The Price Tag Isn’t Dangerous, But the Algorithm Behind It Might Be

By David Price 
Professor of Marketing Business 
Brenneman School of Business 
Washburn University 

For more than a century, one of the most familiar objects in retailing has also been one of the simplest: the price tag. A retailer decides what an item costs, an employee prints or writes the price, and a small piece of paper tells the customer what he or she will pay. That rather mundane part of shopping is undergoing a significant technological transformation. 

Retailers around the world are increasingly replacing traditional paper price tags with digital shelf labels (DSLs), also known as electronic shelf labels (ESLs). These small electronic screens are attached to store shelves and display the price and other information about the products above them. Instead of an employee physically replacing a paper tag whenever a price changes, a retailer can update thousands of prices electronically from a centralized computer system. 

At first glance, this might seem like little more than replacing paper with a tiny screen. From a marketing perspective, however, digital shelf labels could fundamentally change one of the most important elements of the marketing mix: price. And that presents retailers with both an extraordinary opportunity and a significant challenge. 

What Exactly is a Digital Shelf Label? 

A digital shelf label is essentially an electronic version of the traditional paper price tag. Most use low-power electronic-paper displays similar to those found in e-readers. They can show the product name, price, unit price, promotional information, barcodes, QR codes and other helpful information. The important difference is that the label is connected electronically to the retailer’s pricing and inventory systems. 

Imagine a supermarket with 30,000 different products. Under the traditional system, changing 2,000 prices means printing 2,000 new labels and having employees walk through the store locating the correct products and physically replacing those labels. With digital shelf labels, those changes can be transmitted electronically. 

The scale of the potential efficiency is substantial. The Food Industry Association reports that the average grocery store changes more than 7,000 price tags manually each week. Large chains may print millions of shelflabels every week. Digital labels can synchronize shelf prices with point-of-sale systems, reducing both the labor involved and the possibility that the shelf price differs from the price charged at checkout. 

One prominent example is Walmart. The company reported in 2026 that approximately 2,300 locations were already using them, with plans to expand the technology throughout all its U.S. stores by the end of the year.The technology, therefore, isn’t merely replacing a piece of paper, it is becoming part of the store’s larger digital infrastructure. Walmart says a price-change process that once could require employees to spend days replacing labels can now be accomplished in minutes. Kroger has also implemented DSLs in approximately 25% of its grocery stores nationwide.   

Why Retailers Like the Idea  

The most obvious attraction is labor efficiency. Changing paper price tags is repetitive, time-consuming work. Every hour an employee spends replacing shelf labels is an hour that cannot be spent stocking products, helping customers, filling online orders or performing other tasks. Digital shelf labels substantially reduce that work. 

A second benefit is pricing accuracy. Nearly every regular shopper has experienced the frustration of seeing one price on a shelf and another at the register. Sometimes an old promotional label was never removed, or perhaps an employee simply missed a price change. When the shelf label and checkout system receive information from the same digital pricing system, those discrepancies can be greatly reduced. 

Third, digital labels provide retailers with considerably greater pricing flexibility. For example, a supermarket with too many cartons of strawberries approaching their sell-by date could quickly reduce the price rather than have employees locate and relabel every package or shelf display. Prices could also respond more quickly to inventory conditions or competitive changes, or a retailer could introduce a promotion almost immediatelyacross hundreds of stores. This flexibility can benefit consumers by offering faster markdowns of perishable foods and reduce food waste while giving shoppers access to lower prices. 

There are environmental benefits too. Retailers routinely print and discard enormous quantities of paper labels, so by eliminating millions of continuously replaced paper tags this has obvious appeal. Finally, DSLs can communicate considerably more than price. Depending on the system, a label can display promotions, nutritional information, allergens, country of origin or QR codes connecting shoppers to additional information.Essentially, the physical store begins to acquire some of the information capabilities consumers have become accustomed to online. 

The Elephant in the Aisle: Dynamic Pricing 

The feature creating the most controversy is also one of the most interesting from a marketing perspective. Once prices can be changed electronically, they can theoretically be changed very quickly and frequently. This creates the possibility of dynamic pricing. 

Dynamic pricing is a system where prices can change in real time based on many factors such as demand, time of day, inventory levels, or customer data collected through apps and online shopping behavior.Consumers already encounter dynamic pricing regularly in other industries: airline tickets may cost considerably more on Friday than on Tuesday, hotel rooms become more expensive during major events and Uber fares increase when demand suddenly rises. We as consumers have become begrudgingly accepting of this.  

But suppose temperatures suddenly reach 100 degrees, could a retailer immediately increase the price of bottled water? Could umbrellas become more expensive when it starts raining? Could snacks and beer cost more shortly before a major football game? This has been described as surge pricing, a specific type of dynamic pricing. Whereas dynamic pricing is a broad strategy where prices change continuously based on many factors, surge pricing is a reactive tactic focused only on raising prices during sudden spikes in demand. 

Technologically, DSLs make these strategies easier. Digital shelf labels remove much of the physical obstacle preventing that price from changing easily, and that possibility has generated political and consumer concern. As early as 2024, U.S. Senators Elizabeth Warren and Bob Casey questioned Kroger about whether electronic shelf labels could facilitate grocery surge pricing. 

Retailers including Walmart strongly deny using DSLs for surge pricing. Walmart says its prices remain the same for everyone shopping in a particular store regardless of demand, time of day or the identity of the shopper, and says its planned price changes are typically implemented outside normal shopping hours. 

It is important, therefore, not to confuse capability with current practice. Emerging academic evidence suggests that this feared scenario has not (at least yet) occurred. A study examining transaction data from a U.S. grocery retailer operating more than 100 stores found virtually no surge pricing either before or after DSLs were introduced. Industry groups make similar arguments, emphasizing pricing accuracy, markdowns and operational efficiency rather than surge pricing. 

But there is an even more controversial possibility. What if the price does not merely depend upon when someone shops, but upon who is shopping? 

From Dynamic Pricing to Personalized Pricing 

Let’s consider a hypothetical future supermarket: A retailer’s app recognizes that a customer enters the store. The retailer knows from years of purchase history that this person buys the same brand of coffee almost every week and rarely switches brands. Could an algorithm determine that this particular shopper is willing to pay $11.49 while a more price-sensitive customer is offered $9.99? 

That would represent a transition from dynamic pricing to personalized pricing, sometimes described by critics as surveillance pricing. When companies use your personal data and online habits to set a unique, individualized price for a product or service. This possibility is not as far-fetched as it may sound. Retailers already possess enormous amounts of customer information through loyalty programs, mobile applications, online shopping histories and other sources. Artificial intelligence now makes analyzing that data far more sophisticated. 

New Jersey Governor Mikie Sherrill recently signed the Fair Price Protection Act that places a ban on firms using consumer data to set individualized prices. The ban places a one-year moratorium on the use of new DSLswhile they study the technology. This follows other states like Maryland that have implemented a new bill passed in 2026 that stops large food retailers and delivery apps from using personal data to raise individual prices. 

For now, it seems, the immediate concern may not be what retailers are doing, but what the technology makes it possible for them to do in the future. For marketers, this raises a fascinating question: Just because we can identify a customer’s maximum willingness to pay, should we? 

The Consumer Trust Problem 

Perhaps the greatest danger of digital pricing is not technological at all; it's psychological. Consumers generally understand that prices change, but what matters is whether those changes appear fair. For example, ashopper may happily accept a 50% markdown on bread shortly before closing because the reason for the price reduction is understandable. The same shopper might be furious to discover that bottled water became 50% more expensive during a heat wave. 

Economically, both are examples of prices responding to market conditions. But psychologically, they are very different. This distinction matters because consumer perceptions of price fairness affect trust, satisfactionand long-term loyalty. So, a retailer could create an algorithm that generates greater short-term revenue while simultaneously damaging one of the most valuable assets in marketing: the customer’s trust in the brand. 

If consumers begin wondering whether a price increased because they arrived at the wrong time, because demand suddenly increased or even worse, because an algorithm decided they personally would tolerate a higher price, the simple price tag becomes a source of suspicion. That is not a desirable outcome for retailers. 

The digital shelf label itself does not create the system. It alone does not contain a camera, identify customers or collect personal information. But when digital pricing, retailer apps, loyalty databases and artificial intelligence are combined, the technological ingredients for increasingly individualized pricing begin to exist. Customer data provides the information, and artificial intelligence increasingly provides the decision-making capability. The digital shelf label now can provide the mechanism. 

What Will the Future Look Like? 

The safest prediction is that DSLs will become increasingly common, the economics are simply too compelling. Retailers gain faster price changes, lower labor requirements, greater accuracy, better inventory integration and the ability to connect the physical store with digital information systems. The more interesting question is what retailers will eventually do with that capability. 

In the relatively benign version of the future, DSLs simply make stores operate better. Prices are more accurate, promotions appear immediately, and products approaching expiration are automatically marked down, creating less waste. Customers receive better product information while employees spend less time changing paper tags. 

In a more aggressive version, retailers begin experimenting with increasingly dynamic prices based on inventory, competitors, weather, demand and time of day. And in the most controversial version, artificial intelligence and customer data eventually allow retailers to move toward individualized pricing based upon what algorithms believe particular consumers are willing to pay. Government will almost certainly have something to say about where those boundaries should be drawn, as policymakers are now debating restrictions on dynamic and surveillance-based pricing, particularly for essential goods such as groceries. 

A Marketing Question, Not Just a Technology Question 

Digital shelf labels illustrate a recurring lesson in marketing: technological capability frequently develops faster than consumer expectations and social norms. There is nothing inherently sinister about a digital price tag. In many respects, replacing millions of pieces of paper with accurate electronic displays is a logical modernization of the retail store. We can see the benefits are real, but so are the concerns. 

The danger is not the little electronic screen attached to the shelf; the danger arises from what can eventually be connected to it: enormous customer databases, sophisticated pricing algorithms and artificial intelligence capable of estimating exactly how much each of us might be willing to pay.  

Therefore, retailers will face an important strategic choice: 1) They can view digital pricing primarily as a tool for extracting the maximum possible revenue from every transaction; or 2) they can use it to improve efficiency, reduce waste, offer timely discounts and make shopping easier while maintaining understandable and transparent rules about how prices are determined. 

While the second approach may occasionally leave a few dollars on the table, I think savvy marketers understand something that algorithms can overlook: a customer relationship is worth considerably more than a single transaction. So as the paper price tag gradually disappears from store shelves, that may be the most important lesson retailers should remember.