Dynamic Pricing. Fair & Transparent. Right..???
Jeff Sward
RETHINK Retail Top Retail Expert. RetailWire BrainTrust Panelist. Founding Partner - Merchandising Metrics. Consulting on Strategic Merchandising. How to embrace RISK as a brands’ best friend. It’s a differentiator.
December 19, 2025
Over the years I became a little numb to the idea of dynamic pricing. It was just a fact of life in booking flights and hotels. Supply and demand. And timing…TIMING being a big factor. Book early and save a couple of bucks. Book at the last minute and pay a premium. What the market will bear. OK…I get it.
Shopping for apparel is the opposite. Buy early and pay ticketed price, or maybe the first level of discount. But I know if I wait the price is surely going to go down. It’s just a question of how much and when. I have been trained to wait, along with a couple million other shoppers.
And then I ran across this interesting scenario while doing my annual shopping for flannel shirts. (I love flannel shirts. I own over a dozen. It’s my uniform October thru March. If I buy a couple, I will then donate a couple to the local shelter.) A couple of weeks ago I saw a flannel shirt on the Weatherproof website that I really liked. $65.00. My training kicked in. I’ll wait. Then I remembered that Macy’s carries Weatherproof and checked Macy’s website. They had it! $39.00. Perfect. I got distracted and forgot to order it. I stalled and thought I would run to my local branch and pick it up. Never made it. Then, on December 12th, I got the email below. The price is now $26.00. Cool! And how cool/scary is it that Macy’s knew exactly what I had been shopping for and sent me a notice of the price change…???
I still don’t get organized enough to go visit the store or order it on line. Two days later, on December 14th, I get the reminder email, below. Okay, okay…I’m thinking about it.
Then comes December 15th and the email below. The price went up from $26.00 to $32.50! They are still calling it a price drop (from $39.00), but okay, I get it. The price drop to $26.00 accelerated the rate of sale too much. They were going to sell out earlier than they had to or wanted to, so they raised the price. Makes perfect sense. And as a shopper, my reaction for a couple of seconds was “What the heck is going on here…??? Oh, right…shouldn’t have waited”.
It all made perfect sense. I waited and waited, thinking the price would keep going down. JUST LIKE IT ALWAYS HAS. But a little number crunching and the application of Dynamic Pricing suggested to Macy’s that the price could go back up again. I LOVE IT! I love it as a retailer, and I even love it as a customer. The very clear signal is that quantities are getting low, so I might finally want to take action.
To summarize this anecdote, I created the graphics below. One is a simple snapshot of Price and Demand. In this case, I’m guessing that due to the dynamics of Christmas shopping the demand surge at one given price level was greater than anticipated. There’s no reason to sell out early and leave $$$ on the table. So up goes the price.
A couple of notes on the graphic below. The top yellow arrow indicates a WOS in early December that suggests the item would not have sold out until sometime in Spring. The second yellow arrow suggests that the price drop to $26.00 would project the item to sell out in February. But a couple of days later the acceleration in selling, the red arrow, must have suggested a sell out much earlier than necessary. So, a bump in price will slow the rate of sale a little, recover some otherwise lost sales and margin $$$, and still sell out in a timely manner…the green arrow.
I always like to look at end-of-season and seasonal conversion windows through the lens of Weeks-of-Supply. If the retailer manages every Customer Choice at the WOS level, they will take the most efficient markdowns that will achieve the conversion on the desired calendar AND maximize sales and margin $.Inthiscase,everyunitsoldat$32.50insteadof$26.00is$6.50ofpureprofit.Everycostandexpenseatthatpointisasunkencostorexpense.The$6.50ismannafromheaven,thatinlegacythinkingandsystemswouldhaveevaporatedforever.Thislogicandthinking,appliedoverafullrangeofproducts,canrecoveralotof$ that would otherwise simply vanish into thin air.
I have to say here that I don’t have any access to Macy’s data. I don’t know if they are formally using Dynamic Pricing or not. This may have been the work of a really sharp buyer or ecomm manager. But the whole scenario added up to what I viewed as a great way to tell the story of the fair and transparent use of Dynamic Pricing. Supply and Demand. Timing. Inventory management. Weeks of Supply. All in plain view.