AI-driven Predictive Pricing Strategies Discussed with 7Learnings at the NRF Retail Big Show, as demonstrated by Tamaris
In the dynamic world of retail, a Berlin-based startup named 7Learnings is making waves with its innovative predictive pricing system. The company, founded by CEO Felix Hoffmann, who brings extensive expertise in pricing from his career at consultancies like A.T. Kearney and Zalando, is helping retailers navigate the complexities of pricing in an increasingly digital marketplace.
Hoffmann's brainchild, 7Learnings, has recently collaborated with Tamaris, a retailer within the Wortmann Group, to expand their online business across 26 countries. Tamaris faced challenges in setting prices across markets and channels, and 7Learnings' predictive pricing system has proven to be a game-changer.
Predictive pricing is not just about discounting; it also involves strategic lowering of prices to maintain margins. The system uses data to forecast the impact of prices on key performance indicators like revenue, margin, and sell-through. It predicts how much of these promotions will be used and what impact they will have on profit.
Initial pricing suggestions for new items are made based on comparing attributes to similar items. The system learns more and more from transactions and attributes over time to improve its pricing decisions. It's important to note that 7Learnings does not involve itself in collection development, deciding which styles and quantities.
In a five-month proof of concept with 7Learnings, Tamaris saw an increase in profitability, a decrease in their average discount rate by 5 percent, and a reduction in the manual time spent on price optimization by half. This success has led Tamaris to run an AI-driven pricing setup across all their markets, steering prices and margins automatically.
The system's long-term forecasts are used to set boundaries, not to dictate every decision. It calculates the price that optimizes long-term profit, and then allows for movement within a 20 percent range around that point. This flexibility ensures that short-term decisions, like pushing sales faster, can be made without jeopardizing long-term profitability.
Online pricing is more complex due to additional layers like vouchers and coupons, and the danger of losing control of profitability if too many promotions are used. However, 7Learnings' system takes these factors into account, helping retailers maintain control and maximize profitability.
While the system is highly effective, human judgment is necessary for pricing standout pieces, as the system won't see that. The system's predictions are based on data, and unique, one-of-a-kind items may require a more personal touch.
In addition to Tamaris, 7Learnings has worked with other retailers such as Tom Tailor and Mister Spex. As more retailers embrace the power of AI in pricing, 7Learnings continues to lead the way, proving that predictive pricing is one of the most attractive AI use cases in retail, with the highest business impact.
Pricing is the biggest lever for profitability in retail, and with 7Learnings' predictive pricing system, retailers can optimize their pricing decisions, increase profitability, and stay competitive in the ever-evolving retail landscape.
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