Why Some Shoppers May See Prices Changing by the Day
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Here's your Money Briefing for Monday, February 7th. I'm J.R. Whalen for The Wall Street Journal. With inflation at 7%, household budgets are being stretched thin. Dealing with prices that go up every few weeks is bad enough. But now prices at some stores are changing a lot faster than that, and that's caught many consumers off guard.
Many retailers have gone from updating their prices monthly or quarterly or even weekly to updating their prices as frequently as once a day and in some cases many times a day.
So why are businesses doing this and how are shoppers responding? On today's show, we'll talk with our reporter Charity Scott about the growth of dynamic pricing. That's after the break.
The next time you're out shopping, you might see prices have changed, and not necessarily because of inflation. More businesses are experimenting with something called dynamic pricing strategies that let them change prices a lot faster than they used to. So what does that mean for you and your next trip to the store? Here to discuss is WSJ reporter Charity Scott. Charity, thank you so much for being with us.
Thanks for having me.
So Charity, walk us through this dynamic pricing approach. What kinds of stores is it showing up in, and what does it look like for customers?
Consumers might be seeing dynamic pricing showing up at the grocery store, at places like hardware stores, and at many online retailers. Many retailers have gone from updating their prices monthly or quarterly or even weekly to updating their prices as frequently as once a day, and in some cases, many times a day.
Now for consumers, I imagine it has to be pretty surprising to see prices changing so rapidly.
Well, I guess it depends on what direction those prices are moving in. If a price all of a sudden goes down, then the consumer is likely to feel pretty good about it. But when a price is going up and it may not be clear to the consumer why that's happening, it can lead to people feeling, you know, a bit of sticker shock.
And so why would retailers see the need to change prices so frequently?
Well, retailers are saying that these moves are coming in response to rising production, labor and shipping costs, and also as a response to product shortages associated with the COVID-19 pandemic.
Sure. We've been talking about those supply chain issues and all the ways they've been hitting consumers financially for a while now.
What is dynamic pricing and why are retailers changing prices multiple times a day?
So can you break down how this actually works? You know, a lot of stores have hundreds of different products for sale. How are they able to change their prices so often and so quickly?
In a brick and mortar retailer, there are basically two options. One is to physically print and then relabel all of the prices that have changed, which can be very time consuming and expensive. The other option is to outfit the store with digital price labels, which essentially allow for retailers to update their prices in real time. Now, there's also an expense associated with this. So it's a bit of a trade-off for these retailers to figure out which way they want to go.
Got it. And how are businesses making that decision about whether investing in this kind of technology is worth it?
I think the most important distinction is that most of these price changes are being powered or assisted by software. So the main thing to think about whether you're talking about a small mom and pop or maybe you're only talking about one or two stores versus a large retailer like Best Buy that has many hundreds of stores.
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