DIGITAL shelf tags are replacing traditional paper tags in grocery stores across the US, and shoppers are being urged to take caution.
The tags, also known as electronic shelf labels, are increasingly being used at popular chains including Whole Foods, Amazon Fresh and Walmart.
The retail giant sells over 120,000 products on shelves[/caption]
The argument heated up between lawmakers and one of America’s largest supermarket chains Kroger[/caption]
The technology means big brands can change the price of an item in an instant, and some experts fear they can be exploited to allow companies to raise prices during periods of high demands.
Walmart has been testing digital shelf labels since early 2019, and now plans to add the technology to 2,300 US stores by the end of this year.
The retail giant sells over 120,000 products on shelves, each with an individual price tag meaning price changes for retail staff could take days.
But experts and lawmakers worry the change can lead to “dynamic pricing”, which is a business strategy where companies set flexible prices that change in real time based on demand and supply.
In response, supermarkets have long argued that the technology allows them to better manage inventory and frees up staff to spend more time assisting customers rather than on menial tasks like changing paper pricing labels.
FIGHT BACK
The argument heated up between lawmakers and one of America’s largest supermarket chains Kroger.
In a letter sent to Kroger’s then-chairman and CEO Rodney McMullen, Senator Elizabeth Warren and then-Senator Bob Casey expressed fear the supermarket was using them to “extract maximum profits”.
“Digital price tags may enable Kroger and other grocery chains to transition to ‘dynamic pricing,’ in which the price of basic household goods could surge based on the time of day, the weather, or other transitory events — allowing stores to calibrate price increases to extract maximum profits,” they wrote.
In response, Kroger said it had never engaged in “surge pricing”.
“[The labels] provide us with operational data to better manage inventory,” Kroger said.
“Those insights allow us to pinpoint opportunities where we can lower prices on items that are perishable, seasonally specific or which otherwise need to move more quickly, including key staples.”
Some shoppers have criticized the technology claiming it will leave them paying more.
Walmart shoppers recently attacked the rollout of the technology, claiming the tags were not installed properly, and that they were “falling off the shelves”.
What is dynamic pricing?
Dynamic pricing is the practice of changing the price for a product or service to reflect changing market conditions.
This usually consists of increasing prices at a time of greater demand.
Some people refer to it as “surge pricing.”
You may have paid for surge pricing while using a rideshare app. Fares often increase during busy times when more people are looking for rides.
In February, Wendy’s CEO announced the restaurant would test out the practice.
“We said these menu boards would give us more flexibility to change the display of featured items,” an official statement on Wendy’s website reads.
“This was misconstrued in some media reports as an intent to raise prices when demand is highest at our restaurants.”
“We have no plans to do that and would not raise prices when our customers are visiting us most. Any features we may test in the future would be designed to benefit our customers and restaurant crew members,” they further denied any future of surge pricing.
They said: “Hopefully yours are installed correctly because about half of ours are just laid in the tracks and don’t have guards on them to keep them in place.
Retail expert Ioannis Stamatopoulos, an associate professor at the University of Texas in Austin, told CNBC that “the facts show there is no surge pricing currently occurring”.
“The basic economics of grocery retail is that they want to acquire customers and retain customers,” Stamatopoulos said.
“It’s silly of them to risk upsetting you over gaining a few extra cents on an ice cream when it’s hot outside.”
