DAILY TRIFECTA: The Brave New World Of Grocery Shopping
It's not gouging, it's "dynamic"!
TITLE: What Is Dynamic Pricing?
https://www.nerdwallet.com/article/finance/what-is-dynamic-pricing
EXCERPTS: Dynamic pricing is a strategy used by retailers and service providers to automatically raise or lower prices based on current market conditions. Companies who use dynamic pricing rely on technology, including artificial intelligence, to shift prices up or down based on a set of factors that can include availability of the product or service, customer demand and competitor pricing.
For example, prices might increase automatically at a time of high demand and limited supply. This form of dynamic pricing is often called surge pricing. But dynamic pricing can also mean prices go down at a time when demand is low or there’s a surplus of the product.
One upside of dynamic pricing is that, to a point, companies can be just as driven to lower prices as they are to raise them, because discounts tend to increase demand and, consequently, sales. This principle has become obvious in recent months as more businesses see consumers pulling back on spending because everything is so expensive. To bring up sales, companies lowered some prices, from grocery stores that marketed summer discounts to fast-food chains that rolled out cheaper menu options, like McDonald’s new value meal.
At the same time, when companies raise prices during a period of high demand, it can mean people who are willing to pay a premium face less competition for a limited supply of goods. So if you really, really want tickets for a Taylor Swift concert, and you’re willing to pay more for them than other people, you can do that.
There’s a difference between getting priced out of something you want — like tickets to see your favorite pop star — and something you need. That’s why companies face criticism (and sometimes legal trouble) when they raise prices on essential goods and services during an emergency.
There also can be a lack of transparency in dynamic pricing. As more and more companies adopt the strategy, they’re fluctuating prices for goods and services that consumers expect to be fixed. So, it’s not always clear to customers when or why they’re paying higher prices and how they could avoid doing so.
And there’s another degree of opaqueness that’s more worrying. Companies are gathering tons of personal information on their customers every day, which they can leverage to set prices at an individual level. The Federal Trade Commission calls this “surveillance pricing,” and has raised concerns about how it could lead to consumers unwittingly paying more.
TITLE: Sens. Casey And Warren Sound Alarm On Kroger's Digital Price Tags, Warn Of 'Surge Pricing' And Consumer Harm
https://www.blackenterprise.com/warren-casey-digital-price-tags-krogers/
EXCERPTS: Massachusetts Sen. Elizabeth Warren and Pennsylvania Sen. Bob Casey cautioned in a letter that Kroger and other grocery store chains might exploit electronic shelving label (ESL) technology to artificially raise consumer prices through a dynamic pricing model.
According to Fortune, although Kroger began using ESL in 2018, the senators sent a letter to Kroger CEO Rodney McMullen on Aug. 5. In the letter, the pair warned: “Widespread adoption of digital price tags appears poised to enable large grocery stores to squeeze consumers to increase profits. Analysts have indicated that the widespread use of dynamic pricing will result in groceries and other consumer goods being ‘priced like airline tickets,’ ‘creat[ing] a sense of urgency and a sense of scarcity that wouldn’t exist if there were just publicly posted prices that everybody understood,’ and allowing ‘sellers…to … figure out ways to extract the maximum amount of profit from each customer.'”
The grocer branded the technology “Kroger Edge” and initially pitched it as a way for customers to have a positive shopping experience at the store. The technology includes video advertisements, digital coupons, and a search function through the company’s mobile application.
However, this also created concerns about surge pricing, which the senators’ letter alludes to. Surge pricing refers to the ability of a company providing goods or a service, like Uber, to raise prices during certain points of the day based on usage volume or other metrics. Likewise, this technology could artificially manipulate prices based on several factors, including the customers themselves.
The senators also raised concerns about the potential application of facial recognition software and the gathering of sensitive personal data in the letter.
“In addition to price gouging, the EDGE Shelf helps Kroger gather and exploit sensitive consumer data. Through a partnership with Microsoft, Kroger plans to place cameras at its digital displays, which will use facial recognition tools to determine the gender and age of a customer captured on camera and present them with personalized offers and advertisements on the EDGE Shelf,” the letter stated.
The letter continued, “EDGE will allow Kroger to use customer data to build personalized profiles of each customer, and then use those profiles ‘to determine how much price hiking each of us can tolerate,’ quickly updating and displaying the customer’s maximum willingness to pay on the digital price tag –- a corporate profiteering capability that would be impossible using a mere paper price tag. I am concerned about whether Kroger and Microsoft are adequately protecting consumers’ data, and that as Kroger expands the personalized customer experience, customers will ultimately be offered a worse deal.”
TITLE: Surge pricing your groceries: What could go wrong?
https://www.cnn.com/2024/08/22/business/surge-pricing-groceries-nightcap/index.html
EXCERPT: Look, business is business, and corporations are going to embrace whatever technology they can to make money. But extracting a short-term profit with creepy AI that knows your specific, individual buying history — like the kind Starbucks used recently on my colleague Elisabeth Buchwald — isn’t worth it if they anger their customer base.
Back in 1999, the CEO of Coca-Cola merely floated the idea of a dynamic pricing model and it became a debacle almost as dumb as New Coke.
The idea was, maybe we put thermometers on vending machines that would automatically raise the price for a Coke on a hot day. The anger was instant. People accused Coke of price-gouging, and Pepsi accused its rival of exploiting consumers, according to the New York Times.
Coke immediately walked it back, saying that the company was actually talking about ways thermometer technology could lower the cost of a drink.
Which sounds pretty familiar…
This spring, when Wendy’s announced plans to use AI-powered digital menus with variable pricing based on the time of day, fans immediately accused it of pricing-gouging. No, no, Wendy’s said — we weren’t going to raise prices at peak times, we were going to lower prices at off-peak times.
And there’s the rub. Companies will swear up and down their “dynamic” pricing only goes one way — down.
But, historically, we know better, because we’ve seen how big corporations nickel and dime us to pad their margins when given the chance. We’ve bought plane tickets and paid for checked bags and watched our favorite singer’s ticket price go from $50 to $85 because of some unidentifiable “service” and “handling” fees. Countless girls and women have paid a “pink tax” on skin care and hair care products, and stores regularly tout sales promotions that ultimately benefit their bottom line more than the customer.
That’s why Marco Bertini, a professor of marketing at Esade Business School in Barcelona, says the problem is not the tools used for dynamic pricing but the monopolistic status of the companies potentially abusing them. (The US Justice Department’s looking at you, Ticketmaster…)
There are good ways to use dynamic pricing that benefit buyers and sellers, Bertini notes. For example, a store can create instant, automatic discounts on milk or yogurt so that the price goes down the closer it gets to its expiration date, helping avoid the kind of food waste that’s both expensive for businesses and bad for the environment.
It all comes down to the companies’ intentions, Bertini says.
“Any government should be worrying about the market power of companies and why they have it, not so much what they do with that market power.”
On a deeper level, though, these variable pricing models serve as a blunt tool to give more power to companies. As Bloomberg columnist Amanda Mull recently noted, they provide a “convenient source of abstraction.”
“The history of modern consumerism is built on the concept of the public price … If no two buyers see the same price at the same time, the consensus reality that underpins the system — or, at least, underpins the only theoretical power that individuals can have within it — becomes totally moot.”