It’s one thing for retailers to use technology to instantaneously match Amazon on pricing. It’s another to have the tech to know when that’s actually a smart decision.
Boomerang Commerce, a two-year-old startup run by Amazon veteran Guru Hariharan, is hoping to help retailers make those smart decisions.
The company makes software that online retailers use to evaluate competitors’ pricing on similar goods, and then analyze a variety of factors to decide when to match prices, or drop them lower or push them higher than a competitors’. Current customers include Staples, Sears and Groupon’s Goods product business.
Based on business rules set by a retailer, Boomerang can automatically adjust prices on the fly. Sometimes, for example, Boomerang’s technology may suggest that pricing a bit above Amazon or another competitor will not be damaging, but will instead help boost margins in a particular category where that is the main goal.
“Just matching against Amazon is not a strategy,” Hariharan said.
The company, which hasn’t taken any outside funding until now, has raised an $8.5 million investment from Madrona Venture Group and Trinity Partners.
Scott Jacobson, a managing director at Madrona, who worked on Amazon’s marketplace and Kindle businesses, says the key to Amazon’s pricing tactics — and what Boomerang is trying in some ways to emulate — is a real-time focus on how the pricing of a particular product fits into the overall business goals. What is the cost of the item being sold? How much will shipping cost? What percentage of the stock of a given product ends up getting returned?
“Then you can make an automated price decision to maximize some objective,” he said.
Boomerang is also testing technology to assist online retailers in decisions about what products to carry and how many. At Amazon, the sales ranking of products makes that decision an easier one, Jacobson said. At other retailers, it’s not always so clear.