Consumer apprehension grows as U.S. retailers adopt AI-assisted pricing tools

U.S. customers are not only annoyed by soaring prices but also furious and baffled by the sophisticated methods employed by big box stores and food chains to set those rates. Digital price tags, once confined to grocery shelves, are now commonplace in retail environments, courtesy of artificial intelligence (AI) tools that assist businesses in determining optimal pricing by forecasting customer behavior.

Expressions like "dynamic pricing" and "surveillance pricing" have sparked concern on social media platforms, where users speculate whether individuals may be subjected to different pricing for identical products.

Americans have become accustomed to fluctuating prices when booking flights, hotels, and ride-sharing services. However, the idea that everyday purchases could be influenced by algorithms and personal data they are unaware of sharing has struck a nerve. Katie Thomas, who heads a consumer behavior research team at Kearney, a consulting firm, remarks that there are significant power struggles at stake as companies and shoppers vie for control over algorithms and artificial intelligence (AI) usage.

Companies utilizing AI-driven pricing assert that some concerns arise from misconceptions about their pricing systems. Walmart CEO John Furner, in a recent blog post, stated that digital price tags save employee time and maintain updated pricing. He emphasized that these labels are not intended to alter prices based on external factors like weather, time of day, or individual shoppers.

"We price the product, not the person," Furner wrote. However, the lack of transparency regarding the collection and use of customer data has fueled suspicions and misinformation among consumers. Retailers' digital price displays, for instance, are falsely alleged by some social media posts to scan shoppers' faces or cellphones, setting individualized prices, according to Thomas.

Legislators and regulators are stepping in. At least thirty states have contemplated pricing bills this year, with some targeting algorithmic and personalized pricing, according to the National Conference of State Legislatures. The Federal Trade Commission (FTC) has proposed an enforcement policy that warns businesses against concealing the use of personal data to set tailored prices, which could violate consumer protection laws.

Dynamic pricing refers to adjusting prices in response to shifting market conditions, including supply and demand. For example, airlines modify ticket prices as departure times approach using dynamic pricing, while Uber employs surge pricing during peak demand. Price changes are widespread, not limited to food items. Decodo, a web data firm, recorded approximately half of the U.S. price changes in 2025 as decreases, contradicting the common belief that dynamic pricing only increases costs.

Electronic shelf labels, electronic displays that update shelf prices automatically, have gained prominence as they become more prevalent in U.S. stores like Walmart and Whole Foods. Consumer advocates warn that these labels could potentially facilitate dynamic or personalized pricing. Labor unions oppose the technology, arguing that frequent price adjustments do not inherently lead to higher prices.

Research indicates that grocery chains have not seen significant surge pricing since implementing electronic shelf labels, as shoppers generally prefer consistent pricing.

Personalized pricing involves offering different prices and discounts to customers based on their locations, income levels, web-browsing habits, and other individual or group-specific information. While some advocacy groups and regulators use the term "surveillance pricing" to describe this practice, its extent of adoption remains unclear.

A January 2025 FTC staff report revealed that intermediaries offering price-tailoring tools have worked with over 250 clients, including grocery and clothing retailers. Recent legislation in Maryland, New Jersey, and Connecticut restricts the use of shoppers' personal data for determining prices, focusing on groceries and prohibiting certain promotions.

California's 2022 lawsuit against Target, alleging the use of geofencing technology to increase prices based on shoppers' locations, resulted in a $5 million settlement and a commitment to transparent pricing.