An employee arranges digital price tags for vegetables at a Whole Foods store in the Silver Lake neighborhood of Los Angeles.
Patrick T. Fallon/Bloomberg via Getty Images
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Patrick T. Fallon/Bloomberg via Getty Images
Prices in grocery stores are changing faster than ever—literally. This month, Walmart became the latest retailer to announce it was replacing price stickers in its aisles with electronic shelf labels. The new labels allow employees to change prices every ten seconds.
Grocery industry analyst Phil Lempert said, “If it's hot outside, we can raise the price of water and ice cream. If something is close to its expiration date, we can lower its price — that's good news.”
Apps like Uber already use surge pricing, in which greater demand leads to higher prices in real time. Companies in a variety of industries have generated controversy by talking about implementing surge pricing, with fast-food restaurant Wendy's most recently making headlines. Electronic shelf labels allow similar tactics to be implemented at grocery stores, but that's not the only reason why retailers might adopt this change.
The ability to easily change prices was not mentioned in Walmart's announcement that 2,300 stores would have digitized shelf labels by 2026. Daniela Boscan, who participated in Walmart's pilot of the labels in Texas, said the major benefits of the labels are “increased productivity and decreased walk-through time,” as well as faster replenishment of shelves.
Walmart isn't the first major grocery store to make this change, as you can already find electronic shelf labels at Whole Foods, Amazon Fresh stores, and the Midwestern chain Schnucks. Digital shelf labels are even more common in stores across Europe.
Another feature of electronic shelf labels is their product descriptions. Lempert says the barcodes on the new labels can provide other useful information besides the price.
“These can actually be used where you take your mobile device and scan it and it can give you more information about the product — whether it's the source of the product, whether it's gluten-free, whether it's keto friendly. That's really the promise of what these shelf tags can do,” Lempert said.
As higher wages make labor more expensive, retailers large and small could benefit from the increased productivity caused by digital shelf labels, said Santiago Gallino, a professor specializing in retail management at the Wharton School of the University of Pennsylvania.
“At least when I talk to retailers, the most important thing is that they calculate how much manpower they're going to save by incorporating this. And in that sense, I don't think this is something that only big companies like Walmart or Target can benefit from,” Gallino said. “I think even smaller chains can see the potential benefit from this.”
Although the labels give retailers the ability to suddenly raise prices, Gallino is skeptical that companies like Walmart will leverage the technology in this way.
“I don't think that's the main reason, to be honest,” Gallino said. “These are companies that have long-term relationships with their customers and I think the risk of disappointing them might be too high, so I'd be surprised if they tried to do that.”
Rather than seeing an opportunity to use surge pricing, Gallino says retailers are increasingly turning to electronic shelf tags to ensure consistency between pricing online and in-store.
“Today, Walmart customers can see on their app once they're in the store what prices Walmart is offering online,” he said. “And if there are any discrepancies, that can lead to frustration or confusion for customers.”
Electronic shelf tags will make it easier for stores to keep up with online price changes. And, he says, that consistency should be better for customers.