Consider a situation where a store could adjust the price of a single item multiple times throughout the day. This concept is known as dynamic pricing and is more common in commerce than you might realize.
“Dynamic pricing involves constantly changing prices over short periods, with the goal of maximizing profit for a company,” explained Yehua Wei, an associate professor of business administration in the decision sciences area at the Fuqua School of Business at Duke University.
Ride-share companies and airlines apply this strategy when customers make online purchases. For example, an Uber fare can fluctuate based on the availability of drivers, passenger demand, or even weather conditions.
“When booking an airfare ticket online, prices are updated frequently,” Wei added.
Could brick-and-mortar stores implement dynamic pricing?
“If the price changes while I’m shopping for other items, and then increases when I reach the checkout, I would be very upset. Many people would likely feel the same way,” Wei expressed. “I personally believe this is unethical.”
Earlier this year, Wendy’s hinted at the possibility of experimenting with dynamic pricing, leading to speculation of surge-pricing during peak hours. However, Wendy’s clarified that they had no intention of raising prices during busy periods.
Related Story: No, Wendy’s isn’t trying surge pricing. Here’s what it’s changing.
Walmart recently announced plans to introduce digital shelf labels in 2,300 stores by 2026, making it easier to update price tags. This sparked concerns among shoppers about potential use of dynamic pricing with this new technology.
However, in a blog post, Walmart stated that the digital price tags aim to enhance productivity, with no mention of transitioning to dynamic pricing.
“I don’t think people should be overly worried about this,” Wei reassured.
Experts suggest that dynamic pricing can also have benefits, such as lowering prices to promote sales when products are close to expiration. This approach could be advantageous in reducing food waste, for instance.
