Calvin Klein recently partnered with Amazon Fashion to launch holiday pop-ups in LA and New York, featuring exclusive product ranges.

The physical stores were supported by a new online shop – amazon.com/mycalvins – where additional products were available. In-store consumers were able to engage with a range of new Amazon technology, including instant access to online product reviews. All very cool, high-tech... a great fit for both brand and retailer.

But the thing that really stood out about the activity was this: there were no price tags in-store. Visitors to the pop-ups had to scan a product on the Amazon app in order to find out the price. Easy to see how this benefits Amazon. Not so easy to see how it benefits shoppers, or Calvin Klein for that matter.

Is dynamic pricing a headache for brands?

Of course, as everyone knows, Amazon pricing is based on a somewhat clandestine algorithm. There can’t be price tags on these products as the cost might change at any moment, and can do so hundreds of times over the course of a year. So far, consumers have accepted this, with the wider convenience brought about by this new age of retail – from next-day delivery to a more extensive range of products on offer - making it all seem worthwhile. 

Consumers might be content and online retailers certainly benefit. But where does all this leave brands?

The starkest consequence is a race to the bottom on price. Couple this with retailer hegemony in relation to ecommerce platforms and brands are left to battle for consumers’ attention in increasingly cluttered and price-driven marketplaces. Grocery ecommerce platforms, for example, are designed and managed in a way that prevents brands from engaging well with consumers. Standing out from the competition in this environment can seem like an impossible task. 

A backlash waiting to happen?

Despite its ubiquity, ecommerce’s many facets are still not widely understood outside the industry. The details behind dynamic pricing are a case in point. But, as retailers and brands continue to experiment with new ecommerce technology, consumers are growing increasingly tech-savvy and aware of the intricacies that underpin platforms.

One thing brands and retailers will always agree on is the importance of consumer trust, which can be hard to earn and easy to lose, but success in retail demands that it’s nurtured. Dynamic pricing puts this trust at risk. 

No one wants to see something they just bought suddenly drop in price, making shoppers hesitant when it comes to clicking through to purchase. Assuming the current default to price-led strategies continues, delayed purchase will increase. Hesitancy benefits no one, but it’s exactly where retail is headed with dynamic pricing.

Another way

When it comes to making a purchasing decision, consumers take numerous considerations into account. In the world of behavioural science these considerations are known as heuristics.

The most relevant of these mental shortcuts, such as social proof or choice reduction, can be used as sales triggers. Brands and retailers need to be looking at the bigger picture, rather than focusing on price and price alone. 

Using 'brand budgeting' in the right way, being creative about how you communicate price and value, you can overcome a reliance on discounting.

Of course, it’s important to avoid oversimplification. Elements like channel and product category all affect the approach you should take, but brands should stop, think, and re-examine their approach.

Andrew Watts

Published 16 January, 2018 by Andrew Watts

Andrew is the founding partner at KHWS and a contributor to Econsultancy. You can connect with him via LinkedIn.

1 more post from this author

You might be interested in

Comments (0)

Comment
No-profile-pic
Save or Cancel
Daily_pulse_signup_wide

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Digital Pulse newsletter. You will receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.