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How Digital Pricing Works—And Might Save You Money

4 minute read

Digital price labels could be coming to a grocery store near you—if it isn’t there already. The pricing system, which replaces paper stickers with electronic labels that can be changed in real time, is being rolled out in stores like Whole Foods, Amazon Fresh, and the Midwestern chain Schnucks. Walmart recently became the latest retailer to announce that it will soon switch to a digital pricing model, expanding into 2,300 stores by 2026.

But the switch has caused apprehension amongst consumers worried that the ability for stores to change prices quickly might make them more vulnerable to price gouging— in which the price of a good is increased when there’s higher demand. 

Though the system would make it easier for stores to raise prices, it’s unlikely to mean overpaying for ice cream or water on a hot day or an umbrella in the middle of a storm, experts say. In fact, the change might actually save you money.

“A lot of times this is framed in the media as a way to increase business bottom lines, and in some cases, that does happen, but it doesn't mean the customers always lose,” says Timothy Webb, assistant professor at the Alfred Lerner College of Business and Economics. 

One of the reasons why stores are turning to electronic labels is to increase efficiency, rather than consumer costs. Manually changing the labels of thousands of store items is a labor intensive task— one that has become more challenging as grocery stores struggle to recoup from labor shortages. One report from Grocery Doppio found that 68% of grocers said that they’ve found it “difficult” or “very difficult” to staff up.

“Digital display of prices is the way of the future,” says Z. John Zhang, Professor of Marketing at the University of Pennsylvania. He adds that many grocery stores are beginning to implement the system now that the cost of the technology to do so has become more affordable.  

Walmart says that it will not engage in surge pricing, and that the electronic pricing system is simply a way to simplify tasks like price updates, shelf stocking, and product picking for online orders. “Walmart’s pricing strategy and business model remains Everyday Low Prices (EDLP),” Walmart said in an emailed statement to TIME on Tuesday. “Our new digital shelf labels are a technology tool for communicating these prices in the stores and for streamlining associate tasks.”

How it can save you money

Despite apprehensions many consumers might have about dynamic pricing, the system can actually be good for their wallets, experts say. Digital pricing systems can allow stores to make changes easily to provide discounts for shoppers who come in at less busy times, putting less of a strain on staff and providing better deals for customers.  

Grocery stores have to toe the line between making a profit and appealing to price conscious customers. “It has been the eternal problem for retailers—do you go after the margin or after the volume?” says Zhang. 

Dynamic pricing allows grocery stores to have it both ways—and provide deals for budget-conscious shoppers. Instead of engaging in Uber-style price increases when demand is higher, stores are more likely to provide discounts to those shopping at less busy times. 

“The same price would apply to everybody all week long, but on Mondays or Tuesdays that's a time that price sensitive customers will shop, so they could offer more of a discount,” says Zhang.

Read More: How to Buy Groceries Right Now Without Breaking the Bank

It also provides an opportunity to lower food waste. A store can quickly discount soon-to-expire produce, providing customers with a better price. “Customers will view it as an opportunity to get a deal and grocery stores now get to sell something that they would have had to throw out otherwise,” says Webb. 

Stores want to keep a good relationship with their customers, a tactic most recently exemplified when stores including Target, Aldi, and Walmert chose to lower the costs of thousands of items in the face of soaring grocery costs,

“As much as people are concerned with the price changes, I think the businesses are also cognizant that people have options,” Webb says. 

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Write to Simmone Shah at simmone.shah@time.com