Sell beer like petrol?

World-weary drivers are used to petrol prices which go up and down during a day for no apparent reason, while shoppers are used to supermarket prices which stay pretty much the same. All that, however, might be about to change thanks to electronic shelf-edge labels, which can adjust prices in real time. Electronic price tags are a fact of life in most larger stores in France and Scandinavia but not in the UK yet.

Recent reports have suggested that fixed prices in supermarkets for everyday items will be gone within five years, to be replaced by what is called surge pricing. This would enable supermarkets to charge more when goods are in greater demand. There are obvious candidates – ice cream on hot days, sandwiches at lunchtime, beer and wine during major sporting events and burgers during barbecue season.

At the moment, what stands in the way of introducing electronic shelf-edge labels is cost. It is assumed that it costs GBP 8 to GBP 10 (USD 10.35 to USD 13.00) per label. If you multiply this by 20,000 items – the number of products a UK supermarket stocks on average – and by 500 to 1,000 stores then, suddenly, the outlay is hefty.

In June 2017, several UK newspapers reported that three of the country’s largest supermarket chains – Tesco, Sainsbury’s and Morrisons – are planning to roll out Uber-style surge pricing in select stores. A Sainsbury’s spokesperson said: “We always look at ways that technology can help us improve the shopping experience for our customers.”

Over the summer, this led to a storm of outrage on the internet. As was pointed out, supermarkets are trying to sell to and price for three broad types of customers, a) price sensitive customers, b) convenience driven customers and c) status conscious customers.

If surge pricing were introduced, this would make life very difficult, even with price comparison apps and social media, for customers in category a), who consider the lowest price THE most important factor. By definition, customers in groups b) and c) are not price sensitive and are prepared to pay higher prices to satisfy their needs.

“Thus the supermarkets are trying to use a strategy which can be regarded as a value pricing strategy, taking a cynical line by setting a price according to the perceived value to the non-price sensitive customer which is not related to cost or historical prices, essentially squeezing as much as the customer can afford,” a post at pistonheads.com read.

Others pointed out that the whole point of dynamic prices is that in the end the customer has no baseline for what is good value. That’s why supermarkets have been playing around with all those “3 for 2 offers”, whose prices are constantly changing. Ultimately, shoppers will not know if a bottle of any bathroom cleaner should be GBP 1.50 (USD 1.95) or GBP 1.99 (USD 2.60).

Incidentally, these types of offers are far from fool-proof. A shopper wrote that he stopped shopping at Tesco when he saw an offer for mixed seafood – GBP 3 each or three for GBP 10. Some mistake, surely?

Some commentators called Sainsbury’s explanation that they seek to improve the shopping experience for their customers a bluff. In their opinion, the whole retail shopping experience in the UK is going to become a lot more complicated and a hassle with absolutely no benefit to the customer.

Others even warned that the customers lost to surge pricing will not be coming back but will beat a straight path to Lidl and Aldi stores.

Maybe, in the future, the bulk of grocery purchases is going to be done online, anyway, where the fixed-price principle has long been abandoned. “There is evidence to suggest”, a Guardian commentator wrote on 4 June 2017, “that calculations about what you will be prepared to pay for a given product are made from knowledge of your postcode, who your friends are, what your credit rating looks like and any of the thousands of other data points you have left behind as cookie crumbs in your browsing history.”

As things stand, pulling the trigger on the price for a certain service or product will become more of a gamble than an informed decision.