The Price Tag May Know More About You Than You Know About the Price
Pricing technology can use location, shopping history and behavior to shape what consumers see. The harder question is whether consumers can tell when it happens.
Pricing technology can use location, shopping history and behavior to shape what consumers see. The harder question is whether consumers can tell when it happens.
By The Redemption Project Newsroom
Consumer Protection / Technology Desk
For most of retail history, the seller knew the price and the customer decided whether to pay it.
The emerging pricing system can know much more about the customer.
A Federal Trade Commission study of what the agency calls “surveillance pricing” found that pricing intermediaries have access to technology capable of combining consumer data, behavior and market conditions to influence prices, discounts, promotions and even which products shoppers see.
That does not mean every retailer is secretly assigning every customer a personal price.
It means the infrastructure to make pricing increasingly personal already exists.
The harder problem is that consumers usually cannot see how the system reached its answer.
Systems Explained: Dynamic pricing is not personalized pricing
Prices have always changed.
Airline fares rise as seats disappear. Grocery prices vary by market. Stores discount excess inventory or respond to competitors. Those are forms of dynamic pricing based primarily on the product, market or moment.
Personalized pricing introduces another variable:
the customer.
The FTC said pricing intermediaries it examined could draw from information such as location, demographics, browsing behavior, purchase history, website activity, items left in shopping carts and characteristics inferred from other data.
That information does not have to produce two different sticker prices to matter.
One shopper might receive a discount another never sees. One might be shown a cheaper product first while another sees a higher-margin option. A promotion can be personalized even when the shelf price remains unchanged.
The effective price changes without the price tag changing.
Walmart shows the difference between capability and use
Electronic shelf labels have drawn attention because they make large-scale price changes much easier.
Walmart has been expanding digital shelf labels in U.S. stores, saying they allow employees to update prices more efficiently while improving stocking and fulfillment. The company says shoppers at the same store receive the same prices and that the labels are not being used to change prices based on who is standing in the aisle.
The Redemption Project Newsroom found no evidence that Walmart is currently identifying individual shoppers through those labels and charging them personalized prices.
That distinction is important.
Digital labels demonstrate how quickly prices can now be changed.
They do not prove why a company changes them.
The technology determines what is possible. Company policy determines how it is used.
Instacart showed how invisible price differences can be
Instacart provides a more concrete example.
The company acknowledged that some retail partners used its Eversight technology to conduct randomized item-price experiments in which different customers could see different prices for the same products.
Instacart said those shoppers were randomly assigned rather than targeted according to income, demographics, shopping history or other personal characteristics. The company later ended the item-price experiments and says shoppers buying the same products from the same store at the same time should now see the same item prices.
That experiment was not the individualized surveillance pricing described in the FTC’s broader concerns.
But it demonstrated something important:
A digital marketplace can quietly show two customers different prices, measure their responses and conduct the experiment without either shopper knowing what the other person saw.
Airlines show where the line gets harder to see
Airlines already operate one of the world’s most sophisticated dynamic-pricing systems.
Delta has tested artificial-intelligence pricing recommendations from Fetcherr. Delta says the technology analyzes aggregated purchasing information, route demand, market conditions and other variables to help human analysts set fares.
The airline also says it does not give Fetcherr personal customer information and does not use personal data to determine an individual traveler’s price.
That produces a useful dividing line.
An algorithm estimating what people will pay for a Knoxville-to-Atlanta flight next Tuesday is pricing the trip.
An algorithm deciding what Brandon, Susan or John will pay based on what it knows about them would be pricing the traveler.
The public record reviewed for this article does not establish that Delta is doing the latter.
The distinction matters precisely because consumers have little ability to independently inspect the systems making those recommendations.
The accountability problem
Federal law does not generally require every customer to receive the same price.
Senior discounts, loyalty programs, negotiated prices, geographic differences and airline fare classes have existed for years. Different pricing can be legal and sometimes beneficial to consumers.
The harder questions begin when consumers cannot tell why they received a particular offer.
Did the price change because inventory was low?
Because demand increased?
Because a competitor changed its price?
Because the shopper lives in a particular ZIP code?
Because the system knows what that shopper bought last month?
Because another customer was offered a discount the first customer never knew existed?
Those are fundamentally different explanations, yet the consumer may see only one number on a screen.
What the FTC has — and has not — shown
The FTC’s work is important partly because of what it does not establish.
It does not prove that every company using advanced pricing software is individually targeting consumers. It does not establish that every personalized promotion is harmful or unlawful. And it does not show that every retailer has adopted the most aggressive capabilities available from pricing vendors.
What it establishes more clearly is capability.
Companies now have access to systems that can combine enormous amounts of information about consumers with increasingly sophisticated pricing decisions.
That changes the traditional relationship between buyer and seller.
The shopper can see the price.
The seller may be able to see the shopper’s location, purchase history, browsing behavior, likely preferences and response to previous prices.
Only one side can see the whole transaction.
That is the accountability question policymakers and consumers now have to confront.
Personalized pricing does not become troubling simply because an algorithm changes a number.
It becomes difficult to evaluate when the seller knows why you received that number — and you do not.
For most of retail history, the customer could ask, “What does this cost?”
The emerging question is harder:
“Why does it cost this much for me?”
I am a retired detective and criminal justice / government educator based in Tennessee. I am a commentary write for Tennessee Lookout and a weekly columnist with Knox TN Today. My work examines public policy, public safety systems and civic responsibility. My reporting and commentary have also appeared in Governing, The Arizona Capitol Times, South Florida Sun Sentinel, Police1, among other state and regional outlets.
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