- Companies like Walmart are digitizing price tags and menus in many of their stores.
- They said they do not intend to use the technique to inflate prices at a time when demand for their products is likely to increase.
- However, the new pricing strategy could pose risks to consumers in the future.
There are few things American consumers love more than a discount, and companies are constantly competing with each other to offer the best prices, or at least to make shoppers think they do.
Let’s take the latest big corporation, Walmart, for example. In progress New pricing innovations. In early June, Digital shelf labels will be introduced in 2,300 stores by 2026.
Walmart Spokesperson He told Business Insider Even with the ability to quickly adjust prices with digital shelf labels, The company will not spike prices to consumers in the event of increased demand, and “we have no plans to change the frequency of price changes or implement different pricing methodologies.”
But in practice Raising big questions Some experts are concerned about the impact of the change in pricing strategy. Airlines and ride-hailing companies like Uber have practiced surge pricing for decades, but experts say that if dynamic pricing becomes more widespread, Retail and grocery stores, This is made possible by technologies such as digital price tags. Consumers may struggle Budget for basic necessities. Meanwhile, those with the time and funds to shop around and wait may be able to take advantage of cheaper prices.
To be sure, adjusting prices based on supply and demand is a fundamental principle of the U.S. capitalist system. Many retailers and restaurants have long implemented differentiated pricing at different times, such as for back-to-school sales or happy hours. But the digitization of shelf tags, menus, and other shopping methods, such as apps and websites, is speeding up the process. Companies will be able to offer a wider range of prices to different customers. — and shoppers may have a hard time keeping up.
A new era in pricing — rooted in old strategies
A Walmart spokesperson told Business Insider that the primary goal of digital price tags is to make work easier for associates, who often have to manually re-tag hundreds of items every day to keep up with changes due to inflation and discounts.
“The new efficiencies enabled by digital shelf labels will enable associates to spend less time on tedious tasks and more time serving customers and addressing their needs,” Greg Cathy, Walmart’s senior vice president of innovation and transformation, said in a statement to BI.
Elizabeth Pancotti, Director of Special Initiatives The president of the left-leaning think tank Roosevelt Institute told BI that while digital pricing strategies are not new, he is concerned about them being applied to essential goods.
“There are a lot of people who are counting on more stable prices. Prices are high, but at least they’re stable,” Pancotti said. “And they could get more volatile. Given the macroeconomic levers, I don’t think the Fed has the capacity to fight for price stability when they’re fighting digital prices that change every three seconds.”
Imagine you’re out in the pouring rain without an umbrella. You see a corner storekeeper increasing the price of umbrellas from $5 a pop to $20 on a sunny day. You need an umbrella to stay dry and you have no other choice, so you’re probably happy to pay the $20. With digital price tags, big retailers could theoretically do the same.
Federal Reserve Chairman Jerome Powell said this kind of dynamic pricing is “critically important to our economy.”
“As long as companies aren’t fixing prices or not disclosing to the public what their price changes are, I think we need to give them the freedom to do so,” Powell said at a Senate hearing on monetary policy in March.
Some experts say dynamic pricing practices Potential benefits for consumers Consumers who understand the system can shop around. Z. John Chang, a marketing professor at the Wharton School of the University of Pennsylvania, told BI that varying prices throughout the day allow consumers who can’t afford full-price items to seek out lower prices or discounted items.
“In the airline industry, if you’re patient, you can probably wait and buy a ticket at a cheaper price,” he said, “but imagine what would happen if there was only one price. That wouldn’t be very efficient for the companies and it would undoubtedly prevent a lot of people from flying.”
But as Wendy’s found out earlier this year, some customers are skeptical. During an earnings call in February, the CEO announced that the company would begin testing dynamic pricing features, such as digital menus that could change prices and menu items throughout the day. After customers complained online that these changes were causing prices to skyrocket, a spokesperson said the company was There are no plans to implement surge pricing.
Wendy’s said the digital menu boards will be used to more easily offer discounts to customers, but this kind of pricing experiment has left some consumers and experts confused. “It makes me uneasy, especially when these changes can be made without significant oversight,” Pancotti said.
“I appreciate that companies are being ingenious and trying to find places where they can operate without regulation and government interference,” she said, “but I think it poses a big risk to consumers.”
What’s at stake for shoppers?
Some Democrats have expressed concern about the rise of new pricing tactics. Sen. Sherrod Brown, who held a Senate Banking Committee hearing to address the issue in May, said in his opening statement that some companies are “installing electronic menu boards in their restaurants and putting digital price tags on their shelves, allowing them to raise prices instantly.”
“This is frustrating and makes it impossible for people to compare prices and shop around, which is a key element of a fair and open marketplace,” he said. “Families on fixed budgets can’t afford to go to the grocery store or pharmacy without knowing what their paycheck will cover.”
many Of the companies that have adopted a digital strategy, Pancotti said rushing to set prices to stop price spikes could have future repercussions. For example, Americans who rely on federal benefits like SNAP could be hit the hardest because the amount of assistance they receive is based on price data, and constantly changing prices make it difficult to accurately calculate benefits.
As American Prospect highlighted in a recent series on price gouging, price fluctuations could lead to hyper-personalized pricing, in which companies collect data on consumers’ shopping habits — even finding out information about their income or family size — and then adjust product prices based on that data.
Dynamic pricing is already a part of consumers’ lives — think price fluctuations at gas stations — and shoppers may need to get used to it as it permeates other industries, Zhang said. — and lawmakers — will be taking notice.
“It’s all a game,” Pancotti said. “They all have the same goal, which is to maximize profits, and we’re just finding new ways to do that as economic conditions change.”
Have you ever witnessed skyrocketing prices in your life? How has dynamic pricing affected you? Share your story with this reporter. Ashfee.
