Digital price labels are increasingly replacing traditional paper shelf tags in U.S. supermarkets, but a recent study indicates that this transition has not led to significant price fluctuations based on demand. The study analyzed five years of pricing data at a grocery chain, concluding that fears of dynamic pricing strategies are somewhat misplaced.
Despite the findings, there remains skepticism among shoppers, consumer advocates, and lawmakers regarding the potential misuse of digital labels. Critics, such as Dan Gallant, a sports media worker in Edmonton, Canada, express concerns that retailers might exploit the technology to adjust prices based on weather conditions or consumer behavior, steering a wedge between corporations and customers.
Social media platforms are abuzz with warnings that grocery chains may take advantage of these digital tools to raise prices during high-demand weather—like increasing ice cream prices on hot days or raising prices for umbrellas when it rains. This skepticism has garnered attention from lawmakers, including Democratic Senators Elizabeth Warren and Bob Casey, who questioned Kroger about whether it would adopt a dynamic pricing model using these electronic labels.
In response to these apprehensions, lawmakers in states such as Rhode Island and Maine have introduced legislation to limit the use of digital labels. Similarly, Rep. Cesar Aguilar from Arizona has put forth a bill that would ban digital labels outright, though it has yet to be heard in a legislative session. Aguilar emphasized his goal of initiating dialogue about the implications of these labels and how they might lead to pricing manipulation.
Research conducted by Ioannis Stamatopoulos from the University of Texas at Austin, Robert Evan Sanders from the University of California, San Diego, and Robert Bray from Northwestern University indicates that price surges linked to digital labels are negligible. The study tracked price changes from 2019 to 2024 at a grocery chain that implemented digital pricing in October 2022. It found that temporary price increases affected only 0.005% of products daily before the digital labels were introduced, rising marginally to 0.0006% after their adoption. Interestingly, the study also found that discounts became slightly more common following the rollout of digital labels, challenging the notion that they lead to higher prices.
Economists have long pondered why grocery prices show infrequent changes. Stamatopoulos suggested that the cost of labor, essential for physical price changes, could deter frequent price adjustments. Additionally, grocers must navigate the intricacies of consumer behavior, being cautious not to upset customers who monitor prices closely. Stamatopoulos remarked, "Selling groceries is not selling a couch. It’s not a one-time transaction, and you will never see them again. You want them coming to the store every week."
While electronic price labels have existed in Europe for over a decade, their adoption in U.S. grocery stores has been slow, with only 5% to 10% currently using them compared to 80% in Europe. Amanda Oren from Relex Solutions attributes this slow uptake to the high costs involved; each label costs between $5 and $20, necessitating investment in thousands of labels for an average supermarket boasting over 100,000 different products.
Nevertheless, the grocery industry is moving forward with plans to implement these labels. Walmart, the largest retailer in the U.S., aims to deploy digital price labels in 2,300 stores by 2026. Kroger plans to expand their usage following successful trials in 20 stores, and Whole Foods is also testing these labels in nearly 50 stores. Proponents of this technology argue that electronic labels significantly improve efficiency, reducing the time required to update prices from days to minutes.
Digital labels can additionally provide useful features, such as codes that shoppers can scan for recipes or nutritional information. In a recent initiative, a supermarket chain in the Netherlands and Belgium has integrated an AI tool that dynamically adjusts prices on its digital labels every 15 minutes for products nearing expiration, resulting in the reduction of over 250 tons of food waste annually.
Despite the advantages, skepticism persists among politicians like Warren and Casey, particularly due to Kroger's suspected connections with Microsoft in developing personalized pricing based on customer data collected through cameras in the aisles. Kroger has denied the implementation of any facial recognition technology and rejected claims of price surges during peak demand periods, asserting that their business model prioritizes lower prices to attract customers.
Aguilar also raised concerns about job losses potentially associated with the transition to digital labels, noting that grocery pricing continues to rise despite a decrease in checkout lane workers. He argued that grocers ought to prioritize community hiring to maintain robust workforce connections. In light of these concerns, Oren countered that the objective of deploying digital price tags isn’t to reduce labor costs, but rather to optimize staff allocation for more meaningful roles across the store.
