| PROSPERITY PUB MARKET TALK
The Future of Shopping… or a Wasteland of Price Gouging?
So-called “surge pricing” or “dynamic pricing” has had a place in certain sectors of business for decades.
For example, it’s no secret that airlines and hotels have, for decades, adjusted their prices based on demand, with busier times and areas costing more.
More recently, companies like Uber and Lyft have popularized the concept by changing the price of a ride based on real-time demand.
But if companies like Walmart and Wendy's have their say, the day is soon coming where you'll pay more for bottled water on a hot day or more for a burger during the lunchtime rush.
Earlier this year, the two companies announced new initiatives that would allow them to change prices dynamically.
In the case of Walmart, they are testing out new electronic shelf labels that can be updated as often as several times per minute. The company says the technology not only allows for rapid price changes but also enhances productivity by reducing the time employees spend manually updating prices.
According to Phil Lempert, a grocery industry analyst, these electronic labels can provide additional product information via barcodes, further enhancing the shopping experience for customers.
Dynamic pricing at Wendy's would be implemented via digital menu boards.
The company claims these boards "could allow us to change the menu offerings at different times of day and offer discounts and value offers to our customers more easily, particularly in the slower times of day."
Importantly, Wendy's claims that it does not plan to implement surge pricing in the traditional sense, where prices rise during peak demand times — for example higher burger prices during a lunchtime rush.
Despite these reassurances, it's hard to see why a company would completely overhaul its menu boards without at least an eye towards increasing its profits.
Critics, including Senator Elizabeth Warren, are calling the initiatives "price gouging."
One of the main criticisms is that these companies could easily raise prices during peak periods, fattening their profit margins while their costs remain the same — and the consumer is the one that loses out.
The backlash has been significant, with both companies receiving criticism online and in the halls of Congress. Consumers and lawmakers are concerned that dynamic pricing could lead to higher costs for everyday essentials, particularly during high-demand periods.
This could be seen as unfair, especially for those on tight budgets who rely on predictable pricing — and especially for a country already battered by years of post-pandemic inflation.
Walmart and Wendy's argue that the primary benefit of these technologies is increased efficiency and the ability to offer more targeted discounts — while analysts have pointed to the benefits of ensuring consistency between online and in-store pricing, rather than exploiting peak demand periods.
As these initiatives roll out, it remains to be seen how consumers will react to price fluctuations that can appear arbitrary or opaque. The success or failure of these tests could significantly impact how other retailers and restaurants approach pricing in the future.
Meanwhile, for two companies that are pursuing such similar initiatives, the stock performance of Wendy’s (WEN) and Walmart (WMT) could not be more different.
Over the past 5 years, WMT has surged nearly 105% — and is currently at all time highs.
Meanwhile, Wendy’s stock has languished in a sideways-to-down pattern where it currently sits at nearly 14% below its value in summer 2019.
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