Dynamic pricing of perishable food as a sustainable business model

Abstract

PurposeThe purpose of this paper is to (1) investigate the effect of freshness on consumers' willingness to pay, (2) derive static and dynamic pricing strategies and (3) compare the effect of these pricing strategies on a retailer's revenue and food waste. This investigation helps to reveal the potentials of dynamic pricing strategies for building more sustainable business models.Design/methodology/approachThe authors conduct an online experiment to measure consumers' willingness to pay for fresh and three-days’ old strawberries. The impact of freshness on willingness to pay is analysed using univariate tests and regression analysis. Pricing strategies are compared using a Monte Carlo simulation.FindingsThe results of this study show that freshness largely determines consumers' willingness to pay and price sensitivity. This renders dynamic pricing a promising strategy from an economic point of view. The results of the simulation study show that food waste can be reduced by up to 53.6% with a dynamic pricing instead of a static pricing strategy in the case that there are as many consumers as strawberry packages in the inventory. Revenue can be increased by up to 10% compared to a static pricing strategy based on fresh strawberries.Practical implicationsThis study suggests that food retailers can improve their revenue when switching from static to dynamic pricing. Furthermore, in most cases, food retailers can reduce food waste with a dynamic instead of a static-pricing strategy, which might help to improve their image through a more sustainable business model and attract additional consumers.Originality/valueThis study is the first to analyse the possibility of using food freshness to design a dynamic pricing strategy and to analyse the impact of such a pricing strategy on both, a retailer's revenue and a retailer's food waste.

Circularity of food systems: a review and research agenda

“…Alongside the Internet of things, other technologies, such as additive manufacturing, artificial intelligence, and machine learning, can play a pivotal role in enhancing sustainable and circular practices. 3D food printing, for instance, can contribute to reducing food waste through the usage of food by-products and eco-friendly foods (Burke-Shyne et al, 2021), while machine learning can instead enable dynamic pricing, a promising strategy for retailers wishing to increase their revenues and reduce food waste (Scholz and Kulko, 2021). In this regard, De Bernardi and Azucar (2020) provided the case example of a food start-up that uses a machine-learning pricing engine to price products in real time based on a series of dynamic variables that include the expiration date, shelf capacity, regional factors, brand strength, and on-shelf competition.…”

Implementation of the SDGs by social economy enterprises in the agrifood sector

“…The Internet of Things is useful to reduce food waste in domestic settings (Nasir et al ., 2018), restaurants (Wen et al ., 2018), the food supply chain (Manavalan and Jayakrishna, 2019) and the wider food industry (Jagtap and Rahimifard, 2019; Jagtap et al ., 2019). In addition to the internet of things, other technologies such as 3D printing, artificial intelligence and machine learning can help improve sustainable practices (Burke-Shyne et al ., 2021; Chopra et al ., 2022; De Bernardi and Azucar, 2020; Scholz and Kulko, 2021). Likewise, blockchain technology contributes to the SDGs in different ways.…”

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“…Authors Stolz, Stolze, Hamm, Janssen and Ruto (2011) emphasized that organic food marketing should consider the price sensitivity of parts of occasional organic consumers and increase the perceived priceperformance ratio of organic products communicating quality attributes. According to Scholz and Kulko (2022), freshness largely determines consumers' willingness to pay and price sensitivity. The use of the price sensitivity tool in price management brings for the pricing of a perishable product, which food products are, considerable positives.…”