The Shifting Sands of Retail Pricing at Old Navy

For the past week, one shopper tracked their Old Navy cart, attempting to pinpoint the optimal moment to purchase items. This observation highlights a growing trend where prices for everyday goods, like clothing, are no longer static. The shopper noted that items added to their Old Navy app cart frequently changed in price day-to-day.

Often, prices would increase after a short period, only to drop again the following day. This volatility led the shopper to rush checkout to avoid potential price hikes, feeling frustrated by the uncertainty. An experiment tracking a cart of basic items over two weeks confirmed this instability, showing the cart's price fluctuating three times.

In-Store vs. App Pricing Discrepancies

The dynamic pricing extended beyond the digital realm. The shopper visited two separate Old Navy physical locations, finding that the in-store prices were consistently higher than those displayed in their app cart.

The rules of traditional shopping are rapidly evolving. While consumers expect price changes for services like airline tickets or rideshares, applying this volatility to staple clothing items feels fundamentally different. Dynamic pricing is becoming widespread, affecting retailers from Walmart to Kroger.

Understanding Dynamic Pricing and Price Discrimination

When asked about the logic behind these price fluctuations, Old Navy twice stated they were "not able to participate at this time." This practice, where different buyers pay different prices for the same item, is known in economics as price discrimination.

Historical Context: Clearance vs. Real-Time Adjustments

Mark Tremblay, an assistant economics professor at the University of Nevada, Las Vegas, explained that price discrimination is not new. He cited the example of student movie tickets, where a lower price targets a group with less disposable income, thereby increasing overall sales.

Historically, retail inventory management relied on clear markdowns. Peggy Stover, director of the University of Iowa's marketing institute, noted that items not selling, like Halloween candy on November 1st, would receive significant, visible clearance discounts. This was a straightforward way to manage stock.

The Digital Evolution of Pricing

However, experts like Tremblay and Stover suggest that increased access to consumer data allows companies to move beyond simple clearance sales. Prices are now becoming real-time experiments. Tremblay predicted, "You just have these constant price fluctuations, and that's how things will be moving forward."

Gap Inc. CEO Richard Dickson has indicated a shift away from constant promotions toward a "much more refined and directed narrative" regarding promotions. This means shoppers must adjust to gradual, rolling price shifts rather than relying solely on traditional sales racks.

The New Shopping Calculus

The National Retail Federation (NRF) suggests that this digital pricing structure could lead to lower prices during off-peak times and more personalized discounts. Lindsay Owens, executive director of the Groundwork Collaborative, noted that decades of shopping knowledge are being disrupted.

Owens stated, "Comparison shopping is really difficult now because there often isn't a posted price, or the posted price is varying minute by minute, or day by day."

The Personal Experiment: Gains and Anxiety

During the experiment, the shopper successfully saw their Old Navy cart total drop by $11, nearly 17% from its initial cost. This success, however, introduced a new anxiety: determining the absolute lowest price point before buying.

When asked when to finally purchase, Professor Tremblay humorously responded that if he knew the answer, he would be investing in stocks, not discussing pricing. The shopper realized they had become, in effect, a "leggings day trader."

Benefits and Drawbacks of Waiting

Tremblay noted that if a consumer demonstrates a lack of urgency, retailers may lower the price to secure the sale. Stover confirmed that this waiting period can benefit consumers, as the shopper saved $11 by waiting. This demonstrates a potential advantage of the shifting model.

Navigating Brick-and-Mortar Price Gaps

The in-store experience presented a different challenge. Purchasing the exact items in person would have cost nearly $24 more across two locations. The shopper discovered a tactic: scanning item tags in the app revealed lower prices, which Old Navy staff would price-match in-store.

By using the app to price-match socks, the shopper paid half the price indicated by the in-store scanner. The shopper observed many older shoppers without smartphones who were not scanning tags, suggesting they might pay higher prices.

Factors Influencing In-Store Costs

Jason Straczewski of the NRF suggested that higher brick-and-mortar costs might stem from regulatory requirements, labor, or energy expenses, making online fulfillment cheaper for companies.

Tremblay added that in-person shoppers face less immediate competition than online browsers, leading them to tolerate higher prices. Price-matching in the moment allows in-store buyers to access competitive online rates, provided they know the tactic.

The Disadvantage for Less Savvy Shoppers

This environment creates a "pricing Wild West" where consumers must actively manage price volatility. The shopper expressed concern for those who may have less time, technological proficiency, or language skills to navigate price matching.

Stover concluded that this dynamic pricing structure presents "definitely a disadvantage to those consumers who either don't have the technology to help them do price comparison, or don't have the resources or the knowledge to do it." The experiment concluded with the shopper purchasing a three-pack of socks, having navigated the new complexities of retail pricing.