So when US retailers such as Walmart and Kroger announced in 2024 that they would start using electronic shelf labels (or digital price labels) in their stores, of course they set alarm bells for regulators and policymakers. This new technology will, theoretically, give the retailers to suddenly increase prices during cutting -edge or holiday shopping or other cases of higher demand.
“Some people could say that the fact that these stores are willing to pour so much money to install these electronic shelves is at first glance evidence that they are planning to raise prices because there is no reason to install them differently,” he says. Robert BreakAssociate Professor of Business at Kellogg School.
Such concerns have caused many Legislators to the US to send letters to the CEO of the big retailers, demanding detailed information on how they plan to use technology.
“In order to worry so much the regulators for pricing overflow is a reasonable fear,” he says Ioannis Stamatopoulos At the University of Texas in Austin, “that is, if you do not know the business details of grocery pricing”. But having invested years in the study of pricing, Bray and Stamatopoulos, along with their colleague Robert Sanders At the University of California, San Diego, it was fine that these fears were mostly unfounded.
“Based on everything we knew,” Sanders says, “rising prices in grocery stores did not seem to be particularly reasonable.”
Still, Bray, Stamatopoulos and Sanders decided to try their intuition. They examined hundreds of millions of product transactions at grocery stores of major retailers in all the US for a five -year period and did not find virtually no sign of overflow pricing, either before or after the adoption of digital price labels.
“It is tempting to believe that stores install electronic shelf labels to participate in dynamic pricing and a kind of Gouge customers,” says Bray, “but just doesn’t happen.”
A negligible difference
Years before the growing cost of eggs and other grocery stores began to dominate the titles, the team was studying the prices of the products and the consequences of their change. Indeed, the current research program was one of the many that had its roots in previous Stamatopoulos work completed for his doctoral thesis in Kellogg.
“What made us more hooked on this issue was the sudden superiority of grocery prices in American life and politics,” Sanders says. “We started observing the policy debate on grocery pricing and believed that possession of hard data on this issue would be useful for policymakers who spend what looks like a disproportionate effort and time on it.”
To this end, the researchers received all trading data from 114 groceries of an important US retailer in four states. This included nearly 400 million transactions for about 200,000 products in 23 different sections – from bakery and drugs and drinks – starting in July 2019 to July 2024.
The researchers then carried out an in -depth mathematical analysis of the data that allowed them to plan to drive grocery prices in each of the stores.
Overall, they found that the standard of prices seemed almost exactly the same before and after the use of digital price labels.
To be specific, on a typical day, a given store saw a temporary increase in prices (or a price increase) for 0.005 % of its products before and 0.0056 % of its products after began using digital price labels – an almost negligible difference. The trend continued in individual parts of a store.
In other words, “price rise was basically non -existent before electronic shelf labels and remained non -existent with labels,” says Stamatopoulos.
“And not just temporary price increases are incredibly rare,” Bray adds, “their increase, or the delta, after using electronic shelves is also irrational.”
Protection
Because airlines, hotels and Rideshare applications, such as Uber, see real, dynamic demands, increasing pricing can be an effective business model for these industries, but “there is something inherently different for groceries,” Sanders says.
For one, optimizing prices in grocery stores is a giant task due not only to their huge and varied product offers, but also to countless contracts and promotions negotiating with manufacturers, usually months earlier.
“Supermarkets do not really have enough thin granules to make this optimization problem really work,” Bray explains. “So the idea that they simply optimize the price of a product each time to get the extra 50 cents from people – just beggars.”
Another factor that researchers note is that grocery stores generally benefit from customers who buy a wide variety of products for a long time and not from buying some hot goods at a specific point.
“The true goal of the stores, to be profitable, is to grab consumers and keep them for as long as they can,” says Stamatopoulos. “So why would they be in danger of stinging you. Increasing the price of a particular object, if this might make you just go to a different store next time?”
Increased prices are actually what led Bray’s decision, as a consumer, to make the transition from Whole Foods to Trader Joe’s. “I used to shop firmly in Whole Foods for about seven years,” he says. “And then one day, I got somewhat to pin priced and transfer to Trader Joe’s. Had prices of Whole Foods prices [their goods] A little lower, maybe instead of getting seven years than me they could have gotten fifteen. ”
A good business decision
For their part, American retailers manage that they apply digital price labels to increase efficiency, while reducing the costs they normally need to honor and flood their goods, not to raise prices. And as stock monitoring improves, stores could use digital price labels to quickly execute Markdowns based on the end that would help sell products that otherwise would have to fly.
Whether these claims come or not, buyers can at least find comfort in finding that digital price labels are unlikely to raise prices in their favorite grocery store soon. “I know that prices have risen and this creates pressure on households, but this is a sector that you don’t really need to worry about,” says Stamatopoulos.
There may be a crucial lesson for other businesses in all of this as well. Despite access to a technology that could potentially use to give their profits a quick boost, grocery stores have greatly avoided doing so, in their long -term benefit.
“Now we see that maintaining the prices relatively stable was not a technological restriction. It was a good business decision,” says Bray. “Other businesses can consider what this company has done and what retailers of supermarkets have done in the last hundred years and realize:” Hey, do you know what? Maintaining the prices fixed and trying to extract each penny from each transaction can be really good for businesses in the long run. “
