How would dynamic pricing in UK supermarkets work?

For many people in the UK, the phrase ‘dynamic pricing’ will immediately conjure memories of the fiasco over ticket prices for last year’s Oasis comeback tour.

Under the system, the cost of a product is dictated by demand – and in August 2024, the demand for the return of the Gallagher brothers was enough to send prices soaring, prompting a furious backlash.

But a new report from the Bank of England reveals the wider public may soon be at the mercy of dynamic pricing every time they go to the shops.

A survey from the bank found that close to one in three businesses are planning to adopt a form of dynamic pricing in the next year, compared to just over one in five using it at the moment.

This might give you visions of a world where the price of a Cornetto is hiked up every time the temperature goes above 20°C, but it’s a little more insidious in reality.

In recent years, shops have been realising how useful tech such as algorithms and AI could be in setting prices.

It means they’re able to adjust according to the data they get on demand, capacity and even how much their competitors are charging – and this is happening already.

Using information they have collected, they can offer one person a particular promotion that another person does not see.

The Bank of England report said: ‘The result is different customers paying different prices for the same or very similar goods and services.

‘Through these practices firms are seeking to move towards the textbook view of “perfect price discrimination” – charging as close to the maximum price a consumer is willing to pay for a good or service.’

Increasingly, supermarkets in the UK are introducing electronic labels at the edges of their shelves to replace the more familiar paper versions.

While this change reduces waste – a country-wide increase or decrease in price would mean replacing a vast number of paper labels – it would also make dynamic pricing possible.

More than 700 Co-op shops around the country have electronic labels, and the company has said it aims to have them in all of its more than 2,300 UK stores this year.

Both Morrisons and Waitrose told the Times they had no plans to introduce dynamic pricing despite shifting to digital shelf labels.

An investigation by US consumer news outlet More Perfect Union last year found that certain US supermarkets appeared to use these labels to show different prices in different stores, in order to test how much people were willing to pay for certain products.

They would then allegedly use those experiments to charge the price that ensures the maximum amount of profit.

There is no indication British supermarkets are plotting to do similar, and the Bank of England suggested certain obstacles could prevent firms from ploughing ahead with dynamic pricing.

The report, co-authored by economists Clare Lombardelli and Rupal Patel, said: ‘Adoption in the UK may be limited more by reputational considerations than by technological ones.

‘Businesses may worry about the potential consumer backlash from changing prices in a way that is opaque and thought unfair.

‘International studies show that consumers in the UK are more likely than consumers in other countries to consider dynamic pricing unfair.’

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