NRF is pushing back on unnecessary and aggressive state laws that limit behavior retailers have always used to give consumers competitive prices. Learn more.
With the rise of AI and digital technology, “algorithmic pricing” has become a hot button issue across the country. However, much of the debate is predicated on misconceptions around terms like “surveillance pricing.” These characterizations misrepresent reality and risk fueling policy outcomes and rhetoric that ultimately harm the very consumers they aim to protect.
Digital pricing technology leverages modern tools to do what retailers have always done — deliver more goods with more discounts, more often.
Retailers have long used strategic formulas to determine the appropriate price for goods. The cost of goods, labor, rent, transportation and competitor prices are a few examples of data that feeds retailers’ pricing formulas. Innovation in digital technology enables retailers and associates to use automated formulas or “algorithms” to sell and deliver goods at competitive prices faster and more efficiently.
Reality: Digital pricing used by retailers is overwhelmingly about offering consumers discounts, not raising prices. It provides services consumers rely on as part of their regular shopping experiences: i.e., checkout coupons based on what they just purchased, loyalty rewards for products they buy regularly, personalized offers on items relevant to their household, and markdown alerts on end-of-season items.
These tools provide benefits for consumers including improved efficiency, waste reduction and savings opportunities. They’re getting targeted discounts, not targeted price hikes.
Reality: These tools use straightforward inputs to solve everyday retail challenges. When retailers use digital pricing, they analyze based on publicly available information such as regional cost differences (rent, wages, utilities, taxes), supply costs and shipping expenses, seasonal demand patterns, inventory levels and what their customers might be paying elsewhere.
The questions being answered aren't mysterious: "Exactly when should we discount sunscreen, and by how much?" "Should we lower our price to match the store across town?" "What prices will allow us to sell these perishables before they expire?" "Which items do customers buy monthly, and should we offer those customers a discount?" “Will a timely offered discount at checkout help a customer make a purchase?”
These are decisions retailers have always made. Technology just enables faster, more accurate answers — always with human oversight. For retailers, providing high-level explanations of these inputs could help alleviate consumer skepticism. Transparency matters, and it works.
Reality: Consumers have more power and influence than ever before. Unlike airlines, hotels or rideshare apps where there are often few choices, retail is a highly competitive environment. If a consumer is dissatisfied with a retailer’s price or selection, they can easily access information on alternatives or source other options with just a few clicks.
In such a competitive, transparent environment, no retailer can afford unfair or opaque pricing. Retailers are focused on moving inventory efficiently from stores to people’s homes. Higher prices curb inefficiencies, decrease sales and drive customers to competitors. Retailers are focused on providing products relevant to consumers and selling them at volume at the lowest possible price.
Reality: Electronic shelf labels enable greater accuracy, regulatory compliance and efficiency.
They are used for very practical things including price accuracy and consistency; ESLs ensure the shelf price matches the register price, reducing errors, customer frustration and compliance risk. Some ESLs display SKU details and barcodes or stock indicators, which can help staff restock faster and manage shelves more effectively.
ESLs support continued growth in ecommerce, third-party delivery and in-store fulfillment by making it easier for employees retrieving customer orders to locate items in-store quickly. Electronic shelf labels also make it easier to maintain accurate pricing records and respond to audits or consumer protection requirements.
While the technology is sophisticated and supports digital skill-building for retail workers, retailers primarily use ESLs to implement scheduled price changes with greater accuracy and less friction.
Reality: A comprehensive legal framework already protects consumers from potential concerns. What consumers and policymakers often forget is that retailers already operate under extensive legal requirements providing robust consumer protection against deceptive practices, such as price gouging and false advertising.
Antitrust laws prohibit price fixing and anti-competitive coordination. 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. Consumer protection laws require truthful advertising, accuracy in pricing displayed on the item and at the register, and prohibit deceptive practices. Twenty state privacy laws regulate how businesses collect and use consumers’ personal data.
NRF's Retail Law Resource Center offers retail in-house counsel invaluable legal insights and unique opportunities to build meaningful peer-to-peer relationships.
These aren't theoretical, they're enforced. Retailers comply with this framework every single day.
As we continue to shift toward a digital-forward economy, requiring blanket disclosures that frame all “algorithmic pricing” as suspicious doesn't promote transparency. It creates confusion and discourages legitimate practices that benefit consumers. Algorithmic pricing is not a new or radical practice, but a digital extension of pricing methods that have existed since the earliest forms of retail trade.
While the speed and scale of price analysis have changed, the fundamental principles behind how prices are set have not. Establishing reasonable guardrails around fairness, transparency and predictability upholds consumer protection — without sacrificing the innovation that makes shopping more affordable and convenient for all consumers.
