In clothing and footwear retailing, is Dynamic Pricing widely used and benefiting retailers?

ReBO has developed its own and end to end 12-module merchandising suite. This is an AI- solution made for retail by retailers.

We are aware retailers need a Pricing tool (of which Dynamic Pricing may be a part). We at ReBO have experience of having used this, but we seek your input as to how/ if you use Pricing tools (Dynamic or otherwise) across your businesses to help to produce a balanced view on the subject.

What benefits do you see and what challenges do you experience?

Context

Pricing tools are increasingly used in clothing and footwear retailing, though not as aggressively or visibly as in industries like airlines or hotels, who truly embrace Dynamic Pricing models. Retailers are embracing more data-driven pricing strategies thanks to AI, machine learning, and real-time sales analytics.

How do fashion retailers use Pricing tools?

1. Markdown Optimization:

Retailers use algorithms to decide when and how much to discount items, often dynamically adjusting based on speed of sale, inventory levels and seasonality.

Eg. A slow-selling jacket might drop 20% after a few weeks; a hot item may stay at full-price or even increase online.

2. Real-Time Competitive Pricing:

Retailers monitor their historic pricing levels, set new seasons price levels and monitor competitors’ pricing strategies, adjusting their own prices to stay competitive.

Fast-fashion brands like Zara or Shein use dynamic-pricing to remain agile.

3. Personalized Pricing:

Some online retailers offer different prices or discounts based on loyalty status, geo-location, or shopping history—a soft form of dynamic pricing.

4. Flash Sales & Limited-Time Offers:

Prices can fluctuate hourly during sales events (e.g. Black Friday, Singles Day) based on inventory levels or customer engagement.

Are there tangible benefits to retailers that use Pricing Tools:

1. Improved Margins:

Dynamic markdowns avoid deep discounts too early, helping maximize profit on popular or trending items.

2. Inventory Management:

Helps clear unsold stock more efficiently, especially for seasonal items that lose value quickly.

3. Increased Flexibility:

Retailers can respond quickly to market changes, weather, or social media trends

(Eg. If a celebrity  wears a shoe—price spikes).

4. Customer Segmentation:

Dynamic pricing tools allow tailoring strategies for different shopper types—bargain hunters, loyalists, or high-spenders.

Potential Drawbacks / Limitations:

1. Customer negativity:

If shoppers find out they paid more than others for the same item, it can erode trust and loyalty.

2. Brand Dilution:

Constant discounting may train customers to wait for sales, hurting long-term brand perception and profitability. (Eg. Gap)

3. Complexity & Cost:

Implementing dynamic pricing systems can be technically challenging and expensive-especially for smaller retailers.

4. Price Volatility Fatigue:

Unlike airlines and hotels, fashion buyers don’t always accept frequent price shifts as their norm, so excessive use of dynamic pricing could backfire from a long-term customer lifespan perspective.

Conclusion

There is some positive evidence that when done smartly Pricing tools can add value. Some large global players are using dynamic pricing to boost sales, margin and overall operating efficiency. But success depends on finding the right balance between being purely  data-driven  and balancing  brand integrity as well as customer trust.

What is your opinion?