To: Executive Leadership Team
From: Sarah Thompson (COO), with Lisa Nguyen (GM Customer Experience)
Re: Recommendation against pursuing dynamic / algorithmic pricing
Following the pricing workshop last month, this memo sets out our recommendation: RetailFlow should not pursue dynamic or algorithmic pricing at this time. We believe it carries brand risk that outweighs the projected margin benefit, and that it is not the right fit for who we are.
1. Brand risk
RetailFlow's brand promise is fairness and predictability. Our customer research (June 2023) shows our shoppers value stable, trustworthy pricing and react badly to prices that move around. Algorithmic pricing, where the same item can cost different amounts day to day, directly undermines this. The reputational downside of a "RetailFlow caught price-gouging" story far exceeds a point or two of margin.
2. We are not ready operationally
- Our store and online data do not join cleanly; we cannot price coherently across channels.
- We have no competitor price feed and no realistic path to one in the near term.
- Our POS and inventory systems are too old to support real-time repricing.
- We do not have the analytics capability in-house to run or govern such a system safely.
3. The margin case is weak relative to the risk
Vendor projections in this space rely on backtests against the retailer's own history, which we regard as unreliable. We do not believe the realistic, risk-adjusted margin benefit justifies the spend, the operational disruption, or the brand exposure.
Recommendation
- Do not proceed with dynamic pricing.
- Continue with the fixed promotional calendar and quarterly manual review.
- Revisit only if the data foundation and market context materially change.
We consider this settled for the current strategic cycle and recommend the ELT close the topic.
Sarah Thompson, Chief Operating Officer & Lisa Nguyen, General Manager, Customer Experience