Dynamic pricing in UK supermarkets: focus on trust, not hype

The Bank of England’s recent analysis warning that electronic shelf labels (ESLs) could enable real-time, algorithm-driven price changes has triggered a wave of public concern.

Major retailers including Morrisons, Co-op, Waitrose, and Asda are actively rolling out ESL technology across their store estates, with Tesco and Sainsbury’s understood to be in trial phases. The prospect of grocery staples fluctuating in price based on time of day, footfall or demand has alarmed consumer groups and prompted fresh scrutiny of the sector.

My firm delivers insight-led category management consultancy to brands and retailers across the FMCG sector. Much of the current alarm rests on a misunderstanding of what dynamic pricing means in a grocery context.

Let’s be honest, dynamic pricing is as old as the hills. Supermarkets have been using it for decades, particularly on the petrol forecourts where prices shift with the market. It’s common practice to see a 10% premium in convenience formats or station shops simply to cover the higher overheads of those locations.

I know, however, that the technology underpinning pricing decisions is changing rapidly, and that this shift carries real implications.

We’re moving away from manual labellers toward Electronic Shelf Edge Labels. This tech allows head office to trigger price updates across the entire estate instantly. While major players like Tesco are still in the proof-of-concept phase, a wider rollout feels inevitable.

The broader macroeconomic context as a key driver of the public’s heightened sensitivity to pricing. With global markets unsettled by ongoing geopolitical tensions, including the fallout from the US/Iran conflict, many households are already bracing for inflationary pressure. That anxiety is compounded by the fresh sting many consumers still feel from dynamic pricing in other areas of their lives, not least the furore over surge-priced concert tickets, where fans found themselves paying multiples of the face value as demand spiked.

People are bracing for price hikes, and the idea that those increases could hit the shelves immediately, without giving households a chance to budget, is what’s rattling cages.

At the heart of the debate is not pricing mechanics, it is the relationship between retailers and the public they serve.

Ultimately, the backlash against dynamic pricing comes down to a crisis of trust. Shoppers are asking: ‘Is the cost-of-living crisis just a convenient excuse to squeeze us?’ It’s an understandable question, but when it comes to the UK’s Tier 1 grocers, there’s little evidence to support it. These are highly regulated, reputationally conscious businesses operating under intense public and media scrutiny. While isolated bad actors may exist in the broader retail landscape, painting major grocers with the same brush does them a disservice.

The UK’s major supermarkets operate under an exceptionally high level of public and regulatory scrutiny, a factor that I believe should temper the most alarmist interpretations of the ESL rollout.

The reality is that most retailers loathe raising prices; they’d much rather absorb the hit to stay competitive. They are under a microscope held by the government, the media, and savvy shoppers. You’ve got independent benchmarks like The Grocer 33 ranking their baskets every single week. In this industry, there is nowhere to hide.

My concluding message is one of nuance: dynamic pricing, used responsibly, is a commercial necessity for businesses operating on extremely tight margins, not a mechanism for profiteering.

We have to remember these businesses run on wafer-thin margins. While dynamic pricing might feel aggressive, it’s often a tool for survival, allowing them to manage spikes in operating costs so they can keep the staples affordable in the long run.