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Is surge pricing heading to UK supermarkets?

Geoff Riley

2nd July 2017

Could "surge pricing" be coming to a supermarket, petrol station or coffee shop near you?

Are the days of the humble price tag numbered? Many businesses are using complex algorithms to make dynamic pricing common across their product range and e-pricing in supermarkets might be on the threshold of becoming commonplace.

When you walk into Starbucks and you join the queue for a mocha latte you don’t expect to pay a different price from the person ahead or behind you. Wandering into a supermarket to stock up on groceries, you might be unhappy if the the tills applied a personalised discount on your purchases based on numerous individual characteristics. 

What happens if, in a few years time, you are required to pay for your meal using a selfie as customer ID? And at that moment the seller offers you a unique, personalised price? 

Are the days of standard pricing disappearing? Or will businesses decide that there are limits to the effectiveness of algorithms perhaps fearing a customer backlash against suppliers who go gangbusters on harnessing big data and dynamic pricing to drive higher revenues and profits?

Supermarkets are investing in and trialling e-pricing. Dynamic pricing is where electronic price displays can be changed at the click of a button either at the back of a store or centrally at head office. Prices can change much more quickly and often, it allows retailers to react to trends on the high street in the same way as Ryan Air and Easy Jet use dynamic pricing to increase revenues and profits. The price of fresh goods such as sandwiches for example might fall as products near the end of their sell-by-date. 

Smaller convenience stores might use dynamic pricing to offer more promotions without the cost of manually changing price tags. 

Surge pricing is where prices rise sharply because of increased demand – it seems that supermarkets have few plans to adopt an opportunistic Uber-style surge pricing strategy. Will consumers know what is actually going on if supermarkets use e-ink to display prices – often indistinguishable from traditional printed paper price labels.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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