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