How AI and dynamic pricing may change the price of your groceries

Fast-food giants and supermarkets are rolling out a range of AI tools that could affect the prices shoppers pay, but experts warn the spread of data-driven tools could make personalized pricing easier to deploy.

Just this week, a federal antitrust lawsuit filed against McDonald’s alleged the fast food giant uses an AI-powered “pricing engine” to set menu prices across U.S. locations and overcharge customers for Big Macs and fries.

McDonald’s has denied that it’s using AI to determine what individual customers are willing to pay and said it provides its franchisees with “tools, resources, research and recommendations to help them make informed decisions.”

Even so, food businesses globally are increasingly digitizing operations with AI. Earlier this year, American grocery chain Kroger said it’s using an AI platform called FlashFood to mark down perishables nearing the end of their shelf life and marketing them to shoppers via an app.

Meanwhile, electronic shelf labels (ESLs), which display the price of items in store on digital screens, are becoming increasingly popular at supermarkets like Kroger, Amazon Fresh, Walmart, and Whole Foods.

The technology is also gaining traction among U.K. supermarkets such as Tesco, Morrisons, and Asda. More recently, global financial platform Revolut trialed facial recognition checkout in select coffee shops, allowing customers to pay with just a glance.

CNBC reached out to Amazon Fresh, Whole Foods, Tesco, Morrisons, Asda and Revolut for comment on the use of AI but didn’t immediately hear back.

As AI use becomes normalized among retailers, experts warn that this could lead to more dynamic pricing, which refers to frequent, rapid real-time changes in prices that could dramatically affect shoppers’ experiences.

“Dynamic pricing means changing prices in response to changing market conditions, such as demand, timing, capacity or competitors’ prices,” Miroslava Marinova, a senior lecturer of commercial law at the University of East London, told CNBC. “It is not new. Airlines, hotels, and ride-hailing services have used it for years.”

Bank of England economists Clare Lombardelli and Rupal Patel said in April that more sophisticated technology is leading to prices changing more frequently and also becoming more individualized, which could see more firms charging “as close to the maximum price a consumer is willing to pay for a good or service,” which they defined as “perfect price discrimination.”

These conditions could make it harder for statisticians to “measure and interpret” month-to-month inflation data, as the consumer price index is based on a representative sample of prices for shoppers.

“That works well when prices mostly move slowly and uniformly. But when prices shift continually – and differently for each shopper – the idea of a ‘representative’ price…