Shoppers may face higher prices as retailers look set to use digital labels that could change the cost of products based on demand.
The Bank of England warned that these ‘market-responsive pricing tools’ will be adopted by one in three companies in the coming year, up from one in five in the year before.
These ‘dynamic prices’ will change based on algorithms and AI, with the labels adjusting to ‘demand, capacity or competitors’ prices’, according to a business survey commissioned by the Bank.
Factors that could affect these prices may take into account the weather, the time of day, and how busy the shop is. For example, if it is a hot day, then the price of sunglasses may be increased.
This is something that online retailers, like Amazon, have already adopted. Hospitality and travel businesses do much the same, with prices changing based on popularity or times of the year.
The study then suggests that electronic labels in supermarkets could be the next frontier – something which is ‘already widespread in Europe’.
UK retail food prices are already 38 per cent higher than pre-Covid levels and experts fear further significant increases if disruption caused by the war in Iran continues.
This British Retail Consortium graph shows how CPI inflation since 2020 stands at 29 per cent – below overall food inflation and median employee earnings which are both about 38 per cent
Britain’s most popular supermarkets have already begun introducing or testing digital price displays, but there is no evidence that they are using surge pricing.
Around 700 Co-op stores use electronic labels currently, with plans to extend it to all 2,300 shops.
Morrisons are also looking to use the tech in all its 497 stores, telling The Times that it was intended to eliminate paper labels and was not using dynamic pricing.
Waitrose similarly will extend the digital labels to all of their supermarkets but reportedly have no plans to bring in surge pricing.
Tesco and Sainsbury’s have been testing the displays and Asda will roll them out to their 250 ‘Express’ supermarkets.
Events and concerts often bring dynamic prices to the forefront, with hotel prices surging up to 156% in London when Taylor Swift performed her hugely popular Eras Tour.
Dynamic pricing in hotels is more popular than before, the study highlighted, with about 15 per cent of room rates adjusting at least once a month in 2005, but happens around 80 per cent of the time nowadays.
Clare Lombardelli, the deputy governor for monetary policy, explained: ‘Digitalisation has radically reduced what economists call menu costs – the expense of changing listed prices – so–called historically because of the costs associated with having new menus printed with updated prices. Digital pricing allows firms to change prices frequently at negligible cost.’
Ms Lombardelli and Rupal Patel, who wrote about the study, said: ‘Personalised pricing goes further still and may involve tailoring the price each consumer is offered to their personal circumstances and consumption patterns.’
Shoppers may face higher prices as retailers look set to use digital labels that could change the cost of products based on demand
| Generic Product | 31/3/21 | 31/3/26 | £ change 26v21 | % change 26v21 |
|---|---|---|---|---|
| Pampers Baby Dry Size 4 Essential Pack 44 Nappies | £7.38 | £10.75 | £3.37 | 45.69% |
| Aptamil 1 First Baby Milk Formula Powder from Birth 800g | £11.35 | £13.32 | £1.97 | 17.36% |
| Hovis Soft White Medium Sliced Bread 800g | £1.09 | £1.39 | £0.30 | 27.13% |
| Own Label 8-6 pack Crumpets | £0.30 | £0.46 | £0.16 | 55.08% |
| Own Label Olive Oil 1ltr | £2.85 | £6.66 | £3.81 | 133.48% |
| Yorkshire Tea Bags 250g | £2.64 | £4.36 | £1.72 | 65.28% |
| Smirnoff No. 21 Vodka 37.5% vol 70cl | £15.00 | £18.62 | £3.62 | 24.12% |
| Own Label Penne Pasta 500g | £0.50 | £0.69 | £0.20 | 39.39% |
| Own Label Semi Skimmed Milk 2 pints | £0.80 | £1.20 | £0.40 | 50.00% |
| Cathedral City Mature Cheddar Cheese 350g | £2.80 | £3.29 | £0.49 | 17.53% |
| Own Label Beef Steak Mince 5% Fat 500g | £2.59 | £5.19 | £2.60 | 100.39% |
| Own Label Granny Smith Apples 5-6 pack | £1.47 | £1.76 | £0.28 | 19.30% |
| Own Label Chicken Breast Fillets 950-1kg | £5.08 | £6.69 | £1.62 | 31.87% |
| Own Label 8 Pork Sausages 454g | £1.50 | £1.91 | £0.41 | 27.42% |
| Own Label Whole Cucumber | £0.44 | £0.99 | £0.56 | 127.59% |
| Own Label Maris Piper Potatoes 2.5-2kg | £1.24 | £1.84 | £0.60 | 47.89% |
| Own Label Free Range Medium Eggs 6 pack | £0.84 | £1.79 | £0.95 | 113.43% |
| Own Label British Double Cream 300ml | £1.01 | £1.69 | £0.68 | 67.08% |
| Own Label 0%/Low Fat Yogurt 500g | £0.84 | £1.10 | £0.27 | 31.74% |
| Birds Eye 10 Breaded Cod Fish Fingers 280g | £3.13 | £4.50 | £1.37 | 43.84% |
| Own Label Thick Bleach 750ml | £0.42 | £0.75 | £0.33 | 79.64% |
| Cadbury Dairy Milk Chocolate Bar 110g | £1.25 | £2.02 | £0.78 | 62.45% |
| Ambrosia Rice Pudding Can 400g | £0.81 | £1.74 | £0.93 | 113.85% |
| Own Label Plain Flour 1.5kg | £0.58 | £0.75 | £0.17 | 29.57% |
| Nescafe Gold Blend Instant Coffee 200-190g | £5.96 | £8.19 | £2.23 | 37.40% |
| TOTAL | £71.82 | £101.61 | £29.79 | 41.48% |
| Data sourced by Assosia for the Daily Mail is based on the average pre-promotion price on March 31, 2021 and March 31, 2026 across Tesco, Sainsbury’s, Asda and Morrisons | ||||
And while these digital labels ‘introduce opportunities for efficiency’, they also raise ‘concerns about fairness’.
Martyn James, a consumer rights expert, told The Times that he was concerned about retail giants adopting dynamic pricing, despite early promises not to.
He highlighted other industries, like concert tickets or airline fares, using this method: ‘In almost every other sector, from airline fares to gig tickets, providers have misused their powers to change pricing without any official oversight in real time…
‘So how can we trust [supermarkets] to use digital pricing solely to update the cost of items without price manipulation?’
But even if this ever came to be, he said it would be a good way into the future, as the technology behind these price adjustments is very expensive.
