by Daniel Johnson
August 19, 2024
The senators also raised concerns about the grocer’s potential use of facial recognition software and the gathering of sensitive consumer personal data.
Massachusetts Sen. Elizabeth Warren and Pennsylvania Sen. Bob Casey cautioned in a letter that Kroger and other grocery store chains might exploit electronic shelving label (ESL) technology to artificially raise consumer prices through a dynamic pricing model.
According to Fortune, although Kroger began using ESL in 2018, the senators sent a letter to Kroger CEO Rodney McMullen on Aug. 5. In the letter, the pair warned: “Widespread adoption of digital price tags appears poised to enable large grocery stores to squeeze consumers to increase profits. Analysts have indicated that the widespread use of dynamic pricing will result in groceries and other consumer goods being ‘priced like airline tickets,’ ‘creat[ing]a sense of urgency and a sense of scarcity that wouldn’t exist if there were just publicly posted prices that everybody understood,’ and allowing ‘sellers…to … figure out ways to extract the maximum amount of profit from each customer.’”
The grocer branded the technology “Kroger Edge” and initially pitched it as a way for customers to have a positive shopping experience at the store. The technology includes video advertisements, digital coupons, and a search function through the company’s mobile application.
However, this also created concerns about surge pricing, which the senators’ letter alludes to. Surge pricing refers to the ability of a company providing goods or a service, like Uber, to raise prices during certain points of the day based on usage volume or other metrics. Likewise, this technology could artificially manipulate prices based on several factors, including the customers themselves.
Kroger, meanwhile, disputed this interpretation of its technology in a statement the company issued to Fortune.
“Kroger’s business model is to lower prices over time so that more customers shop with us, which leads to more revenue that we then invest in lower prices,” the company said. “Any test of electronic shelf tags is to lower prices more for customers where it matters most. To suggest otherwise is not true.”
The statement continued, “Kroger and the company it partnered with to expand its ‘Kroger Edge’ technology in 2024, Intelligence Node, have been careful to avoid any mention of dynamic pricing, only saying in a press release that Intelligence Node would assist Kroger by using its expertise to “enhance online shopping by delivering an experience that better informs shoppers’ product selections and purchase decisions.”
Kroger is not the only grocer looking to use this kind of technology. According to Fortune, Walmart, Amazon Fresh, and Whole Foods, owned by Amazon, intend to implement ESL technology in their stores.
The senators also raised concerns about the potential application of facial recognition software and the gathering of sensitive personal data in the letter.
“In addition to price gouging, the EDGE Shelf helps Kroger gather and exploit sensitive consumer data. Through a partnership with Microsoft, Kroger plans to place cameras at its digital displays, which will use facial recognition tools to determine the gender and age of a customer captured on camera and present them with personalized offers and advertisements on the EDGE Shelf,” the letter stated.
The letter continued, “EDGE will allow Kroger to use customer data to build personalized profiles of each customer, and then use those profiles ‘to determine how much price hiking each of us can tolerate,’ quickly updating and displaying the customer’s maximum willingness to pay on the digital price tag –- a corporate profiteering capability that would be impossible using a mere paper price tag. I am concerned about whether Kroger and Microsoft are adequately protecting consumers’ data, and that as Kroger expands the personalized customer experience, customers will ultimately be offered a worse deal.”
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