Anthony Chan, a former chief economist at JPMorgan Chase, was responding to Kamala Harris saying she would make lowering prices a priority on her first day in office, even though she’s already in office.
Two Democratic senators are investigating Grocery store chains Kroger has expressed concerns about the use of digital price tags, known as electronic shelf labels (ESLs), saying they could enable “dynamic price gouging.”
Democratic Senators Bob Casey of Pennsylvania and Elizabeth Warren of Massachusetts wrote Kroger CEO Rodney McMullen asking for “further information to better understand the justification and risks of electronic shelving.” They warned that “dynamic pricing allows companies to gouging, suddenly raising the prices of products without warning.”
“Large grocery chains such as Walmart and Kroger argue that dynamic pricing through ESL benefits consumers by allowing employees to spend more time serving customers. But such a system could allow the big grocers to abuse their power and Rising food prices“They suddenly raise prices at times when demand for certain products is highest,” Casey and Warren wrote.
“The increased use of dynamic pricing increases corporate profits and passes the cost on to consumers,” they wrote. “It is outrageous that grocery giants like Kroger continue to gouge prices and pursue other corporate profit-seeking tactics while families continue to struggle to pay for food.”
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Senators Casey and Warren sent a letter to Kroger expressing concern that digital price labels could be used for “dynamic price gouging.” (Photographer: Patrick T. Fallon/Bloomberg via Getty Images/Getty Images)
“It appears poised to enable large grocers to exploit consumers to increase their profits,” Casey and Warren wrote, pointing to companies like Kroger and Walmart’s expanding use of ESLs. The letter did not cite specific examples of ESLs being used in this way, but pointed to a 2021 UCLA study suggesting ESLs can be used for time-based pricing that “creates value for stores (through higher prices).” [but] There is no benefit to the consumer.”
Kroger has denied allegations that its electronic shelf labels are used for dynamic pricing.
“Kroger’s business model is to lower prices over time to get more customers to shop. This generates more revenue, which we then invest in lower prices, higher wages and an even better shopping experience. All of our initiatives are designed to support this strategy, and customers shop at Kroger more than ever because we fight inflation and offer great value. The test of electronic shelf labels is meant to further lower prices for our most important customers. Any suggestion otherwise is untrue,” a Kroger spokesperson told FOX Business.
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Grocery stores operate on relatively low profit margins when compared to the U.S. economy as a whole. (Photo by Liu Guangguan/China News Service/VCG via Getty Images)
Bert Flickinger III, founder of Strategic Resource Group, which has worked with grocery companies such as Kroger, said stores Dynamic Pricing When it comes to ESL use, the Democratic senators’ investigation appears to be merely speculative.
“Prices don’t go up before a flood, a hurricane, a blizzard, a heat wave, a power outage, or on Friday through Sunday, when grocery stores make 60 to 70 percent of their weekly sales. Stores are crowded, [prices] “It’s not going to go up, it’s going to stay the same,” Flickinger said, “so all this speculation and conjecture is just projecting something into the future that’s not based in fact.”
He also explained that ESLs can have a significant impact on a grocery store’s labor costs by allowing workers to reallocate the time and effort of manual labeling workers to other tasks: “If a store’s labor costs are estimated at about 20 cents per dollar of sales, ESLs can save between 0.5 and 2 cents in labor costs, depending on state rules and regulations.”
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Without digital price tags, employees would have to manually change price tags on items in the store. (Photo by Smith Collection/Gado/Getty Images/Getty Images)
Flickinger said the average supermarket carries between 25,000 and 35,000 items, but Target and other retailers have fewer. Walmart Supercenter He noted that the brands that supply these products to grocers, which carry more than 100,000 products — some of which are sold daily and others that are seasonal — are primarily responsible for changing prices.
“Almost 100% of the changes are dictated by brands like Kraft, Kellogg’s, Coca-Cola and Conagra. Retailers are using electronic shelf labels as an analytical way to clearly communicate to shoppers the price per ounce and price per pound of an item,” he explained.
“Kroger is not accepting ESL price increases, and neither is Walmart, Costco or WinCo,” Mr. Flickinger added. If there is any price gouging, he said, it’s coming from food manufacturers. Falling into “shrinkflation” ESL makes it easier for consumers to track these changes as they go to the store.
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Food service companies have relatively low profit margins. A recent survey of U.S. companies across industries conducted by the New York University Stern School of Business found that as of January 2024, Food & Grocery Retailers The net profit margin was 1.18%, food wholesalers 1.21%, food processors 6% and agricultural companies 7.12%.
By comparison, the profit margin for the overall U.S. market was 8.54%, and excluding it fell to 7.59%. Financial Services Research shows that companies are more likely to do so.
