What’s The Big Idea?

Digital Shelf Labels Help Retailers And Don’t Hurt Consumers

By Ioannis (Yannis) Stamatopoulos, IROM

In June 2024, Walmart announced plans to install electronic shelf labels (ESLs) in 2,300 retail locations by 2026. ESLs are digital price tags that allow retailers to update prices at the shelf using a mobile app, streamlining operations. Walmart follows chains such as Kroger, Whole Foods, Amazon Fresh, and Schnucks, which already have ESLs.

Walmart’s announcement sparked media speculation and regulatory concerns. NPR, for example, predicted a future where grocery prices change dynamically — potentially surging due to factors such as higher consumer demand because of impending weather (e.g., bottled water before a hurricane or even ice cream over a hot weekend). Politicians have expressed public reservations that ESLs could allow price gouging or extract maximum profits from vulnerable and low-income shoppers.

My research arrived a decade early to this controversial party. And, I have good news: ESLs are far more likely to lower prices, increase sales, reduce food waste, and improve supply chains. My theoretical arguments and empirical evidence show that ESLs (in the U.K.) are not used for temporary price hikes but for markdowns that reduce overstock, minimize waste, and boost sales. In follow-up work in the EU, I demonstrated that when combined with inventory tracking, ESLs can nearly eliminate food waste. Another study based on data from China showed that ESLs reduce reliance on last-minute supply purchases, excess manufacturing, overtime labor, inefficient warehousing, and premium shipping fees.

Moreover, my ongoing research reveals two other key findings: (i) Grocery retailers do not price to maximize profits from a customer’s single trip, but rather to ensure the customer keeps returning to the store over time; (ii) Quantifying customers’ responses to price changes is notoriously difficult. These insights suggest that fears of ESL-driven surge pricing are misplaced. Given how focused retailers are on staying competitive, introducing surge pricing would be irrational. And given how difficult it is to measure price responses, implementing real-time pricing in response to transient events would be technically challenging.

So, worry not! This long-overdue shift in grocery retail is far more likely to bring efficiency and consumer benefits than the dystopian scenarios some fear.

Stamatopoulos, Ioannis, Achal Bassamboo, and Antonio Moreno. “The Effects of Menu Costs on Retail Performance: Evidence From Adoption of the Electronic Shelf Label Technology.” Management Science 67.1 (2021): 242-256.

Chehrazi, Naveed, Robert Evan Sanders, and Ioannis Stamatopoulos. “Inventory Information Frictions Explain Price Rigidity in Perishable Groceries.” Marketing Science (2024).

Bray, Robert L., and Ioannis Stamatopoulos. “Menu Costs and the Bullwhip Effect: Supply Chain Implications of Dynamic Pricing.” Operations Research 70.2 (2022): 748-765.