‘Dynamic Pricing’ at Major Grocery Chain Can Vary Prices Depending on Your Income

Two U.S. senators are raising alarms about grocery chain Kroger’s artificial intelligence-driven “dynamic pricing” model.Senators Warren of Massachusetts and Casey of Pennsylvania, both Democrats, say the initiative, which Kroger presented as a way to enhance customer experience, might exemplify unchecked corporate greed.In a letter addressed to Kroger’s CEO, Rodney McMullen, the senators expressed concerns about potential privacy violations and the risk of increased inequality. The concern is that the grocery chain’s collaboration with an AI firm, IntelligenceNode, could result in customers incurring higher costs based on personal data used to gauge their purchasing thresholds.Since its introduction in 2018, Kroger’s dynamic pricing strategy has expanded to 500 of its nearly 3,000 stores. This includes a partnership with Microsoft to develop the Enhanced Display for Grocery Environment, a digital shelving label system. The technology allows employees to adjust prices with ease, adapting to factors such as time of day and demand — and sometimes even a shopper’s personal info, like preferences and income.“The EDGE Shelf helps Kroger gather and exploit sensitive consumer data,” the senators wrote. “Through a partnership with Microsoft, Kroger plans to place cameras at its digital displays, which will use facial recognition tools to determine the gender and age of a customer captured on camera and present them with personalized offers and advertisements on the EDGE Shelf.”“EDGE will allow Kroger to use customer data to build personalized profiles of each customer … quickly updating and displaying the customer’s maximum willingness to pay on the digital price tag—a corporate profiteering capability that would be impossible using a mere paper price tag,” they wrote.Ms. Warren highlighted on social media how digital pricing could enable stores to implement surge pricing, such as increasing the cost of water or ice cream during hot weather or raising turkey prices before Thanksgiving. Beyond these adjustments, Kroger is now exploring ways to customize pricing based on individual consumer profiles.With grocery costs being a major concern for American families, the senators pointed out that some chains employ methods like “shrinkflation” and “greedflation,” where product sizes decrease but prices remain high. This is despite the resolution of many supply chain issues that contributed to inflation during the pandemic.Kroger, which is considering a significant expansion through a $24.6 billion acquisition of Albertsons, reported an operating budget of $3.1 billion last year, maintaining gross profit margins above 20% for the past five years.“The increased use of dynamic pricing will boost company profits, leaving consumers to bear the cost,” the senators wrote. “It is unacceptable that as families struggle to afford groceries, companies like Kroger continue to implement surge pricing and other profiteering strategies.”A Kroger spokesperson said in a statement, “Kroger’s business model is to lower prices over time so that more customers shop with us, which leads to more revenue that we then invest in lower prices, higher wages, and an even better shopping experience. “Everything we do is designed to support this strategy, and customers are shopping more with Kroger now than ever because we are fighting inflation and providing great value. Any test of electronic shelf tags is to lower prices more for customers where it matters most. To suggest otherwise is not true.”

‘Dynamic Pricing’ at Major Grocery Chain Can Vary Prices Depending on Your Income

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