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Retailers across grocery, fashion, and general merchandise are accelerating investment in AI-driven electronic shelf label (ESL) technology, which enables dynamic, or surge, pricing.The appeal is straightforward: digital labels reduce manual labor, improve pricing accuracy, and create the infrastructure for more responsive promotions. But the rollout has not been without friction. Public debate around dynamic or surge pricing in supermarkets has put retailers on the defensive, even when the technology itself is being used for far more routine purposes. This article explains what dynamic pricing actually means for retail operations, where the real risks lie, and how retailers can adopt pricing technology in a way that builds rather than erodes customer trust.
What Dynamic Pricing Actually Means for Retailers
Dynamic pricing is the practice of adjusting prices in real time based on external signals: demand, time of day, stock levels, or competitor activity. Some might argue the concept is nothing new for consumers accustomed to fluctuating prices when booking a flight or hotel room. E-commerce giants like Amazon also have a history of tweaking prices based on demand and overall popularity, successfully undercutting competitors. A 2024 study found that one-quarter (25%) of US consumers would take advantage of dynamic pricing if it meant lower prices, but even then, over one-fifth (22%) said they would not shop at businesses that use dynamic pricing. Much of the more recent discourse, however, suggests an even broader backlash, so why is it happening only now?For starters, grocery retail operates under different expectations than entertainment or hospitality. Shoppers buying milk, bread, or household staples expect price stability on essentials. If they get the impression that prices are being manipulated to extract as much as they can or are willing to pay, discontent and resentment build up fast. Thomas Hill, former pricing director at Asda and co-founder of retail technology firm HyperFinity, notes that dynamic pricing itself is not the reason for consumer fairness concerns. What customers are actually bracing against is opaque, inflated, misleading, or seemingly arbitrary pricing, which he terms “insult pricing”. For example, seeing an item priced one way on a shelf and another at checkout will most likely make customers feel taken advantage of, ultimately damaging their trust.Central to this debate is the advancement and rollout of ESL technology. Digital labels enable retailers to update prices and promotions across all stores centrally, rather than manually changing paper tickets. Large chains including Walmart, Co-op, Lidl, Asda, Waitrose, and Morrisons have introduced ESLs across parts of their estates. Co-op has already deployed them in more than 700 stores, with plans to extend across its full estate of more than 2,300 shops during 2026.The primary benefit for retailers is operational. Connecting digital price tags to inventory systems enables automated, real-time expiration tracking and dynamic markdowns. What’s more, removing the labor cost of manual price changes frees up resources and reduces the likelihood of errors. For customers, however, this technology fuels fears of sudden, manipulative price changes. Pursuing it for essential goods, especially, carries significant reputational risk, which is why retailers need to tread carefully.
Where the Approach Can Go Wrong
Adopting pricing technology is a necessary step for retailers looking to stay competitive, but doing so without clear communication or certain guardrails invites a number of problems.Consumers tolerate variable pricing when they understand how it works and feel they have a fair chance to access a good price. They will, however, react negatively when the rules seem hidden or when the technology appears to work against them. According to an Ipsos survey, six in ten consumers think dynamic pricing is “price gouging” and only three in ten think it is fair.This is not surprising. If shoppers believe prices on essential items could rise at any point, they will associate the ESL technology with the worst interpretation of dynamic pricing, regardless of how it is actually being used.While it is highly unlikely that customers would see daily price changes on the shelf edge at a supermarket, silence on these matters leaves space for assumption.To return to the earlier example, customers would have reason to worry that they will see one price advertised and then find a higher figure at checkout, or while completing their transaction. The premise alone could be enough to prompt boycotts of chains known to use dynamic pricing.There is also a category-sensitivity consideration. Applying any form of variable pricing to essential goods, particularly products that lower-income shoppers rely on, or sanitary products, carries a different level of scrutiny and potential reputational harm.As such, retailers need more than technology. They need internal governance that reflects those distinctions and alleviates shoppers’ concerns.
What Retailers Should Prioritize
A clear boundary between essential and discretionary categories is the starting point for any retailer deploying ESL or dynamic pricing capability. Essential goods warrant stable, predictable pricing. Discretionary products, particularly those already positioned as treats or impulse purchases, offer more room for targeted, time-sensitive offers.On the other hand, personalized promotions are already generating positive consumer response through loyalty schemes. Shoppers are increasingly comfortable receiving deals based on their purchase history, particularly when those deals feel relevant, and the mechanics are transparent.Nevertheless, pricing based on shoppers’ income and shaped by their personal data raises ethical concerns, earning it the dark moniker of AI surveillance pricing, which is why retailers need to be careful how they approach these initiatives.A useful lens for evaluating any new pricing initiative is to think of it as a targeted promotion that benefits the customer, retailer, and supplier. If only one party is winning, the commercial rationale may be present, but the long-term customer relationship will take a hit.Smarter markdowns represent a separate area of practical value. The traditional yellow-sticker section is labor-intensive and imprecise. Digital pricing infrastructure makes it possible to notify shoppers via app when specific products are approaching end-of-shelf-life, reducing food waste while offering genuine value. New analysis by Bins UK suggests the country’s supermarkets could be throwing away around 100,000 tonnes of edible food each year, which amounts to an estimated £316m in lost food value.Industry bodies increasingly view smarter inventory management and targeted markdowns as key tools in reducing those losses, giving retailers a sustainability rationale alongside the commercial one.Transparency, however, connects all these considerations. Shoppers need to understand how prices are set, how offers are generated, and how they can access available deals. Accessibility matters as well. If promotional pricing is locked behind an app or loyalty card without clear signposting in-store, it will feel exclusive rather than rewarding.
Pricing Technology Is a Question of Trust
Retailers deploying dynamic pricing tools are, at their core, deciding how they want customers to perceive them. The technology is a mechanism; the values it reflects are what shoppers will respond to.The debate around ESLs has conflated operational efficiency with surge pricing. Addressing that conflation requires active communication, careful planning, and clear boundaries before deployment.Retailers must not move too quickly on pricing technology without:
Establishing internal guardrails on category sensitivity
Explaining to shoppers what has changed and why
Designing offers that deliver genuine value to the customer
Without these, they will face a trust deficit that the technology itself cannot solve. On the other hand, the retailers best positioned to benefit from ESL and dynamic pricing investment are those that treat customer trust as a design requirement, not an afterthought.
