Researchers from Texas McCombs have discovered an innovative new way to reduce food waste created by supermarkets through the use of digital labels.
According to the food waste nonprofit ReFed, in 2022, US supermarkets wasted 5 million tonnes of food, with 35% of it going to landfills. Over half of that waste—2.7 million tonnes—was past the labels’ expiration dates.
By moving from paper shelf labels to digital labels, supermarkets can easily lower prices and move older stock from their shelves to consumers’ homes.
Using technology to quickly change prices on labels, a process known as dynamic pricing, benefits more than just consumers.
Ioannis Stamatopoulos, associate professor of information, risk, and operations management at Texas McCombs, explained: “Everyone benefits when dynamic pricing is enabled. There’s less food waste and less emissions from food ending up in landfills.”
Should supermarkets rush to perform these updates?
Stamatopoulos, along with Naveed Chehrazi of Washington University in St. Louis and Robert Sanders of the University of California, San Diego, analysed two European grocery chains as they installed digital labels.
One in the United Kingdom introduced digital labels for 940 perishable products. The labels displayed the base price and added discounts as products approached expiration. The researchers found that the stores changed prices 54% more often.
The second supermarket chain in the EU adopted electronic labels but added a second technology: expanded barcodes.
Added benefits of digital labels
Grocers can change digital labels — also called electronic shelf labels — with a few keystrokes on a tablet, compared with printing physical labels and sticking them onto shelves.
Unlike a standard barcode, an expanded one can hold inventory details such as packaging dates, lot numbers, and expiration dates. When inventory nears its ‘sell-by’ date, a store can lower prices to stimulate buying.
After several EU stores installed the technologies, the researchers found that they increased the frequency of price changes by 853%.
Stamatopoulos said: “If you’re a consumer who really, really cares about price, then you can buy the blueberries that will expire two days later and consume them today.”
By managing inventories better, the barcodes also boost stores’ bottom lines because the grocery store can put things on discount when they’re about to expire. They can afford larger orders, so they take advantage of economies of scale in order.
Overcoming issues with dynamic pricing
Although dynamic pricing has long-term benefits, it faces short-term obstacles. One is consumer fear that retailers will increase prices when demand is high — as ride-hailing companies such as Uber do.
In February, when the fast-food chain Wendy’s announced it would roll out dynamic pricing, it drew backlash. It quickly clarified that it would cut prices during slow periods but not raise them during busy periods.
But unlike restaurants, it’s hard for grocers to pinpoint hours of high demand for individual products.
“For retailers to estimate demand very finely and dynamically respond accordingly, so as to squeeze every dollar out of it, I think that’s kind of impossible,” Stamatopoulos stated.
Another barrier is cost. Grocers must invest in digital labels and tablets, while employees must update data daily for thousands of items.
Europe is ahead of the US in adopting these technologies, but that could change. In June, Walmart announced it will transition to digital price labels in 2,300 stores by 2026. Amazon Fresh and the Midwestern chain Schnuck’s are also using them.
To speed the transition, Stamatopoulos suggests government subsidies, like those for solar panels and electric vehicles.
He concluded: “Somebody needs to break this equilibrium. Then things will move to a new era where everybody’s using the additional information.”
