Electronic price tags: what if your orange juice cost more at 7 PM?

Should you pay more for your orange juice at 7 PM than at 10 AM? Supermarkets are adopting technologies that can change prices in real time. Discover how electronic price tags will disrupt pricing and why this innovation could transform your shopping experience and retailers’ profitability.

Tourism is often mentioned when it comes to revenue management. It must be said—whether we’re talking about accommodation, transportation, or theme parks—that they all have the necessary attributes for its implementation: a fixed and perishable inventory, segmentation, fluctuating demand, and marked seasonality.

The worlds of retail and mass distribution are somewhat different. There is a variable inventory—you can order additional stock if there aren’t enough sunscreens to cover the summer—and products are less perishable—the shampoo not sold today can be sold tomorrow, or even months later.

On the other hand, demand remains fluctuating and busy periods are predictable: on Saturdays or late in the day, there are more people—it’s sometimes the only time available to do shopping. As a result, inventory moves faster, restocking becomes more complex or slower, and variable costs increase (more staff are needed at the checkout and on the floor compared to a Tuesday morning when traffic is still low).

Should prices be adjusted accordingly? Should households be charged more for their fruit juice in the evening for the next morning because they have no choice but to shop “like everyone else”? Should those who plan their shopping outside peak hours be rewarded?

Retail: product obsolescence and seasonality

Not quite. First of all, retail is somewhat different from mass distribution.

In retail, inventory is even less perishable. Unlike a yogurt, a fan won’t expire; its only risk of losing shelf space is when a new model comes out and overshadows it. This kind of product “obsolescence”—due to the release of a new, more advanced, more technological, or trendier range—is often the starting point for clearance sales where products “expired” by time end up.

Moreover, although they are less perishable, their appeal can vary significantly depending on the time of year—there is definitely seasonality for products like fans or swimsuits. You’re more likely to buy these kinds of items before summer rather than in the middle of winter, when wood pellets are flying off the shelves, along with wood stoves, which are also popular.

The challenge for professionals is to identify periods of low demand and sell off their stock ahead of time, so they can replace it with other products on the shelves. Otherwise, they will incur storage costs until the product’s time comes again, and before the product’s life cycle definitively ends (for example, they will likely stop selling a T-shirt after a few years of the collection).

The idea of “how much is my customer willing to pay to have this product right now” is increasingly being leveraged. Some retailers have understood this so well that they raise their prices before summer—or winter, depending on the product—and even just before Christmas, those clever ones.

Mass distribution: constraints and dynamic pricing

So, what does it look like on the mass distribution side?

The idea behind revenue management, and more specifically dynamic pricing—let’s focus on this lever—is to identify the constraint. As mentioned earlier, the main constraint in supermarkets is the time slot: customers flock at 7 PM before closing. But the constraint doesn’t stop there; you also have to consider manufacturing, shelving, and restocking costs… Especially since storage capacity is limited, so you need to sell before you can restock and sell again.

So it’s not just about changing prices during peak hours, but also about considering all constraints—especially shelf and storage capacity—to optimize retailers’ revenues.

For this, technology takes center stage. To the dismay of some resistors, paper price tags will soon be a thing of the past—at least for those who want to optimize. Welcome to electronic price tags. In use for several years now, they allow easier price changes that can even be controlled remotely, in real time, much to the delight of pricing managers. Prices could therefore be adjusted based on real-time store traffic and even current stock levels. Ah, technology works wonders…

Our English friends have understood this well and use this technique to reduce food waste. When products are no longer as fresh, discounts are applied to sell fruits, vegetables, and meats before they have to be thrown away. It’s a winning combo for both waste reduction and logistics.

Mass distribution can therefore use real-time data on purchasing trends to automatically adjust product prices based on demand. If a product is selling slowly, price discounts will be used to boost sales, while if a product is in high demand, the price can be increased to maximize profits. These adjustments can be made dynamically throughout the day, based on factors mentioned earlier such as time of day, day of the week, and even weather conditions (aren’t you willing to pay 10% more for your tub of ice cream during a heatwave?).

Does that seem unfair to you? Not necessarily. For consumers, it also means competitive and fair prices because prices can be lowered for products with low demand—you might finally get to treat yourself to that chocolate mousse that’s been tempting you for two days. Moreover, with demand-based pricing, consumers are encouraged to shop on other weekdays or during off-peak hours, leading to lower crowds and a more pleasant shopping experience.

Casino, which had initially paved the way, has backtracked due to a poor strategy (increasing all prices by 30% on Sundays didn’t have the desired effect, due to a seasonal pricing schedule rather than dynamic pricing). According to a recent TF1 study, the Monoprix group, on the other hand, has taken the matter seriously.

As technology continues to evolve, it’s likely that electronic price tags will play an increasingly important role in supermarkets’ revenue management strategies in the future.