This holiday season may be a nail-biter for some retailers. While resilient, shoppers are more cautious this year and are searching for bargains as they focus on getting the best bang for their buck.

Price-sensitive consumers put a lot of pressure on retailers and brands. Not only do they need to have the right product, it must be at the right price too. Here, Prashant Agrawal, founder and chief executive officer of Impact Analytics, discusses pricing strategies and how AI-powered technology can be deployed.

More from WWD

• Beauty Brand Trinny London Pops Up in New York

• This Tool Uses Gen AI to Create Digital Product Passports in Seconds

• Zalando Revenue Gains 5% in Q3 as Company Grows B2B Logistics Business

WWD: How should retailers be thinking about pricing strategies this holiday season? Will dynamic pricing be more important this year, given the macroeconomic conditions?

Prashant Agrawal: Pricing will be one of the most important considerations for consumers this holiday season. Consumers are still feeling squeezed by inflation on everyday essentials, despite the recent Fed rate cut, which means that retailers and brands are going to need to work harder to sell nonessentials this holiday. Identifying which categories will drive traffic, increase basket size and ultimately deliver higher margins and profits will be key. By segmenting the categories that will be the big engines this holiday, retailers will have more latitude to be more selective with their promotions.

Dynamic pricing with targeted coupons will be one way that retailers can respond to shoppers’ demands for value this holiday season. By diving deep into the data, retailers will have a greater ability to understand the regional nuances that will help them satisfy shoppers and maintain margins this year. Leveraging data across category, channel and customer segmentation is the smart way to determine whether promotions will be necessary or not.

WWD: When is the right time to start discounting this holiday season?

P.A.: Amazon kicked off holiday promotions during their October Prime Big Deal Days, which may have a ripple effect throughout the industry.

Developing a cadenced approach to discounting may prove to be the best strategy for most retailers. Taking initial markdowns, and just continuing to reduce from there, may not be necessary. Small, temporary markdowns, taken periodically throughout the season, may help many retailers maintain profit margins. It’s important to monitor shoppers’ behavior and adjust based on that data rather than simply repeating the same promotions year after year. Retailers should also vary discount timing and depth based on category type/seasonality and other planned marketing activity like print/digital ads, social media marketing spend, etc.