Walmart Rolls Out Digital Pricing. Could the AI-Fueled Innovation Boost the Stock?

Walmart (NASDAQ: WMT) has arguably executed better than any other retailer over the last decade. After initially being slow to embrace e-commerce and falling behind Amazon, the company rolled out thousands of grocery store pickup kiosks, leveraging its brick-and-mortar footprint. It introduced an Amazon Prime-like membership program, Walmart+, that offers free delivery, and it's tapped into the power of advertising and a third-party marketplace, further growing its e-commerce business. It's also improved in-store operations, growing market share, and consistently delivered same-store sales growth at a time when many of its peers are struggling.

Over the last decade, the stock is up more than 400%, and its market cap recently topped $1 trillion, though it has since pulled back from that milestone.

Now, Walmart is making its next big move in technology.

Image source: Walmart.

Walmart embraces digital pricing

Walmart is stepping up its efforts around digital price tags and dynamic pricing.

The company is already using these price tags in 2,300 of its stores, and it said recently that it would roll out digital pricing to all of its stores.

While dynamic pricing, or pricing that changes according to market conditions, sometimes frustrates consumers, it has its advantages for retailers. If a product is in short supply or in high demand, a retailer can easily raise the price. Similarly, if a product isn't selling, the company can lower the price instantaneously by changing the digital shelf tag. However, Walmart says it will not be using the tags for dynamic pricing. Rather, the tags make it easy to update prices when a new product is on the shelf or to adjust them when they are marked down.

By doing so, Walmart will ensure that the prices it wants to charge will show up faster, and it will save on labor, as it can do so automatically rather than manually.

Will it make a difference for Walmart?

Digital pricing may sound like a minor change for a company the size of Walmart, increasing margins by even 10 basis points, which would make a huge difference on the bottom line, adding roughly $700 million in profits.

Walmart competes primarily in groceries, a notoriously low-margin corner of retail, so any improvement in profit is a win for the company.

While Walmart doesn't intend to follow a dynamic pricing model, the digital shelf labels should make its operations more efficient, help improve inventory turnover, and lift profit at the margins. That's enough to be a winner for the retail giant.

Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.