There is a well-known adage that says, “a little knowledge is a dangerous thing.” This aphorism rings particularly true when reading the latest study from UC San Diego’s Rady School of Management, suggesting that dynamic pricing – a mechanism of pricing that applies an algorithm to determine when grocery stores should discount perishables – could prevent food waste more effectively than organic waste bans.
The assumption is almost laughable. Academics, with no hands-on experience in the retail grocery sector, are essentially declaring that they possess superior insights than seasoned grocery professionals about minimizing food waste. This presumption is both ludicrous and unfounded.
There’s an implied naivety in the belief that discounting food nearing expiration is a novel concept. This practice has been an established method used by grocery stores for decades. If it were as simple as applying an algorithm to determine when and how much to discount perishable goods, grocers would have a much easier time managing their inventory.
It’s clear that the authors of this study, in their ivory towers, are out of touch with the realities of grocery store operation. They fail to account for variables such as storage conditions, product handling, and consumer behavior, which often play significant roles in the viability of perishable goods.
The assertion that fewer than 25% of U.S. grocery retailers offer dynamic pricing is misleading. Most grocers employ a variety of strategies to reduce waste, including pricing strategies. They typically utilize a combination of markdowns, promotional sales, donations to food banks, and composting.
The study author, Robert Sanders, acknowledges that grocery retailers generate high waste because it’s profitable. This may seem counterintuitive, but it underscores the complexities of grocery retail management. If a store fails to meet customer demand due to understocking, it risks losing more in sales than it would save in reducing waste.
Furthermore, the touted 21% reduction in waste through dynamic pricing does not account for the cost of implementing such a pricing system. The necessary investment in technology, training, and the administrative costs of monitoring such a system on a real-time basis are often substantial.
Sanders also suggests that dynamic pricing could make healthy food more affordable. However, he disregards the fact that the increased complexity and cost of implementing dynamic pricing could potentially increase the cost of food for consumers, negating any supposed savings.
It’s critical to note that the real-world practice of grocery retailing is far more intricate than a mere academic exercise. Studies such as these do not remotely reflect the practical realities of grocery retail management.
News release: Dynamic Pricing Superior to Organic Waste Bans in Preventing Climate Change
The reason most food is not discounted when nearing its less optimum state is that sales staf are too busy selling things ot go round the store re-pricing everything.
An algorithm allows for automation of that part of the grocery job.
Updatable LED displays for the prices (rather than the current printed tags) would mean this role could be completely perfomed by the computer and fewer sales staff would be required (savng costs).
Automation is coming. Get used to it.
Automation is already here and has been a long time – what sort of grocery stores do you frequent…. if at all.
What you suggest (LED labels) is already happening in the UK, with The Discounters believe or not.
i.e. Aldi and Lidl
Why. Because it takes pressure off staff and they can employ fewer of them
LEDs are passe (do try to keep up) and far too power hungry anyway,
Supermarkets are using LCD price labels along the shelves and they’re so realistic, it comes as shock to many that they are ‘real’ ‘live’ ‘electronic’
In any case, the price labels are ‘quides’ for shoppers to select between brands
Shoppers can also now use a scanner they attach to their trolley/baskets and scan items as they pick them up – with instant up-to-date pricing and next-to-instant funds transfer from their bank – item by item.
You got there before I could set mcourtny straight except I would add that often, I have trouble negotiating aisles as they are clogged with people stocking shelves and, while they are at it, updating tags.
Have you seen the discounts available on week old sushi!!
Have you seen the food-poisoning?
Some few stores in Sweden have had LCD tags on the shelfs at least for 10 years, but it isn’t common, due to cost and technical issues. These stores tend to be slightly more expensive, than those who still use traditional price tags.
Of course the next round of minimum wage increases could completely reverse that.
Lidl/Aldi are a shock to the rest who discount just as much; LED labels will be VERY illuminating for fruit and veg in these shops because certain products degrade so quickly we stopped buying them a long time ago…..they clearly buy “old stock”; of far better worth, and legally binding, would be labelling which states when the product was harvested so we can gauge how long it has been “stored:…
My issue is with academics thinking they can come up with a better solution than the stores will when the technology becomes available.
I agree. Most of what is wrong with America is based on ideas thought up by very smart people in ivory towers—crime, poor education, too much welfare, not enough good jobs, government bloat, climate scares, etc. Central planning, even by very smart people, is very stupid.
H/T Thomas Sowell.
https://www.hoover.org/research/thomas-sowell
I think we make the mistake in labelling them as “very smart people”. They are what is left over after the commercial world finishes with the 10th round pick. As the old saying goes, they “know more and more about less and less until eventually they know everything about nothing” … or more commonly their craniums disappear up their rectums.
“or more commonly their craniums disappear up their rectums.”
Nick would be one of those..
They have spent all their lives in academia and have multiple advanced degrees. So of course they think they must be smarter than those guys who couldn’t hack the academic world and bailed for the false glory of big paychecks in the commercial world.
And if you don’t believe they are the smartest critters on the planet, just ask their mothers.
Yes. Communists have never been good at the basics. Especially regarding food.
>>Central planning, even by very smart people, is very stupid.<<
Your comment would be true if the goal of those very smart people was to prevent or solve the problems you mention…But it’s not. Their goal is to create & reinforce those problems in order to gain & secure control. Cf- Alinsky’s Rules for Radicals.
Yes my corner shop will be in the vanguard
Newspapers will obviously be cheaper in the evening
Even with automation, they are still going to have to manually reprice the near expired stuff.
The reason for this is that the UPC codes are the same for the new stuff and the old stuff. There is no way for the check out scanner to determine how old the package being scanned is.
A possible solution for this would be to get the manufactures to add to their UPC codes, some kind of date indicator, perhaps a 3 digit Julian date tag on the end. Then you would have to get someway to indicate which packages on a shelf are old vs new. For that you would have to add some kind of human readable indicator on the package, and train your customers how to use it.
The problem with that is if presented with packages that are 1 day, 2 days and 3 days old on the same shelf, and are the same price, they only get a discount after 4 days, who wouldn’t grab only the day old product?
I don’t know if this trick is world wide, but it’s widely used in the US. On bags of bread, the clips they use to seal the bags are different colors, and the color indicates what day of the week the bread was baked on. The clerks know how to read these tags, but very few customers do.
That is how the clerks know which bags of bread they need to take over to the day old cart, and slap a new price sticker on.
In Sweden and most countries in Europe, bread, meat packages and most other food with short shelf life, have packaging dates in addition to the expiration date. Exceptions are fresh vegetables without packaging, but you’ll know when not to buy those, when they look saggy or have a number of squese marks …
Exactly. My comment above should have included the comment – “our experience of Lidl/Aldi/Edeka etc in Western Europe is very different than so called discounters in the UK”.
It’s all about the bottom line for you, isn’t it, M?
Are you claiming that you never comparison shop?
Or are you just desperate to say something even if it makes you look dumb?
I think he’s saying he works for free.
Money means nothing to him.
It is all about making Foolish Nitwit comments for you, isn’t it, FN !
This is how most revolutions start.
Do you believe that “dynamic prices” will only go down?
“Dynamic pricing” is also called “fluid pricing” and much used by the travel industry – often indefensibly by ferry companies in our experience but that is for another day.
Apparently these academics do not know what BOGO is.
We have BOGOF in the UK. A multitude of uses!
Or BOGOHO
I shop Publix and Winn Dixie here in Fort Lauderdale. Both use aggressive dynamic pricing on high value meats (price labels say when package was set out), but not on low value produce. Winn Dixie uses screaming yellow Lowered to labels. Publix uses red Reduced to stickers.
When restocking produce, they simply remove and toss anything with signs of spoilage to protect the rest. There is no way to know how old the produce already is that they are restocking, so no way know when it might start spoiling, so no way to apply dynamic pricing to it.
Exception is bananas. They come in a bit greenish, turn yellow, then start developing brown spots on the peels. Publix moves brown spotted bunches to a different end aisle display over by coffee, and simply stickers the reduced price per pound on each bunch there for the cashier to ring up. Simple, effective, and fast.
Reminds me of an old joke. Those who can, do. Those who can’t, teach.
Pretty much the same system used in most countries, just minor details may be slightly different. Here in my home town food beyond it’s sell by date, but still perfectly edible, is donated to food banks, charity distribution (elderly, disabled, special needs etc) and others. These days the amount of food waste has reduced dramatically from 20+ years ago.
I suspect the article is based on an outdated view of food retail and the far left view that all capitalism is evil, wasteful and bad for the planet.
They’ve been doing this in Australia for at least 3 decades or more.
Those who can, do. Those who can’t, teach. Those who can’t teach- regulate.
Fixed it!
As long as it’s not mandated, grocers won’t mind having another tool at their disposal.
Pricing is information. If some sort of regulations interferes and artificially increases the price of waste, then grocers will have less incentive to overstock, regardless of how effective the algorithm is, which will lead to shortages.
Donating expired foods products to food pantries is a complete waste as they are not allowed to distribute expired foods to the public–or at least the one I worked with could not do that. I would assume most states and the USDA rules preclude that.
It’s not as if someone taking that expired food isn’t going to be able to judge whether or not the food is edible. But governments need to protect them?
Generally we are talking about packaged grocery items, which you or I might eat anyway. The agency could not take perishables, due to storage constraints. Maybe it is a largely a liability thing. I do know the agency had to throw out anything that was past its date, as a matter of regulation. And sadly, yes, some people do need someone to tell them what is best to do.
A number of years back there was a big stink when some crusading newspaper reporter discovered that grocery stores were dumping bleach on the food that they tossed out, in order to make it inedible.
According to the store owners, their lawyers advised them to do this, out of fear of being sued by someone who dumpster dived and ate something that had gone bad.
“Expiration” dates on food (typically “best by”) are not an indicator that the product is spoiled, only that it may be in a degraded condition and typically refers to texture and/or flavor. They are also entirely voluntary with the exception of baby formula.
ref: https://www.fsis.usda.gov/food-safety/safe-food-handling-and-preparation/food-safety-basics/food-product-dating
In fact, the USDA itself suggests not worrying about them and to check the food instead: https://www.usda.gov/media/blog/2013/06/27/you-toss-food-wait-check-it-out
One set of academics argue that “dynamic pricing” is a solution. And once implemented, another set of academics will argue that when the “dynamic” price goes up, that’s “gouging” and should be illegal.
Lord, save us from the “Smart People”(tm)
‘Academics, with no hands-on experience…’ are the fuse that explodes the weapons of mass desturction often referred to as unintended consequences. Some of the dumbest people I have encountered in my life are intellectuals, usually of the pseudo variety, and they represent a danger to mankind.
How did they come to the conclusion that dynamic pricing would reduce waste?
If they say models, they should be condemned to work as stock boys at the nearest grocery store for the rest of their natural lives.
BTW, pretty much every store that I have been to has a shelf or cart, for day old bread that has been marked down.
You triggered a memory. In my very expensive grad school days, my new wife and I were on a slimmer than shoe string budget. So we would shop Friday nights after 1900. That was when the local grocery store went through their Grocery cases and put soon to expire/suspect stuff up front on big racks at sharply reduced prices. We called them the rotten racks. We bought almost exclusively there a weeks worth of ‘fresh’ dinner supplies, went home, and spent hours trimming spoilage (meats, vegetables) and refrigerating/freezing the remainders. Made for a lot of good Chinese style meals in our cheap electric wok with lots of cheap rice. Expiring beef plus expiring spinach plus soy sauce on rice = batayaki (Japanese equivalent of originally Chinese dish, which we would make with expiring bok choy).
The use of spices in pre-refrigeration days was often to hide the off taste of bad meat. Surely yours wasn’t quite as bad as that.
>>How did they come to the conclusion that dynamic pricing would reduce waste?<<
Right…Farmers don’t plant seeds and harvest based on a daily basis according to that day’s sales figures at the local PigglyWiggly. Buying old stuff merely means the newer stuff will soon become old stuff too.
How did they come to the conclusion that dynamic pricing would reduce waste?
Feelings, probably.
An interesting perspective on pricing things like lettuce can be found at https://podcasts.apple.com/us/podcast/lettuce-again-and-lumber/id1687215430.
I’ve always want to buy my breakfast at auction.
I get the idea of preventing waste. But what is being wasted? I am reminded of a situation that the owner of a convenience store told about. He said they began offering yesterday pastries to a retirement home close by. It worked for a while but then people began asking for just the jelly filled or something like that. What started as a good will gesture and prevention of waste turned into a time-consuming headache just to sort out what they wanted. They stopped taking the day-old stuff to them as it didn’t achieve much. It was less trouble to let the racoons get it out of the dumpster than send it to the old folks. The real point of any product is to get the best price and sell the best product you can produce. I used to distribute bread. My view, it was better to just barely sell out the last delivery than to take back. And you always moved what was still good to the front and NEVER let the customer find an outdate package. Screwing around with variable pricing does nothing but set you up for people looking for the low-ball price. If you have a product, always present in as high a quality as you can and ask for the best price for what it is worth. Anything less than that is a disservice to both your product and your customer. Making excuse for selling substandard product by lowering the price seems wrong. Only a central planner with no concept of good product and service would lose that plot.
The arrogance of academics.
I’m always brought back to Thomas Sowell and his wise words: “It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”
Milton Friedman, Thomas Sowell and Walter Williams are my heroes. They saw the world as it is, not how it looks from faculty lounges and bureaucratic corridors.
“The arrogance of academics.” AKA “The incompetence of Career Politicians” or the other side of the same coin.
One approach to bringing academia back into the real world would be to provide more sabbaticals and force academics to take their sabbaticals on a regular basis. Of course my idea of sabbaticals is not like what they experience now. No, it would be a year or two of service performed in the blue collar world, you know like garbage men, sewage treatment, construction, manufacturing, janitorial, truck driving, policeman, fireman, farming, ranching, seafood processing, meat processing and on and on. A bonus would be that we don’t have to pay them for their sabbatical, their wages will do that. Their teaching job will be there for them with no loss of seniority but if they choose to stay in their new job we will hire someone else to replace them. It’s a win win.
I am old enough to remember the Economic Stabilization Act and the disastrous results, Unfettered markets can be cruel and predatory but don’t hold a candle to the havoc that governments wreak when they try to manage economies.
Per Seinfeld show, if you offer the muffin tops as a stand alone, nobody will want the muffin bottoms (not even the homeless).
There was no follow up Seinfeld episode where the regulators got involved, and required that anyone who removed muffin tops for individual sale would be required to also sell all of their muffin bottoms (even though there was no market).
Which would then be analogous to, and acknowledging that, if you have a competent smart govt regulator, you are also required to have a incompetent diversity hire to go along with the good one. All at tax payer expense.
The diversity hires are the muffin bottoms of government & woke business.
Windmills are the muffin bottoms of the energy sector.
How many times must central planning be tried before history is believed? Markets between buyers and sellers making millions of decisions everyday will generate a tried and true barter that results in the most efficient series of transactions.
Bureaucrats, academics, and know it all people imposing a structure from the top down will NEVER be able to supplant free markets.
But THIS TIME they will do it right!
(Just ask Joe Biden and AOC.)
Grocers who don’t under the price of groceries are no longer grocers
You can always get more sold by reducing the price but there’s that wee problem of falling margin across the lot you sell. No doubt the good perfessors in question can easily appreciate how their students could get twice the educational outcomes with twice the number of perfessors at half wages. No?
Cue the sudden appreciation of marginal economic analysis vs the law of averages no doubt. Our market system infinitesimal food wastage aided and abetted by the productivity of fossil fuels is dwarfed by the hunger games of those who lose so much of their production via spoilage through lack of such logistics safe storage and distribution. Spare me their next brainfart that we all need unreliable energy to create a level playing field with said hunger games.
No algorithm needed. Buy brie or similar soft cheese when close to the best by data and reduced in price, because it’s a not-at-it’s-best-until date.
Anything like a lab experiment on CO2 taken as proof we’re all going to die?
Yes, it will be a digitally managed method of mark downs as opposed to any other remaining methods of markdown determinations. But claiming a new solution? Academia on stilts.
As a side note, the cover picture of the two professors at the top of page is interesting because it seems to be AI-generated. Like many human artists, GPT-AI has difficulty drawing hands and fingers, probably greater difficulty. The prof on the right is giving his colleague the ‘middle finger’. While the right-side prof’s digital appendages look more like tentacles than fingers. :-]
Otherwise, the image looks quite realistic, the overall quality of AI-generated images is improving.
… and I just noticed the left-side prof has three legs!
So, that’s what happened to Jake the Peg.