March 2, 2026
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Can Discounting And Smarter Displays Reduce Food Waste?
A university study challenges the assumption that selling only the freshest items at full price is the safest way to protect perishables margins.
Using advanced analytical modeling and thousands of simulated retail scenarios, researchers from Netherlands’ Eindhoven University of Technology, the University of Texas and the University of Florida explored how perishables (fresh produce, dairy and meat) decline in quality over time and are impacted by three factors: product display, discount timing and discount depth.
One finding was that where a product is placed on the shelf matters almost as much as its price. When older, soon-to-expire items are made easier to reach, such as by placing them at the front of a display, shoppers are more likely to buy them. Compared with a common industry practice of making fresh and older items equally accessible with no discounts are offered, optimizing display and discount decisions led to a 6.01% increase in profit and a 21.24% reduction in relative waste on average.
“Retailers don’t have to choose between profitability and sustainability,” said Zumbul Atan, a supply chain management professor at Eindhoven University of Technology and study co-author, said in a statement. “In many cases, the same decisions that improve profits also dramatically reduce waste.”
The study found the impact of display and discounting depth depends on the category:
· Items that deteriorate slowly (i.e., dairy ) benefit most from displaying older products more prominently and offering modest discounts.
· Products that deteriorate quickly and are costly to discard (i.e., meat or prepared foods) perform better when fresher items are emphasized and discounts are used more aggressively.
· For fast-decaying products (low-cost items like fresh bread) , it can still make sense to clear shelves entirely when new stock arrives.
The research further found that even for retailers that avoid discounting and focus on an ELP (everyday low price) strategy such as Walmart, adjusting how products are displayed can reduce waste and improve profitability “when customer traffic is unpredictable, which is the reality for most stores.”
In separate research, professors from the Rady School of Management, the business school of the University of California, San Diego, found that laws requiring grocers to compost or donate food waste to avoid produce rotting in landfills and releasing methane are hard to enforce and ineffective.
At the same time, their analysis showed that dynamic pricing reduces waste by 21% on average while increasing grocery chain’s gross margins by 3%. Making perishables more affordable also incentivizes consumers to eat healthier foods.
Robert Sanders, professor of marketing and analytics at the Rady School of Management, said in a university interview last year, “To an economist, it’s actually really weird that grocery stores don’t dynamically price their perishables. Why should you, the consumer, be paying the same price for milk that will expire one week from now as you would for milk expiring three weeks from now? Not only is it unfair, it’s inefficient.”
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Discussion Questions
Discussion questions: Does it make sense that efficiently displaying and discounting older perishable foods can increase net profitability and reduce food waste in those categories? Is it a better option that focusing largely on full-price selling and then composting and donating expiring items?
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What this boils down to is that how products are displayed and where products are displayed matters. This isn’t rocket science, but it could have benefits if executed more thoroughly in grocery. That said, I am not sure of some of the practicalities. For example, most retailers already discount products that are nearing their expiry date – usually by placing yellow stickers on the items. Dynamic pricing is interesting, but how would it work in practice? Unless each item had its own dynamic pricing tag, it would be quite difficult to implement.
When older, soon-to-expire items are made easier to reach, such as by placing them at the front of a display, shoppers are more likely to buy them.
That’s some path breaking research there !!
Probably a few million from the research budget for that nugget!
Well perhaps people like me are to blame: just this past Saturday I reached six – or was it seven? – cartons back, and pulled out a newbie…13 Mar vs. 06 Mar (well worth it , I say!).
Seriously tho, I wonder if these savants ever encountered a rear loading freezer: isn’t their point essentially automatic ?
That’s some classic university research, right there.
The emerging research I’ve seen—and increasingly, real-world practice—makes a compelling case that smarter display and discounting of perishables is both more profitable and more sustainable than a full-price-then-discard model. A recent study I read found that relatively simple changes—placing older items more prominently and applying targeted markdowns—can increase profits by ~6% while reducing food waste by over 20%. That directly challenges the long-held assumption that protecting margin requires prioritizing only the freshest product at full price. In reality, moving aging inventory efficiently creates a win-win: improved sell-through, better inventory productivity, and less shrink.
From a business standpoint, this is clearly a better option than relying primarily on donation or composting after the fact. While those are important backstops, they are value-recovery mechanisms, not value-creation strategies. Once a product reaches that stage, the retailer has already lost the opportunity to monetize it. Markdown optimization, on the other hand, allows retailers to capture partial value while still meeting consumer demand for deals—effectively turning a loss into incremental revenue. The key, however, is precision: research shows that moderate, well-timed discounts outperform aggressive markdowns, which can erode margin or shift waste downstream.
The broader implication is that retailers should rethink perishables as a dynamic merchandising challenge rather than a static inventory problem. Smarter rotation, visibility, and pricing—often achievable with minimal capital investment—can materially improve outcomes. Donation and composting should absolutely remain part of the strategy, but as the final step in the lifecycle, not the primary plan. The retailers that win here will be those who treat food waste reduction as an operational discipline tied directly to profitability, not just a sustainability initiative.
Markdown optimization is a familiar discipline in the fashion-apparel world, but it’s not widely practiced at food retailers.
Calling it “dynamic pricing” is triggering to consumer advocates who sense a conspiricy behind every price tag.This, as we know, has been a persistent criticism of electronic shelf labels. Years ago a similar fear was raised when shelf-edge labels and UPC codes replaced price tags or stamps applied to individual items.
Since both perishable and non-perishable food products carry “best-by” dates, it is not a rare behavior for consumers to dig back into the display to find the package with the longest date. This presents a confound for merchants who diligently rotate their stock to maintain product freshness.
Thrift-oriented shoppers can possibly be trained to prefer lower prices for certain short-dated items, but retailers also need to solidify their markdown practices and make them consistent and trusted.
I’ve seen how yellow tags or “manager’s special” on-pack coupons in the meat department can be an effective tool in the hands of a diligent store merchant. It may be less practical for a stock clerk to riffle through the yogurt cups checking dates. It’s also important to consider whether a promotion is underway for a particular product, as this may impact price alignment.
Rest assured, if shoppers smell something is off with markdown pricing, they will lose faith in the retailer. Combine that with executional complexity, and many grocers won’t go down that aisle.
It absolutely makes sense that older and more perishable items should be displayed more prominently so they sell first. That’s Retail 101. The same principle also applies to fashion and other seasonal items.
“Dynamic pricing reduces waste by 21% on average while increasing grocery chain’s gross margins by 3%.” This is huge for grocery stores, which live or die by thin margins.
ESL (electronic shelf labels) enable this by letting grocers preset discount prices on relevant items based on freshness at each time of day. Game changing technology.
As someone who spent time in grocery, I can tell you that managing perishables requires as much experience, training, and discipline as merchandising a meat counter or running an in-store bakery. These are skilled positions, not tasks you rotate through a generalist workforce.
The research is compelling, and the logic is sound, but the fact is you need people who actually know the perishables business to really impact shrink and manage spoilage.
The shift toward generalist store models — particularly in big-box formats that added grocery as a category — hollowed out much of that institutional knowledge. You can layer on data tools and markdown algorithms, but if the person executing at the shelf doesn’t understand *why* the decisions matter, or what the real shelf-life of a banana is, or the saleability of soft avocados, all the data and discipline breaks down pretty fast.
The answer to reducing waste and impacting the bottom line- and I feel like I’m a broken record here, invest in your people first, then support them with technology.
As a retailer and wholesaler in the USA, I embraced weeks-of-supply as a key metric. Then I spent a year+ in China working with an apparel retailer who turned their inventory 15 times a year. Not a typo…15 times a year. The key metric every Monday morning was Days-of Inventory…DOI. The DOI metric demanded immediate and surgical markdowns, at the style/color level, to ensure there was no buildup of inventory. Their small stores did not have the luxury of clearance rooms, and the next wave of inventory was in the pipeline. Food might be an ideal candidate for a DOI or Hours-of-Inventory metric.
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What this boils down to is that how products are displayed and where products are displayed matters. This isn’t rocket science, but it could have benefits if executed more thoroughly in grocery. That said, I am not sure of some of the practicalities. For example, most retailers already discount products that are nearing their expiry date – usually by placing yellow stickers on the items. Dynamic pricing is interesting, but how would it work in practice? Unless each item had its own dynamic pricing tag, it would be quite difficult to implement.
When older, soon-to-expire items are made easier to reach, such as by placing them at the front of a display, shoppers are more likely to buy them.
That’s some path breaking research there !!
Probably a few million from the research budget for that nugget!
Well perhaps people like me are to blame: just this past Saturday I reached six – or was it seven? – cartons back, and pulled out a newbie…13 Mar vs. 06 Mar (well worth it , I say!).
Seriously tho, I wonder if these savants ever encountered a rear loading freezer: isn’t their point essentially automatic ?
That’s some classic university research, right there.
The emerging research I’ve seen—and increasingly, real-world practice—makes a compelling case that smarter display and discounting of perishables is both more profitable and more sustainable than a full-price-then-discard model. A recent study I read found that relatively simple changes—placing older items more prominently and applying targeted markdowns—can increase profits by ~6% while reducing food waste by over 20%. That directly challenges the long-held assumption that protecting margin requires prioritizing only the freshest product at full price. In reality, moving aging inventory efficiently creates a win-win: improved sell-through, better inventory productivity, and less shrink.
From a business standpoint, this is clearly a better option than relying primarily on donation or composting after the fact. While those are important backstops, they are value-recovery mechanisms, not value-creation strategies. Once a product reaches that stage, the retailer has already lost the opportunity to monetize it. Markdown optimization, on the other hand, allows retailers to capture partial value while still meeting consumer demand for deals—effectively turning a loss into incremental revenue. The key, however, is precision: research shows that moderate, well-timed discounts outperform aggressive markdowns, which can erode margin or shift waste downstream.
The broader implication is that retailers should rethink perishables as a dynamic merchandising challenge rather than a static inventory problem. Smarter rotation, visibility, and pricing—often achievable with minimal capital investment—can materially improve outcomes. Donation and composting should absolutely remain part of the strategy, but as the final step in the lifecycle, not the primary plan. The retailers that win here will be those who treat food waste reduction as an operational discipline tied directly to profitability, not just a sustainability initiative.
Markdown optimization is a familiar discipline in the fashion-apparel world, but it’s not widely practiced at food retailers.
Calling it “dynamic pricing” is triggering to consumer advocates who sense a conspiricy behind every price tag.This, as we know, has been a persistent criticism of electronic shelf labels. Years ago a similar fear was raised when shelf-edge labels and UPC codes replaced price tags or stamps applied to individual items.
Since both perishable and non-perishable food products carry “best-by” dates, it is not a rare behavior for consumers to dig back into the display to find the package with the longest date. This presents a confound for merchants who diligently rotate their stock to maintain product freshness.
Thrift-oriented shoppers can possibly be trained to prefer lower prices for certain short-dated items, but retailers also need to solidify their markdown practices and make them consistent and trusted.
I’ve seen how yellow tags or “manager’s special” on-pack coupons in the meat department can be an effective tool in the hands of a diligent store merchant. It may be less practical for a stock clerk to riffle through the yogurt cups checking dates. It’s also important to consider whether a promotion is underway for a particular product, as this may impact price alignment.
Rest assured, if shoppers smell something is off with markdown pricing, they will lose faith in the retailer. Combine that with executional complexity, and many grocers won’t go down that aisle.
It absolutely makes sense that older and more perishable items should be displayed more prominently so they sell first. That’s Retail 101. The same principle also applies to fashion and other seasonal items.
“Dynamic pricing reduces waste by 21% on average while increasing grocery chain’s gross margins by 3%.” This is huge for grocery stores, which live or die by thin margins.
ESL (electronic shelf labels) enable this by letting grocers preset discount prices on relevant items based on freshness at each time of day. Game changing technology.
As someone who spent time in grocery, I can tell you that managing perishables requires as much experience, training, and discipline as merchandising a meat counter or running an in-store bakery. These are skilled positions, not tasks you rotate through a generalist workforce.
The research is compelling, and the logic is sound, but the fact is you need people who actually know the perishables business to really impact shrink and manage spoilage.
The shift toward generalist store models — particularly in big-box formats that added grocery as a category — hollowed out much of that institutional knowledge. You can layer on data tools and markdown algorithms, but if the person executing at the shelf doesn’t understand *why* the decisions matter, or what the real shelf-life of a banana is, or the saleability of soft avocados, all the data and discipline breaks down pretty fast.
The answer to reducing waste and impacting the bottom line- and I feel like I’m a broken record here, invest in your people first, then support them with technology.
As a retailer and wholesaler in the USA, I embraced weeks-of-supply as a key metric. Then I spent a year+ in China working with an apparel retailer who turned their inventory 15 times a year. Not a typo…15 times a year. The key metric every Monday morning was Days-of Inventory…DOI. The DOI metric demanded immediate and surgical markdowns, at the style/color level, to ensure there was no buildup of inventory. Their small stores did not have the luxury of clearance rooms, and the next wave of inventory was in the pipeline. Food might be an ideal candidate for a DOI or Hours-of-Inventory metric.