The dystopian future this is leading to is clear: personalized pricing. So, you're upper middle class (*)? Well, surely, you don't mind paying a little more for your groceries.
(*) Thanks for bringing your smart phone with you, and thanks to FAANG to provide us with the necessary information about you.
This is already a thing, at least in the US -- do you sign up for the "savers program" at your local grocery store? Generally this looks like filling out a form including your phone number to join it, and then inputting your phone number at the payment terminal in order to get various discounts advertised on the shelves. The "default price" is the one that people who are wealthy enough not to care about such savings will pay.
>> The "default price" is the one that people who are wealthy enough not to care about such savings will pay.
The interesting thing is most of the "wealthy" people I know are the most voracious coupon hunters and users. They also spend a majority of the time trying to find the best deal on quality stuff outside of groceries. If there is some high end item they want, THEN they are ok paying more for it like a Gucci bag or something similar in order to keep up the idea they are able to afford such things.
Great example is I've known two billionaires and there were exactly like this. One (he made his money in finance and owned a large bank) sent his kids to two different Ivy Leagues schools, but he made sure they both procured scholarships, both athletic and academic as well as leveraging his "legacy" status to get even more of a cut on tuition. He said for everyday items they do everything they can to be frugal. Anything he can find a way to get a discount, he will. Any relationships he can leverage to get a better deal on anything, he will. But all the artwork you saw in his house? He still confided in me he did, for the most part, pay full price for all of the stuff he had. It was one of a few things he was willing to pay full price on.
So if you didn't know about his habits as a part-time art dealer, you would simply assume since he's "wealthy" he pays full price for all the stuff he has. Nothing could be further from the truth.
Membership loyalty cards typically gate "yellow tag" pricing. Some yellow tags are for bulk purchase discounts but some are just "discounted prices". The FTC says that it's deceptive pricing to advertise a sale while raising prices, but since yellow tags are membership pricing, not a discount, it's defensible to raise prices with the original price as a yellow tag rate, available only to members. Yellow tags are not always promotional prices.
only works if you pay all cash - major supermarkets' data ingestion systems are linked up with credit card companies. it doesn't take a genius to correlate the data.
who made a $73.86 visa transaction at the maple st store at 6:23PM, then another transaction for $12.20 the next day at.. etc
Every supermarket checkout I've been to rings up all the items and shows the total (with any discounts) before you pay. By the time they receive card info, it's already too late to change the total or refuse the discount. At best they can refuse discounts to phone numbers that are used by too many people.
In the small, yes, but I believe there are innovations still undiscovered that will allow retailers to replace the areas roughly approximated by multiple price points with a model which captures the entire consumer surplus. Think about the advantages a retailer would have over competitors if they could capture the entire consumer surplus. It would be incredible.
>Think about the advantages a retailer would have over competitors if they could capture the entire consumer surplus. It would be incredible.
Not really. Even if they know exactly how much you can/are willing to pay, that's useless if the store next door is undercutting their pricing. Grocery stores are a relatively competitive industry with razor thin margins, so being able to "capture the entire consumer surplus" seems doubtful.
Undercutting doesn't really address the area below the demand curve, but above the equilibrium point. You can draw out the supply and demand curves of the undercutting scenario you're describing and see for yourself.
HN doesn't support charts, but here's a snippet from wikipedia:
>Consumer surplus, or consumers' surplus, is the monetary gain obtained by consumers because they are able to purchase a product for a price that is less than the highest price that they would be willing to pay.
Sure, producers can claim that surplus by charging more (up to the willingness the consumer is willing to pay), but if there's a competitor that isn't doing this, then the consumer will switch to the competitor and keep their surplus.
I don't disagree that's the case when a producer sells at a single price. Their revenue is the the rectangle formed under the demand curve[1] bounded by price * quantity.
What I'm saying is that having a single price means that consumer surplus is left on the table and that charging each consumer exactly what they'll pay for the good will capture that surplus. It will essentially "fill in" the space not captured by the revenue rectangle.
In microeconomics this is called first-degree or perfect price discrimination[2].
We see the kind of thing you're describing in a market like housing, but it only shows up there because of a strange combination of a) we live in a democracy and b) blocking new housing supply in desirable areas is hugely politically popular among multiple classes of people who vote. We don't see it in the grocery business, where even modest price increases like we've seen recently (that are mostly covering real costs) are hugely unpopular and drive people to the already numerous competitors very easily, and on top of that startup costs for grocery businesses aren't all that high so moats are very shallow for existing entrants.
We do see attempts at price discrimination in haggling and negotiations, but this is stereo-typically a human-human interaction rather than one mediated by predictive analytics.
Theoretically there are margins to be gained by identifying customers, retrieving their personal financial information, predicting the price they would be "just" willing to buy for that's still above the equilibrium price of the good, and doing this at scale and automatically.
I think a grocers could absolutely do the online ordering and pickup/delivery space where prices could be tailored to individual consumers and there was market dominance.
Sorry, I don't have the data to give a figure. I'd have to build the model, and have a complete transaction record dataset.
Target does this, showing you online pricing based on the local store you have set. Doesn't matter where you pick up the item from; if you change your local store to a different neighborhood, you can expect the app to show different prices.
Source this is actually done? It's non-trivial to turn a phone number into a phone model, unless you're conspiring with the carrier. If you're doing BYOD or are using a MVNO, it's even harder.
The big chains that do this in Europe are very clear that prices never go up during the day, and generally everything bulk updates at night. Baked goods get cheaper towards the end of the day, for example. The linked Planet Money episode in the article covers it nicely.
But sure, once you enable the capability, it won't be long before we are living in the inevitable grim meathook future.
How long until you grab something that has a price of $5 and it's already $7 by the time you get to checkout?
We need better pricing laws. Already, half the gas stations I go to don't have any price tags at all. And of the stores that do have price tags, none include sales tax.
That's when I get into the habit of photographing price labels while I put items in my cart, and upon finding a discrepancy, abandoning the entire cart full of goods for an employee to return. Make it costly for the company.
Photographing the price labels and then comparing each one during checkout for a big trolly of groceries? Spending an extra hour to make sure you weren’t overcharged $3? Assuming your time has a nonzero value (I’m not sure of that actually), it sounds like this is costly for YOU
No, I'm not spending an hour on verification; what are you, a government contractor or something?
I've already got my phone out, because that's where I stick my shopping list sticky note. I already watch prices and frequently catch mistakes at the till. But I trust that the paper price tag won't change, so I just tell the cashier their system overcharged me and they fix it. Occasionally I'm hit with an unexpectedly large bill and spend an extra 30 seconds or so to figure out what's going on (the answer is usually cheese).
But if they change to electronic price tags, you bet your ass I'm gonna spend that extra few seconds per item so I have evidence on hand.
Plenty of people do this already by memory, if they're the ones that do the shopping regularly and are familiar with pricing. Several times I've told the cashier that an item was on sale or a different price than advertised and not reflected on the ticket. It didn't take an hour, it took less than 5 minutes.
Sure make it costly for the company that already pays the employee peanuts when some dickhead leaves a cart full of groceries to spite upper management. Sounds like a fantastic strategy…
If you scan the item as you add them to the cart I don’t think it could be adjusted at checkout.
For an old fashioned scan-at-checkout it obviously can’t know what the price was when you added it to your cart, so presumably you risk finding it has a different price at the checkout than you saw at the shelf. Only way to avoid that (and probably the most common practice) is to change prices e.g only nightly.
yeah how does it know; and how would it prevent a user from having 2 people with 2 bakets, monitoring prices and pulling the cheaper out while at a store.
in CA at least, the store is required to sell to the consumer at the advertised price (if for instance if its advertised as $1 a lb, and the register has it as $1.20 a lb, the customer will get it for $1; if the price flops dymaically every 10 secs, how will this be upheld?
Stores aren't going to change the price six times a minute. Like you said, existing laws would stop it from happening and customers would revolt if it did. The headline is just hyperbole form NPR even if it's technically true.
yep headline is a bit over the top. sadly, ive lost my faith in customers. i do remember seeing gas stations prices being manually updated in the daytime during rush hour. i can imagine even a change in price once during open hours could cause confusion.. and it would be hard to catch. how many folks do you know actually pay attention to price next to item vs checkout price? - most folks i know just pay-whatever and ignore 2nd checking at register
>“If it’s hot outside, we can raise the price of water and ice cream. If there's something that’s close to the expiration date, we can lower the price — that’s the good news,”
Making price changes easier for workers is cool, but can we not have surge pricing for some things? This is getting ridiculous.
The fact that we don't have surge pricing on everything is a market inefficiency that only exists due to the lack of technology. This seems inevitable, unless we legislate against it (what detractors could accurately call price fixing).
that would encourage people to hoard/bank resources when prices are low. which could lead to more underground markets/resellers, which could be bad for quality control. seems fine for something like clothes, but not for food.
Price controls are not the same as price fixing. Price fixing is done by cartels to ensure all their prices stay high. Price controls are implemented by governments to prevent price gouging.
If you had an efficient market, wouldn't a competitor charge just a little less than others who are using surge pricing? Isn't the whole efficient market thing about how eventually prices should reach the cost of production, which would not be affected by surge demand?
> If you had an efficient market, wouldn't a competitor charge just a little less than others who are using surge pricing?
Absolutely. If everyone raised their prices of umbrellas due to rain, I'd lower my prices a bit to get those customers. I'd probably wind up making more overall too. Hopefully it will also lead to increasing return customers due to goodwill. If everything works out, not only would I sell more umbrellas, but I'd make more money in the future from returning customers. Win for me. And I feel like that's why we _don't_ have surge pricing on everything already.
It seems to me that "market inefficiency" is a euphemism for the dystopian hyper-capitalist hellhole concept of extracting as much money as possible from your customer, all other side effects, both short and long term, be damned.
Do you think commodity markets are "price gouging", given that prices there are dictated by supply and demand, which is essentially "surge pricing"? eg. Russia invades Ukraine -> oil prices go up
Commodity markets are essentially auctions. That's a completely different thing. I do think if we conducted retail sales using that model, it would be very damaging to most real people.
I don't think I missed anything. Gas prices fluctuate multiple times per day, and it's unclear how it's "very damaging to most real people", contrary to what OP claims. Moreover, gas prices aren't "essentially auctions", so I don't see how the "That's a completely different thing" excuse applies. Finally, the person only mentions that it's "completely different", but failed to explain why that's relevant.
I've spent a lot of time selling at flea markets. I try to get as much as the market will bear, moment to moment. I would probably ask more for an umbrella if it started to rain. Is that wrong?
Without dealing with the morality, I think practically it doesn’t lead to good outcomes.
How will you feel when customers do the same, and try to get as much as they can for as little as possible? It’s free to buy an umbrella and then return it when it stops raining. Is that less ethical than surge pricing? It’s based on the same premise; their need for an umbrella now makes the umbrella worthless so they regret the decision.
It erodes trust in the market. It shows consumers that businesses are willing to capitalize on their inelastic demands, which encourages responses in kind. I would wager consumers find it less unethical to abuse returns or steal from price gouging vendors.
On a long enough timeline as a common enough practice, I think we all lose. Those frustrations become crippling market inefficiencies and both customers and producers are worse off.
>It’s free to buy an umbrella and then return it when it stops raining. Is that less ethical than surge pricing? It’s based on the same premise; their need for an umbrella now makes the umbrella worthless so they regret the decision.
That's easily solvable with a clause in the return policy like "no returns if the product is used". AFAIK electronics retailers have added similar clauses because people were buying TVs for the superbowl and then returning them afterwards. More likely though, a place that sells umbrellas, especially in tourist areas would have a "no refund" policy.
Sure, you can argue with customers about whether it’s used or not. They’ll probably just file chargebacks and let you argue with their credit card company.
The specific actions aren’t really the point, the point is that it rapidly becomes an antagonistic relationship, which is bad for the market in aggregate.
>They’ll probably just file chargebacks and let you argue with their credit card company.
aka. "we do a little wire fraud"
More seriously, if the merchant has a clearly documented "no refunds" policy they'll probably prevail in chargeback. Also, if you're the type of person who's going to chargeback a $10 umbrella, you're probably not going to have a credit card to do chargebacks with for long.
>The specific actions aren’t really the point, the point is that it rapidly becomes an antagonistic relationship, which is bad for the market in aggregate.
Having a "no refunds" policy is an "antagonistic relationship" now?
Walmart is huge and probably has, in some areas, some kind of monopoly. If you sell your stuff on a flea market, I can deal with you to get a price that suits both of us. You have competition all around you, easy to reach, easy to compare. You are selling umbrellas, Walmart is selling water, one of if not the most basic food, for a maximum profit.
The additional profit goes straight into your pocket. Same for Walmart, it's not like the employees somehow benefit from a price raise.
Yes, the free market works like that: demand and offer control the price. But at some point this reaches the area of immorality.
I'd have to think about it more. However, my first thought (which is not always correct), if you know that it might rain, then raise the prices beforehand, not when it starts to rain. That just feels like an extra tax.
A lot of stores increase their prices when they're expecting something like bad/good weather, events, etc., and it's fine for me. But when prices are increased momentarily due to a sudden need, that just feels bad for the customers. And it's not just me. A lot of people feel that way. That's why there's such a negative connotation to surge pricing.
As a small scenario, if I came to your booth when it isn't raining and asked about umbrella prices and you quoted a price, would you respect that price if I came back later if it started raining? If yes, then great. If not, and you raise the price, do you think that I won't say negative things about your booth to others? You may gain a few dollars in the short term, but overall you may lose more than the few dollars you gained.
And a reason I said I'd have to think about it: A solo person selling to a small flea market affects a lot less people than a major grocery chain. Like even if you did raise the price to me when it started raining, I wouldn't feel bad, knowing that you're just a small seller. When a large multi-billion dollar revenue chain does it, it feels bad, since they're just taking advantage and don't give a damn.
Side note: I stopped using Uber during surge pricing due to the fact the driver doesn't actually get a good portion of it. If the driver got all or most of the extra pricing because they're the one's stuck in traffic, I probably wouldn't mind.
> But when prices are increased momentarily due to a sudden need, that just feels bad for the customers.
If 100 people come into your store to buy the 50 umbrellas you carry, isn't it better for everyone to raise the prices? Some of those 100 might not REALLY need an umbrella, and are just buying it because they think they should (or to resell later!). If you raise the prices, you drive those buyers away and leave more product for the people who need it the most.
A single individual at a flea market is vastly different than a multi-billion dollar corporation using their monopolistic power to increase their never-ending profits.
Is it okay for the flea market host to charge you a higher vendor fee on sunny days? What about if the day started cloudy, and then at noon it got sunny - would you be okay with paying a higher fee for the 2nd part of your day?
That’s how pricing already works. I would bet summer flea market days cost more, due to the higher probability of more customers, due to the higher probability of good weather days.
Airlines/hotels/rental cars/theme parks charge more for days where demand is anticipated to be higher. Any expiring good works this way.
Isn't surge pricing how you prevent shortages? If you are going to the store for milk, would you rather have a 50% chance to be able to buy it at $3, or a 100% chance to buy it at a variable price between $2 and $4?
Right, but not everyone wants it equally. Some people are like, "I kind of like milk sometimes so I'll buy it if it's cheap" while others are like "my kids need to drink milk to survive I'll buy it no matter what". Surge pricing can help make sure the "kinda want it maybe" people aren't taking supply from the "I really really need it" folks
Surge pricing does not increase supply, and by design it does not decrease demand to the point where demand is less than supply. The end result is that exactly the same number of people can buy exactly the same products.
The only difference is that companies make more money from selling the same products, and that products in short supply are distributed more towards the people with deeper pockets.
>The end result is that exactly the same number of people can buy exactly the same products.
Right, but arguably with surge pricing it can put the limited supply into people who need it the most. Without price gouging laws/price controls, no matter how badly/ambivalent about buying the milk, you'll buy it. Upping the price forces everyone to weigh how badly they need the milk, and ensures that people who need it the most gets it. Of course, the usual caveat of "willingness/ability to pay =/= neediness" applies, but price is probably the best mechanism we have short of setting up a Bureau of Rationing and having everyone fill out a 10 page application justifying why they need milk.
"Surge pricing" comes from Uber, where it absolutely can increase supply. If you're a part-time driver not working and then prices are suddenly double or triple, you might decide it's worth it to go make hay while the sun shines.
If it's hot outside shouldn't you also raise the price you pay for labor? If it's "harder" for you to deliver ice cream, then it's certainly "harder" for your workers to operate your store.
Night shift premiums have been a thing for a long time. You'd need another mechanism to make labour market effective at per-hour basis to adjust for the weather.
What’s the reason this hasn’t happened everywhere yet in the US when it’s common in (the usual parts of) Europe? Less volatile prices? Cheaper labor that can run around changing the shelf labels? Or something else (inertia)?
In my part of Europe, half of the major retail chains have had this for quite a few years. I actually didn't realise what it was until one day I went in and it was broken, as all the price labels were flickering. The price displays use black and red eink displays in a plastic frame.
I think it's the last one, inertia. A lot of people, companies, and governments here are slow to adopt stuff, especially tech. Look how long it took us to get chip cards and tap payments, and there are still places that don't have either.
I really really don't see prices changing more than before the store opens. Anything beyond that just opens up a lot of trouble with the price changing between when you pickup the item and when you checkout.
It just feels like a lawsuit waiting to happen for minor at best gains.
Outside of that, I am surprised we have not seen this more places yet. It feels like this has been showing up at random stores for years and make a lot of sense.
States will need to update their consumer protection laws to account for the electronic tags if they're used for prices changes while the store is open. When I worked in the industry, price changes were done overnight when the store was closed. Tags were organized into tear apart sheets by area and aisle. Price increase tags were first on the sheet and decreases last. The pricing managers were instructed to always post the increases first and if they weren't going to be able to get all the changes done before the store opened, to do all the increases for all areas and aisles before doubling back to the do the decreases. The reason was to avoid customers ever getting a higher price at the register than what was marked on the shelf.
The biggest problem wasn't shelf tags, it was sales items on end caps and special displays. Sometimes those signs would get missed and the wrong price would linger until someone complained. Since those displays often were built and stocked by third party vendors, the pricing manager wasn't always aware of their locations or required changes in signage.
I'm a bit astonished by my current state Michigan having such poor enforcement on pricing. I've lived in states in the deep south and on the west coast and they all had pricing laws that were enforced. I've seen entire convenience stores here with no price tags at all and even national retail chains like Kroger are sloppy with their pricing and signage. To me that's a sign that the state government isn't enforcing the rules or the rules are weak. At the very least there should be abundant price check scanners scattered throughout the stores that customers can use.
From the article: “If it’s hot outside, we can raise the price of water and ice cream. "
It's hard to see this as a "good thing" for anyone other than the retailer. It's easy to see how retailers might move to "third party pricing" services that enable price fixing across a wide range of retailers and goods.
The canard that I can "scan a QR code" and get information that already required, by law, to be on the bag of goods itself highlights the fact that this is an arrangement with a one way benefit.
As if consumers need less power in the grocery space.
>Meanwhile, the dude with the ice cream truck already charges more on hot days than on regular days, and no one cares.
Not all of them. The two trucks that come to my neighborhood have the same prices all the time. Our weather is more moderate, so that may be a factor. But whether it's 102dF or 60dF, I can always buy $1.50 ice cream from those trucks.
These are almost certainly contract prices for the store. "Just in time" is not compatible with retail grocery stores.
The real parsimonious angle is the cost of refrigeration changes on hot days. Although that means ice cream should be 25% of it's original price during the dead of winter.
And I haven't seen an ice cream truck with a digital price sign. Yet.
> They can actually be used where you take your mobile device and you scan it and it can give you more information about the product — whether it’s the sourcing of the product, whether it’s gluten free, whether it’s keto friendly.
This is the more important part to me. I've long been proponent of far stricter and more comprehensive labelling rules, especially for foods. This won't make those weak laws any better, and the corporations that sell us food will continue to fight tooth and nail to deny us more information about what they'd have us put in our body. But having a common interface to get more info to consumers is better than the constraints of physical labelling and might at least expand that conversation and get consumers wanting more.
That's just marketing blabber from whoever bought this article. Everything on the shelf already has a UPC code. If a retailer wanted to build this, they could do it today without needing any new hardware, by letting your phone camera scan UPC codes.
If I know that the guy who came to the same supermarket as me got his water cheaper just because he got there ten minutes earlier, how much do you think I feel like shopping at that place?
what about the price changing once you've picked up the item?
I'd honestly consider endorsing a law that says pricing can not automatically change more than X/day.
I think a rule which says that once a price changes, the POS system must universally use the lower price for the next two hours (for the largest supermarkets, maybe 1 hour for a mid-sized, and 30m for a small metro sized shop) would be appropriate.
So, if a price increases it’s very unlikely a customer who has seen the lower price will be charged it, and if a price lowers, it must be implemented instantly.
“If it’s hot outside, we can raise the price of water”
I’m not an expert but it’s this price gouging? I guess it depends on your definition of reasonable. I don’t find it reasonable to raise the price on a lifesaving necessity right when it’s needed. Let’s all file FTC complaints and see what their investigation finds.
I think it depends whether they would realistically run out of their stock of water if they don't raise the price. And then, second order things like whether they could be reasonably expected to have adjusted their inventory in response to the weather forecast.
Without coordination though gouging would not be a good business strategy, and such coordination is already illegal. Though the anti-coordination laws do need to be enforced, and whether that is done consistently is unclear to me.
I'm not surprised this is still new in the USA, considering Americans are still apparently cutting out paper coupons?? But these labels have been in shops here in New Zealand for years now.
Is there not a law or regulation that prevents a retailer, such as a grocer, from changing their prices so rapidly? It seems.. very dystopian, and unfriendly.
It is how all markets worked (and still work in developing countries).
I have seen my grandparents haggling with a merchant over the price of fruits and flour and everything else.
Developed countries just had richer populations that could afford to pay a high enough price such that merchant can eat the volatility and not have to pay the labor costs of having an employee to haggle.
However, due to automation, price discrimination for low profit margin/high volume goods is more able to hone in someone’s ability/willingness to pay. Similarly, buyers are able to scan the internet very quickly for what other sellers are willing to sell at.
And technically, price discrimination has existed for a long, long time in the US too via coupons and mailed discounts based on purchasing history. Only thing that changes is the frequency.
> buyers are able to scan the internet very quickly for what other sellers are willing to sell at.
For retail goods, this makes sense; however, the notion that the majority of people are doing this for food items like bananas and potatoes is a little bit specious.
I mean are the types of retailers you're describing posting their prices on the Internet in the first place? Or is price discovery happening entirely by word of mouth?
But the price doesn't change from the time between putting the ticket in your cart and checking out with your credit card. These articles are implying that this could happen in a grocery store. There's no way consumers would stand for it.
Airline booking sites enforce the same by holding your cart for 30 min/1 hour or so. After that you are required to repick your tickets with possibly higher prices.
Let’s say they do alter the price based upon demand (which it sounds like they won’t do at a granular scale like the other commentators are suggesting). It will punish customers who come later, but reward early customers who buy in bulk. Imagine scalping ice cream in a parking lot on a hot day!
But seriously, i would like to see non linear scaling of prices for people who buy a lot at once, for scarce items. Everybody gets a little seems like a more moral way to handle scarcity, but Walmarts new pricing system won’t handle this. Oh well. Overall though still a fun development.
Most Walmarts that I've come across at least have other stores nearby. I can't help but wonder how these will impact poorer, rural areas where Dollar General is king.
DG already has already faced lawsuits related to their advertised pricing vs price at the register. Surge pricing in a food desert sounds like a Late Stage Capitalism wet dream.
Nothing really wrong with this. Constantly changing prices means a great deal of busywork and stores constantly have the wrong prices posted the way things are now.
I'm not going to argue for the virtue of updating prices for products by hand out of FUD over surge pricing or the like. If people are really upset about it we can legislate that prices can't be changed more frequently than weekly.
It seems like if this were a real danger then it should have already happened on the internet.
I'm aware of broad geo-based price differences, but it seems like you could also tailor the price based on browsing history (via cookie networks, etc). Has this happened?
The increasing cookie restrictions over time could get in the way of this, but I haven't heard of it ever being a problem in the first place.
Now we're going to get the horrible "surge pricing" in the grocery store? At least it's just walmart for now. I don't shop there so I can escape this for the time being.
(*) Thanks for bringing your smart phone with you, and thanks to FAANG to provide us with the necessary information about you.
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