Surge Pricing in Supermarkets
Imagine visiting a grocery store, grabbing a carton of milk, and by the time it’s in your cart, the price has already changed. Not due to a special sale or a cashier’s error, but because the price tag itself is now a small digital screen that updates in real time, several times a day. That is not science fiction. Across supermarkets in Europe and the United States, Electronic Shelf Labels (ESLs) are replacing paper tags. Dynamic digital labels are revolutionizing grocery pricing and may usher in a future of real-time ‘surge pricing’ for basic staples. Surge pricing, also known as dynamic or demand-based pricing, is a strategy that causes prices to change in real time according to demand levels. It is frequently utilized in ride-sharing, hospitality, and e-commerce.
A report from The Wall Street Journal reveals that ESLs are currently utilized by several major US chains, enabling grocers to adjust prices as many as 100 times daily. Retailers assert that moving away from traditional paper tags decreases labor costs and paper waste, while allowing for quicker markdowns on perishables. However, the same infrastructure raises the possibility of surge pricing—price increases during high-demand periods—prompting concerns from regulators and shoppers. Retailers are leveraging dynamic digital pricing strategies.
- In Norway, REMA 1000 employs ESLs for real-time pricing adjustments to maintain a competitive edge. The Wall Street Journal reported that prices on certain items, such as milk and eggs, may fluctuate dozens of times a day, particularly during holidays.
- In the Netherlands, Albert Heijn, a subsidiary of Ahold Delhaize, employs ESLs in more than 1,200 stores. The system monitors near-expiry items every 15 minutes, applying discounts up to four times daily—starting at 25 percent and reaching as high as 90 percent—to reduce food waste. The company estimates that this has cut waste by more than 250,000 kg each year. Despite advancements in technology, stores still occasionally rely on physical stickers, as early trials indicated that customers frequently overlooked digital discounts.
- In the United States, Walmart has implemented ESLs in over 400 of its nearly 4,600 stores and intends to expand to cover half of its locations. Kroger and Whole Foods are testing electronic shelf labels (ESLs). Lidl US commenced the rollout of ESLs in 2024.
The possibility of immediate price hikes on essential goods has alarmed both policymakers and consumers. In 2024, Senators Elizabeth Warren and Bob Casey (now retired) sent a letter to Kroger, raising concerns that digital tags might enable price manipulation during holidays or natural disasters. The letter cautioned that ESLs “appear poised to enable large grocery stores to squeeze consumers to increase profits.” In the UK, Members of Parliament interrogated grocery chains Tesco and Sainsbury’s regarding surge pricing technology following reports from France that indicated prices for barbeque items increased in tandem with rising outdoor temperatures.
Public reaction on social media has mirrored wider concerns, as many users speculate about potential fluctuations in the cost of essential products throughout the day. Surge pricing refers to the practice of increasing prices in response to high demand for a service or product, often seen in industries like transportation and hospitality. In the ride-sharing industry, platforms like Uber and Lyft utilize this model to align driver availability with passenger demand, particularly during peak hours or public events.
Hospitality providers, such as hotels and rental services, employ similar strategies to modify room rates during peak travel seasons. E-commerce platforms utilize dynamic pricing during flash sales or product launches to optimize inventory and maximize revenue.
Retailers have been explicit regarding the current applications of ESLs, despite the concerns. The primary goal is to conserve labor by removing manual price adjustments and lessen environmental impact by decreasing the use of paper tags. Most grocers, including those in Europe and the US, indicate that price reductions—particularly for near-expiry goods or to match competitors—are their main application. REMA 1000 and Lidl state that any price increases occur overnight to prevent confusing or upsetting customers.
No concrete evidence currently exists that US grocery retailers are employing ESLs for demand-based pricing. A McKinsey & Company report states that real-time analytics and predictive modelling are increasingly enabling pricing strategies across sectors. A 2021 report indicated that dynamic pricing “doesn’t necessarily require ultrasophisticated software that changes every product’s price multiple times a day”. Even traditional retailers can benefit from “merchant-informed, data-driven algorithms that recommend price changes for selected products at some level of frequency.”
However, a study by researchers from UT Austin, UC San Diego, and Northwestern University noted that real-time surge pricing, particularly in physical stores, is unlikely due to two key constraints: Tracking in-store demand with the required granularity for algorithm-driven pricing poses challenges & that customers are highly sensitive to price changes. Shoppers might forgo purchases if prices rise prior to checkout.
Real-time price hikes are uncommon, yet ESL adoption is anticipated to grow. More US grocery chains are expected to adopt the technology to enhance pricing operations. Intraday price reductions—particularly on perishable or seasonal items—are anticipated to occur more frequently. Price increases during active shopping hours remain unlikely, given the reputational risks and concerns regarding customer trust.
The fast food sector is also experimenting with surge pricing. Wendy’s announced last year its intention to test a dynamic pricing model for menu items in 2025. Under the proposed model, prices would fluctuate throughout the day according to demand; however, it specified that they would not increase prices during peak hours. The company announced that the rollout would start as a test; however, as of July 2025, surge pricing has not been implemented. After the announcement, Gizmodo carried out a survey revealing that 52 percent of respondents associated surge pricing with price gouging, and 65 percent indicated it would complicate their food purchasing decisions.
Electronic shelf labels provide retailers with unparalleled control over pricing and operations. Currently, their primary applications are for efficiency improvements and markdowns, rather than for surge pricing. As technology becomes widespread and other industries explore real-time pricing models, the discussion on transparency, fairness, and digital automation in pricing is poised to intensify.
