A MAJOR change has been rolled out at Walmart and Kroger in a Wendy’s copycat move that was slammed at the time.
It is feared that the change could take advantage of shoppers by squeezing profit margins and rapidly changing prices.
A major change has been rolled out at Walmart and Kroger in a Wendy’s copycat move that was slammed at the time[/caption]
It is feared that the change could take advantage of shoppers by squeezing profit margins and rapidly changing prices[/caption]
Walmart and Kroger have recently adopted an electronic label policy, which allows stores to change prices in front of a consumer’s eyes to match competitors.
This means that the prices are set as flexible in response to the current market demands for it.
Many fear this could spill over into dynamic pricing, which often entails charging higher rates at times of high demand.
They know customers are more likely to buy it, because they don’t have any other option.
Those in the US are looking to its use in countries like Norway, where prices for a single product can change up to 100 times a day using REMA 1000 technology.
REMA 1000’s head of pricing, Partap Sandhu, said: “We lower the prices maybe 10 cents and then our competitors do the same, and it kind of gets to [be] a race to the bottom.”
US PUSHBACK
But in the US, it has raised alarm bells, especially now that the likes of Walmart and Koger have embraced it.
Both lawmakers and consumers worry that prices could be put up as quickly as they could be put down.
A letter from Massachusetts Sen. Elizabeth Warren and Pennsylvania Sen. Bob Casey said: “Widespread adoption of digital price tags appears poised to enable large grocery stores to squeeze consumers to increase profits.”
It is important to note that Casey has since left office.
Joel Rampoldt, the CEO at Lidl US, added: “When you say dynamic pricing, the hair on the back of my neck kind of stands up.
“You see an electronic shelf label and the thought is going to occur to you, ‘Well this is a way to raise prices more efficiently and more quickly and to take advantage of situations.’”
Rampoldt added that Lidl US introduced electronic shelf labels in its stores last year to save time and display more consistent pricing.
Cedric Clark, Walmart’s executive vice president of U.S. store operations, said that the store has digital shelf labels in more than 400 of its nearly 4,600 U.S. stores.
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.
He said: “Imagine just pulling out your phone, and about two clicks in, when it’s time to actually change those prices…just hit that button.”
Kroger has said that it doesn’t plan to use electronic labels for dynamic pricing.
A company spokesperson said: “They are a great way to take manual shelf tagging work off our associates’ roles so they can have more time to work with our customers directly—and it’s a huge reduction in the paper waste generated by tags.”
Other major retailers that plan to roll out something similar include Whole Foods, but it has said it doesn’t plan to use it for dynamic pricing.
WENDY’S SLAMMED
Despite this positive outlook, when Wendy’s has rolled out a similar scheme in the past, it was slammed by customers.
Wendy’s announced last year that it would be testing dynamic pricing, but many feared this would mean higher prices during peak demand times.
Sen. Elizabeth Warren said Wendy’s plan was “price gouging plain and simple.”
In response to the backlash, Wendy’s was forced to come out and confirm that this would result in better deals for customers.
It said new digital menus could allow it to change menu items during the day and offer discounts.
Regarding the phrase dynamic pricing, the company reaffirmed: “We didn’t use that phrase, nor do we plan to implement that practice.”
REASSURANCE
But Ioannis Stamatopoulos, an associate professor who studies retail technology at the University of Texas, said that fears of electronic labels have been overblown.
A recent study he authored, along with Robert Evan Sanders at the University of California, San Diego, found that electronic shelf labels haven’t led to demand-based pricing in U.S. grocery retail.
This is despite the concern of US regulators.
Stamatopoulos explained that this is partly because it is hard to detect a real-time surge in demand for goods in the store aisles.
He also clarified that retailers would be wary of annoying their customers if an item was more expensive by the time you got to the checkout than when you picked it up.
David Bellinger, a senior analyst at Mizuho Financial Group, predicts that Americans will likely see price rises in the future.
But, he believes this will likely happen infrequently and outside of store hours to avoid confusing or upsetting shoppers.
