As retailers like Walmart roll out digital price tags, fears of surge pricing grow
Walmart plans to replace paper price tags on store shelves with digital shelf labels in thousands of stores over the next two years. Though some say retailers could use the technology to raise prices based on demand at different times of day, the retail giant says it won’t implement such a practice, and analysts say doing so could compromise the company’s trust with shoppers.
The company said it’s been researching digital price tags for several years and in June announced plans to finally roll out technology developed by Vusion Group to 2,300 stores by 2026. The labels are meant to make it quicker and easier for employees to change prices and manage inventory.
Other retailers, especially grocers, have also been introducing the technology that has been more widely used in other countries but is still in early days in the U.S. Hy-Vee, a grocer in the Midwest and the South, in July also announced plans to implement electronic shelf labels from Vusion Group in more than 230 of its stores. St. Louis-based grocery chain Schnuck Markets has been using electronic shelf labels from another provider, Aperion, since 2022 and just announced it would integrate the technology with Instacart to make order fulfillment easier.
This comes as more than a third of consumer goods leaders surveyed by Salesforce in 2023 said they viewed improvements in brick-and-mortar merchandising and promotion as a key opportunity. It’s also a new way for retailers to combat potentially costly pricing errors. In March, for example, Bloomberg reported that Walmart’s price data stopped flowing to the self-checkout stands, resulting in incorrect pricing in 1,600 stores.
Walmart’s digital tags allow employees to update prices at shelves and on other merchandising displays such as apparel racks using a mobile app. Employees can activate an LED light on the shelf tag to flash, signaling areas that require attention when stocking shelves. The lights can also guide employees to products needed for online orders, which the company said will make order picking and fulfillment faster.
Walmart declined to provide the cost of these devices, though supplier VusionGroup said in April it received an order intake of around 1 billion euros, or $1.08 billion, from Walmart U.S. for the digital shelf system and cloud device-management technology.
“It is obviously going to be a pretty big capital spend for retailers,” Mickey Chadha, vp of corporate finance for Moody’s Ratings, told Modern Retail. “But retailers have done that in the past when they spent on e-commerce, and this is just the next level of digitization in retail that needs to be done to streamline these operations and integrate them all together in one system.”
Some reports have suggested that electronic price displays could allow retailers to rapidly raise prices at certain times based on demand, a practice known as “surge pricing” especially known in ride-sharing and travel industries. “If it’s hot outside, we can raise the price of water and ice cream. If there’s something that’s close to the expiration date, we can lower the price — that’s the good news,” grocery industry analyst Phil Lempert told NPR in June.
Analysts, however, admit raising prices frequently would frustrate customers. “I think that consumers are savvy enough to know that you have increased the price of a product that was cheaper yesterday,” Chadha said. “Especially in today’s inflationary environment, consumers are pushing back on pricing, so I think that if they try to do that they would get some pushback, and I don’t think that’s the intention here.”
Dynamic pricing has already sparked conversations in the restaurant industry. In February, Wendy’s CEO Kirk Tanner said the restaurant chain would begin testing dynamic pricing by 2025 using its digital menu boards. Based on that call, news outlets reported that Wendy’s could hike prices during busy times of day, sparking negative reactions on social media. The company later clarified that it did not have plans to raise prices when demand is highest, and that the digital boards could actually allow the company to offer discounts during the slower times of day.
In an email, Walmart said it has no plans to use the technology to rapidly change prices throughout the store and that they are simply a new method to communicate pricing to the customer and a technology tool that assists employees with various tasks.
“Any change that a retailer intends to make, consumers are going to catch on pretty quickly,” said Caila Schwartz, director of consumer insights for Salesforce. “Holding on to that consumer trust is so important, I don’t believe retailers are willing to compromise that.”