The disruption generation: They will change the world – with or without you

Sep 1 2014

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Cosmopolitan SA magazine recently invited international Millennial expert, Joan K. Snyder to present her theory on ‘why Millennials matter’.

For starters, it’s important to note that this generation (currently aged between 14 and 34) spends up to $600 billion a year in the US alone with forecasts stating this number could rise to close on $2,45 trillion in 2015. This spending power stems from viewing and treating their parents as peers and not authority figures, which in turn results in Millennials having a greater say in their household spend compared to previous generations. It if predicted that the Millennial generation will outpace the spending capacity of the Baby Boomer generation in just 5-10 years.

They’re known as Generation Y but could easily be called Generation Y NOT with their ‘oh well’ versus ‘what if’ attitude towards their careers, relationships and experiences. This generation believes wholeheartedly that they have the promise, power and potential to change the world forever and they’re going to do it with or without you, so best you pay attention to what they’re saying on- and off-line.

The numbers don’t lie, this year 50% of the global workforce is made up of Millennials and by 2015 this number would have risen to 75%. There are 2,5 billion Millennials worldwide and 19,5 million alone in SA (38% of the population!). Globally, the average age of the human population is 29 – they are either already in the workforce or moving their way up the corporate ladder while slowly and surely changing the face of business.

This generation is the most educated in history but also the most unemployed and underemployed with many a Millennial accepting a job way under the level and standard of their degrees/masters.

When it comes to shopping, 69% of Millennials will read product reviews before making a final decision, they will also request price matches and if they’re happy will buy the product/service immediately but when you think that 88,8% of retailers globally do not have mobile paying applications you realize how many sales are potentially missed.

There are some companies however doing it right as for the Millennial it’s all about the experience. Experience is the new luxury brand.

Globally, 7 out of 10 Millennials believe it is their responsibility to give brands feedback and with the explosion of social media and blogging/vlogging this is getting easier to do. A few years ago, blogger Jenny Evans wrote a blog on how she missed a specific 1-piece swimsuit by American retailer J Crew that had been discontinued. The blog went viral with many others stating how much they missed the swimsuit and wished it would come back. Shortly afterwards, then CEO Jenna Lyons of J Crew took out a 2-page ad in a popular fashion magazine saying the swimsuit is back, she also hand wrote a letter to Jenny saying ‘your wish is our command xoxo’. This just shows the power of social media and how it can make a difference, if used correctly of course. 55% of Millennials check social media up to 20 times a day, they are on every platform all the time and so should you be.

Another industry our Millennials are changing is travel and with 20% of global business travellers falling within this generation it’s important for those in travel to pay attention. Millennials want to feel like VIPs but can’t necessarily pay the high prices for this treatment currently. The Marriot Hotel Group noticed a gap and recently launched a sub-brand targeted directly at the Millennial generation. Moxy opened first in Milan, Italy and boasts an affordable VIP experience with online check ins, stylish rooms and a communal living room with WiFi and a fully stocked bar. Travel is an $855 billion industry in the US alone with SA being in the top 3 choice of where global Millenials want to visit.

They are disrupting everything, they value time over money, they are recalibrating what is important to them, they are aware of the trouble the planet is in, they care about their health and feeling good and they will only support you if your values are in line with theirs – so are they?

Are Consumers Ready to 

Spend Again?

Retailers Try to Decipher Mixed Signals 

as Economy Picks Up, but Shoppers Are Still 

Sheepish

By 

THEO FRANCIS 

CONNECT

Sept. 1, 2014 7:39 p.m. ET

In August, the Commerce Department said U.S. retail spending was flat in July. Shown, a newly opened J.C. Penney store at the Gateway Center Mall in Brooklyn, N.Y. Getty Images

Summer brought companies some hopeful signs of economic recovery. This fall, the optimism will be put to the test.

That's because it is unclear whether consumers—the engine behind more than two-thirds of the American economy—are ready to resume spending at significant levels.

Signals are mixed. After years of lackluster growth, corporate revenues for large companies grew more rapidly in the second quarter, and company guidance suggests that trend will continue in the second half of the year. The Conference Board said consumer confidence picked up in August.

Employment continued to tick upward. Gross domestic product jumped in the second quarter as businesses and consumers made up for the first quarter's lousy weather. Economists are predicting growth at a 3% rate for the second half, and 2% growth for the full year.

Fall Business Preview

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Bill Mayer

Still, the retail industry, tied more closely to consumer spending than any other, is struggling. In August, the Commerce Department said U.S. retail spending was flat in July. And household spending declined by 0.1% in July, the first drop in personal spending since January.

Investors are clearly nervous as well. For much of August, retailers and a grocer made up most of the 10 worst-performing stocks in the S&P 500 index: Coach Inc., down 34% for the year;Whole Foods Market Inc.,down 32%; Mattel Inc.,down 28%; Staples Inc., down 26%; and Bed Bath & Beyond Inc. and Best Buy Co , both down about 20%.Avon Products Inc. andFossil Group Inc.  also lagged behind, down about 18% and 16%, respectively. The Dow Jones U.S. Retail Index has struggled to mark gains so far this year.

One indication that investor anxiety may be justified: When retailers talk about sales growth, many are reserved in their projections. On Aug. 26, Best Buy predicted a tough holiday season marked by steep discounts and weak demand after recording a 2% drop in sales at U.S. stores open at least 14 months. And in some sectors, including low-end dollar stores, companies may be benefiting more from market share than broader growth.

"Revenues are doing better than they were," says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. But companies "don't think consumers are going to be spending that much more."

At Home, a closely held Texas home-furnishings chain with 75 locations in 21 states that advertises low prices, says sales are up 20% year over year. The company is seeing new customers, more-frequent visits and higher ticket prices amid mediocre increases in overall consumer spending, which means much of the growth is coming at the expense of competitors, Chief Executive Lee Bird says.

"There's growth here, but we're getting a disproportionate share of that," Mr. Bird says. "We're definitely taking share while growing with a sluggish economy."

And then there is the question of how much capacity consumers have to spend. What isn't spent is generally saved. But the savings rate in the U.S. is about 5.3%, at or below recent trends.

In other words, there may not be enough untapped spending power sitting on the sidelines, waiting for confidence to improve, to fuel a strong consumer recovery, says Dean Baker, an economist and co-director of the Center for Economic and Policy Research in Washington.

So far, that has been true for customers of Hibbett Sports Inc., a sporting-goods retailer with primarily lower-income customers in the South, Southwest, Midwest and mid-Atlantic, says Scott Bowman, the company's chief financial officer. The company saw sales inch up just 0.1% in the quarter ended Aug. 2, excluding new and closed stores.

"That lower-than-average-income consumer has a few more headwinds than the upper-tier consumer, with static wage growth, underemployment," Mr. Bowman says. "I think it will get better, but it will be gradual."

Still, consumers have managed to rally before. And some economists are more upbeat. While summer monthly sales figures looked grim, the year so far hasn't been terrible. At about 4%, year-over-year retail sales growth is reasonable, says Mark Zandi, chief economist for Moody's Analytics.

Consumer spending overall also is roughly matching income growth, with consumer confidence at prerecession levels and debt payments at record lows, he added.

"As long as the job market continues to improve, and it is, then I think consumers will continue to ramp up their spending consistent with that," or possibly higher if they decide it is safe to borrow more, Mr. Zandi says. "I think it is fair to say that consumers are doing their part for the recovery."

The economics of Amazon’s delivery drones

by Colin Lewis

Aerial

 

Opinions

June 18, 2014

Last December there was a lot of skepticism when Jeff Bezos, CEO and founder of Amazon, announced on the 60 minutes TV program that they were looking into using drones for delivering small packages. Many pundits called it a publicity stunt and nonsense! — timed for the biggest online shopping day of the year .

Bezos on the other hand was bemused and took pains to point out in his 2013 annual letter to shareholders that Amazon are serious about delivery by drones., writing: “The Prime Air team is already flight testing our 5th and 6th generation aerial vehicles, and we are in the design phase on generations 7 and 8.”

On their Prime Air Q and A page Amazon anticipate FAA’s rules for commercial drones will “be in place as early as sometime in 2015.” And state: “We will be ready at that time.”

To be ready they are assembling a team, said to already consist of between 45 to 50 employees and at least 10 additional personnel sought according to job openings on Amazon’s website, with job postings for the Prime Air team ranging from a Patent Lawyer, to a Communications Manager, Software Engineers, Machine Learning Engineers, Executive Assistant, Project Coordinator, Research Scientist and Technical Program Manager.

To give you a taste of what the company is aiming for, the Communications Manager post indicates:

We’re looking for a communications leader for Amazon Prime Air, a new delivery system that will get packages into customers’ hands in 30 minutes or less using unmanned aerial vehicles.

So what’s driving Amazon’s Prime Air initiative?

Instant gratification from customers is clearly one element; providing outstanding service is another; as is staying ahead of the curve with innovative delivery and order fulfillment. All highly significant points in their own right to meet Amazon’s goal: “to be Earth’s most customer-centric company.”

Cost of transportation is another. Amazon’s total shipping costs in 2013 were $6,635 billion. They received shipping revenue of $3,097 billion and incurred overall losses of $3.538 billion related to shipping costs.

Amazon use several services for shipping, UPS, FedEx, US Postal, and others as well as developing their own City Pick Up points, delivery van service and Amazon courier cycles. Shipping is clearly a major cost factor to Amazon and one that they are focused on improving the service and reducing the cost.

Technical difficulties

In addition to the regulatory hurdles that must be overcome there are many technical difficulties.

Amazon is aiming for their drones to deliver shoebox size packages.

They probably do not want video onboard due to the extra weight on the drone and also privacy concerns, so will need another way of identification before customers can accept delivery, e.g. biometric identification or pin code to release the package provided with the consignment email – package drop off will be a challenge.

Wind will be a factor in delivery.

Sense and avoid – very few of the current breed of drones (especially the hobbyist drones) have sense and avoid capabilities and should not be flown where there are people or objects. CyPhy Works is possibly the leader in this technology with their tethered drones.

Amazon will want their drones to be as safe as regular manned planes. Piloted planes have 9.4 accidents per million flights, in other words statistically very safe.

GPS lock is an issue that has caused drones to drop out of the air and piloting inexperience is also a major issue, although one the FAA is looking very closely at and I’m sure Amazon will too – drones should never be operated without formal training and some license arrangements.

Another hurdle will be location for dispatch – most of Amazon’s Fulfillment Centers are outside major cities, although it is probable that the items Amazon will provide via Prime Air will be a vastly reduced inventory and kept at the Amazon Pick Up points or smaller Fulfillment Centers closer to major city centers.

These are just a few of the technical hurdles, not insurmountable and as Amazon state they will be ready when the FAA approve the use of commercial drones.

Will drones be more cost effective?

According to shipping-industry analysts Amazon typically pays between about $2 and $8 to ship each package, with the cheapest option through the Postal Service and the most expensive via UPS or FedEx.

Amazon may be able top get a premium price for the Prime Air delivery service – customers who want their package within 30 minutes may be prepared to pay a premium of say $15 to $20 per delivery. Irrational for a book that costs $18, but as behavioral economics shows humans do not always act rationally.

During a 15 hour window (7am to 10pm) one Prime Air drone could potentially make 30 deliveries (absolute maximum efficiency and at a significant stretch).

Assume the drones are fully in service for 360 days per year that will be the equivalent of 10,800 deliveries per drone.

The drones will require 2 full time pilots. With drone pilot wages ranging between US$13 to US$23 per hour, plus fulfillment center costs, insurances, drone fees and service, the Prime Air Team overheads and development – the annual fees per Prime Air drone service – per drone – could be between US$105,000 to $186,000 per year.

Those numbers divided by the maximum number of delivery per drones indicate that the Prime Air service could cost Amazon between $9.75 and $17.44 per delivery.

Amazon will want to get maximum number of deliveries and efficiencies out of the drone capabilities, whilst reducing the costs as close to $2 per delivery as possible and maximizing the revenue by providing the wow factor to customers.

They will also be aiming to reduce the US$ 8,829 billion in cumulative shipping losses in the last three years.

At some stage don’t be surprised if Amazon seeks to move into the logistics business. The robots that they are deploying in their fulfillment centers and now with Prime Air Drones, Amazon are clearly building a high quality, high capability logistics service – and ultimately that is good news for consumers.

How Beacons Are Changing the Shopping Experience

by Chuck Martin  |   11:00 AM September 1, 2014

Beacons are taking the world of mobile by storm. They are low-powered radio transmitters that can send signals to smartphones that enter their immediate vicinity, via Bluetooth Low Energy technology.  In the months and years to come, we’ll see beaconing applied in all kinds of valuable ways.

For marketers in particular, beacons are important because they allow more precise targeting of customers in a locale. A customer approaching a jewelry counter in a department store, for example, can receive a message from a battery-powered beacon installed there, offering information or a promotion that relates specifically to merchandise displayed there. In a different department of the same store, another beacon transmits a different message. Before beacons, marketers could use geofencing technology, so that a message, advertisement, or coupon could be sent to consumers when they were within a certain range of a geofenced area, such as within a one-block radius of a store. However, that technology typically relies on GPS tracking, which only works well outside the store. With beaconing, marketers can lead and direct customers to specific areas and products within a store or mall.

As a point of technical accuracy, the beacon itself does not really contain messaging; rather it sends a unique code that can be read only by certain mobile apps. Thus, the carrier of the smartphone has to have installed an app – and if he or she has not done so, no message will arrive. The choice to opt-out exists at any time. But the key to beaconing’s effectiveness is that the app does not actually have to be running to be awakened by the beacon signal.

Think about it, and you realize that beaconing has been the missing piece in the whole mobile-shopping puzzle. The technology is essentially invisible and can work without the mobile consumer’s having to do anything – usually a major hurdle for any mobile shopping technology. The shopper only has to agree in advance to receive such messages as they shop.

So imagine walking by or into a store and receiving a text message triggered by a beacon at the store entrance. It alerts you that mobile shoppers are eligible for certain deals, which you can receive if you want. Assuming you accept, you begin receiving highly relevant messaging in the form of well-crafted, full-screen images based on what department or aisle you are strolling through at the moment. Here’s an example:

Implementing beaconing is less about installing the actual beacons and much more about rethinking the overall shopping experience they can help shape. Since the best way to imagine the possibilities is through actual, small-scale deployments, this has been how many retailers have spent the past several months, quietly experimenting and learning. Now, many are ready to scale up their initiatives, and beacons are bursting onto the scene in a big way. For various purposes, they are being used by retailers such as Timberland, Kenneth Cole, and Alex and Ani, hoteliers such as Marriott, and a variety of sports stadiums. Here are some details from a handful of companies – each by the way running on a different beacon platform:

• Hudson’s Bay Company (HBC). The owner of Lord & Taylor, Hudson’s Bay, and Saks recently became the first major retailer to launch a North American beacon deployment, in its U.S. and Canadian stores. A shopper with the SnipSnap coupon app on an iPhone can receive messages and offers from seven separate in-store, beacon-triggered advertising campaigns. Like some others, the retailer is not relying on its own app for the beacon recognition, but rather is using outside, third-party apps that more people are likely to already have on their phones. (This also allows Lord & Taylor to use the beacon program for new customer acquisition.) The Hudson’s Bay beacon program runs on the advertising platform of Boston-based Swirl.
• Hillshire Brands. In what appears to be the first U.S.-wide beacon deployment by a brand, the maker of Ball Park Franks, Jimmy Dean sausage, Sara Lee, and the Hillshire Farm portfolio of products, beaconed grocery shoppers to launch its new American Craft sausage links in the top 10 markets for grocers nationally. Based on an analysis by Hillshire’s agency BPN (part of the IPG Mediabrands global network), there were 6,000 in-store engagements in the first 48 hours of the two-month trial, and purchase intent increased 20 times. Shoppers needed an app such as Epicurious, Zip List, Key Ring, or CheckPoints; this beacon platform is run by InMarket.
• Universal Display. This global mannequin company based in London and New York is putting beacons inside mannequins in store windows. Why? To allow passersby to instantly see the details of the outfit the mannequin is wearing – and purchase any of its components right from their phones. The beaconed-mannequins are in the U.K. in the House of Fraser, Hawes & Curtis, Bentalls, and Jaeger, and will soon come to stores in the U.S. Here, the beacon app used is Iconome, which is also the platform.
• Simon Malls. The giant of retail real estate is putting location-based technology into more than 200 of its shopping malls, targeting the complexes’ common areas. For beacon recognition, the mall owner is using its own Simon Malls app, which already contains mall information ranging from maps to dining options. That beacon platform is run by Mobiquity.
• Regent Street. London’s mile-long, high-end shopping street has some 140 store entrances, and now has beacons at the entrances of many of them. The beacon app used is the Regent Street app, slated to be promoted on the sides of double-decker buses that run along Regent Street. The app allows shoppers to pre-select the categories that interest them and the ones that don’t, making the messages they receive more relevant to them. That platform is run by Autograph.

That’s a lot of activity to report, but the truth is that it only constitutes a vanguard. Most shoppers have yet to be beaconed; many will encounter the technology before the end of this year. How long will it be until it’s hard to find someone who is not familiar with beaconing? How long till it’s hard to remember a time when the marketing messages you encountered had nothing to do with where you were? I would guess, not long at all.

As Amazon and Alibaba Face Off, Who Will Come Out On Top?

My money is on Alibaba, the massive Chinese company that will soon conduct a New York IPO.* Here’s why.

Amazon and Alibaba, the world’s largest e-commerce companies, are gearing up for the next big competition: cross-border e-commerce. Both companies have unique advantages in the market, and both are rushing to lock in an advantage in shipping goods from abroad into China, now the world’s largest e-commerce market.

In the last few weeks, Amazon.com Inc announcedthat it would set up a new hub for cross-border operations in the free trade zone outside of Shanghai. Amazon will use these facilities to connect Chinese consumers to its global platform, allowing imports into China of products that are normally only available to Amazon shoppers in other countries. The facilities will also serve as a logistics warehouse for exporting goods from China to abroad, and a center for organizing cross-border payments.

A little back-story: Amazon has operated in China for about a decade under the Amazon.cn brand. It has built a solid reputation for customer service and product quality, but its market share remains tiny: Amazon.cn had just 2.7% of the business-to-consumer market in 2013, according to Observer Solutions, behind Alibaba’s Tmall.com, JD.com, and Suning’s and Tencent’s B2C sites.

Source: Observer Solutions, 2014. http://www.slideshare.net/projectmanagement_bbp/julia-q-zhu

Till now, Amazon’s China platform, Amazon.cn, has not been connected with its international site, Amazon.com. Chinese people do occasionally use Amazon.com directly, but they have to create new accounts and navigate foreign payment and delivery systems to do so. Amazon’s bid to connect these sites more closely is a strong and logical move. Chinese customers are aware of the company’s extensive supplier network in the US, and many will undoubtedly be excited to access its foreign products.

This new development will help Amazon to tap into a huge and growing demand for Western productsin China. A 2013 report by PayPal and The Nielsen Company estimated that China’s cross-border shopping market will grow from 18 million customers spending $35 billion in 2013 to 36 million shopping spending up to $163 billion a year by 2018. For the Chinese respondents surveyed in this report, the US was by far the most preferred shopping destination.

Source: PayPal and The Nielsen Company, 2013. https://www.paypal-media.com/assets/pdf/fact_sheet/PayPal_ModernSpiceRoutes_Report_Final.pdf

This business could be a big source of growth for Amazon, but the company still faces challenges in its execution. Julia Q. Zhu, the founder of Observer Solutions, an e-commerce research and advisory firm, says Amazon’s success in this venture will depend on how it integrates its international merchants with sales in China, as well as how it solves the problem of time-consuming international delivery. An additional challenge for the China unit could be its lack of independent decision-making ability; some Chinese media reports have intimated that Amazon.cn lacks autonomy, and that important decisions must be referred back to U.S. headquarters.

In addition to these factors, Alibaba retains an even more important advantage: its extensive market share in China. Alibaba is the largest and most profitable e-commerce company in China by every measure, controlling roughly 80% of China’s e-commerce market. Amazon will undoubtedly benefit from integrating its Chinese and foreign business, but it would have to do something remarkable to win the attention of the Alibaba’s dedicated shoppers.

Alibaba entered the cross-border e-commercemarket in February with the launch of Tmall Global (www.tmall.hk), which sells foreign brands such as GNC, Lancome, and Coach directly to Chinese shoppers. (Foreign brands can also set up shop on Taobao and Tmall, but they must have a legal entity in China). The site has channels for formula and other baby products, nutritional supplements, clothing, and cosmetics. With its huge user base advantage over competitors like JD.com, Suning, and Amazon, Tmall is the force to watch in the cross-border shopping market.

Alibaba has a far more limited reach among foreign brands than Amazon does, but the noisy parade of media coverage leading up to Alibaba’s massive IPO is helping it to attract the attention of retailers throughout the world. Earlier this week, Alibaba made a splash by reporting $1.1 billion in operating income for the second quarter, 42% more than Amazon and Ebay combined. Analysts also noted that Alibaba’s sales on mobile devices, considered key to capturing e-commerce sales over the next decade, more than doubled from the previous quarter.

With big names like Burberry and Apple recently joining the Tmall Global platform, brand reach may not be a problem for Tmall Global for much longer. “Alibaba is being very proactive to recruit as many brands as possible. If Tmall can get these products soon, it will have an advantage over Amazon, because Tmall has a huge market,” says Zhu. “Things can change very quickly.”

Retail Software Periodic Table

By David Dorf on Aug 28, 2014

In general, your average shoppers just don't think about the complexities of retailing.  They see, they like, they buy.  But behind the scenes is a complex orchestration of retail processes, and it would surprise most just how many software applications are involved.  I've seen many ways to depict the retail software landscape but decided to see if things fit in a periodic table.  The result is below (click for larger image):

On the far left are the back-end processing systems where items are sourced and shipped through the supply chain.  They are all about fast and accurate execution.  On the far right are the selling systems that interact with shoppers.  They are also focused on execution but in a way that is branded and differentiated.  Those two groups of applications are common for any retailer of size.  Where things get interesting is in the middle.

Its the analytics that inform the merchandising and selling systems.  Those applications help understand what customers want, what they're willing to pay, and how to keep them coming back.  The planning & optimization applications leverage the knowledge from the analytics to predict and plan the future.  This is where differentiation is born and eventually manifests on the selling side as customer experience.

Its truly the combination of great execution and science-driven decisions that power the most successful retailers.

Dynamic Pricing in a Post-Uber World

Here is one more thing we can thank (or blame depending on your perspective) Uber for: the widespread acceptance of dynamic pricing in the retail and consumer service sector.

In simple terms, dynamic pricing refers to the setting of prices for a good or service based on the demand for said good or service at the moment and the availability of supply.  It sounds like Econ 101 and essentially it is, with the added complexity of pricing becoming a moving target, changing almost in real-time depending on what is happening in the market at that moment. Is there, for example, a snowstorm underway. Is it, to borrow another common scenario from Uber’s playbook, 2 in the morning and nary a cab on the street? Then the price you pay for that ride goes up.

For retailers – and for the hospitality and travel industry before it – dynamic pricing has helped maximize revenues in a high-cost, low-margin world. In the case of retailers specifically it has also proven to be a great offense against showrooming, precisely because the prices are always changing.

Basically all retailers do it to some degree or another—Amazon is a great example but so are brick-and-mortar retailers like Sears and Wal-Mart. It is Uber, however, that has come under fire for the practice from its customers, as MIT Technology Review recently noted.

Thanks to its reliance on what it calls ‘surge pricing’— meaning that during times of high demand, Uber raises its prices, often sharply—the company has been accused of profiteering and exploiting its customers. When Uber jacked up prices during a snowstorm in New York last December, for instance, there was an eruption of complaints, the general mood being summed up by a tweet calling Uber ‘price-gouging assholes.’

Uber is taking greater care to explain its pricing policies and in some cases it is bowing to the conventional opinion that surge pricing is unfair. It recently reached an agreement with New York’s attorney general to cap surge pricing in emergency situations, for example.

While he understands the politics and PR behind the agreement on emergency pricing, article author James Surowiecki warns against Uber tinkering with the basic premise of dynamic pricing, which he argues is fair and makes sense.

I don’t think Surowiecki, or Uber for that matter, has anything to worry about.

New Data Points

Not only is dynamic pricing becoming a part of mainstream retail, but new data points are also being thrown into the mix that will impact even more the final price.

Tel Aviv-based FeedVisor, an algorithmic pricing and business intelligence platform for online retailers on Amazon’s platform, just raised a $6 million Series A round led by Australia’s Square Peg Capital.

FeedVisor watches hundreds of millions of sales on Amazon to determine what the best price is a for a particular retailer and product, Shmuli Goldberg, director of Marketing at FeedVisor tells me – but that is hardly the basis for its decision making.

“If you are selling a product for $12 and you see your competitor is selling it for $11.50 so you drop your price to $11.49 you have not accomplished anything except starting a price war,” he says.

FeedVisor, besides analyzing the competitive environment and product demand, also takes into account the company’s brand as well as a few other non-price metrics. “We basically work out how much a brand is worth to the customer and then raise the price to what we think they are willing to pay to buy a certain product from that retailer.”

Other factors the system takes into account is how the item is shipped, or fulfillment, the seller’s Amazon rating, how long it takes the seller to ship out a product, how much feedback it receives and whether that feedback was positive or negative and the seller’s order history.

Most of the price increases are below a $1 but there have been times when the system determined a seller could raise its prices by 20% to 30% and still make the sale, Goldberg says.

Other companies are also introducing their own versions of dynamic pricing with a secret sauce consisting of a mix of various indicators that determine just how price elastic a good or service can get.

San Francisco startup, Beyond Pricing, calculates the maximum price people can charge to rent out houses or rooms through Airbnb, based on the demand for that particular day.

As Andrew Kitchell, CEO and co-founder explainedto BetaBoston, the system analyzes a wide range of factors from airfares, hotel rates, and the prices of properties listed on Airbnb and HomeAway. It also factors in such data points as single nights available between bookings and near-term vacancies versus vacancies several months away.

Of course there are other factors that go into a customer’s decision to make a purchase besides just price: loyalty programs and gamification techniques (buy 11 sandwiches and get the 12th free) come to mind as do really killer marketing.  And here is another: if a customer feels like it is being manipulated, or worse, gouged it could refuse to buy on principle. That hasn’t happened to Uber but then it is trail blazer of sorts in many respects. Other companies might not be so lucky.