Making the case for dynamic pricing in grocery

What’s the first thing that comes to mind when you hear the term ‘dynamic pricing’? If it’s a recent – and very public – controversy, then you’re probably not alone. From “furious” reactions to Ticketmaster’s handling of the Oasis reunion tour¹ through to the growing adoption of surge pricing in the robotaxi industry², dynamic pricing has been grabbing headlines for all the wrong reasons over the past couple of years.

Much as these incidents might feel like cautionary tales for businesses, though, they don’t really tell the full story – particularly when it comes to the grocery industry. With the right strategy in place, dynamic pricing can actually reduce waste, boost loyalty, and deliver real value for customers. Let’s see how.

An old idea made new

Dynamic pricing isn’t a new concept. Travel operators have been using it for years already, setting the prices of flights, hotels, and taxis based on fluctuations in customer demand. As time has gone by, though, dynamic pricing has begun to creep into a range of other industries. Amazon’s pricing system now makes more than 2.5m changes per day³, for instance, while fast-food brands are starting to experiment with price adjustments based on time of day⁴.

Grocery isn’t immune to that trend, but – again – dynamic pricing isn’t really a new concept here. Back when most people shopped at local stores like butchers and greengrocers, they had the option to barter or negotiate with store owner. And even today, market shoppers may be more likely to get a bargain later in the day when a seller wants rid of their stock. Grocery and dynamic pricing have gone hand-in-hand for decades already.

What is new, of course, is the sheer sophistication and scale at which dynamic pricing can now be implemented across the grocery landscape – and that’s a change that presents opportunity and threat in equal measure.

Keeping pace

Before we get into the potential risks and benefits of dynamic pricing, let’s take a moment to look at some of the different ways in which it can be applied.

Much like the marketplace example above, one of the clearest use cases here relates to shelf life. Through a combination of smart packaging data and electronic shelf labels (ESLs), a retailer can give shoppers the opportunity to buy short-dated stock at a discount. Rolling this kind of initiative out en masse can help to drive revenues and reduce waste in equal measure; Germany’s METRO saw a 15.3% drop in food waste in the first year of implementation, for example⁵.

Waste isn’t the only issue that dynamic pricing can address; it can be used to defend against rival retailers, too. At Norway’s REMA, for instance, dynamic pricing is used to help maintain a competitive position throughout the day⁶. A network of “price hunters” keep watch on the cost of goods at competing stores, enabling REMA to update its own pricing in response. REMA makes as many as 2,000 changes a day, with prices only ever dropping rather than increasing.

Understanding the risks

While the potential applications of dynamic pricing might be clear, there are of course some risks for retailers to be aware of. One of the major ones – as alluded to above – is that of public perception. Dynamic pricing is often associated with price gouging and profiteering, the response to which can be vocal to say the least. Take Wendy’s announcement of digital pricing boards, which necessitated significant damage control after an audible public response⁷.

There’s also the issue of exploitation to consider. While Uber’s surge pricing during the June 2017 London terror attack⁸ may be an extreme example, it isn’t hard to see how similar (albeit less egregious) examples could play out in the grocery space. Higher priced ice creams on sunny days? Uplifted umbrellas during a rainstorm? Both would likely draw the ire of customers and media – and rightly so.

Finally, there’s the perennial issue of differentiation to take into account. If REMA’s competitors responded in kind, then a race to the bottom could quickly be the result. Price wars – and eroding profit margins – would rapidly follow.

Counting the benefits

The risks associated with dynamic pricing may be pronounced, but so too are the benefits. When it’s applied effectively – and with a genuinely “Customer First” mindset in place – dynamic pricing can be a win-win for both shoppers and retailers.

For customers, dynamic pricing can:

• Give them greater ownership over their purchasing decisions.
• Create opportunities to get products at lower prices.
• Give them greater confidence in a store’s competitive position.

For retailers, it can help them:

• Drive up customer satisfaction through lower prices and greater choice.
• Meet environmental, ethical, and financial targets by reducing food waste.
• Optimise inventory management by managing sell-through.
• Boost traffic during traditionally quiet times.

Final thoughts

If a retailer is going to manage prices dynamically across their estate, there are certain considerations and investments that need to be taken into account. The staffing costs associated with updating pricing tickets mean that ESLs are a must, for instance. ESLs come with a sizable upfront cost of their own, of course, especially for chains with stores numbering in the hundreds.

Dynamic pricing also increases the need for data quality and completeness, particularly when product shelf life is involved. At that point, every barcode and date needs to be 100% accurate, all the way down to store level.

This is where a tool like dunnhumby Price can help. Optimising prices based on wide range of criteria, dunnhumby Price also supports automatic pricing features, making it easy for retailers to roll out updates to their entire store network in real time. Learn more about dunnhumby Price here or simply get in touch to find out how it can benefit your own dynamic pricing strategy.

1 Fans urge Oasis to refund difference after 'dynamic pricing' strategy hikes prices – The iPaper, 1^st September 2024
2 Surge pricing, the scourge of ridehailing, is evolving for the robotaxi era – The Verge, 19^th April 2025
3 Amazon Pricing Strategy: Ultimate Guide – Sellberry, 22^nd June 2025
4 Your Wendy’s Order Could Cost More During Peak Hours In 2025 – Southern Living, 27^th February 2024
5 German Supermarket METRO Experiments with Dynamic Pricing – Packaging World, 23^rd January 2023
6 Is dynamic pricing feasible within supermarkets? – Supermarket News, 7^th March 2024
7 Wendy's denies plans for surge pricing after backlash – BBC News, 28^th February 2024
8 Uber has refunded customers caught up in London terror attack – Business Insider, 5^th June 2017