Recently, I found myself shopping on Adidas.com for new sneakers, an activity that for me typically signals the start of a new season, or depending on my mood, the end of a work week. While working my way through the available inventory of Adidas’ Samba sneaker-line (I hew toward the classic model - it’s likely an age demographic thing) I noted with surprise that the same sneakers varied in price from $55-$110, with versions designed with leather uppers or as spineless sneakers “for golfing” running as high as $160.

The only visible difference between one SKU and the next among the majority of the Adidas Samba OG line is their color scheme, which sorts out as a combination of leather/suede dye color combined with a separate color scheme for the iconic three stripes along the side of the sneaker.

No industry insider knowledge is required to grasp why fashion brands, arguably a space where Adidas at least partially positions itself, often serve up deep discounts for items in a line that don’t sell off the digital or in-store racks as quickly as do others. It’s perhaps this collective understanding among most consumers about how fashion brands operate that explains why more Adidas customers aren’t pushing back against the brand for applying what are clearly AI-algorithm automated and fine-tuned promotional discounts and markdowns for its online and e-commerce products.  In short, paying an upcharge for a preferred sneaker color combination because it happens to be trending on Tik Tok or Instagram is part of the shopper’s price of admission at Adidas, and likely true as well at many of its competitors’ showrooms and ecommerce sites.

What then caused shoppers at Walmart to express their frustration and skepticism when Walmart rolled out its recent algorithmically-driven electronic pricing and automated shelf label system for both its physical store aisles and presumably for its digital inventory catalog? Walmart is a leader in endless aisle operations and technology, and savvy Walmart customers have come to prize Walmart’s “every day low price” model, while still actively comparing across similar products or showrooming with their Amazon apps while in the aisles, or literally busting through doors during major holiday sales events.  

From Walmart’s perspective, the innovation AI enables via its deployment of electronic shelf labels (ESL’s) seemed a huge operational victory by transforming what had historically been a time consuming, error-prone, industrial era chore for category managers and store clerks alike.  For Walmart’s customers electronic shelf labeling looked like a step toward algorithmic surge pricing, or personalized pricing where a pair of sneakers, for instance, would rise for one customer, but potentially fall for the next.  Picture a shopper at Walmart showing up on a blistering hot summer day for a box of Luigi’s Italian Ices for her sweltering kids, and finding the price jacked up, much like an Uber ride or an airline ticket, to double the normal store price because of surge pricing.

The difference between these two instances of algorithmic pricing, based on demand, is that within Adidas retail fashion category there’s a foundational acknowledgment (if not a comfort level) maintained by this sector’s consumers that, although prices may fluctuate and not always in ways that seem fair, a rising demand for a color of product (limited edition or otherwise) is baked into the shopper’s experience with the prevailing price.  Walmart’s role as a provider of food staples and other necessities likely means that its shoppers don’t possess anywhere near the level of comfort or perhaps even level of brand affinity that an Adidas customer does; which is part of the reason Walmart customers feel Walmart’s “operational innovation” of instrumenting dynamic pricing labels using AI becomes a slippery slope toward removing their taste and preferences from the equation and replacing these price/value variables with how much profit Walmart can generate from each and every customer, individually.

For a retailer like Walmart the lesson for introducing scaled innovation, even in service to resolving a long-standing operational headache, is to first understand through a prototyped experience, in a controlled retail setting, where the appearance of innovation creates new value and where it adds new tension among real customers.

Walmart is responding to the current backlash through PR and communications, as a risk and reputation management issue. Managed differently, this messy ESL rollout could have become a simple series of product team tweaks within the scope of the innovation program, and PR would be handed the more enjoyable task of writing this as another Walmart success story as a press release.