Reteconomy live interview on Sky 512, episode of “Buongiorno Economia – in primo piano”
December 9, 2016
by Elena Sanfilippo (Italy)
Elena: "As said, physical and digital are increasingly weaving, in both cases the aim of sellers, of the retailers' shops, is to meet and satisfy customer needs. Selling that way the right product, in the right place, at the right time, and for the right price.
In this episode we get to know Evo Pricing, a Turin-based startup, also located in London, that has developed an algorithm that can predict and to advise retailers about what are the goods more suitable to be pushed into a particular store, how to manage the warehouse and distribute, precisely, the products. Starting from the use and analysis of Big Data, more than a million parameters including for example the geographical location, the weather climate, historical data of the sales combined with the experience of those who work in the store.
Evo Pricing advises retailers, in fact, to choose which product to showcase, when and how to release warehouse and how to distribute goods, the products between the various outlets. We met Fabrizio Fantini, Evo Pricing’s CEO. Let’s watch the report."
Elena: "To sell the right product, in the right place, at the right time is the goal of every trader but how do you figure out which product to display in the shop window or what and how much merchandise to stock? How to differentiate offer in the various outlets spread across Italy, what price to set for a particular product?
This is the mission of Evo Pricing, startup with an international vocation born in Turin in 2013, that thanks to big data helps retailers predict the future and optimize sales, logistics and storage.
Geographical location, climate, historical data of the sales and experience of the contracts help to develop a kind of navigator that assists managers in taking better choices in anticipation of about eight weeks the trend of demand-supply combination."
Fabrizio: "Evo Pricing is a data analysis company that was created with the insight that today the world predictive analytics has grown a lot, very quickly, and companies still do not have fully exploited the potential of data analysis for their marketing decisions.
So Evo Pricing is a company that puts together the data of the companies, therefore the internal sales data, consumer data, data on stock levels and about planning along with market data and combining these two things, with a team of data scientists and research of University, provides recommendations to companies on how to make prices, promotions, demand planning and supply optimization.
Our solution, which I like to compare to a SatNav, as it essentially has inside some rather articulated logics and algorithms which are very easy to use by the end-user: I call them SatNavs for management. The solutions essentially use the data to do objective assessments if we desire this and provide recommendations to the manager.
The manager in basis with its own intuitions, in a way with own inclinations he can take also different decisions.
The system is an evolutionary system which learns from both the managers and the customer's response and that’s why the company is called Evo Pricing, because it is a company of evolutionary algorithms that learn over time, that update its recommendation like the algorithm of a SatNav - which automatically updates based on traffic, according to the conditions of the driver guide.
The juice can be, if you want, enclosed in two basic criteria: the first is, with regard to prices and promotions, the driver is always in demand and then all the things that have untapped potential in the market, of course, they can be pushed on the volume through promotions or through marketing initiatives or through the value. There is always a trade-off between volume and value, and the value of course through pricing levers. The other component instead is the offer optimization because it is difficult for a company with a very complex offer to monitor local demand, especially when you have hundreds of outlets and then we help them to optimize the offer on the basis to the complexities that escape from human eye.
Our typical customers are companies with a 100 million to 1 billion turnover and typically in retail, FMCG in almost all segments; vertical sectors of the retail, from fashion, electronics and groceries to the less classic categories like souvenirs and accessories to taxis in Italy and in the rest of the world."
Elena: "Everything is based on big data. The application processes over a million variables but the analytical calculation alone is not enough: the human element is essential."
Fabrizio: "We have discovered a fascinating thing, of which I am personally very proud. Today, everyone is talking about artificial intelligence and some thinks it's a great opportunity, but many are also, in my opinion, unjustly worried believing that artificial intelligence will replace in somehow the human intuition.
Here, we have demonstrated an experience for the first time ever, which will be published together with Harvard University and other universities on a scientific level, that an algorithm alone performs worse than an algorithm combined with human intuition and specifically we have put together the intuition of retailers, of fashion shops committed together with an artificial intelligence system that mediates on the market and guarantees that no one would seek to take advantage of the system.
Interestingly, we have seen that hundreds of retailers, on average, are able to predict sales 8 weeks in advance. Clearly the single retailer can also make significant errors, but intelligence, we say the collective intelligence is something that no algorithm in this field is able to do, since it is a sector in continuous evolution and once the data are consolidated probably the season is over.
So this is the weakness of the artificial intelligence that it has the need to wait the data, now it is compensated by the human intuition and this is a trend that we like very much, it proves one thing that we think is obvious but for many people is increasingly doubtful, that the intelligence and human intuition both of the manager and of operational people on the field will not be replaced in a short time and even not in the medium term, in our view."
Elena: "Being able to meet customer expectations, to optimize its own offer, they are very important goals in Christmas time in which maximize sales can make the difference."
Fabrizio: "This year the Christmas season I think it is an opportunity to reflect a little in the end of a year rather complex. As we are having access to data from various countries we have seen some interesting trends in a degree also of commonality, of international trends: the first is the apparent lack of reaction towards the political upheavals that have occurred this year both in England and in the United States; however, in Mexico we have not seen an answer with respect to the necessary changes due to election results but we expect things will change after Christmas.
Probably it will be a rising Christmas and we have already seen, for example in England Microsoft will announce a 22% increase in prices after Christmas, which is an almost unprecedented increase for an advanced economy.
The second thing is, in some way, the convergence between the online and offline world: sales growth in the period of approaching Christmas is above all online but we see a very strong correlation between the traffic in stores and online sales, regardless of pure online players such as Amazon, we believe there is more and more a positive synergy between having a physical retail presence and the channel of online sales.
The last thing is the aggressiveness of what we call in the jargon "high low" strategies, it consist to raise prices and to increase promotional intensity. We have seen the Black Friday and Cyber Monday, which begin in Thanksgiving and become highly anticipated which lead towards a cyber week, it always stretches more. We expect this trend to continue until Christmas and beyond it and it’s something that we believe can create value both for the consumer and the company."
Elena: "Born in Turin in 2013 from an idea of thesis, Evo Pricing is a startup with an international vocation that once again it represents the desire and the ability of young Italians to innovate and to think about solutions of success going towards the future."
Fabrizio: "Italy is a very interesting market, it’s the market where we were born and so it’s definitely a market to which we are very affectionate, also because we are based here. Italy's difficulties are not so much related to the specific field of artificial intelligence, but the problem is innovation in general.
There is a propensity to traditional solutions and to preserve the status quo, abroad this does not exist, and this happens for various reasons; we say, it’s perhaps a broader discussion of this context. It happened to us to close contracts with customers in California, giving motion to the phone also for contracts with 5 zeros so for large sums, this would be impossible in Italy.
The time for innovation in Italy is definitely far away; it is also true that it is a less competitive market and therefore it is easier to keep the relationships once established.
I believe that there are a lot of opportunities in Italy and there are also some great excellences both in terms of talent, that we find ourselves here with our collaboration with the University but also in terms of customer, business, entrepreneurial companies that want to innovate, who want to grow, who have appetite to develop abroad. In these contexts, there is definitely an ability to innovate even greater of that we can found abroad.
Now our projects are to continue to do what we are doing, to continue growing in Turin, to hire talented people, to collaborate with the Italian universities and we would like, as a dream, of being able to help making Italy a country more competitive on the international level.
We are very proud to export the creativity, innovation and Italian intellectual property in the world. We would like to exploit this intelligence and this excellence to be able to contribute to the renewal and modernization of our country."
Elena: "It ends here also this episode of "In primo piano", I thank you as always for joining us. I give you appointment next week."