Grocers Adopt AI Pricing Tools to Reduce Food Waste and Maintain Profit Margins

Grocery chains are increasingly turning to artificial intelligence tools to manage pricing on perishable goods, according to a CNBC report. These tools allow for targeted discounts on items nearing their best-by dates, helping to reduce food waste and protect profit margins.

This strategy comes amid competition from discounters and warehouse clubs, as shoppers seek deals across multiple retailers.

U.S. 2 billion in lost value. With recent inflation and rising gas prices affecting household budgets, grocers are seeking ways to minimize such losses, known as shrink. AI platforms enable dynamic pricing adjustments to sell these items before they spoil.

AI Platforms and Implementation One AI

company provides an app that connects shoppers with local stores offering discounted food close to expiration.

Users can browse, purchase, and pick up items in-store. The company reports partnerships with chains including Kroger, Piggly Wiggly, Loblaws, and Gelson's, with expansion to over 100 additional Kroger locations this month. Partners using the platform have seen an average 27% reduction in shrink, along with increased customer traffic.

Shoppers using the app make nearly four extra trips per month and spend about $28 more per visit on full-priced items. This data also provides insights into consumer behavior, particularly in fresh food categories with higher spoilage risks.

Market Context and Competition

A Deloitte study indicates that 89% of people shop for discounts, while Numerator data shows shoppers visiting 23% more retailers for groceries.

Traditional grocers face market share gains by discounters like Dollar General and warehouse clubs like Costco. AI-driven pricing helps these grocers compete by offering value without eroding margins through blanket promotions. The approach allows retailers to convert surplus inventory into sales, reducing landfill waste.

Grocers gain better understanding of product sell-through rates, prices, and shelf life stages. This is particularly relevant for categories with tight margins, such as bakery and fresh foods.