Artificial Intelligence (AI) could soon be deciding how much your weekly grocery shop costs, with dynamic pricing expected to become common place in the coming years.
Dynamic pricing sees the costs of products change throughout the day according to factors such as demand and availability. You may have already witnessed similar pricing strategies with the likes of Expedia, who adapt prices based on your internet data and history, and Uber, who use "surge" prices when there is an increased demand, and cinemas are now even experimenting with such schemes.
With the rise in popularity of internet shopping and tech giants like Amazon getting involved in the grocery sector, brick and mortar stores are becoming inventive to keep consumers shopping in-store. We are seeing consumers increasingly take a hybrid approach to their shopping, comparing prices online and buying in store.
As a result of these changing shopping habits, supermarkets will increasingly turn to real-time data to react to market trends. Spar stores in Walthamstow and Hackney are already experimenting with dynamic pricing, and we are likely to see the adoption of dynamic pricing, alongside technology such as Computer Vision and Machine Learning become the norm within the next few years. In fact, this is already becoming the norm in some European countries, particularly in France and some Scandinavian countries. In France, for example, supermarkets are using electronic price tags that allow for 90,000 dynamic price changes a day.
Supermarkets could adopt this approach to compete with online retailers. For example, if Amazon suddenly drops a price on a product, such as your favourite brand of beer or crisps, a retailer like Tesco can quickly assess the availability levels for that product and respond accordingly: They could decide to compete by lowering the price, or replace the stock with something more likely to sell. This type of tactic could be particularly effective during large events and peak seasons when demand increases, like the FA Cup Final, an Anthony Joshua fight or during the Christmas period.
However, the use of technology to manage prices in-store has its drawbacks, with some shoppers fearing that it its use could lead them to being charged over the odds for their weekly shop - much like the uproar created by Uber for introducing its surge pricing during the tube strikes in London and busy public events like New Years' Eve. This means that, at least in the short term, supermarkets will be cautious about adopting dynamic pricing.
Most households will demand regular and predictable prices as part of their shopping experience, meaning that dynamic pricing may also have a negative effect on shoppers' loyalty in the long term. However, this type of pricing strategy can drive competitiveness between stores and can potentially reduce the price of your favourite soft drink, meaning it would be good news for the retailer as they have sold a product and good news for you, the shopper, as you brought a product at a cheaper rate.
And with profit margins continuing to shrink in the retail industry, supermarkets are embracing new technologies in order to increase performance and financial results. Brexit could also potentially fuel adoption, with UK supermarkets having less access to low-cost labour which they rely upon for manual price changes in-store.
We have already seen large supermarkets trial electronic shelf labels and I expect adoption to increase, alongside technologies like Computer Vision and Artificial Intelligence to collect real-time shelf data, and eventually become the norm in UK supermarkets. So, you may not see the price of your weekly shop costed by an AI in the coming weeks and months, it could well happen within in the next few years.