Walmart faces FTC scrutiny over AI-era personalized pricing

Walmart (WMT) intends to use artificial intelligence to better understand its consumers without raising prices.

As merchants compete to make buying more individualized, this difference is becoming increasingly crucial.

While openly pledging that a customer’s income, past purchases, urgency, or apparent readiness to pay would not influence the price they see, Walmart has been increasing the role AI plays across its digital operations.

The Federal Trade Commission now requests a more thorough investigation.

The agency has demanded information from Walmart and eight other companies about whether and how personal information is used to determine prices, worker compensation, and job offers.

The investigation does not imply that Walmart employs individualized pricing. Walmart makes it clear that it doesn’t.

Rather, the inquiry raises a much more significant question about AI-powered retail: Where does helpful customization stop and customized pricing start when businesses get more knowledge about specific clients?

The response is important to Walmart as its AI approach relies more and more on consumers giving it 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 information requests from the FTC.

The organization is interested in learning more about the data, tools, and techniques used by businesses to calculate costs, salaries, and employment offers.

The companies have 45 days after receiving the orders to respond, according to the FTC.

FTC Chairman Andrew Ferguson wants to know if companies use personal data to set prices or offer gig workers for the same product, service, or job.

The dynamic pricing that customers now experience from hotels, airlines, and other companies is not the same as personalized pricing.

In general, dynamic pricing modifies prices in response to variables including supply, demand, timing, and location.

One step further is personalized pricing. A business may 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 might be examples of this.

Delta, JetBlue, and Instacart denied having personalized pricing.

Walmart wants smarter AI without crossing one pricing line

Kevin Dietsch / Getty Images

Walmart has already made a major pricing promise

The FTC inquiry arrives after Walmart took an unusually direct public position on the issue.

“We price the product, not the person,” Walmart CEO John Furner said in a September letter to customers.

Walmart says it does not use a shopper’s income, shopping history, urgency, or estimated willingness to pay to establish individualized prices.

Additionally, the firm claims that it will not use any information consumers provide through its AI shopping tools to raise their costs.

Walmart has presented that pledge as a component of a larger commitment to separating price choices from AI-driven customization.

Walmart wants AI to understand what customers want, which makes that difference crucial.

A tailored shopping assistant might know a customer’s frequent purchases, preferred brands, and current product type.

These features have the potential to speed up shopping and boost sales via Walmart’s digital ecosystem.

However, if customers thought the information was used to evaluate how much they could afford or were ready to spend, it could become contentious.

Walmart claims it won’t go over that boundary.

AI makes personalization more valuable and sensitive

Retailers have always made an effort to comprehend their clientele.

AI significantly expands their possible applications for such data.

Without altering an item’s pricing for a specific consumer, Walmart may utilize customer data to enhance search results, provide product recommendations, and assist customers in navigating its vast selection.

Instead, the business claims that its pricing algorithms take into account traditional retail criteria, including inventory, competition, region, expenses, and seasonality.

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Walmart says those systems do not calculate the maximum amount an individual shopper may be willing to spend.

As AI shopping assistants get more sophisticated, that distinction may become more crucial.

Think about what a typical discussion may reveal to a computerized shopping assistant.

Customers may disclose what they need, why they need it, when they need it, and what alternatives they are considering.

The AI can provide better recommendations thanks to the knowledge.

Additionally, if customers believe the information affects their price, it may cause them to become concerned.

Therefore, improved consumer awareness is the source of both the economic potential and the regulatory danger.

Walmart’s bigger challenge is keeping customer trust

The FTC investigation is more than just another regulatory request for Walmart.

It addresses one of the main obstacles that merchants must overcome to include AI into the purchasing experience.

Customers may be more inclined to share information with Walmart if their AI solutions are beneficial.

By making shopping simpler, suggestions more helpful, and purchasing easier, that might improve Walmart’s digital connection with customers.

However, trust is a key component of the concept.

Walmart reaffirmed this stance in October when it once again denied claims that it sets customized rates based on customers’ willingness to pay or personal information.

Walmart said its relationship with customers depends on maintaining that trust.

Investors may have a better understanding of how large retailers and digital platforms truly utilize personal information when establishing pricing thanks to the FTC’s future investigation.

For Walmart, the concern extends beyond whether authorities find a legal issue in the end.

The store is essentially making two promises at once: its AI will become better at understanding specific consumers, but that improved knowledge won’t be used as an excuse to raise prices for those customers.

Deeper customization might boost Walmart’s digital operations without compromising its value offer, as long as it can maintain that line.

The same data that makes Walmart’s AI more beneficial might also become its greatest trust issue if customers start to question it.

Related: Instacart, Walmart, Delta, charging differently? FTC questions

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