Savers Value Village, the national chain of thrift stores that sells secondhand merchandise, announced this week that it’s using AI to help price its goods in dozens of its 375 stores. But the company denies that it’s going to be used for so-called dynamic or surveillance pricing, the practices of changing the price quickly based on market conditions or the individual characteristics of who’s doing the buying.
The AI platform is called ThriftIQ and it aims to take the guess work out of pricing the goods that it sells. The company pays non-profit organizations for things like clothes and household items and then turns around and sells them for a profit. Jubran Tanious, the president and CEO of Savers, explained during an earnings call Thursday how pricing has traditionally worked for the used goods retailer.
“Prior to ThriftIQ, our team members would assess each garment and they would grade it based on condition and quality to determine its value. And then that grade would translate to a price based on the category and department. And for many years, this method has worked well,” said Tanious.
Tanious said that pricing with that strategy would be inconsistent and that two employees could evaluate the exact same item and come up with different prices, even with the best training since it was so subjective.
“So now fast forward to ThriftIQ, we’re no longer asking the team member to assess condition and quality,” Tanious said. “We’re simply asking them to identify the brand. We then use that brand and combine it with seasonality [and] sell-through to determine the price of the garment. So it’s easier, it’s more objective, allows us to show up to the customer in a more consistent and in a precise way, and that is the key.”
The company, which is mostly owned by the private equity firm Ares Management and also operates in some parts of the U.S. under the brand Unique, has faced criticism in Canada for charging several times what goods are sold for in other stores new. As one example, a vase that was priced at $3 new was being sold for $8 at Savers, according to the CBC. It’s unclear whether AI will avoid situations like that or if getting maximum dollar, above and beyond the new price, is actually the goal.
Whatever the answer to that question, Savers is reporting that it expects net sales of $1.77 billion to $1.79 billion in the second half of the year with comparable store sales growth of 3% to 4%. And AI seems to be helping.
“ThriftIQ delivered improvements in sales yield and gross profit in our pilot stores, with average prices that are the same or lower than the rest of the fleet, and continuing to average 40% to 70% off traditional retail,” CEO Mark Walsh said on that earnings call.
CNBC reports the AI tool was developed with the tech reporting firm Kaizen Analytix using proprietary data sets held by Savers, though it’s unclear what data that may entail. Walsh, clearly anticipating the concern customers have about surveillance pricing, told CNBC that they’re not using AI for dynamic pricing and “once those garments are priced and tagged, that tag doesn’t change.”
There has been massive pushback against the idea of AI setting prices, largely because there’s concern that companies are jacking up the prices on a whim to maximize profits. Sixty-eight percent of Americans say they worry surveillance pricing will increase the cost of goods, according to polling from May.
“ThriftIQ is currently live in 58 stores across the U.S. and Canada. In these stores, we’ve seen customers respond positively through increased unit sell-through, larger baskets, and stronger sales yields with the same or lower average prices compared to the rest of our fleet,” CFO Michael Maher said on the earnings call.
“That translated into gross profit dollar growth that was approximately 100 basis points higher in our pilot stores than in our non-pilot stores. ThriftIQ is also helping our new stores ramp to profitability faster with better data-driven pricing out of the gate and simpler operational processes.”
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