Shoppers Unlikely To Find Anything “Dynamic” About Rapidly Changing Prices

Prices, They Are A-Changin’

Shoppers are encountering rapidly changing prices on a number of items these days, including everyday purchases such as groceries or hardware. Retailers explain this is tied into rising costs as well as product shortages due to the pandemic, with analysts pointing to effects felt both online and at brick-and-mortar stores.

Some store managers report barely breaking even on some products as a result of a failure to properly update prices. Quicklizard, a company that sells software to help retail businesses automate pricing in response to changing environments, says that over the past 12 months 75% of its customer base has increased the frequency of price changes.

We’ve Seen This Before

Large retailers like Walmart (WMT) and Amazon (AMZN) have used dynamic pricing for years. Analysts say the practice is key for big companies that constantly compete with their peers and need to carefully protect profit margins. Businesses such as airlines sometimes raise prices based on a customer’s previous web search history, and gasoline stations sometimes change prices at different times of the day.

Smaller businesses with a more localized customer base face unique risks when employing dynamic pricing strategies. Even the process of changing pricing stickers can prove difficult and costly in terms of new technology or labor outlays. Consultants also note customers who feel taken advantage of won’t return—and retailers rely on brand loyalty.

Some Companies Resisting The Trend

For some retailers, dynamic pricing appears less than worthwhile. Others are paying overtime for employees to swap out pricing stickers or using electronic shelf labels to easily change prices at a moment’s notice.

Still, some companies are expressing concern about changing prices too often, noting the practice diminishes customer trust. It’s a tricky balance, as analysts note rapidly rising wholesale prices can leave retailers upside down if they only change prices on a monthly or weekly basis. The strategy is well established in the minds of consumers when it comes to buying plane tickets or refueling at the pump, but its effectiveness for smaller retailers remains to be seen.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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