Shoppers face surge in ‘dynamic pricing’ as supermarkets adopt digital technology to change grocery prices based on demand
Shoppers may face higher prices as retailers look set to use digital tags that can change the cost of products based on demand.
The Bank of England has warned that these ‘market-sensitive pricing tools’ will be adopted by one in three companies next year, up from one in five the previous year.
These ‘dynamic prices’ will change based on algorithms and artificial intelligence, with labels adjusted based on ‘demand, capacity or competitors’ prices’, according to a business study commissioned by the bank.
Factors that may affect these prices include weather, time of day, and store density. For example, if it is a hot day, the price of sunglasses may increase.
This is something online retailers like Amazon have already adopted. Hospitality and travel businesses do much the same; prices vary depending on popularity or time of year.
The study then suggests that electronic labels in supermarkets could be the next frontier; This is something that is ‘already common in Europe’.
Britain’s most popular supermarkets have already started introducing or testing digital price displays, but there is no evidence they are using surge pricing.
This British Retail Consortium chart shows how CPI inflation since 2020 is at 29 per cent; This is below overall food inflation and average worker earnings, both of which are around 38 percent.
Electronic tags are currently used in around 700 Co-op stores and there are plans to expand this to all 2,300 stores.
Morrisons also wants to use the technology in all 497 of its stores and told The Times the aim is to eliminate paper labels and does not use dynamic pricing.
Waitrose will similarly expand digital labels to all its supermarkets but reportedly does not plan to introduce price increases.
Tesco and Sainsbury’s are testing displays and Asda will roll them out to 250 ‘Express’ supermarkets.
Events and concerts often feature dynamic prices; Hotel prices in London, where Taylor Swift held her popular Eras Tour, rose by up to 156%.
The study emphasized that dynamic pricing in hotels is more popular than before; In 2005, about 15 percent of room rates were adjusted at least once a month, but today that happens about 80 percent of the time.
Deputy head of monetary policy Clare Lombardelli explained: ‘Digitalisation has radically reduced what economists call menu costs – the expense of changing listed prices – so named because of the costs historically associated with printing new menus with updated prices. ‘Digital pricing allows companies to change prices frequently at negligible cost.’
Writing about the study, Ms Lombardelli and Rupal Patel said: ‘Personalised pricing goes further and may involve adjusting the price offered to each consumer according to their personal circumstances and consumption patterns.’
Shoppers could face higher prices as retailers look ready to use digital tags that could change the cost of products based on demand
| Generic Product | 31/3/21 | 31/3/26 | £ change 26v21 | % change 26v21 |
|---|---|---|---|---|
| Pampers Baby Dry Size 4 Essential Pack 44 Baby Diapers | £7.38 | £10.75 | £3.37 | 45.69% |
| Aptamil 1 First Baby Milk Formula Powder From Birth 800gr | £11.35 | £13.32 | £1.97 | 17.36% |
| Hovis Soft White Medium Slice Bread 800gr | £1.09 | £1.39 | £0.30 | 27.13% |
| Self Label 8-6 pack Krumpets | £0.30 | £0.46 | £0.16 | 55.08% |
| Self Labeled Olive Oil 1Ltr | £2.85 | £6.66 | £3.81 | 133.48% |
| Yorkshire Tea Bags 250gr | £2.64 | £4.36 | £1.72 | 65.28% |
| Smirnoff No. 21 Vodka 37.5% volume 70cl | £15.00 | £18.62 | £3.62 | 24.12% |
| Own Label Penne Pasta 500gr | £0.50 | £0.69 | £0.20 | 39.39% |
| Own Label Semi-Skimmed Milk 2 pints | £0.80 | £1.20 | £0.40 | 50.00% |
| Cathedral City Mature Cheddar Cheese 350gr | £2.80 | £3.29 | £0.49 | 17.53% |
| Own Label Beef Steak Minced Meat 5% Fat 500gr | £2.59 | £5.19 | £2.60 | 100.39% |
| Own Label Granny Smith Apples 5-6 pack | £1.47 | £1.76 | £0.28 | 19.30% |
| Own Label Chicken Breast Fillet 950-1kg | £5.08 | £6.69 | £1.62 | 31.87% |
| Own Label 8 Pork Sausages 454g | £1.50 | £1.91 | £0.41 | 27.42% |
| Own Label Whole Cucumber | £0.44 | £0.99 | £0.56 | 127.59% |
| Own Brand Maris Piper Potato 2.5-2kg | £1.24 | £1.84 | £0.60 | 47.89% |
| Own Label Free Range Medium Eggs 6 pack | £0.84 | £1.79 | £0.95 | 113.43% |
| Own Label British Double Cream 300ml | £1.01 | £1.69 | £0.68 | 67.08% |
| Own Label 0%/Low Fat Yogurt 500g | £0.84 | £1.10 | £0.27 | 31.74% |
| Birds Eye 10 Breaded Cod Fingers 280gr | £3.13 | £4.50 | £1.37 | 43.84% |
| Own Label Thick Bleach 750ml | £0.42 | £0.75 | £0.33 | 79.64% |
| Cadbury Dairy Milk Chocolate Bar 110g | £1.25 | £2.02 | £0.78 | 62.45% |
| Canned Ambrosia Rice Pudding 400gr | £0.81 | £1.74 | £0.93 | 113.85% |
| Own Label Plain Flour 1.5kg | £0.58 | £0.75 | £0.17 | 29.57% |
| Nescafe Gold Blended Instant Coffee 200-190gr | £5.96 | £8.19 | £2.23 | 37.40% |
| TOTAL | £71.82 | £101.61 | £29.79 | 41.48% |
| Data provided by Assosia for the Daily Mail is based on the average pre-promotion price across Tesco, Sainsbury’s, Asda and Morrisons on 31 March 2021 and 31 March 2026. | ||||
And while these digital labels ‘offer efficiency opportunities’, they also raise ‘fairness concerns’.
Consumer rights expert Martyn James told The Times he was concerned retail giants were embracing dynamic pricing despite previous promises not to.
He highlighted other industries using this method, such as concert tickets or airline tickets: ‘In almost every industry, from airline fares to concert tickets, providers have abused their power to change pricing in real time without any official oversight…
‘So how can we trust? [supermarkets] ‘Will you use digital pricing to simply update the cost of items without price manipulation?’
But even if that happens, he said, it would be a good way forward because the technology behind these price adjustments is very expensive.
