Digital labels help grocers cut food waste

In our modern world, food waste remains a significant problem. A shocking revelation from ReFed, a food waste nonprofit, informs us that in 2022, a staggering 5 million tons of food had been wasted by U.S. grocers.

Ultimately, 35% of this discarded food ended up in landfills. What’s even more concerning is that over half of that waste – around 2.7 million tons – were only discarded for having passed their labeled expiration dates.

A technological solution to food waste

Every problem presents an opportunity for innovation and solutions, and food waste is no exception. New research from Texas McCombs suggests a transformative solution: transitioning from paper shelf labels to digital ones.

This shift allows supermarkets to easily lower prices on items nearing their expiration dates, moving them off the shelves and into consumers’ homes, reducing waste and emissions.

Ioannis Stamatopoulos, associate professor of information, risk, and operations management, elaborated on the potential benefits of digital food labels.

“Everyone is better off when dynamic pricing is enabled,” said Stamatopoulos. “There’s less food waste and less emissions from food ending up in landfills.”

Grocers also benefit from the technology, saving time and money. “They 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.”

Digital food labels and inventory management

To understand the impact of dynamic pricing, Stamatopoulos collaborated with Naveed Chehrazi of Washington University in St. Louis and Robert Sanders of the University of California, San Diego to analyze two European grocery chains adopting digital labels.

At a United Kingdom-based chain, digital labels were introduced for 940 perishable items, displaying discounts as products neared expiration.

This resulted in a 54% increase in price changes, proving how the technology encourages proactive inventory management.

Adding more dimensions to barcodes

Another supermarket chain in the European Union not only embraced electronic labels but took it a step further by introducing expanded barcodes.

These barcodes are not your typical barcodes. They hold crucial inventory details such as packaging dates, lot numbers, and expiration dates.

As inventory nears its “sell-by” date, the store can conveniently lower prices to encourage buying. After implementing these two technologies, the EU stores witnessed an astonishing increase of 853% in price change frequency.

The researchers observed that adopting such rapid price changes is beneficial for shoppers. “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,” said Stamatopoulos.

These technologies also improve stores’ profitability. “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 ordering,” explained Stamatopoulos.

Challenges of dynamic pricing

However, despite the long-term benefits of dynamic pricing, it does face some short-term challenges. One major concern is consumer apprehension, as seen when Wendy’s faced backlash in February over its dynamic pricing announcement.

Though the fast-food chain clarified it would only reduce prices during slow periods, the fear of price hikes lingers.

However, Stamatopoulos noted that grocers face a unique limitation. “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.”

Another hurdle is the upfront cost. Implementing digital labels, tablets, and daily data updates for thousands of products requires significant investment.

The transition to digital food labels

While Europe leads the adoption of these technologies, the U.S. is catching up. Walmart plans to transition to digital price labels in 2,300 stores by 2026, with other retailers like Amazon Fresh and Schnuck’s following suit.

To accelerate adoption, Stamatopoulos suggests government subsidies, akin to those for solar panels or electric vehicles.

“Somebody needs to break this equilibrium,” said Stamatopoulos. “Then things will move to a new era where everybody’s using the additional information.”

By embracing digital innovation, the grocery industry can turn the tide on food waste, paving the way for a more sustainable future.

The full study was published in the journal Marketing Science.

—–

Like what you read? Subscribe to our newsletter for engaging articles, exclusive content, and the latest updates. 

Check us out on EarthSnap, a free app brought to you by Eric Ralls and Earth.com.

—–