note: The opinions expressed in this column are the author's and do not necessarily reflect the views of Convenience Store News.