Blog

Nov 07, 2023

Supermarkets Use AI To Cut Prices In War On Waste

Supermarkets are using AI to automatically mark down the price of food nearing

Supermarkets are using AI to automatically mark down the price of food nearing its expiration date – and prevent it being dumped.

Meat, poultry, dairy products, ready-meals, salads and other perishables can be discounted up to four times a day, to encourage shoppers to buy them.

The "dynamic pricing" system adjusts electronic shelf labels based on the unique conditions of each store, such as consumer purchasing patterns, expiration date of the product, and inventory.

If, for example, a product is marked down for 10 per cent for two days and doesn't sell, the AI will make deeper markdowns until the product is bought, and it constantly learns from customer decisions.

Electronic shelf labels (ESL) are common in European supermarkets and are increasing in popularity in the States, where 72 per cent of retailers plan to adopt them.

Wasteless, an Israeli startup that has pioneered dynamic pricing, says supermarkets using its technology have reduced food waste by as much as 40 per cent.

The company helps retailers find the perfect discount, increases their revenues by reducing waste and offers a good deal to the customers.

"The basic idea behind Wasteless is so simple that even a five year old can explain it," CEO Oded Omer tells NoCamels.

"It doesn't make sense that we pay the same price for a pack of minced beef that expires in two days. We apply dynamic pricing that is anchored in the expiration date."

Food retailers in the US generate an estimated 10.5 million tons of food waste every year – causing one-third of all the food they produce to be thrown into landfills or incinerated. A substantial amount of this is due to expiration date waste.

Retailers already experiment with marked down prices, but these reductions are just ‘guesstimated’ arbitrary discounts. Many grocers will manually apply discount stickers the day before items expire.

"A supermarket chain with a $70 billion turnover throws away $1.7 billion every year. $1.4 billion of this is just related to expiration date waste," says Omer.

Supermarkets using Wasteless's pricing engine display the original price as well as the discounted price of around 1,000 products nearing the end of their shelf life.

The concept of dynamic pricing is not new, and is used in airlines and ride sharing apps (where it is better known as surge pricing) – but it's not common in supermarkets. As such, Wasteless does not have major competitors. GK Software created a dynamic pricing tool, though it focuses less on consumer patterns and more on shaping the prices according to company goals and relevant market conditions.

Traditional 10-digit barcodes are one of the biggest barriers to implementing dynamic pricing in supermarkets, but a new generation of 13-digit barcodes incorporate the sell-by date and connect to the store's product database.

Wasteless reduces the shelf price of items near their expiration date up to four times a day.

"We typically cover 1,000 items in a supermarket that are generating a heavy financial loss and carbon footprint," says Omer.

He worked as CTO at Weissbeerger, a startup that developed a beverage consumption analytics application used by breweries, pubs and bars.

When it was acquired by Belgian multinational drink and brewing company AB InBev in 2018 for $80 million, he decided to apply the dynamic pricing idea to supermarkets.

"I was very proud but decided not to stay on after the acquisition," he said. "I wanted to start another company."

He was shopping in California for seafood, and noticed that it was marked down 60 per cent as the expiration date drew close. He asked the clerk how much would be sold, and he replied: "None, man. We’ll throw this all away." That was his inspiration for Wasteless.

The company's first commercial deployment was with an Italian supermarket chain in 2019, where it says food waste was reduced by nearly 40 per cent.

Wasteless's technology has been installed in food retailers and wholesalers in seven countries worldwide, including the German multinational company Metro AG, which operates 600 stores across Europe and Asia, as well as the Dutch and Belgian supermarket chain Jumbo.

Metro recently published its first Food Waste Report, which shows that it has reduced food waste by 15.3 per cent between the financial years of 2017/18 and 2020/2021.

Wasteless has also installed its pricing engine in two US chains, which it declined to name.

The company was founded in 2017 and has offices in New York, Tel Aviv, London and Amsterdam, with operations throughout Europe and the US.

NOCAMELS

Straight To Your Inbox