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Electronic shelf label enables dynamic pricing in the store

The electronic shelf label is an essential part of the whole of dynamic pricing, with which the company can maximize profits and increase customer satisfaction.

What is dynamic pricing?

Dynamic pricing refers to a method where the price of products constantly changes based on various factors, such as demand, competition, seasons and even the behavior of individual customers. It enables a flexible pricing strategy that allows the company to optimize its profits and respond to market changes in real time. Various studies show that dynamic pricing can increase revenue by up to 30 percent and increase profit margins by around 11 percent. In the consumer world, dynamic pricing has already been used by hotels and airlines for decades, and this system has become widespread in online stores.

Physical stores have not had the opportunity to benefit from dynamic pricing like online stores for a long time. Fixed prices have been the gold standard and staff have spent unnecessary work time changing traditional paper price tags. The process is particularly frustrating, especially if the notes have to be changed again after a while and the time is away from the actual sales work. Human errors also multiply when prices are put on the labels by hand. This, in turn, can lead to disappointed customers who may no longer want to buy the product. The electronic shelf label enables the product prices to be updated digitally in a few seconds.

Electronic price tag as part of dynamic pricing

Electronic Shelf Label (ESL) systems typically consist of digital shelf labels attached to store shelves, a base station and a background system. The labels can be updated centrally. Electronic shelf labels are a necessary part of dynamic pricing, which enables the price to be changed in the store immediately as needed.  This feature is especially useful in situations where there is an unexpected increase in demand for a particular product. Let’s take the classic example of a downpour that suddenly starts to fall on people’s heads and they rush to the store to buy umbrellas. If a dynamic pricing system is in use, the price of the product can even change automatically due to a sudden increase in demand.

If necessary, the electronic shelf labels can also be connected to the store’s cash register or product system, so that the price labels are automatically updated when the pricing changes. Constant changes in the store’s inventory can be reacted to more quickly with the help of dynamic pricing. The price of a product that is in short supply can be increased, and correspondingly, a product gathering dust on the shelf can be made more tempting in the eyes of the customer by lowering its price. Such a quick response helps the company to take advantage of the sudden increase in demand and maximize sales revenue.

Quick response to competitors’ prices

With dynamic pricing, the company can take faster measures when the competitive situation changes, in which case an electronic shelf label is needed to present the changed price information. If, for example, a competitor lowers the price of some of its products, the company can react faster with a corresponding price reduction for its own products. This strategy helps companies stay competitive and attract customers to their store instead of their competitor.

Easy implementation of campaigns and offers

Dynamic pricing makes implementing campaigns and offers effortless. The merchant can change prices in an instant, for example during a discount sale, and return them to normal after the campaign ends. This flexibility enables a quick reaction to the market situation and helps companies attract customers with different offers. In Finland’s commercial calendar year, many new sale seasons have come from the United States, the opportunities and profits of which may have been overlooked by many before. Changing prices quickly using traditional means can take too much time, when the window has already closed. With dynamic pricing and electronic shelf labels, these opportunities can be accessed in a few seconds.

Dynamic pricing and electronic shelf labels in a nutshell

Dynamic pricing is an effective strategy that helps companies stay competitive in an ever-changing market. Electronic shelf labels are a key part of this strategy, as they enable fast and flexible price changes in real time.  In this comparison, traditional price tags are left helplessly behind due to their clumsiness and difficulty. Thanks to electronic shelf labels, companies can optimize their pricing and respond to rapid changes in the market, creating better customer experiences.

Read also: 3 reasons why electronic shelf labels save time and money