Digital labels make it easy to apply discounts as products approach the end of their shelf life, encouraging purchases and reducing food waste.
New research from the Texas McCombs School of Management in Austin (USA) suggests that replacing physical shelf labels with digital ones allows supermarkets to easily lower prices and transfer older stock from their shelves to consumers’ homes, reducing food waste.
“Everything becomes easier when dynamic pricing [processo que utiliza tecnologia para alterar rapidamente os preços nas etiquetas] is activated. There’s less food waste and fewer emissions from food ending up in landfills,” he says. press release Ioannis Stamatopoulos, associate professor of information, risk and operations management.
“If you’re a consumer who cares a lot about price, you can buy blueberries that will expire two days later and eat them today,” adds Stamatopoulos.
Changing digital labels with just a few keystrokes on a tablet, compared to printing paper labels and sticking them on shelves, also saves supermarket chains time and money. According to Stamatopoulos, when it is easier and cheaper to update prices, supermarkets should do so more often.
A team of researchers, made up of Stamatopoulos, Naveed Chehrazi (University of Washington) and Robert Sanders (University of California), analyzed two unidentified European supermarket chains during the process of implementing the new labels.
The first, located in the UK, introduced digital labels for 940 perishable products, which indicated the basic price and added discounts as the products approached the end of their shelf life. The researchers found that the stores changed prices 54% more often.
The second supermarket chain in the European Union (EU) has adopted electronic labels, but has added a second technology: expanded barcodes. These can contain inventory details such as packing dates, batch numbers and expiry dates. When the inventory nears its expiration date, the store can lower prices to stimulate purchases.
By better managing inventories, expanded barcodes also boost stores’ bottom lines. “Since the supermarket can put things on discount when they’re about to expire, it can place larger orders, taking advantage of economies of scale in ordering,” explains Stamatopoulos.
According to the researchers, after EU supermarkets installed the two technologies, the frequency of price changes increased by 853%.
“While dynamic pricing has long-term benefits, it faces short-term obstacles. One of them is consumers’ fear that retailers will raise prices when demand is high – as ride-hailing companies like Uber do,” reads the statement.
In February 2024, fast-food chain Wendy’s announced that it would be implementing dynamic pricing, which provoked negative reactions. The chain quickly clarified that it would reduce prices during off-peak periods, but would not increase them during peak periods.
However, Stamatopoulos explains that these periods are difficult to identify. “For retailers to estimate demand very precisely and react dynamically accordingly in order to squeeze every dollar out of it, I think, is a bit impossible,” he says.
In addition to the possible negative feedback, another obstacle to this solution is the cost. Supermarket chains have to invest in digital labels and tablets, while employees have to update the data of thousands of items on a daily basis.
To speed up the transition, Stamatopoulos suggests government subsidies, such as those granted to solar panels and electric vehicles. “Someone needs to break this balance. Then things will move on to a new era where everyone will use the additional information,” he says.
In terms of adopting these technologies, Europe is ahead of the US for the time being, but that may be changing. Several American supermarket chains have already implemented these solutions or intend to do so. In June, Walmart announced that it will transition to digital price tags in 2,300 stores by 2026, while Amazon Fresh and Midwest Schnuck’s are already using them.
According to the non-profit organization ReFed, American supermarket chains wasted five million tons of food in 2022, 35% of which was sent to landfills. More than half of this waste – 2.7 million tons – exceeded the expiration dates on the labels.
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