Dynamic Pricing in Retail: The Trust Crisis Brand Leaders Must Navigate
Walmart is putting digital price tags in 4,600 stores across the United States. Kroger is rolling them out in 2,600 locations.
The future Maggie mentioned? It's here, and it's algorithmically optimized.
These electronic shelf labels (ESLs) eliminate manual price changes and allow retailers to adjust prices in real-time based on demand, competition, inventory levels, and other factors. The ESL market is projected to grow from $1.85 billion in 2024 to $9.81 billion by 2035, driven by companies like MPOS, SES-imagotag, and E Ink.
The Wendy's Wake-Up Call
In theory, dynamic pricing sounds reasonable enough: reduce waste on perishables, match competitor prices instantly, keep shelves stocked efficiently. The reality? When Wendy's CEO Kirk Tanner announced in February 2024 that the chain would invest $20 million in digital menu boards to enable dynamic pricing, the backlash was immediate and fierce.
The company got roasted so hard they had to clarify within days that they weren't actually planning surge pricing—only discounts during slow periods. #BoycottWendys trended on social media. Burger King immediately trolled them with a "No urge to surge" promotion.
What made Wendy's backtrack so fast? Social media turned every customer into a watchdog. Someone in Chicago sees a different price than someone in Atlanta, takes a photo, posts it, and suddenly you've got a national story.
The same technology that enables dynamic pricing also enables radical transparency. The benefits of dynamic pricing might be far more short-lived than companies realize, simply because consumers now watch out for each other at scale. We wouldn't be surprised to see apps emerge specifically to track and expose price variations across retailers and regions—turning customer surveillance into corporate accountability.
When Dynamic Pricing Crosses the Line
Here's what's worth considering: airlines and Uber can use dynamic pricing because consumers have alternatives—you can choose not to fly or catch that ride, or wait for prices to drop. But groceries? People need to eat. When essentials become subject to algorithmic price optimization, the line between smart business and customer alienation gets very thin.
This distinction matters. Research from Yale School of Management found that consumer acceptance of dynamic pricing depends critically on why customers think prices are changing. When pricing feels exploitative—especially for necessities—trust erodes quickly.
The FTC Investigation Into "Surveillance Pricing"
The Federal Trade Commission launched an investigation in July 2024 into what they're calling "surveillance pricing"—using consumers' browsing history, location data, and shopping patterns to set individualized prices.
The FTC issued orders to eight companies, including Mastercard, JPMorgan Chase, and McKinsey, seeking information about how they use AI and personal data to target prices for individual consumers. As FTC Chair Lina Khan stated, "Firms that harvest Americans' personal data can put people's privacy at risk. Now firms could be exploiting this vast trove of personal information to charge people higher prices."
The concerns are justified. A recent investigation by Consumer Reports and Groundwork Collaborative found some shoppers paying 23% more than others for identical items on Instacart. The investigation revealed that identical grocery items had price variations ranging from 7 cents to $2.56 per item, with some products having as many as five different price points.
Whether you call it dynamic pricing or dynamic gouging depends largely on which side of that 23% you land on.
The Better Path: Dynamic Markdowns
The smarter play? Dynamic markdowns—lowering prices rather than raising them. Lower prices on food nearing expiration help budget-conscious families and reduce waste simultaneously.
Germany's METRO demonstrated this approach, cutting food waste by 15.3% in the first year of implementing dynamic markdown pricing. Norway's REMA 1000 has used dynamic pricing for over a decade, but crucially, they only raise prices overnight—never while customers are shopping—to avoid the price-change-at-checkout problem that violates consumer trust.
But most retailers aren't emphasizing markdowns. They're exploring price optimization strategies focused on revenue maximization, and consumers are watching closely. According to industry research, 52% of consumers now associate dynamic pricing with price gouging, which presents a significant brand risk.
The Transparency Opportunity for International Brands
Here's the opportunity: brands could flip this script entirely. For international companies entering the US market, transparent pricing could be your welcome mat.
Imagine a European food retailer launching with a public commitment to stable pricing on essentials, region by region. Better yet, invite consumers to prove you're keeping your word through social campaigns showing price drops in their communities. Put your reputation on the line visibly.
This approach works particularly well for international brands because of a fundamental cultural difference: Americans have normalized corporate extraction in ways Europe hasn't. The European Union has stronger consumer protection traditions, higher trust in regulatory oversight, and greater expectation that the state will intervene in markets to protect consumers.
When European consumer groups like Euroconsumers call for dynamic pricing to be banned for basic products and services, they're operating from values many American consumers share but rarely see reflected in corporate behavior. The brand that publicly commits to using technology to help rather than squeeze will own trust when everyone else is bleeding it.
Dynamic Pricing and Rural Food Deserts: An Inverted Model
There's an even more powerful opportunity that most brands haven't considered: using dynamic pricing to helpeconomically struggling regions rather than extract from them.
According to the USDA, approximately 54 million Americans—about 1 in 6—live in food deserts where access to affordable, nutritious food is limited. Rural areas are disproportionately affected, representing 87% of counties with the highest food insecurity rates.
The economics are brutal. Rural grocery stores operate on profit margins of just over 1%, significantly below the industry average of 1-3%. They face:
- Small, declining populations that can't sustain volume
- Competition from Walmart (which captures 1 in 4 grocery dollars nationally)
- Dollar stores that undercut on price (rural stores are 3x more likely to close after a dollar store opens nearby)
- High distribution costs for remote locations
- Aging infrastructure requiring constant investment
When rural grocery stores close, residents must drive 30-60+ miles for fresh produce. As one rural development expert put it: "Schools and groceries, those two things are so pivotal for whether a community can sustain itself and grow, or whether it's going backward."
Here's where dynamic pricing could be revolutionary: Instead of surge pricing that extracts maximum profit, brands could commit to stable or lower pricing in economically distressed regions.
Imagine:
- A CPG brand that uses data to identify food deserts and sets pricing floors—guaranteeing milk never exceeds $2.99 in rural areas while it's $3.49 in affluent suburbs
- Transparent regional pricing programs where customers can verify commitments through social media
- Volume-subsidy models where profits from high-volume metro areas support lower margins in struggling rural communities
- Technology used not for surveillance, but for community support
-
This isn't charity—it's strategic. It:
- Differentiates brands in an era of surveillance pricing scandals
- Builds unshakeable loyalty in underserved markets
- Creates barriers to competition through trust
- Positions brands ahead of potential regulation
- Generates authentic ESG stories with measurable impact
Strategic Considerations for Brand Leaders
The gap between optimizing for short-term revenue and building long-term trust is widening. Technology can help people or it can extract from them—and consumers increasingly know the difference.
The brands that navigate this well will recognize that in a market where 52% of consumers already feel wary, transparency isn't just ethics, it's competitive advantage.
Key principles for ethical dynamic pricing:
1. Transparency First Be clear about when and why prices change. Research from Yale shows that alerting customers to price changes increases likelihood of purchase compared to quietly raising prices. Framing matters: price increases to cover staff wages during busy times are perceived as fair; unexplained surcharges are not.
2. Directional Bias Toward Discounts If you're going to use dynamic pricing, emphasize markdowns over markups. Make it obvious that technology is helping customers find deals, not extracting maximum willingness to pay.
3. Protect Necessities Airlines and concerts can surge price. Groceries and essentials cannot—at least not without severe backlash. The ethical line is clear: discretionary purchases tolerate price flexibility; necessities demand stability.
4. Invite Verification Turn transparency into differentiation. Let customers photograph and share your pricing commitments. Make social media your ally, not your risk.
5. Lead with Values, Not Algorithms European brands entering the US market have a unique advantage: you can position consumer protection as brand identity, not regulatory compliance. That's differentiation American competitors can't easily copy.
The Consumer Power Shift
Remember that today's consumer isn't yesterday's passive shopper. They're armed with social media and they will take brands down.
Target learned this lesson with boycotts. Wendy's learned it with #BoycottWendys. Ticketmaster faced investigations in both the UK and EU after the Oasis tour pricing controversy. The pattern is clear: when consumers feel exploited on pricing, especially for essentials, the backlash is swift and unforgiving.
The price of damaged trust? Not variable.
Conclusion: Technology as Tool, Not Weapon
Dynamic pricing technology is neutral. It can be used to extract maximum profit from vulnerable populations, or it can stabilize prices in economically fragile communities. It can enable surveillance pricing that charges different customers wildly different amounts, or it can reduce food waste through intelligent markdowns.
The question facing brand leaders isn't whether dynamic pricing works—it's how you choose to use it, and what that choice says about your values.
For international brands entering the US market, this moment represents an opportunity: be the company that uses algorithmic pricing to help, not hurt. Build trust when competitors are eroding it. Own transparency when surveillance pricing is under federal investigation.
The brands that get this right won't just survive the coming regulatory scrutiny—they'll thrive because they saw what others missed: in a market awash in extraction, genuine care is the ultimate competitive advantage.
About the Author
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International brands entering the US market: let's talk about pricing strategy that builds trust. Book a 60-minute readiness assessment with our strategy team: Schedule here
Related Reading
- FTC Investigation Into Surveillance Pricing
- Consumer Reports: Instacart Pricing Investigation
- Rural Food Deserts and Grocery Store Sustainability
- Dynamic Pricing Ethics - Harvard Business Review
Keywords
dynamic pricing, surveillance pricing, retail pricing strategy, grocery store pricing, consumer trust, brand strategy, international brands, US market entry, food deserts, rural grocery stores, ethical pricing, transparent pricing, FTC investigation, price discrimination, CPG strategy
