IBM introduces fleecing-you-as-a-service for retailers

IBM has introduced a new cloud service it calls “dynamic pricing” that says a lot about where online retailing, IBM and its relationship with partners is going.

Dynamic pricing is conceptually simple: if you run a web store, IBM will now scour rivals price lists for you and offer recommendations about what you should charge. If a competitor drops prices, you won't be left as the most expensive option out there. And if users are bailing out before they buy, leaving a full virtual shopping cart at the checkout, you'll know that too and be offered ways to stop it from happening.

Among the things IBM reckons retailers need to be able to consider are “Market demand, social sentiment, competitor prices, inventory availability, time of day, conversion rates, financial goals, and even the weather”.

Big Blue's guff (PDF) about the new service says it's needed because customers now expect discounts when shopping online. But the company also says “Products with high demand but limited availability could have their prices marginally increased and vice versa. And while we’re not talking about 50 percent price hikes but rather a few cents on the dollar, systematically and continually identifying these opportunities adds up.”

Think about that for a moment: a bot that can figure out when rivals have low inventory and boost your prices accordingly. Nice!

So let's not assume this is an entirely pro-consumer effort. It may also pay to consider the case of Australia e-tailer Kogan, just busted for misleading advertising by local regulators after hiking the price of some monitors before, days later, kicking off a Fathers Day sale with advertising for 20 per cent discounts. Once the pre-sale price hike was taken into account, the actual discount on the monitors was a measly nine per cent, which has resulted in a AU$32,000 fine.

Let's also consider what this does to IBM's business model, which in the not-too-distant past emphasised working with specialist independent software vendors to cook up vertical products. Those products would often be bundled with IBM hardware, nourishing a reseller, a developer and IBM along with way.

As-a-service offerings like Dynamic Pricing cut the developer out of the loop and remove the need for hardware sales. Little wonder IBM's bailed from the x86 server business, and fair enough. But just how the world's niche software developers find a way to market when the likes of IBM and Microsoft are building vertical applications is anyone's guess.

Perhaps there's a niche in code that blocks the likes of Dynamic Pricing from scraping e-commerce sites for intelligence? ®