To understand how data can increase variety and affordability while reducing waste, take a look at Too Good To Go, a company founded in Denmark in 2015 to allow consumers to purchase unsold food from restaurants and stores at significantly discounted prices. Since then, the company has expanded to more than 20 countries, including the U.S. and, most recently, Japan.
Users can purchase “surprise bags” for pickup at the end of the day, filled with varying selections of leftover goods that would have otherwise been thrown out. Too Good To Go sets surprise bag pricing based on time and previous sales data, helping businesses to further reduce waste by making sure more leftover food is sold. Meanwhile, buyers with the flexibility to place orders closer to pick up get lower prices, increasing affordability for budget-constrained consumers.
Companies like Too Good to Go show how variety, availability, and affordability can be expanded by algorithmic pricing, and its close cousin, algorithmic innovation — using data to create products and services that meet the real needs of consumers. More convenience and less waste are potential benefits of increased use of data.
Still, algorithmic pricing has encountered opposition because of fears that businesses will take advantage of consumers. Moreover, many people have the feeling that it’s unfair to charge different people different prices. “When New Yorkers place an order online or go to the grocery store, they should be able to trust that they are seeing the same prices as everyone else,” said New York Attorney General Letitia James.
Conversely, excessively tight restrictions on algorithmic pricing and innovation would move us towards a “one-size-fits-all” economy, where everyone would pay the same price, and everyone would have access to the same limited selection of goods and services. Businesses would produce for the median consumer. People whose tastes are near the norm would do well, while people with different preferences and capabilities would feel like a square peg shoved into a round hole.
That balance suggests a need to set guardrails on acceptable practices, without going too far. One model is Maryland’s recently enacted Protection from Predatory Pricing Act, which provides the state’s consumers with thoughtful protections against exploitative practices while preserving the flexibility to use tools like promotional discounts, loyalty programs, and demand-responsive pricing that can help consumers access an expanded range of goods at lower prices.
