Seventy-five dollars for a new pair of jeans? No thanks — but I'll give you $50.
Much like a car dealership or an overseas bazaar, two technology firms — Engaged Pricing, and Greentoe.com — are re-imagining the way consumers bargain with retailers over prices. Their vision? Let shoppers play an active role in negotiating an item's cost.
Though the idea of bargaining over the value of a good dates back centuries, these innovations come at a time when price tags are becoming less black and white, thanks to the growing prevalence of price-matching programs and personalized promotions.
Still, these concepts face substantial challenges in being adopted, perhaps the greatest from brands that could be hesitant to climb aboard.
"What we think of today as the price is really going to serve as a reference point from which shoppers can judge the value that they're getting," said Anne Zybowski, vice president of retail insights at Kantar Retail.
Three strikes and you’re out
Boston-based Engaged Pricing was founded in 2011 when Shawn Harris, who had a background in retail and consulting, linked up with Joe Shartzer, whose expertise was in digital marketing.
The pair had noticed that the daily deal sites proliferating on the web were causing shoppers to complete transactions through third-party companies — effectively cutting the retailer out of the equation and eliminating any sense of brand loyalty.
"We were kind of losing these interactions between retailers and customers," Shartzer said. "We were creating these … deal zombies."
The first iteration of the company, then known as Nyopoly, was a website that gave shoppers three chances to say what they were willing to pay for a handbag or piece of apparel. If the offer was accepted, the transaction was complete; if the proposal was reasonable but lower than what the company could accept, they were sent a counteroffer.
The more realistic the offer, the more aggressive the counteroffer, Shartzer said. And the quicker the two parties could agree on a price, the more the shopper would receive back in credit for a future purchase. That way, they were less likely to simply try to low-ball the company.
"There is an incentive for a shopper to be more reasonable and truly tell us what they're willing to pay," he said.
Nyopoly, now known as Engaged Pricing, used this website to hone its technology and fine-tune its algorithms. Now, it's pitching the system to traditional retailers, in hopes they will adopt it. The technology is already in use in a handful of small Northeast retail locations, via tablets, and the firm is in talks with several major retailers, Shartzer said.
Engaged Pricing also broadened the technology's capabilities so retailers that are unwilling to accept a shopper's offer can recommend similar products that are closer to their budget, or notify that person if the product eventually drops to their desired price.
Though Shartzer said he doesn't think name-your-own-price tools will "totally overtake a retailer's pricing strategy," businesses will increasingly find them useful. For instance, they could be used to clear through excess merchandise more profitably, or to help brands set an initial price on a new product that they aren't sure about.
Through its partners and its former e-commerce site, Engaged Pricing has seen a 20 percent lift in transaction prices compared with traditional discounting techniques. In other words, if a $100 sweater received a broad markdown of 30 percent, Engaged Pricing was able to move the item for an average price of $84.
"That is a massive increase to topline revenue," he said.
Shartzer said some retailers are hesitant when they first hear about the idea, because they never want to negotiate with their customers. He disagrees.
"The fact is retailers are negotiating with their customers [already], they're just doing it unintelligently," he said. "It's just a one-way negotiation where you're not learning what your customers are actually willing to pay."
Discounts on what you actually want
Like Engaged Pricing, Greentoe.com, which sells discounted electronics, also allows shoppers to name their own price. But it works in a slightly different way. Whereas Engaged Pricing's platform is designed to be adopted by retailers, Greentoe conducts sales straight from its website.
Yahoo alumnus Joe Marrapodi and Andrew Kurland, formerly with Deloitte Consulting, founded the company three years ago, when they were getting inundated with promotions on products they had no interest in buying. What if, they asked themselves, you could instead get a deal on an item you actually want?
Here's how it works: If a shopper is looking for a deal on a Canon camera, they select the one they want on Greentoe's website. From there, they're brought to a screen that shows them the lowest online price and the average online price.
They then enter the amount they're hoping to pay, and a meter gauges the chances of having their offer accepted. Once the price is entered, Greentoe sends the proposal out to its authorized network of 75 retailers, which range from small to large businesses.
The first retailer to accept the offer makes the sale; if the offer is not accepted but within the realm of possibility, retailers can send a counteroffer. Once a sale is complete, the item is shipped directly from the retailer.
Marrapodi said most of its customers save between 15 and 20 percent. Though Greentoe does not disclose its financials, he said the company will do "at least" $25 million in revenue next year, and is well over six figures per month in unique users. The firm plans to expand its reach into professional audio equipment and sporting goods next year.
"E-commerce is going to shift to what I call [an] intention economy," Marrapodi said. "Market pricing will come to retail."
The future of pricing
Kantar's Zybowski agreed that the future of pricing will look markedly different than it does today. However, she's skeptical that name-your-own-price tools will truly take off with retailers. The risk, she said, is perceived brand dilution, as such discounting techniques could not only "undermine the value of brand equity but change the dynamics in the marketplace."
Instead, she envisions a future where retailers offer a bundle of products for a fixed price, so they're not pulling apart a brand's price integrity.
Wal-Mart, for example, could offer a set number of meals for $50 a week, but make the call as to which foods are included. Along those lines, Waitrose — a UK-based grocery retailer — allows shoppers to pick 10 products from hundreds that are available, and save 20 percent.
"It's kind of a similar theme, but rather than a guessing game it puts shoppers actually in control," she said.
Similarly, as beacon technology begins to be adopted, and retailers fine-tune the science of sending more targeted offers, shoppers will increasingly receive personalized prices.
Take, for example, Kohl's. When using the department store's mobile app, shoppers can scan an item's bar code to see the starting price. From there, they can digitally apply their cash rewards or other discounts to see what their final price would be.
"There is definitely an opportunity [for retailers] as we start moving toward a more personalized pricing environment," Zybowski said.