Digital Shelf Tags on Rise: Retailers Should Be Mindful Regarding the Price

With digital advancements growing exponentially, new trends are emerging in the retail industry to make the customer shopping experience more efficient and seamless. One advancement that gained popularity rapidly is digital price tags. These tags are small screens installed on retail shelves, displaying the product price and information dynamically and in real time. 

In an environment where customers expect business to be agile and quick, depending on paper labels for product representation affects the entire shopping experience. The sticker prices need to be changed frequently, leading to more significant work and utilization of paper, and one mistake in printing can lead to client dissatisfaction. 

Digital tags help overcome all such challenges by providing a dynamic and real-time solution. Staff can make changes in the price and product information in the back-end systems, and it will be updated on the product shelves. 

 It has been reported that Walmart intends to use digital shelf labels in 2,300 stores by the year 2026. Regional grocers, like Hy-Vee, Whole Foods, Amazon Fresh stores, and Schnucks (a midwestern grocery chain store), have also switched to digital tags, embracing the new technology that drives efficiency, all thanks to automation. 

However, the digital tags make the price changes quick, at times on an everyday basis, raising customer concerns about price gouging and dynamic pricing. Retailers should, therefore, be cautious while adopting the technology.

Why Retailers Should Be Mindful with Digital Price Tags?

Digital shelf tags make retail operations streamlined; however, customers are concerned regarding their appropriate use in the retail industry. Let’s understand the concerns associated with digital price tags: 

• Dynamic Pricing: These systems are integrated with third-party applications that offer dynamic pricing. Now, dynamic pricing changes the prices automatically according to inventory levels and customer demand. If the demand for a product is high and the inventory is low, the prices will rise automatically without any human interference. 
• Price Gouging: Price Gouging is another common issue that customers are vocal about. It is a business strategy of increasing prices excessively during high demand. For instance, a significant increase in the cost of holiday essentials than the actual costs during Christmas because they are in demand. Stringent laws against price gouging allow customers to complain about it anytime.
• Risk of Data Breach and Data Security: Digital Tags provide additional information about the products using QR codes. Customers can scan the code using their smartphones to access product details. The concern around this is hackers can easily steal user information when they scan the codes if the encryption technology of the digital shelf labels is not robust, raising fear of data breaches. 
• Access to Data: Customers are also developing an aversion to retailers’ monitoring of their shopping patterns, likes, and dislikes using digital labels, which they see as a breach of their privacy.

That’s why retailers must be careful and understand the critical role they play in the product’s pricing. Due to this, the US Federal Trade Commission has launched two investigations to understand the price. 

The first looks into how companies set prices for customers based on location and other data, and the second delves deeper into understanding why grocery prices remain high while there is a dip in retailer costs. Besides, according to the Civic Science survey held in March 2024, around two-thirds of US citizens consider dynamic pricing to be price gouging. 

How to Implement Digital Shelf Tags Carefully?

While digital shelf tags with dynamic pricing offer flexibility to retailers, they should be implemented carefully because the customers should not perceive the changes as opportunistic. That’s why here are some tips that you can implement: 

1. Display the price history alongside current prices to indicate when a product is on sale or discounted. Use phrases like Today’s Price or Flash Discount to attract customers. 
2. Set limits to avoid drastic price changes. Decide on a maximum allowable price to prevent spikes that can be seen as exploitative, especially during emergencies. 
3. Choose dynamic pricing software that reflects real changes based on demand and inventory levels, not just an arbitrary algorithm. For instance, with Intelligence Node’s solution, retailers can set pre-configured rules that reflect their pricing goals. So, the profit margins won’t be compromised, and the trust between the retailer and customer will not be eroded as well. 
4. Avoid making multiple changes in price in a single day. 

The Bottom Line

A coin has two sides. Communicating pricing decisions and algorithms with customers helps manage their concerns and build trust. Retailers decide upon Digital Price Tag installation after evaluating their business needs and customer expectations. If enhancing the shopping experience, reducing labor costs, and staying competitive in a tech-driven market are necessary, adopting this technology could be a strategic move. However, retailers must remain transparent and ethical in their pricing practices to promise long-term customer satisfaction and loyalty.