What is Dynamic Pricing?
Dynamic pricing is an approach or a strategy in which prices change in response to real- time supply and demand. In online retail context, it denotes to highly flexible costing method employed by shops for products sold on their website. Prices are persistently recalculated, and depending on the product, requirements are refreshed and changed as much as every day, hour, minute or second. If the strategy is thought and implemented well, dynamic pricing empowers a retailer to offer the right product, to the right customer at the right price and at the right time. If all these key things are delivered successfully it results in a positive profit margin for the business.

In a layman term, dynamic pricing works by using mathematical and statistical means to infer data which is analyzed and used repeatedly to update prices. While applying this technique, the data is continually collected and analyzed; this analysis further assists in giving a prognosis about the current and projected market demand. Pricing is usually set, altered and adjusted during the forecast.

Why do retailers use Dynamic Pricing?
The motive and thought behind using dynamic pricing is to achieve profit, flexibility and control. Retailers apply and use this method because dynamic pricing allows shops to react and respond hurriedly to changes in the market supply and demand. Situation of this sudden fluctuation is rewarding as it helps them to make most of their profit margins. When an important competitor changes their price a retailer acts quickly so that they don’t miss and lose out on profit. In an order to react quickly to these ever changing fluctuations, the information that dynamic pricing provides is absolutely essential. It is a common school of thought that flat pricing models are limiting to online retailers in 2017, this is so because online retailers need pricing solutions that move as swiftly as the market does and as swiftly as their customers expect. The ingenious rick behind Dynamic Pricing is the software and apps that control prices. This software uses complex algorithms that help in calculating the current best price to offer a product. And they also help in ridding the exhaustive and mental work of manually calculating the pricing.

If the strategy is thought and implemented well, dynamic pricing empowers a retailer to offer the right product, to the right customer at the right price and at the right time

Why dynamic pricing in E-commerce industry?
Dynamic pricing is excessively and primarily used in Ecommerce. It is difficult and cumbersome to apply the strategy of dynamic pricing in a physical shop. This is because it involves a great deal and effort to manually tap and keep an eye on competitor’s prices, customer behavior, the supply and demand and then manually adjust in gthe price labels each time in an order to keep up. Never the less,it is easier in an online retail set up, as technology and software behind it helps in making it conceivable.This is the reason why online retailers of various segments, be it fashion, home wares and technology use dynamic pricing. Additionally, dynamic pricing is also used by ticket and entertainment sites so that they can positively influence their profit margins by using Dynamic Pricing.