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August 19, 2025
What If Dynamic Pricing Was Solely Used To Reduce Prices?
Dynamic pricing appears to working at the grocery level — as long as it’s used to lower prices.
An article in The Wall Street Journal pointed out several benefits for retailers:
- Time and cost savings: Using electronic shelf labels to instantly update prices promises to eliminate the cost and time required to print out and place new price stickers. Speaking at the National Retail Federation’s 2025 Big Show, Cedric Clark, Walmart’s EVP of U.S. store operations, said using digital shelf labels removes a “tedious task” facing store associates while enabling them to further engage in-store shoppers. He said, “Can you imagine just pulling out your phone and about two clicks in, it actually changes those prices… just hit that button.”
- Reducing food waste: Albert Heijn, a grocer in the Netherlands and Belgium, saves around 550,000 pounds in food waste annually by using dynamic pricing to gradually clear expiring perishables. According to the WSJ, store associates highlight items about to expire, causing an electronic in-house pricing system to check every 15 minutes as to how they are selling, and whether further discounts are needed. The article states, “Prices on any one item are cut a maximum of four times in a day, with discounts starting at 25% before expanding as needed to 40%, 70% and finally 90%.”
- Competitive pricing: Similar to online pricing, dynamic pricing is used by REMA 1000, a Norwegian grocer, to reduce prices at the store level on between 50 and 300 items each day — concentrating on seasonal items — to keep prices competitive. The grocer’s head of pricing, Partap Sandhu, admits to WSJ, “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.”
At REMA, in-store shoppers only see price cuts. Any increases are made when stores are closed.
Dynamic Pricing Remains a Contested Concept in Retail
Despite the potential for in-store shoppers to benefit from continued lower prices, the roll out of electronic shelf labels has driven concerns from officials in the U.S., as well as those overseas, that dynamic pricing will be used for Uber-like surge pricing, or temporarily hiking prices as a result of increased demand or limited supply.
A U.K. trade official, Jonathan Reynolds, recently wrote on social media, “The picture is that when it is hot, the price of barbecues is going into the boom and the customers are being punished because of the good weather. Could you see a world in the future where Tesco and Sainsbury’s will use electronic labelling for pricing of demand in that way?”
Kroger and Whole Foods told the WSJ they don’t use electronic shelf tags for dynamic pricing, while Walmart declined to comment.
A study from the University of California Rady School of Management found no evidence that electronic shelf labels was leading to price hikes. The authors also felt anxiety over surge pricing was overblown, since trust in pricing is critical at retail.
“Unlike Uber or hotels, grocery stores don’t make money on a single item—they make money on your entire basket and your long-term loyalty,” said Ioannis Stamatopoulos, a co-author and a professor of information, risk, and operations management at UT Austin’s McCombs School of Business, in a statement.
“Using surge pricing could alienate shoppers and drive them away permanently, which is the last thing grocers want,” he added.
Discussion Questions
Would dynamic pricing at the store level be less controversial if it was only used to lower prices?
Do you agree that consumers would revolt and feel alienated if dynamic pricing was used to raise prices?
Poll
Loading …BrainTrust
Mohamed Amer, PhD
CEO & Strategic Board Advisor, Strategy Doctor
Alex Walderman
Director of Business Development , SOLUM
Doug Garnett
President, Protonik
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In what world would dynamic pricing just be used to reduce prices? Sure, I can see it being useful for something like instant price matching with a competitor, which would constitute a price reduction. But if the competitor then put prices back up, surely the price would revert back to the previous level which would, technically, be an increase. I think it is deceptive to say it would only be used solely for reductions. That said, even with dynamic pricing, retailers would not be immune from competitive dynamics and creating trust through honest pricing, which make constant fluctuations and things like surge pricing hard to implement.
The world where all prices are below average, of course !
This sounds like a parallel dimension. I want to visit, just for a little while!
Does WalMart have a store in Lake Wobegon?
(I think Rite Aid did, but it closed….not that we’d know that from RW)
I am not sure. However, I feel like there is a Sears in Lake Wobegon!
It was just the Sears Outlet where you’d get replacement dryer belts and pick up your catalog orders. The Pamida closed about 12 years ago; you’ve gotta drive all the way down to Willmar or up to St. Cloud now to do your shopping if you can’t find it at the Casey’s convenience store or the Dollar General out on the edge of town.
The world where the food is expired. It’s creepy
Dynamic pricing is by definition a way to both lower and raise prices, based upon supply and demand. Even in a perfect world, where retailers aren’t actively trying to drive improved margins via dynamically-powered price increases, the very logic of the tool itself doesn’t work unless the system is allowed to raise prices accordingly.
Less controversial but…
People like a certainty in what they will be paying; knowing something may go down in price if they come back in an hour – which is also to say they know it may not come down, and they’ve wasted time and effort over a mirage – will prove annoying as well. To (hopefully but I doubt it) put an end to this overly-talked-about issue: I feel the gains from dyanamic prcing will be smaller than the aggravation it will cause.
It’s the latest new-shiny-groupthink fad. Sounds like a great idea, like self-checkout, which is massively unpopular in my area, to the point that retailers are yanking them out. I would walk out of any store that tried this, and strike them from my shopping consideration.
In spite of the fact that some consumers may feel alienated by sudden price increases, others may appreciate the flexibility and potential discounts offered by dynamic pricing. However, a lack of transparency in the manner in which prices are set could lead to mistrust and dissatisfaction among customers. Maintaining consumer loyalty can be achieved through clear communication and fair pricing.
Customers cannot and will not know what is down or what is up. They understand the traditional MSRP with sales and discounts and know how they might trust those models. All these ideas about dynamic prices seem destined to hurt sales by destroying consumer trust. Just because something can be done doesn’t mean it should.
I hope that you are right and that I a wrong…
How gullible would you have to be to assume that all the companies around you — not just retailers — existed solely to improve your finances?
The event ticketing industry has created enormous!!! distrust (and anger) of the practice.
Retailers are taking on a shiny object with a reputation. (music pun intended)
Retailers need to find a new name for it (not tainted by scalping industry).
Better yet… a transparent receipt itemization line… whether that is a tariff increase, or supply chain, or whatever biz issue that is causing the price to change. That is a trust/accountability mechanism… that the added cost will reverse (in whole or in part) when the problem is resolved.
When it wasn’t so easy or to deploy ESLs all over a huge store, Kmart used to conduct sporadic “Blue Light Specials” but only to lower prices, on limited products and very temporarily. Who is going to guarantee the consumer that, with the proliferation of ESLs, retailers are only going to use ESLs as a tool for “Blue Light Specials” on steroids, and not to take advantage of dynamic pricing to squeeze extra margin out of the laws of supply and demand? I bet that, if retailers do that, those states that have strong consumer protection departments will pass laws only allowing retailers to ‘lower’ prices temporarily for the purpose of running promotions. The technology is very flexible and I am too skeptical.
This premise suggests that when prices go up – and they go up, with or without electronic shelf labels – the store would cover the ESLs with manual price labels for the items with price increases. Because…
I don’t think so. Price accuracy and lower cost to administer prices are key benefits of ESLs. Those benefits accrue for both price increases and decreases.
Dynamic pricing is precisely that, dynamic and bidirectional. Imagine investing in electronic shelf labels and associated infrastructure, only to limit half of their functionality. Not realistic at all. The more critical conversation should center on trust. For many staples, customers establish a mental anchor for fair prices, and arbitrary price changes (even lower ones) can erode consumers’ confidence in the grocer’s overall pricing integrity.
Grocers need to implement these systems in a way that feels fair and predictable to customers. All the vendor ROI projections in the world won’t matter if you’ve eroded the foundational trust that drives basket size and shopping frequency.
Yes, dynamic pricing always fluctuates, moving up and down. If it just goes down, it is called a price reduction.
Consumers want to shop with a retailer they trust. A retailer to trust to have the products they want, when they want them, at fair prices – and at prices the retailer promoted.
Retailers want profits (of course) but they also want efficient operations and to protect shopper loyalty. Especially in grocery where repeat visits are what build consistent profitability and growth.
Using dynamic pricing to take advantage of shoppers (like raising sunscreen prices when it’s hot outside) erodes shoppers’ trust. Retailers won’t do this and if they do try, it won’t last long as they’ll quickly see shoppers move to their competitors.
ESLs have many benefits to retailers beyond dynamic pricing:
labour savingsless food wastepick to light and stock to light featuresout of stock notificationsand moreIf a grocer uses ESL to raise prices to take advantage of shoppers, that’s a short-term play that won’t last. If they use ESL to improve operations, that’s a winning strategy.
Precisely, Alex.
Recent paranoia about abusive use of dynamic pricing with ESLs is the province of politicians and social critics who have no clue about the actual dynamics of the grocery business in developed countries.
The industry has more than two decades of experience using machine intelligence to set, manage and optimize prices and markdowns. With or without ESLs, maintaining a trusted “price image” with shoppers is a paramount objective. When prices change too frequently, or price gaps between items (sizes, store brand, premium) make no sense to shoppers, they run to the competition.
As long as there remains robust competition between food retailers, there is little risk that retailers will use “dynamic” pricing to abuse their customers.
Great observations!
Or they will all use this and other strategies to abuse their customers. The “enshittification” of retail continues….
Grocery & retail will feel the heat from consumers who have been abused (for years now) with dynamic pricing (a kin to scalping) in the events industry.
“Recent paranoia about abusive use of dynamic pricing” is not recent in consumer viewpoint. It’s a cross industry alarm bell to consumers.
Using dynamic pricing to lower prices may result in creating an artificially high price, which could be perceived as non-competitive. Furthermore, if you can only go one way (lower) with dynamic pricing, that might be referred to as discount pricing. The point is a dynamic pricing strategy and a discount strategy are not the same.
I grew up in retail thinking in terms of weeks-of-supply (WOS). When I lived and worked in China for a year, it was with an apparel retailer that turned their inventory 15+ times a year. The metric was days-of-inventory (DOI). You don’t turn apparel inventory 15+ times by being bashful about slow sellers. It was all done with excel spreadsheets, but that was7 years ago. I don’t embrace surge pricing, or dynamic pricing or anything that would erode customer confidence. But managing pricing for inventory efficiency AND customer confidence makes a lot of sense to me. Food and fashion can both benefit from more sohpisticated pricing management.
Dynamic pricing at store level would absolutely be less controversial if it was only used to lower prices, but that’s not how it works.
My most in-depth interaction with dynamic pricing happened at a Las Vegas hotel gift shop. Prices increased at key times during the day and guests definately noticed. I felt bad for the store associates who had to politely deal with all the comments.
If dynamic pricing is only used to lower prices – sales, quick promotions – then it would truly serve the grocer in new ways while maintaining shopper trust. The current process in store of lowering prices, setting deals, and quick sale offers takes a fair amount of labor by POS teams in making computer edits, then printing, then installing tags. Labor savings alone is a good reason to embrace digital shelf tags to serve this purpose.
But grocers who are curious about using dynamic pricing to raise retails on a whim had better be ready for shopper backlash and risking brand loyalty.
Currently for brick and mortar stores the only place I see dynamic pricing used regularly and is an accepted practice is the prepared food items. Stores will have the 1/2 price after a certain time to clear out the items and it is a generally accepted practice.
Beyond that I just don’t see dynamic pricing panning out for changes within the store hours. The old Kmart “Blue Light Special” if I remember correctly was for the day with stock on hand, not dynamic during the day?