The Rise of Dynamic Pricing in Daily Life
From Benzene to Bocadillos
“A barge of Benzene for delivery next weekend? Hmm let me see…I sold a barge just this morning for delivery next month at $500/MT and I only have one left…I would have to switch quite a few things around to make the timing possible…but for you as a special case I could do that at a price of $525/MT.”
These words are instantly recognizable to any trader—change the specifics and every physical traders has been heard to say this at one time or another. That’s capitalism for you and I’ve been there too, as I wrote a few months ago.
This kind of dynamic, real-time pricing—based on availability, timing, and demand—isn't just a feature of trading floors anymore. It’s showing up in the most unexpected places. A recent article in The Wall Street Journal caught my eye: it described how Norwegian supermarket chain REMA 1000 is now using electronic price tags to adjust prices throughout the day. “Prices can change up to 100 times a day,” the article notes, “and more often during holidays.”
That reminded me of something else—a shift many of us experienced during the COVID era. As indoor dining adapted to distancing rules, restaurants began replacing paper menus with QR code stickers. We scanned them on our phones, accessed the menu online (pro tip: ask for the Wi-Fi password if you don’t have network access!), and placed our orders.
Wasn’t this the perfect setup for dynamic pricing in restaurants? Soon enough some restaurants set up a direct ordering system from the menu on my phone. What stopped the establishment from changing prices “on the fly” as the price of shrimps was higher that morning at the mercado or lowering the price of the sea bass later in the day if it was not selling?
Restaurants aren’t there yet (as far as I know!) but supermarkets like REMA 1000 are already ahead. REMA is not handing QR codes to their customers (God forbid!) but using an electronic display system to show prices and change them instantly from a back office location. They claim that the system is used to adjust prices (always downwards) during the day to match competition or move foodstuffs that may be getting close to expiry dates by discounting them. A similar system is used by the Albert Heijn (AH) grocery store chain in the Netherlands and Belgium.
As consumers, we are used to surge pricing at airlines, hotels, concert tickets, Uber (and for petrochemicals) but how would we react if we see surge pricing in our day to day shopping? Say I rush back to the store to buy a second carton of milk in the afternoon and the price was higher than it was for the first carton in the morning?
Let me hazard an answer—I would react very badly and maybe take my business elsewhere. It would be the same at a restaurant—if my bespoke bocadillo at the tapas bar across the street was priced differently each day, I would not be a happy customer.
However, according to the WSJ article, REMA and AH are using the dynamic pricing system to build trust and positive branding with their customers. Employees flag items that are about to expire and the electronic pricing system takes over. AH says that “This strategy helps the chain save around 250,000 kilograms (550,000 pounds) in food waste every year.” It also improves efficiency and reduces paper waste. These are strong positives, in my opinion.
REMA admits that prices can be changed upwards as well, but that this is only done overnight and not during store working hours.
So here’s the real question—from someone who’s lived and breathed markets: if we’ve already welcomed surge pricing in so many parts of modern life, how long until we accept it in our restaurants and supermarkets, too?
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Endnotes:
We did not change the price of Benzene hundreds of times a day, but some of the moves could be considered to be shocking!
Apparently the issue of dynamic pricing in grocery stores is a bigger issue in the US as well as in the UK, where it has caught the attention of lawmakers.
The pictures used above are from the WSJ article.
If you have seen electronic price labels in your supermarket, I would love to hear from you.
Very interesting paper.
Very interesting. I see why supermarkets argue dynamic pricing is there to build trust. Aren’t supermarket computer systems so advanced to the point they have really very little waste of end shelf life products ? Anything that does go very close to or hits the sell by date is often given to food bank charities and such like. I think they rely on these handouts. You highlight many interesting points. Thank you for this article.