Cutting waste begins at the shelf edge
Carrier bags, straws and single-use coffee cups have joined food waste on the growing list of concerns consumers have about the wasteful nature of much of today’s consumption.
The UK wastes 10 million tonnes of food each year which has a value of over £17 billion, 60% of which could be avoided, and when you throw in the greenhouse gases from the disposal of the wasted food then the situation is whole lot worse.
Thankfully technology is emerging to play its part in helping to solve the problem and meet the ambitious Courtauld Commitment target spearheaded by WRAP which calls for a 20% reduction in food waste by retailers by 2025. Various app-based solutions have appeared including those that link retailers who have excess food left at the end of a trading day with consumers such as TooGoodToGo, OLIO and Karma.
Arguably, retailers need to more efficiently manage waste across their businesses before it requires the involvement of these third-parties. For this they need to manage prices throughout the day, whereby stock levels and sales velocity determine the pricing in order that no excess food is left at the end of the day or when the sell-by-dates are reached.
Electronic Shelf Edge Labels (ESLs) provide retailers with the opportunity to continually change their prices throughout the day based on their available stock levels. If they know that there is a stock of apples in the back of the store waiting to hit the shelves then the sensible approach is to clear the stock on-shelf through dynamic pricing.
To constantly manage prices in this way is simply not possible through manual methods with paper price stickers but with ESLs linked to central software unlimited changes can be made across many categories with great ease. Co-op Denmark found that it saved an incredible $104,000 in cost savings in employee time in one store during the course of a single year after it implemented ESLs. That is an enormous saving in wasted time making manual paper-based changes on top of the cost savings made from reducing food waste.
Such technology provides various upsides. Take the usage of increasingly clever forecasting software, which draws on myriad data points, as well as the growing use of Artificial Intelligence to predict demand and in some cases automatically initiate orders for replenishment. It’s all well and good having such insights on inventory, but are they being practically applied?
One way is through pricing strategies but the execution aspect is where things tend to fall over. The introduction of ESLs would provide the execution component that enables retailers to align their increasingly clever inventory management capabilities with having full flexibility on changing prices. This then delivers fuller margins and ultimately reduces food waste.
For food retailer Kaufland in Germany the key drivers behind its adoption of ESLs was to find a find a more agile way to promote offers, react to competitors’ price changes, and increase the frequency of price markdowns to protect margins and reduce waste. It recognised that such a solution is the most agile way for it to deal with promotional offers and price reductions in a strategic way thereby cutting the amount of waste across its business.
For such organisations the return on investment of ESL implementations can be in a short time. But of course the reduction in waste does not only save money – from both margin protection and eradicating the cost of disposing of waste food – there is also the brand perception.
As consumers increasingly rail against waste in all its forms retailers need to be very careful with how their brand is perceived in the marketplace and the best way to do this is to ensure that the company is doing the right thing and proactively reducing the waste it creates.
Glynn Davis, editor of Retail Insider
[This column has been produced in conjunction with Displaydata.]