Smart Retailing: a model to assess the economic sustainability of smart shelf-enabled dynamic pricing

Smart Retailing, a new approach to retail management that leverages digital technologies, is gaining much attention, as it enables innovation and improvements in consumers’ quality of life. However, the potentialities stemming from the application of such technologies are still not fully explored. Investment analyses addressing specific technologies could be useful to fill the academic gaps and guide retailers in their digital transition. This paper aims thus at evaluating the economic sustainability of investment in smart shelves, which are employed to perform dynamic pricing in presence of perishable goods. A model simulating the pricing variation in different scenarios was built and economic and financial analyses were performed to evaluate the sustainability of the investment. Data to feed the model were collected through semi-structured interviews with a smart shelf technology provider and three grocery retailers. The results show that the employment of smart shelves allows retailers to increase their profits. First, they are always able to assign to the product the price which most accurately reflects the customers’ willingness to pay. Second, the costs related to misplacement issues are reduced. This study contributes to the knowledge in this unexplored field by providing a model that simulates the dynamic pricing policy after the introduction of smart shelf technology and evaluates its economical sustainability. It also provides retailers who want to join the digital transformation of the stores with a useful tool to guide their investments.