Consumer apprehension grows as US retailers adopt AI-assisted pricing tools

U.S. consumers are growing increasingly frustrated and confused by the high-tech methods employed by restaurants and major retailers to set their prices. Rather than simply adding GST or taxes, digital pricing systems are causing a stir.

These AI-powered pricing tools exploit algorithms to predict how customers might react, leading to terms like "dynamic pricing" and "surveillance pricing." While Americans have grown used to price fluctuations when booking travel or accommodations, the idea of everyday spending being influenced by algorithms and personal data has struck a nerve.

Katie Thomas, who leads a consumer behavior think tank at Kearney, notes that a major tension is emerging between companies and shoppers: who holds the power with these algorithms and AI. Walmart CEO John Furner recently defended the company's digital price tags, stating they save workers' time and keep prices up to date without raising prices based on the weather, time of day, or individual shopper. However, there remains a lack of transparency regarding the customer data collected and its use, fueling consumer suspicion.

Several states have considered legislation addressing algorithmic and personalized pricing, and the Federal Trade Commission has proposed an enforcement policy warning businesses against withholding information about personal data usage to set individualized prices. The rise of digital price tags in grocery aisles and the potential for personalized pricing based on customer data are drawing particular scrutiny.