by Kevin Burton
The Wal-Mart closest to our house is almost finished with a major remodel, including all shelves and bins and even its drive-through pharmacy.
I am guessing this is not about being tidy, but about making a tidy profit.
I think this is about surge pricing. Apps such as Uber already use surge pricing to raise prices at times of high demand. I pouted a little bit in print when I read that Wendy's was buying new signs to allow for surge pricing (Wendy's Serves Up A PR Blunderburger, March 9).
Now Wal-Mart is going that same route.
"This month, Walmart became the latest retailer to announce it's replacing the price stickers in its aisles with electronic shelf labels," wrote Lola Murti of National Public Radio. "The new labels allow employees to change prices as often as every ten seconds."
"Companies across industries have caused controversy with talk of implementing surge pricing, with fast-food restaurant Wendy's making headlines most recently," Murti wrote.
I got a little huffy about Wendy's because I had beef with them anyway, regarding their "service" and sometimes their products.
As I read about Wal-Mart however, a wave of inevitability washed over me. Of course, companies will use whatever technology is available to cover their bottoms and bottom lines in glory.
Really this has been going on forever. Aren't the boxed Christmas cards, for example, expensive in the holiday season but dirt-cheap starting Dec. 26?
The only surprise about surge pricing will be if companies actually tell customers the truth about what is going on. That was the Wendy's mistake.
"If it's hot outside, we can raise the price of water and ice cream. If there's something that's close to the expiration date, we can lower the price — that's the good news," Phil Lempert, a grocery industry analyst told NPR.
"Electronic shelf labels allow the same strategy to be applied at grocery stores, but are not the only reason why retailers may make the switch," Murti wrote.
"The ability to easily change prices wasn't mentioned in Wal-Mart's announcement that 2,300 stores will have the digitized shelf labels by 2026," Murti wrote. "Daniela Boscan, who participated in Wal-Mart's pilot of the labels in Texas, said the label's key benefits are 'increased productivity and reduced walking time,' plus quicker restocking of shelves."
"Wal-Mart's not the first major grocer to make the change, as you can already find electronic shelf labels at Whole Foods, Amazon Fresh stores, and the Midwestern chain Schnucks," Murti wrote. "Digitized shelf labels are even more common in stores across Europe."
"Another feature of electronic shelf labels is their product descriptions. Lempert notes that barcodes on the new labels can provide useful details other than the price"
"They can actually be used where you take your mobile device and you scan it and it can give you more information about the product — whether it's the sourcing of the product, whether it's gluten free, whether it's keto friendly. That's really the promise of what these shelf tags can do," Lempert said.
"As higher wages make labor more expensive, retailers big and small can benefit from the increased productivity that digitized shelf labels enable, said Santiago Gallino, a professor specializing in retail management at the University of Pennsylvania's Wharton School."
"The bottom line, at least when I talk to retailers, is the calculation of the amount of labor that they're going to save by incorporating this. And in that sense, I don't think that this is something that only large corporations like Wal-Mart or Target can benefit from," Gallino said. "I think that smaller chains can also see the potential benefit of it."
"While the labels give retailers the ability to increase prices suddenly, Gallino doubts companies such as Wal-Mart will take advantage of the technology in that way," Murti writes.
"To be honest, I don't think that's the underlying main driver of this," Gallino said. "These are companies that tend to have a long-term relationship with their customers and I think the risk of frustrating them could be too risky, so I would be surprised if they try to do that."
Sorry, I am not buying that. I don't doubt companies will use these labels to gain efficiency concerning labor costs. As part of its makeover, our local Wal-Mart has added more self-checkout registers.
But the ability to make consumers spend more will always be the main reason behind such moves. I have no document that proves that, but do you doubt me? Am I being too cynical?
Prof. Gallino says so.
"Rather than seeing an opportunity to use surge pricing, Gallino says retailers are likely drawn to electronic shelf tags to ensure consistency between online and in-store pricing," Murti wrote.
"Today, Walmart customers can check on their app once they're in the store, the prices that Walmart is offering online," he said. "And if there are discrepancies, this can bring frustration or make the customers get confused."
"Electronic shelf tags should make it much easier for brick-and-mortar stores to keep pace with prices as they change online. And, he says, that consistency should be better for customers."
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