(The Center Square) – With the rise of AI technology, grocery stores across the nation are exploring digitized price labels and dynamic pricing. While consumers are familiar with the price of an airplane ticket or Uber lift fluctuating, the price of milk or eggs changing depending on the time of day, is a new and concerning development for many.
Already common household names like Target, Whole Foods and Walmart are beginning to implement electronic price labels. This comes even as recent polls by GBAO Strategies reveal 67% of Americans want electronic digitized price tags and surveillance pricing banned in grocery stores.
In the past two years, Democratic legislators such as state Sen. Nick Pisciottano, Reps. Ryan Bizzarro and Manuel Guzman, have introduced bills that would enforce guardrails or bans on this development. Democratic Rep. Nate Davidson from Cumberland County is one of the most recent of these, seeing dynamic pricing by grocery stores as taking advantage of shoppers, especially for those below the poverty line.
“I don’t want to get in the way of the cost savings of the business community, but I do want to protect individuals who might be low-income or working class.” Davidson said.
Like other Democrat-controlled legislatures proposing a ban on this issue, Davidson sees the primary motivation for dynamic pricing is to charge unknowing customers as much as possible.
“We are [businesses] now taking advantage of consumers and the consumers are not aware that that’s happening,” Davidson said. “That’s not the business environment we want to foster.”
However, President Alex Baloga of the Pennsylvania Food Merchants Association points to research by economists and professors Robert Sander and Ioannis Stamatopoulos, who claim fears surrounding dynamic pricing are unfounded.
“Grocery stores make thin margins on individual items and rely heavily on customer loyalty,” said Stamatopoulos. “Raising prices unexpectedly—even on a single item—risks alienating shoppers and sending them to competitors.”
For Baloga, the reality that most grocery stores are functioning at a 2% to 3% profit margin makes the idea that these businesses would try to spike prices from the time a customer puts an item in their cart until they get to checkout unreasonable.
Instead of legislation, Baloga argued that dynamic pricing will be held in check by the dependency grocery stores have on customer loyalty.
Davidson’s bill focuses on prohibiting retail stores from using dynamic pricing with electronic price tags, but other Pennsylvania legislators, like Democratic Rep. Manuel Guzman from Berks County, seek to ban a more specialized version of dynamic pricing called algorithmic pricing.
Algorithmic pricing often uses AI algorithms to individually price items using a consumer’s personal data.
This type of pricing caught public attention after a Consumers Report in December revealed Instacart was charging up 23% more for groceries depending on the customer.
“Algorithmic pricing is usually invisible to consumers who typically only see the prices and fees they are being offered,” Consumer Reports’ investigative reporter Derek Kravitz said. “Researchers, meanwhile, are rarely given access to the complex systems of algorithm’s AI and data that helps set these individualized prices.”
While Instacart maintains this pricing strategy is random and similar to traditional pricing practices, customers taking part in the Consumer Reports’ study disagreed, with many calling Instacart’s pricing unfair and manipulative.
Davidson’s bill, however, concentrates on the introduction of digital pricing labels and dynamic pricing happening in physical retail settings, not on online manipulation.
“If you’re shopping online, you’re connected, you’re using Instacart, chances are you’re not below the poverty line.” Davidson said.
