Walmart (WMT) intends to use artificial intelligence to understand consumers without raising prices.
This distinction is becoming increasingly important as merchants race to make purchases more personal.
While Walmart has publicly promised that customers’ income, past purchases, urgency or apparent willingness to pay won’t affect the prices they see, Walmart has been increasing the role of artificial intelligence in its digital operations.
The FTC is now demanding a more thorough investigation.
The agency asked Walmart and eight other companies to provide information about whether and how personal information is used to determine prices, worker pay and job opportunities.
The survey doesn’t mean Walmart adopts personalized pricing. Walmart has made clear that’s not the case.
Instead, this survey raises a more important question about AI-driven retail: As companies learn more about specific customers, where does useful customization stop and customized pricing begin?
The response is important for Walmart as its artificial intelligence approach increasingly relies on consumers to provide it with more information.
FTC scrutinizes how companies set prices
Walmart, Target (TGT), Uber (UBER), Lyft (LYFT), DoorDash (DASH), Instacart (CART), Delta Air Lines (DAL), United Airlines (UAL) and JetBlue Airways (JBLU) received FTC information requests.
The organization is interested in learning more about the data, tools and technology businesses use to calculate costs, wages and jobs.
The companies have 45 days to respond after receiving the order, according to the company Federal Trade Commission.
FTC Chairman Andrew Ferguson wants to know whether companies use personal data to price or provide gig workers for the same products, services or jobs.
Dynamic pricing, which customers now experience from restaurants, airlines and other companies, is not the same as personalized pricing.
Generally speaking, dynamic pricing modifies prices based on variables such as supply, demand, time, and location.
Taking it a step further is personalized pricing. Businesses can use information about a specific customer to determine how much that person is willing to spend.
Location, browsing habits, past purchases, loyalty information and other personal data may be examples of this.
Delta Air Lines, JetBlue Airways and Instacart deny having personalized pricing.
Kevin Dickey/Getty Images
Walmart has made a big pricing commitment
The Federal Trade Commission launched an investigation after Walmart took an unusually direct public stance on the issue.
“We price products, not people,” Walmart CEO John Furner said in a letter to customers in September.
Walmart says it doesn’t personalize prices based on a shopper’s income, shopping history, urgency or estimated willingness to pay.
In addition, the company claims that it will not use any information provided by consumers through its artificial intelligence shopping tools to increase costs.
Walmart made the pledge part of a larger commitment to separate price selection from artificial intelligence-driven customization.
Walmart wants artificial intelligence to understand customers’ needs, making this distinction crucial.
A tailor-made shopping assistant may know a customer’s purchasing frequency, preferred brands and current product types.
These features have the potential to speed up shopping and boost sales through Walmart’s digital ecosystem.
However, this could be controversial if customers believe the information is used to assess how much they can afford or are prepared to spend.
Walmart says it won’t go beyond that.
AI makes personalization more valuable and sensitive
Retailers have always strived to understand their customers.
Artificial intelligence significantly expands the possible applications of such data.
Without changing product pricing for specific consumers, Walmart can use customer profiles to enhance search results, provide product recommendations and help customers browse its wide selection.
Instead, the company claims its pricing algorithm takes into account traditional retail criteria, including inventory, competition, region, fees and seasonality.
More artificial intelligence:
- The biggest business opportunity of artificial intelligence may not be like artificial intelligence
- AI racks are outpacing the power of old: Two chipmakers lay out strategies
- As AI agents arrive, Bank of America divides software into winners and losers
Walmart Says these systems don’t calculate the maximum amount a personal shopper might be willing to spend.
As AI shopping assistants become more sophisticated, this distinction may become more important.
Consider what a typical discussion might reveal to a computer shopping assistant.
Customers can reveal what they need, why they need it, when they need it and what alternatives they are considering.
Armed with this knowledge, AI can provide better recommendations.
Additionally, customers may be concerned if they believe this information will affect their prices.
Increased consumer awareness is therefore a source of both economic potential and regulatory risk.
Walmart’s bigger challenge is maintaining customers’ trust
The FTC investigation is more than just another regulatory request for Walmart.
It solves one of the major hurdles merchants must overcome when integrating artificial intelligence into the purchasing experience.
Customers may be more inclined to share information with Walmart if their AI solutions are beneficial.
This could improve Walmart’s digital connection with customers by making shopping simpler, with recommendations more helpful and accessible.
However, trust is a key component of the concept.
Walmart reiterated that stance in October, once again denying that it sets customized rates based on customers’ willingness to pay or personal information.
Walmart Says its relationship with its customers depends on maintaining that trust.
As a result of future FTC investigations, investors may get a better understanding of how large retailers and digital platforms truly leverage personal information when setting prices.
For Walmart, the concern isn’t just whether authorities ultimately discover the legal issues.
The store essentially promises two things at once: Its artificial intelligence will learn more about specific consumers, but this improved knowledge won’t be used as an excuse to raise prices for those customers.
As long as Walmart can maintain this course, deeper customization may boost its digital operations without compromising its value.
The data that makes Walmart’s artificial intelligence more advantageous could also become its biggest trust issue if customers begin to question it.
RELATED: Instacart, Walmart, Delta, how they charge differently? Federal Trade Commission Issues