Retail marketers eye growth of online 'surge pricing'

So-called “surge pricing” – when online firms hike their prices as demand grows – is likely to expand beyond airlines, hotels, ticket sites and apps like Uber, to many other sectors, with retail leading the charge.

That is according to a new analysis by SAP Emarsys, which follows claims that the Wendy’s burger chain would be testing surge pricing next year; plans later dismissed by the company.

The SAP Emarsys study reveals that nearly half of UK marketers (47%) are considering adopting the practice in the future, using AI to dynamically adjust the price of in-demand products.

In fact, 15% of the 250 UK marketers quizzed say they are “very likely” to introduce the model into some aspect of their businesses in future.

For many, this push is being driven by the rise of AI, with one in five (21%) marketers already using AI to help them set prices. Nearly half of those surveyed (41%) also say that they would consider adopting AI to set prices in the future.

The newly released data also highlights the major impact that this type of dynamic pricing could have on the retail sector, with over half (54%) of marketers working in the retail and leisure industries saying they are ‘likely’ to adopt the practice in the future.

SAP Emarsys gloval vice-president of solution management Ross Williams said: “Surge pricing has proved a controversial topic recently, but the reality is that online retailers and brands have been using some form of dynamic pricing or another for years.

“Increasingly, consumers are growing used to this type of dynamic approach, knowing that if they book their flights at the right time of year, or their taxi at the right time of day, they’ll get a much better deal.

“Dynamic and personalised pricing and promotions can be a great tool for retailers to reward their best customers while also dissuading those who regularly return items – either by incorporating higher prices during peak times, on frequently returned or high demand products.

“The main thing to take away from this research is the speed at which AI is shaking things up and taking personalisation to the next level. Dynamic pricing used to be a strategy that was only available to the largest retailers with the biggest budgets. Now, AI is making real-time pricing and personalised deals far more accessible for retailers of all sizes.”