Fetscherin Explains Dynamic Pricing

Fetscherin said the primary purpose of electronic shelf labels is operational efficiency rather than raising prices. “The main motivation for having those price tags is mostly cost reduction,” he said. “Instead of a worker going and manually changing all those tags.” By contrast, he said, the main motivation behind dynamic pricing is often “increased revenues.”

Fetscherin explained that dynamic pricing can take different forms. One approach is based on product-specific factors such as inventory levels, demand and overall market conditions. Another is based on the individual consumer, including location, purchasing behavior or other personal data. He also distinguished between pricing practices that are transparent and publicly visible and those that are not.

“What we all know and have been used to is the pricing” seen in industries such as airlines, he said, where prices fluctuate based on supply and demand. Airline ticket prices, for example, are available to all consumers and often change as departure dates approach.

The greater concern, according to Fetscherin, is whether companies use personal information to tailor prices for individual shoppers. He noted that this practice, sometimes referred to as “surveillance pricing,” raises questions about fairness and privacy.

“With AI and data analytics,” companies have access to increasingly large amounts of consumer information, Fetscherin said. Some estimates suggest businesses may have “up to 5,000 data points” on individuals, including search histories, social media activity and other online behavior. “The more they know about you, the more they could technically exploit you,” he said.

Fetscherin noted that lawmakers have begun examining potential safeguards against discriminatory pricing practices, citing legislative efforts aimed at protecting consumers from pricing decisions based on personal shopping histories or other individual characteristics.

Still, he cautioned against viewing all dynamic pricing negatively. “Dynamic pricing can also go both ways,” he said, pointing to Black Friday and Cyber Monday promotions as examples of demand-based pricing that can benefit consumers through substantial discounts.

Ultimately, Fetscherin said the key issue is how retailers choose to implement the technology. “It really depends on the situation and how companies use this ethically or not ethically,” he said.

Watch the full interview here.