Will dynamic pricing increase your shopping bills?

From gig and event tickets to booking a flight, we’re already experiencing price hikes based on competition from other shoppers. Demand-led price increases might affect the price you pay for a taxi, or the cost of a hotel room. A new report from the Bank of England found 21 per cent of businesses in the UK already have some form of “market-responsive” pricing structures, and this is projected to rise to a third (31 per cent) next year.

The BoE report caused quite a kerfuffle by suggesting the next frontier for dynamic pricing could be supermarkets, as they roll out digital displays in store instead of paper price tags. This would make it easier for supermarkets to potentially increase prices immediately depending on customer demand. Remember when the nation went toilet roll crazy over the pandemic? Imagine paying £20 for a pack of four loo rolls in a similar scenario?!

The good news is supermarkets have more or less all issued assurances they won’t introduce demand-driven pricing. But who’s monitoring them? And how do we know we’re paying a fair price?

The problem with prices

In the UK we have a number of laws and regulations that protect us from being ripped off, but they often don’t adapt easily to the way we shop. The Competition and Markets Authority (CMA) monitors anti-competitive behaviour and can fine firms that aren’t following existing laws and regulations. The Advertising Standards Agency (ASA) can look at how shops advertise prices and sales promotions to see if they are fair. But we don’t have a regulator for the retail industry to monitor the supermarkets all the time to see if they’re following the rules.

Another problem is that supermarkets already charge different prices for the same items online and in-store, in different places and in different outlets. You may pay more for some goods in a smaller inner-city shop than in a bigger store. You may also miss out on better promotional offers depending on where you live too.

Dynamic pricing or discounting?

Yet another issue is the way goods and services are priced as retailers use discounts and limited time offers to get around accusations of overcharging.

When fans tried to buy tickets for Oasis last year, many thought Ticketmaster was using dynamic pricing to overcharge them. When the CMA investigated they found prices didn’t go up based on demand. But only a small number of “affordable” tickets were available, which sold out almost immediately, after which the next tiers of pricing were much pricier. Some VIP packages were indistinguishable from normal tickets. So even though dynamic pricing wasn’t the culprit, it certainly felt like it – this seemed fundamentally unfair.

It’s also possible to manipulate prices to give the impression of discounts when you are charging more. If it’s raining and I increase the price of umbrellas from £5 to £6, that’s dynamic pricing. But if weather reports say it’s likely to rain in two days, I can increase the price of umbrellas to £7 on Day One then cut that price to £6 on Day Two when it rains. I can argue you’re paying £1 less when you’re actually paying £1 more.

Ultimately, technology can be harnessed for good and ill – but we can use the tools too. There’s nothing to stop us using AI to compare prices of goods and find the cheapest place to shop, for example. But we all need to be wary of businesses that are using dynamic pricing without telling us how it works – and without the oversight of a regulator.

Martyn James is a top consumer rights campaigner, TV and radio broadcaster and journalist. Read more from him at this link.