How digital pricing works – and it can save you money

DDigital price tags could be coming to a supermarket near you – if it isn’t already there. The pricing system, which replaces paper stickers with electronic labels that can be changed in real time, is being implemented in stores such as Whole Foods, Amazon Freshand Midwestern chain Schnucks. Walmart recently became the latest retailer to announce that it will soon switch to a digital pricing model, expanding to 2,300 stores by 2026.

But the change has caused concern among consumers concerned that stores’ ability to quickly change prices could make them more vulnerable to price gouging – where the price of a good rises when there is greater demand.

While the system would make it easier for stores to raise prices, it’s unlikely to mean paying extra for ice cream or water on a hot day or for an umbrella in a rainstorm, experts say. In fact, the switch can actually save you money.

“Often this is presented in the media as a way to increase business results, and in some cases it does, but it doesn’t mean customers always lose,” says Timothy Webb, assistant professor in the Alfred Lerner College of Business and Economics. .

One of the reasons stores are turning to electronic labels is to increase efficiency, not consumer costs. Manually changing the labels on thousands of store items is a labor-intensive task – and one that has become more challenging as supermarkets struggle to recover from labor shortages. A report in Doppio Grocery found that 68% of grocery traders said they found it “difficult” or “very difficult” to recruit staff.

“Digital price display is the way of the future,” says Z. John Zhang, marketing professor at the University of Pennsylvania. He adds that many supermarkets are starting to implement the system now that the cost of the technology to do so has become more affordable.

Walmart says it will not engage in dynamic pricing and that the electronic pricing system is simply a way to simplify tasks such as price updates, stocking shelves and selecting products for online ordering. “Walmart’s pricing strategy and business model continues to be Everyday Low Prices (EDLP),” Walmart said in a statement emailed to TIME on Tuesday. “Our new digital shelf labels are a technological tool to communicate these prices in stores and to streamline tasks for associates.”

How it can save money

Despite the apprehensions many consumers may have about dynamic pricing, the system could actually be good for their wallets, experts say. Digital pricing systems can allow stores to easily make changes to offer discounts to shoppers who arrive at less busy times, putting less pressure on staff and giving customers better deals.

Supermarkets need to walk the line between making a profit and attracting price-conscious customers. “This has been the eternal problem for retailers: are you going after margin or volume?” says Zhang.

Dynamic pricing allows supermarkets to have it both ways – and offer deals to budget-conscious shoppers. Rather than engaging in Uber-style price hikes when demand is highest, stores are more likely to offer discounts to those shopping at less busy times.

“The same price would apply to everyone all week, but Mondays or Tuesdays are the times when price-sensitive customers will shop, so they can offer bigger discounts,” says Zhang.

See more information: How to Buy Groceries Right Now Without Spending a Lot

It also provides an opportunity to reduce food waste. A store can quickly discount products that are about to expire, offering customers a better price. “Customers will see this as an opportunity to get a deal and supermarkets will now be able to sell something they would otherwise have to throw away,” says Webb.

Stores want to maintain good relationships with their customers, a tactic exemplified most recently when stores like Target, Aldi and Walmert chose to reduce costs on thousands of items in the face of rising food costs.

“As much as people are concerned about price changes, I think companies are also aware that people have options,” says Webb.