At this year’s K5 Future Retail Conference, 7Learnings and Westwing took part in a joint presentation diving into how Westwing has leveraged the predictive pricing capabilities of 7Learnings’ platform. Eiko van Hettinga, CCO at 7Learnings, was joined by Ismael Jiménez, pricing manager at Westwing, as they explored how Westwing has been able to boost profits and overcome modern pricing complexities.
For those unable to attend the event, you now have the opportunity to catch this exclusive presentation via the video below. Alternatively, you can read on for a summary of the presentation.
Why invest in pricing?
Pricing is arguably the most powerful tool retailers have to enhance profitability. Compared to cost-cutting, which has certain limitations, strategic pricing can consistently improve a company’s bottom line. McKinsey have shown that a 1% improvement in pricing can lead to a 6% increase in profits. With the advent of AI, the capabilities for strategic pricing have only increased; Gartner has identified pricing as one of the most attractive retail use cases for this technology.
For Westwing, pricing represents more than staying competitive—it is about thriving in an increasingly transparent and competitive market. However, with large volumes of data, multiple channels, and intricate product categories, the complexity of pricing is significant, both strategically and operationally. As a result, Westwing required a pricing solution that offered the agility and precision that manual processes can’t match.
What is predictive pricing?
Predictive pricing is the latest generation in price optimization technology, leveraging AI and machine learning to address the complexity of pricing in modern retail. It taps into both internal and external data, and forecasts how price changes impact critical KPIs such as revenue, profit, and sales volume across both SKUs and channels. Retailers like Westwing can then optimize their pricing strategy in a goal-driven manner, whether they aim to boost profit, increase market share, or enhance customer price perception.
The power of predictive pricing lies in its ability to forecast the future impact of today’s decisions, enabling retailers to run test scenarios before acting and choose the most appropriate pricing strategy to achieve their goals.
Deep dive into the 7Learnings x Westwing collaboration
Before working with 7Learnings, Westwing opted for a more simplistic] competitive pricing strategy. The approach was semi-rule-based, with pricing decisions often managed manually or in Excel. While this worked to an extent, it wasn’t flexible or sophisticated enough to handle the complexity of Westwing’s expanding product offerings and pricing needs.
Goals of the collaboration
- Increase pricing flexibility
- Optimize profit
- Improve reaction times
- Incorporate price elasticities into decision-making
- Enhance Westwing’s price perception in the market
Implementation timeline
Westwing implemented 7Learnings’ predictive pricing solution in the second half of 2023. The initial phase involved A/B testing across 2,000 products, and the results were clear—significant uplift in key performance metrics. Today, this advanced pricing solution is applied across 10,000 products.
Specific challenges and use cases
One of the unique challenges Westwing faced was setting consistent and optimal prices across product variants, such as color or size variations. 7Learnings’ tool helped Westwing ensure price consistency within product families, aligning prices by color or size and managing price hierarchies effectively.
Additionally, the tool optimized pricing for seasonal promotions and sales events. It calculated the best possible price to maximize both profit and customer appeal. It also supported the implementation of a KVI (Key Value Items) and profit generators strategy, ensuring that Westwing’s most strategically important products were priced optimally to drive both sales and profit.
The future of predictive pricing at Westwing
Following the successful implementation, Westwing now plans to expand its use of 7Learnings’ predictive pricing solution to include its own-brand products. Additionally, it aims to incorporate lifecycle pricing, adjusting prices dynamically throughout the season to maximize sales. A further area of focus is psychological pricing for promotions, which will help Westwing drive customer engagement by utilizing pricing cues that resonate with consumer psychology.
Westwing’s collaboration with 7Learnings has enabled it to position itself to lead in the competitive home & living space by leveraging advanced pricing strategies that are adapted to customer needs and market dynamics.