At this stage, dynamic pricing is both well known and regularly in the news. The process of looking at flight costs using private browsers or different devices in an attempt not to push up prices has become par for the course now that technology is at a place where companies are able to adapt how much something costs in real time. The most famous example of this in recent times was when tickets for the Oasis tour were on sale in 2024, when the surging prices were so controversial that the conversation went all the way to government.
According to a recent report by the Bank of England, digitalisation has allowed organisations to drastically reduce what economists call ‘menu costs’, which were originally associated with the need for new menus to be printed every time the prices updated. Now, online platforms can dynamically alter their prices with demand at little cost, with roughly 80% of hotel room rates now changing at least once a month, compared to just 15% in 2005. This is something that we see every day in petrol prices and on our phones through apps like Uber and Deliveroo which have surge pricing and regularly changing discounts depending on demand.
The discourse we were seeing online only seemed to scratch the surface of what this could truly mean for the sector, so we decided to reach out to our network to dive deeper.
Recently, we have been hearing more and more about how digital dynamic pricing is physically entering our retail spaces, particularly in grocery. The idea of different prices for different people in grocery is far from new, as bartering at local stores and greengrocers is as old as retail itself. However, with the human element removed, and online retailers like Amazon making more than 2.5 million changes to its prices every day, this potential shift has caused quite a stir. The discourse we were seeing online only seemed to scratch the surface of what this could truly mean for the sector, so we decided to reach out to our network to dive deeper.
Speaking to leaders in grocery and retail, we found that, as we suspected, dynamic pricing in this space is much more complex than simply adjusting prices to fit demand. Through our conversations we discovered that contrary to popular understanding, for retail, dynamic pricing is best utilised to manage inflation rather than to increase margins. For example, if inflation was coming through on protein or another essential category, dynamic pricing could be used to increase the price of a non-essential item like tobacco instead. Rather than disadvantaging the customer, it would actually be used to help protect the price of core produce like milk, and by extension protect the customer.
Further to that, it could also be a tool to help shape behaviour. Another leader gave us the example that a packet of crisps could be altered so it wasn’t cheaper than an apple with dynamic pricing, but without that option, the retailer would be bound by inflation in order to protect margins.
Contrary to popular understanding, for retail, dynamic pricing is best utilised to manage inflation rather than to increase margins.
E-ink electronic shelf labels (ESLs) have been the first step in making this possible. Sometimes barely noticeably different from a regular label, they are essential in enabling the dynamic pricing strategy as they remove the need to manually change prices. However, having ESLs alone isn’t sufficient – there also needs to be solid modelling and capability. We were told that this means creating backend analytical modelling and harnessing AI which, as in so many other areas in 2026, is a crucial element to the overall success. In practice this means using elasticity modelling to examine how price changes affect demand, while AI systems learn over time how to find optimised prices.
Operationally, the technology and capability are there, but this version of in-store dynamic pricing is still a relatively new concept in retail, so with that, comes inevitable questions and teething problems.
The first is that dynamic pricing, which fluctuates in real time based on immediate demand, inventory levels or competitor pricing, often gets confused with differential pricing, (when different segments, such as age, pay different prices) and analytical pricing (advanced analytics are used to determine a customer’s willingness to pay). Understanding the distinction between the three approaches has been a foundational issue that many retailers have not yet resolved, with some confusion even making its way up to C-suite level.
Operationally, the technology and capability are there, but this version of in-store dynamic pricing is still a relatively new concept in retail, so with that, comes inevitable questions and teething problems.
The second is the question of how it is actually implemented, and this confusion over the different types of pricing has meant that retailers haven’t really agreed on what dynamic pricing truly is.
There are two methods here with differing levels of controversy. The more widely accepted is prioritising the operational and customer-first benefits. This could include managing waste, supply and volume which in reality would both reduce the need for the in-store offer section, and also make reducing waste easier by lowering the price of produce without the need to physically apply yellow stickers.
It can also be used to remain competitive with other retailers. In Norway, grocer REMA used dynamic pricing to make 2,000 pricing changes a day, but these were only ever to lower the price. Doing so kept it ahead of the curve and competitive.
With any form of dynamic pricing in grocery, it is transparency with the customer that is the key to success.
The less accepted version of dynamic pricing which has raised far more questions is the process that is led by personalisation and data. This works by using analytical pricing, harnessing personal data to offer different prices to different customers based on their shopping habits or location. One leader explicitly told us that it felt indefensible to increase the price of product because of a customer’s location, while another highlighted that with any form of dynamic pricing in grocery, it is transparency with the customer that is the key to success.
Taken together, these two approaches point to a wider divide. On one side sits a version of dynamic pricing that is operational, visible and broadly understood; on the other, a more complex form that raises questions around fairness and transparency. The technology underpinning both may be the same, but the response from customers is not. As one leader put it to us, success depends less on how sophisticated the system is, and more on whether people feel it is working for them, rather than against them.
Unlike flights, hotels, taxis and takeaways, food isn’t an optional expense but a life essential. So although we were told that there is plenty to learn from more contemporary brands which are using dynamic pricing in their models, and operationally in-store dynamic pricing is ready to go, there is an extra level of thought that needs to go into the implementation of it in retail.
If you have any thoughts or insights on this topic, we’d love to hear from you.
