Typically price changes range from plus or minus 10 percent. However, the impact on sales and profitability can be substantial. Optivo began evaluation trials early this year and claims its customers will see gross margins increase as much as 20 percent. Instead, the Scottsdale, Ariz., company's software analyzes dozens of factors such as a product's life cycle, competitors' prices, and past sales data before churning out a list of possible prices and calculating the best ones. New sales data are fed back into the formulas daily to refine the process.
Some vendors also ask for a percentage of revenue increases resulting from the dynamic pricing.
The retailer has to assemble sufficient data to make the computations. Some retailers are reluctant to hand over control to automated systems, according to Ed Wong, formerly Gymboree's senior vice president of supply chain technology. Gymboree used ProfitLogic's service to clear inventory and boosted the 600-store chain's gross margins 4 percent. At that time, Wong considered implementing ProfitLogic's service online. It helps the bottom line.