Dynamic pricing tech may brighten retail bottom lines and put consumers in the dark

"If you don't have any idea when or why a price might change, it creates a sense of urgency and a sense of scarcity," says Amanda Mull at Bloomberg.

In June, Walmart said it will expand the use of digital shelf labels to 2,300 stores by 2026. These electronic price tags allow stores to change product prices in real time, and Walmart isn’t the only retailer using the new technology

Amanda Mull, senior reporter at Bloomberg, recently wrote about what the widespread use of digital price tags and automated price changes could mean for consumers. She joined Marketplace’s Kristin Schwab to talk about her article. Below is an edited transcript of their conversation.

Kristin Schwab: You open your story talking about how you once worked at a big-box store, and you were sometimes in charge of switching out price tags. Tell us about how that used to work.

Amanda Mull: Yes, when I was in college, I worked at Best Buy for three years. And I would go in on Sunday mornings if I was scheduled for that shift. And back in the store’s warehouse, there was a printer that was connected to headquarters in some obscure way, and it would spit out every Sunday morning a new sheaf of price tags for things that were going on sale. It was the job of whoever opened on Sunday mornings to take all of those and replace the old price tags with the new sale prices. And then for last week’s sales, you took all of those discount tags out and it showed the regular price again.

Schwab: How long did that take you to do?

Mull: Usually just a few minutes. It was not a very involved task. Most of it was just wandering around the store trying to move from product to product; it was a very simple thing to do.

Schwab: But now you write about how digital price tags allow stores to just switch prices in what, a few minutes?

Mull: Less than that even. Digital price tags are one of the ways that retailers are experimenting with what is more largely known as dynamic pricing. If a retailer gets a signal that sales are slowing down, or that the store is getting crowded, either way they can move prices up and down pretty much instantaneously. And it’s largely an automated process. So, it would happen without a bunch of human intervention, either on the central side or on the store side.

Schwab: Tell me more about how retailers might use shopping data to make those real-time price changes.

Mull: Retailers are always sort of like accumulating data through internet shopping. And the internet in general has given retailers many, many more ways to adjust their pricing, at least more than they would have had in a more analog world. So, for example, there’s the idea that retailers could find out that their main competitor down the street has adjusted prices in a certain way. And instead of having to wait until the next sort of pricing shift maybe a week later, they can just adjust them immediately. That also works in the opposite direction; if retailers know that everybody around them is raising prices on a particular type of good, then they get the opportunity to immediately raise prices as well. Instead of capturing potentially more market share, they capture more profit.

Schwab: And you talk about the concept of “public price” in your story. What is that? And why has it been important to pricing and the power between consumers and retailers?

Mull: Right. The concept of the public price is pretty central to modern consumerism as we know it. Basically, what that means is that if you and everybody else knows that a particular thing at a particular place will cost a particular amount, then you can plan your budget. You can shop around, you can see what your other options are, which gives you sort of a baseline of stability in order to make informed choices. If you don’t have any idea when or why a price might change, it creates a sense of urgency and a sense of scarcity that wouldn’t exist if there were just publicly posted prices that everybody understood. And also it sort of individualizes and isolates consumers as people. The ability of you as consumers to sort of exercise your rights or your judgment en masse — which is the type of thing that theoretically is supposed to push stores to be fairer and more reasonable with their prices and more reasonable in their treatment of consumers — if you can’t act as a group, then that collective power goes away entirely.

Schwab: So a question you pose in your story is what if everything you bought was priced like airline tickets? Do you think that’s where we’re actually headed, that dynamic pricing is the future?

Mull: Yes, in general. I do think that unless we have some sort of, like, regulatory reins put on sellers’ ability to change prices like this, I think that it likely is where we’re headed. Because sellers, what they want to do is figure out ways to extract the maximum amount of profit from each customer. Putting buyers at a huge information disadvantage with things like dynamic pricing allows them to do that more effectively.