German consumers are often suspicious of dynamic pricing. They fear having to pay higher prices. In reality though, dynamic pricing frequently offers consumers the opportunity to save money.
There is a spirit of distrust in the German e-commerce landscape: the German Angst of Dynamic Pricing. It is not the first time that the fear of political and social developments, which could change existing conditions for the worse, has gripped the nation.
Why so scared?
In dynamic pricing, algorithms automatically calculate prices based on various factors such as supply and demand or competitor prices. While yesterday designer jeans cost 100 euros in an online shop, today the price has suddenly doubled. Since the triggers and influencing factors behind price fluctuations are not comprehensible to consumers, they are often suspicious of dynamic pricing and are afraid of paying too much.
Consumers can benefit from dynamic pricing
Dynamic pricing, in which prices change every few days and sometimes even several times a day, has been common practice in some areas for years. While you pay 1.50 euros a litre for petrol on a Monday morning or at the start of the school holidays, it’s only 1.35 euros on a normal Wednesday evening. Also, the prices for flights and hotels change constantly, depending on the time and weekday. Those who book early can count on great discounts.
These examples make one thing very clear: dynamic pricing does not necessarily mean that consumers pay more. In fact, they can also benefit from lower prices. Dynamic pricing thus gives price-sensitive consumers the opportunity to save cash. Those who observe price developments attentively and buy at the right moment, can purchase at a more favourable price than spontaneous purchasers.
Willingness to pay as a factor for dynamic pricing
Younger consumers in particular have recognised this possibility and are using it to their advantage. They carefully compare prices of different retailers, also with the help of comparison portals, and only then make their purchase decision. Especially in the 18- to 40-year-old age group, the acceptance of dynamic pricing is particularly noticeable, at over 70 percent. This was the result of a survey conducted in December 2018 on behalf of the auditing and consulting firm PricewaterhouseCoopers (PwC).
These consumers have understood that dynamic pricing gives them more power. As mentioned earlier, the algorithms optimise prices according to supply and demand as well as competition. Therefore, if a competitor offers a product at a lower price as a result of high sales volume, this is included in the pricing. Consumers thus have an indirect influence on prices through their willingness to pay.
No dynamic pricing is no solution either
Due to the use of dynamic pricing by online giants such as Amazon, Zalando and Otto, some of whom even adjust prices several times a day for certain products, not also using dynamic pricing is not an option for retailers. Otherwise in the long run they won’t stand a chance against the big online pure players.