Last week, the Electronic Shelf Label industry was rocked by screaming headlines in the press*:
‘Supermarkets set to introduce ‘surge-pricing’ in their shops according to demand: Plans would mean ice cream is more expensive on hot days’ from the Daily Mail
‘Super-markets could introduce Uber-style ‘surge-pricing’ and put an end to fixed prices’ from the Daily Mirror
And other variations across the national and international press.
In summary, hysterical journalists had latched on to some publicity suggesting that the supermarkets are all planning to introduce digital price tags within the next 2 years which will mean they can seamlessly update the prices on the shelves at the click of a button from HQ. So far so good (well at least for us, since we offer the best-in-class electronic shelf edge labels aka video shelf edge labels). Then came the leap into unreality – This technology will give retailers the flexibility to change prices any time they want. Uber does that. And, therefore, Uber-style surge pricing is just about to appear in supermarkets and don’t be wanting to buy an ice-cream on a hot day, because it will now cost you £1 million. Um no.
The hysterical headlines probably attracted eyeballs/clicks on a slow news day, but the reality is that Uber-style surge pricing will never be coming to a supermarket near you, and here’s why:
Uber surge pricing is a form of demand pricing used a lot by the travel industry. It’s based on the most fundamental principle of the free market – supply vs demand sets price. Sure demand pricing is used to maximise revenues, and what retailer wouldn’t want to do that, but crucially it can only be used in very specific circumstances; where demand fluctuates through time (e.g. the number of people seeking Uber cars in the rain spikes) and supply is restricted (there are a limited number of Uber cars about (I know it doesn’t seem that way!)), and crucially, the window of opportunity for the purchase is restricted (e.g. person standing in the rain has to get home tonight, it won’t wait) or in other words there is some form of captivity to the market.
Now let’s consider the ice-cream on a hot day – yes, a hot day will cause a surge in demand, but supply does not constrict (much – unless the retailers didn’t consult the forecast). For every supermarket there is another convenience store just round the corner competing to sell an ice-ceam on a hot day, and given that the supplier of ice-creams is incentivised to sell as much as it possibly can, a supermarket is not going to have a monopoly on ice-creams. So the market is neither restricted nor captive, and surge pricing won’t work.
Now, moving onto the the delicate relationship between the shopper and the retailer. The shopper has multiple sources of groceries. Your average bricks-n-mortar supermarket is doing all it can to encourage shoppers through its doors rather than those of its competitors. There would be nothing like up-surges in prices to drive shoppers into the arms of competition. Witness supermarket price wars – competition reduces prices not vice versa. And in an era of ever greater price transparency and shoppers with smartphones, the pressure is increasing on retailers to reduce prices in store, not randomly put them up.
And all of this is before trading standards gets involved – they have some pretty strict rules around pricing and fairness for the consumer.
So, let’s put the idea of electronic shelf labels leading the Uberisation of supermarkets away in the silly season drawer and think about the benefits to shopper of digital price tags. Quite simply:
1. SFD Systems’ shelf edge lables makes sure that the prices at the shelf match the prices at the till. Shoppers being over-charged because of an expired offer on the shelf will be a thing of the past.
2. Price competition – with a feed to the internet, and access to competitors prices, a supermarket will be able to display a real-time price comparison with their competitors to encourage shoppers to buy.