Wasteless uses dynamic pricing algorithm at supermarkets to tackle food waste
Globally, one third of our food is wasted. Supermarkets are one of the bottlenecks to tackle that problem as they have a lot of food with a limited expiry date. To reduce how much food is being wasted, the EIT Food supported start-up and former Rising Food Star Wasteless developed a smart algorithm that allows to apply dynamic pricing markdowns based on expiry dates. The efficient discount encourages consumers to buy the products in time rather than letting them go to waste on the shelf.
“Supermarkets are the place in the food chain where food from farmers, industry and other food producers reaches the about 450 million consumers in the European Union”, explains David Kat, VP Business Development of Wasteless. “Unfortunately, a lot of food that arrives at the retailers never reaches the consumers due to all sorts of reasons.”
For example, 85 % of the food waste is caused by fresh food that reaches its expiry date before it gets sold. “The last few years, various supermarkets have been trying to reduce this waste by, for example, applying discount stickers a day before the expiry date. This is labour-intensive and doesn’t entirely achieve the goal, as the food may start to look old or a bit devoured”, he continues. “The discount comes too late and is not efficient.”
A win-win solution
Wasteless came up with a data-oriented approach to help supermarkets reduce their losses and push back on food waste by selling it. “Supermarkets not only lose a lot of good food, but also a lot of money. We came up with a solution to solve both problems: help supermarkets increase their profit by reducing their food waste”, Kat states.
To achieve that goal, they developed a smart algorithm based on expiry dates. Instead of waiting until the day before the expiry date to give a discount, they use the algorithm to calculate and test what the ideal date is to apply a discount. For example, a salad that expires on May 15 doesn’t need to have the same price as a salad that expires on May 21.
Perceived value versus price optimisation
The reason they approach it this way, is that consumers are very likely to prefer the salad with the later expiry date over the salad with the upcoming expiry date. “There is not necessarily a difference in taste or look, but the perceived value of the more recently made salad is simply higher”, Kat explains. “Selling the older salad at a discounted price is a powerful tool to convince consumers to buy and use the product anyway.”
The way it works is that the algorithm knows all the products in the shelves, including their expiry date. Based on all sorts of data, the algorithm predicts whether or not it is likely that the product will get sold. With these insights as a reference, it then calculates the most competitive price point for both consumers and the retailer. To evaluate and further improve the system, Wasteless uses reinforcement learning. This means that each time the algorithm decides a new price point, it will afterwards evaluate whether it was a correct analysis or if it should do it differently next time.
“The data really takes everything into account to calculate the best discount”, Kat clarifies. “If you, for example, consider to buy Parmezan cheese, you are very likely to consider rucola and fresh pasta as well. The algorithm therefore looks at complementary products to make the discount even more interesting or adapt them to each other.”
Reward sustainable consumption
The products in supermarket have a data enabled barcode, which furthermore allows the supermarket to get good data on the increased sales rate of products at those discounts. To take it a step further, they can also reward those consumers who buy sustainably. This can be done through special actions via their membership card.
“Another option that is possible through smart data is to suggest recipes to consumers for the food they bought when that is close to its expiry date”, Kat adds. “This is an easy and innovative way to give them both inspiration and a reminder to use the food they bought.”
Over time, Wasteless also aims to use the data to inform and support producers to increase their efficiency. This is to reduce food waste before it gets to the supermarkets. “Our goal is to make the entire system smarter, as it will reduce food waste and increase the sustainability of our production and consumption”, Kat concludes.