Boomerang Commerce has announced the release of its product Dynamic Price Optimizer, a big data SaaS for price optimization targeted at online retailers. This product enables e-commerce websites to optimize the price of its products and compare it with those offered by competitors.
There are other companies which offer price intelligence, but price optimization is different from price intelligence. While price intelligence considers only market-level price intricacies, price optimization lets you address business goals other than profit, and looks into many more factors, like logistics, COGS, margin etc. As far as we know (do let us know if there are), there’s no one else who offers price optimization as a service.
What it does: This software is integrated into a subscribers e-commerce platform and it measures over 100 variables internally and externally to decide an optimal price point for a product. The system runs numerous pricing strategies in parallel (A/B tests), and makes pricing decisions across hundreds of thousands of SKUs to maximize a business goal.
If you enter a product name into the Dynamic Price Optimizer dashboard, it first shows you a comparative chart of how competent you are in terms of pricing. The software plays around with 100 variables before deciding the right pricing for it. It shares how a variable affects the price, before the pricing gets updated.
Business model: What Boomerang sells essentially is a pricing call for a product. They dynamically change pricing and testing on every transaction to see if it works for a retailer. Boomerang offers this service on a SaaS model and charge a 7-digit figure for multi-year contracts, Boomerang Commerce’s CEO Guru Hariharan told TechCrunch. The charges also depend on what value the retailer wants – some focus on revenue and some, on margins.
Potential market, customers: The company aims at online retailers that make over $15 million annual sales. According to Hariharan, there are 676 retailers that meet this revenue figure.
Hariharan claims they have bookings of over $10 million for about three years. Sears, Groupon and Staples are some of the names Hariharan named at the Tech Crunch NY 2014 Startup Battlefield. Boomerang claims it has driven about 5% revenue lift for many from its customers and has brought to life under-performing categories using Boomerang’s offering.
Our take: Dynamic pricing is a feature peculiar to transport and hospitality industry today – airlines, hotels and cabs have been using it for years now. In online retail, Amazon has been using an internal analytical platform that helps them take optimized pricing decisions and update its pricing every 15 minutes. An average e-commerce player does this once a month and is unable to compete. It is the attention given to little details like these that makes Amazon successful. Instead of developing this software in-house, online retail players will see a value in subscribing to a SaaS model.
Challenges: The company has functioned so far with a handful of people. Since it plans to scale, repeating the success it’s had will be a challenge they’ll face.
Besides, Boomerang is betting on the fact that they are the only provider of such a service today. There’s no assurity that a competitor won’t come up with a similar model- that’s where the real risk lies.
Medianama is getting in touch with Hariharan for more details and will be updated soon.