Why Digital Price Tags Are Spooking Shoppers

0:00This episode is supported by Anthropic, the team behind Claude. Every business wants to move faster. Few can afford to be wrong. That's why nine of the Fortune 10 run on Claude for the work they want to get right. Safety and accuracy are not just line items for Anthropic. That's their whole mission. See what's next at claude.ai.

0:23Welcome to Tech News Briefing. It's Tuesday, October 27th. I'm Danny Lewis for The Wall Street Journal. Imagine a world where going grocery shopping becomes like navigating surge pricing on a ride-hail app, the most popular items getting price hikes in real time, or maybe even going up or down depending on who is standing there waiting to buy them. That's become a concern for some consumers lately, as worries about what companies are doing with all the data they have run headlong into the increasing cost of everyday items, plus a helping of anxiety around AI. But is it just a fear, or is dynamic pricing really becoming more common?

0:59WSJ Retail Reporter Sarah Nassauer joins us now to discuss. Sarah, what are we talking about here when we're talking about dynamic pricing? It's a really good question, because I think different people would answer that question differently. Basically, you know, dynamic pricing just means prices that move around, right? But what people, I think, often mean when they use that term of late is more pricing that is influenced by data about you, the shopper, and moves around because of it. So is that more like, I don't know, surge pricing when you're taking like an Uber or a Lyft or something like that?

1:35It could be. Surge pricing can be based on market conditions though, right? Like, oh, something's happening that's creating a demand spike. It doesn't necessarily mean that's a price that's individualized to you because you're over 65, right? Or you have some personal situation. There's basically many terms that are getting used when consumers and advocacy folks are talking about what's the risk of technology mixing with personal data to create higher prices or unfair pricing. And dynamic surge, personalized surveillance pricing are all terms being used. But fundamentally, I think what folks are responding to is that there's more data out there about us, about the world, and there's more ways to change prices fast online or at a digital shelf tag?

2:27And could those be combined to raise prices or price in an unfair way? Dynamic pricing isn't itself new. What's the big concern about this today? The concern is that we're in a new world when it comes to the amount of data that companies have access to about us as consumers, the technology that artificial intelligence platforms and other technology, how that could be combined with that data to come up with sort of new insights about us and the speed at which pricing could happen, right? You think about like a very traditional price change in a store. There'd be a paper price to change it. Someone would have to physically get out there, change that price, take it down, you know, print out a new one, tape it up.

3:12It's pretty labor intensive. Sarah, you spoke to some people who are concerned that they've had higher prices targeted to them specifically. What did they tell you? We talked to some consumers, you know, one who talked about an experience buying a hard drive on Walmart.com, and he was looking at it and got one price of$369, and then his wife looked on her phone, and she got a price that was$110 less. And, you know, they thought, well, are they using cookies? Are they using stored data? They ended up buying the product on his wife's phone at the lower price, but didn't feel great about it. You know, it was just a moment of, like, what's happening here, and this doesn't feel right.

3:49Walmart says that this was a mistake, basically, and that it was not personalized pricing. But, you know, it speaks to how a lot of consumers are feeling right now. They're just on high alert for any moment where they feel like they're kind of getting ripped off. So how much of the concerns then around dynamic pricing are just fears that this technology is going to be put to use and is being put to use without customers' knowledge versus how much is actually happening right now? I think it's hard to tell for the moment because unfortunately we don't have eyes on every single conversation that's happening at these companies about pricing or what they actually are testing when a price is moving around.

4:27So we're living in a world where like the consumers don't really know why a price is moving around. And it could be something that has happened for decades, right? That like the cost structure of that product went up and now this weekend there's a price increase on that product. So you come back to the store and the price is higher. Or the prices are different for you and your friends in the same town because there's a pricing experiment happening. This is something that companies have said they're doing. Or it's because there's some personal attribute or demand insight that companies are responding to.

4:57I think the issue here is that people don't really know. But they know that there is more data. There is more technology apparent to them. And so in that vacuum of knowing, there's a lot of nervousness. And so, you know, there's consumers that have had experiences like the ones we've talked to. There's also tons of social media postings sort of talking about what people think is happening. There's a really high level of anxiety around it. Why is that in this moment? It's a combination of prices have been higher, right? If you look at pricing compared to a few years ago in particular, prices are higher.

5:32And people feel really strained by that in some cases. Gas, groceries, things that people have to spend on. combined with just a lot of anxiety around AI and technology in general right now. And I think we've seen lots of examples of that bubbling up in recent months. So in that context, affordability and how technology might be used to rip you off is getting a lot of attention. Have you experienced any dynamic pricing out in the wild? If you're a listener on Spotify, let us know in a comment. Coming up, some states are talking about regulating dynamic pricing. What might that look like? That's after the break.

6:15This episode is supported by Anthropic, the team behind Claude. Every business wants to move faster. Few can afford to be wrong. That's why nine of the Fortune 10 run on Claude for the work they want to get right. Safety and accuracy are not just line items for Anthropic. That's their whole mission. See what's next at Claude.ai.

6:38Welcome back. We've been talking about the possibility of dynamic pricing coming to more store shelves. We mentioned Walmart earlier, but Sarah, what are some of the other big companies saying about these consumer concerns? Basically, the companies are saying nothing to see here. Like, we're not doing this. We don't plan to do it. But we've seen like McDonald's had a lawsuit filed against it from a customer claiming that there was some kind of algorithmic driven price gouging happening. McDonald's says that is not the case. We've seen Walmart have to issue multiple statements about the fact that they are not doing this now and they don't plan to in the future.

7:13Kroger has also talked about this. Basically, companies are trying to tell folks, you know, when you see the digital shelf label, we aren't using a camera to scan your retinas and raise the price. But that doesn't mean that we know, you know, everything that they're doing or everything they've considered doing. Digital price labels have been used in Europe for over a decade, pretty widely. So there actually is research on sort of how that's affected pricing there that shows it hasn't led to price increases broadly. In some cases, it's led to less food waste because companies can discount nearly expired milk vegetables faster.

7:50But still, I think it's like a visual representation for a lot of people of technology and price. And so it's led to a lot of social media posts. And a lot of consumer advocates point out it is potentially laying the groundwork to change the price more easily. So companies are saying, we don't plan to do that. We don't do it currently. But it would still be technically possible. And that is leading to a lot of debate. And we're seeing regulation around some of this stuff from different states and regulators. Oh, could you talk a little bit more about that? What regulation are we seeing? It's a really wide range, but a lot of it centers around either disclosing to shoppers that a price has been created using an algorithm or AI or some kind of data or preventing certain kinds of price increases based on personal attributes or data or a sudden need.

8:44There's a really wide variety. And I would say right now there are four states, Maryland, Connecticut, New Jersey, New York, that actually have laws on the books that sort of restrict some kind of personalized or data-driven pricing. But there's many more that are being discussed or considered in different states. And so I don't think we have a really clear sense of what is actually going to be regulated here and what is not. But there's lots of attempts. What does this all say about the current level of trust between companies and their customers? The pricing issue has become a real flash and point of distrust overall beyond what we're discussing today, right?

9:20As prices have gone up the last few years, consumers are worried, right? And there's a lot of anxiety about what things are going to cost. And I think that has created some level of distrust between people, shoppers, and companies that sell them things. And so everything we're discussing about how technology is playing a role in that is in that context for sure. That was Wall Street Journal reporter Sarah Nassau. And that's it for Tech News Briefing. If you're a listener on Spotify, be sure to leave us a comment. Today's show was produced by me with supervising producer Katie Ferguson. I'm Danny Lewis for The Wall Street Journal.

10:00We'll be back tomorrow with a new episode. Thanks for listening.

10:13This episode is supported by Anthropic, the team behind Claude. Every business wants to move faster. Few can afford to be wrong. That's why nine of the Fortune 10 run on Claude for the work they want to get right. Safety and accuracy are not just line items for Anthropic. That's their whole mission. See what's next at Claude.ai. WSJ.