Digital Pricing and Retail

The issue

Retailers use technology to provide clear and competitive pricing for consumers based on age-old pricing practices.

Since the earliest days of commerce, the cost of goods, labor, rent and transportation, and competitor pricing have shaped how retailers set prices for their goods. As markets have become more competitive and fast-moving, retailers are leveraging technology and deploying modern pricing tools to do what they have always done — manage inventory, respond to consumer demand and compete on price — only now with greater efficiency and consistency.

Displaying prices digitally and using algorithmic formulas may sound futuristic, but they are not new methods. These retail pricing practices are already governed by consumer protection laws that guard against deception, discrimination and data misuse.

Far from being a novel or dangerous innovation, algorithmic pricing and digital shelf labels are modern tools that build on a foundation of long-standing retail practices. These tools are suited to today’s fast-moving, competitive marketplace and provide greater efficiency and accuracy with pricing.

How do digital shelf labels work?

Why it matters to retailers

Federal and state legislatures are considering proposals to restrict the use of algorithmic pricing technology and digital shelf labels, while raising important questions about the role of innovation and competition and its impact on consumers.

The answer is not a patchwork of broad, vaguely worded disclosures, nor is it restrictions on tools that improve customer service, ensure accuracy and eliminate waste. These proposals will make it difficult for grocery stores to efficiently mark down products before they spoil and can no longer be sold. It will also prevent retailers from lowering prices to match seasonal trends and respond to consumer demand.

Creating new compliance burdens will ultimately add to the cost of goods and introduce confusion for the consumer and the shopping experience. Mischaracterizing standard pricing practices will discourage retailers from offering personalized discounts, tailored incentives or timely pricing updates — ultimately limiting flexibility and reducing benefits to consumers.  

NRF’s position

NRF supports policies that preserve retailers’ ability to respond efficiently to market conditions while protecting consumers and promoting competition.

At a time when policymakers are focused on promoting affordability and competition, maintaining flexibility for retailers to respond to market conditions is essential. Algorithmic pricing tools help retailers adjust to supply, demand and the competitive pressures of a digital economy while also supporting fair pricing and consumer choice.

Consumers are currently protected by a robust array of state and federal laws. Antitrust laws prohibit price fixing and anti-competitive coordination. Consumer protection laws require truthful advertising and accuracy in pricing displayed on the product and at the register, and prohibit deceptive practices. More than 40 states and territories enforce price gouging laws protecting consumers from exorbitant price increases during emergencies and unique times of increased demand. Civil rights laws ban discrimination based on protected characteristics. Twenty state privacy laws regulate how businesses disclose, collect and use consumers’ personal data.

Building customer trust and loyalty are paramount for retailers. Retailers operate in a highly competitive environment where they work to generate loyalty, provide value and deliver the best possible price for consumers.