Retailers say digital shelf labels save labor and cut checkout errors, but consumer advocates warn they pave the way for dynamic pricing in brick-and-mortar stores
Digital shelf labels have been replacing paper price tags at major retailers.
Store aisles are getting a digital makeover.
Major retailers such as Best Buy $(BBY)$, Kroger $(KR)$ and Walmart (WMT) have begun replacing paper price tags with electronic shelf labels: a small digital screen displaying the item's price. Walmart started rolling out the digital labels in 2024, and announced plans this year to install them across its more than 4,600 U.S. stores by the end of the year.
While retailers say the transition will create more accurate pricing, deliver instant discounts for shoppers and free up time for employees, consumer advocates worry the digital labels are a way to bring dynamic pricing to brick-and-mortar stores. Dynamic or algorithmic pricing is when a business changes prices in real time based on market conditions such as demand, inventory and competitor rates. This practice is standard in the airline and ride-hailing industries, and a growing number of retailers have started using it in recent years.
"This idea that we could be eliminating the price tag altogether in part because price variation is going to be so institutionalized is really worrying," said Lindsay Owens, executive director of Groundwork Collaborative, a progressive think tank that has criticized companies' use of dynamic pricing. The traditional price tag "offers stability, which is so important for budgeting. It offers transparency, which is so important for comparison shopping, which isn't just important for the budget shopper, it's how the entire economy is kept competitive."
Retail trade groups, however, reject the claim that digital tags are designed to manipulate prices to rip off consumers. Jason Straczewski, group vice president of government relations and political affairs at the National Retail Federation, said state and federal law requires the price advertised on the shelf label to match the price at the point of sale, and that digital shelf labels can actually improve price accuracy between the shelf and the register.
Critics, including Democratic Sen. Elizabeth Warren of Massachusetts, have suggested stores could use facial recognition along with digital price tags to show different prices to different consumers. That's not the case, Straczewski said. "These price tags are literally powered by a watch battery," Straczewski said. "They're not hardwired into some system that's connected to the internet to an algorithmic computer center somewhere in the back of the house."
Walmart, for example, said all customers will see the same price on the labels, which "modernize how prices are displayed, not how they're decided" - but the labels do have a light-up feature to help employees and shoppers who are using the store's app find items. "It knows that you're in that particular store and you can be in 'store mode,'" said Walmart spokesperson Robyn Babbitt. "If you're searching for something, it will allow you to light up the [label]."
A Walmart associate uses the light-up feature on a digital shelf label to find an item.
In a response to criticism from Owens specifically, the big-box store said it "does not and will not use digital shelf labels for individual or dynamic pricing." Best Buy and Kroger did not respond to requests for comment.
Despite industry assurances, lawmakers and regulators are monitoring the expanding technology. New Jersey implemented a one-year moratorium on electronic shelf labels this summer "while the New Jersey Innovation Authority studies the effects and impact of that technology." Maryland passed legislation this year requiring prices on electronic shelf labels at grocery stores to remain fixed for at least one business day and prohibiting stores from using customer data to set individualized prices. A proposed state Senate bill would prohibit them in supermarkets and pharmacies in New York, where a poll found that 64% of New Yorkers think the labels would push up the cost of groceries.
The Federal Trade Commission also proposed a policy statement in August targeting personalized pricing, warning that retailers using personal data to set custom prices without clear disclosures violate federal law.
For years Americans have had "a reasonable expectation that if you and I were shopping for the same item at the same time, we'd pay the same price," Owens said. "And that, I think, is really eroding."
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-Genna Contino
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