Dynamic pricing is a strategy that adjusts the prices of products or services in real-time based on various factors, such as demand, supply, time, customer behaviour, competition, and even the time of day. When demand for a product rises, the price may increase accordingly, while prices might drop when demand falls. Additionally, prices tend to be higher during peak times or certain seasons. Companies can also monitor online customer behaviour, adjusting prices based on factors like browsing history, location, and the device used for shopping.

This strategy is commonly employed by corporations such as Uber, Bolt, airlines, and ticketing platforms like Ticketmaster. Beyond the potential for inflating costs, dynamic pricing becomes particularly problematic when a company monopolises a service, leaving customers with no choice but to pay whatever price the company sets.

Kroger, a supermarket chain with over 140 years of history, is one of the most powerful retail companies in the United States. Recently, it has faced serious accusations of implementing dynamic pricing.

Kroger stores have adopted electronic price labels, a move also seen in Lidl stores, as constantly replacing paper tags proved too time-consuming. However, the ease and speed of this system may tempt retailers to introduce dynamic pricing. What does this entail?

For instance, ice cream could become 30% more expensive on a hot day. Between 4 and 7 p.m., when stores are busiest, prices might rise slightly. If you visit the store with a child, items intended for children could be priced higher than usual. Clearly, dynamic pricing is not a consumer-friendly practice.

In response to these concerns, U.S. senators have begun investigating the sudden price changes at Kroger stores amid suspicions that the supermarkets might be employing dynamic pricing. Adding to the speculation is Kroger's partnership with Microsoft, established in February this year, through which the tech giant provides services related to artificial intelligence.

Senators Elizabeth Warren and Bob Casey have asked Kroger's CEO to answer 11 questions about artificial intelligence, labels and Microsoft's EDGE technology. The entrepreneur has until 20 August to answer all of them. Among the questions asked were:

• How does Kroger establish dynamic prices using the EDGE system?
• How does Kroger inform customers of recent or upcoming price changes? How far in advance does Kroger inform customers of price increases that will be implemented using the EDGE system?
• For all items that have been subject to dynamic pricing using EDGE, what is the average percentage change in price of those items over the first six months of using the system?
• Has Kroger ever used EDGE to change the price of an item more than once within the same day? If yes, please provide the complete list of products for which Kroger has altered the price more than once a day.
• Will Kroger use customers’ data to institute personalised pricing on its ESL platforms?
• Will customers have the option to opt out of collecting personal data through ESL platforms?
• How will Kroger ensure that it will not use customer data related to ESL platforms to discriminate based on protected classes, such as race, gender, or age, when offering personalised prices?

It is unclear whether Kroger's CEO's reply will be available to the public.

Source: The Sun