Supermarkets could sell stock faster by putting fresh meals in front

To understand how to make premade meals more appealing – and less likely to be thrown away – a retailer in the United States recently turned to operations management researchers at NJIT and Stanford University. 

In response, Jae-Hyuck Park, an Assistant Professor of Decision Science and Business Analytics at NJIT, and Dan Iancu and Erica Plambeck, professors of Operations, Information and Technology at Stanford Graduate School of Business, created a model to analyse buying patterns for premade foods and evaluate how information such as timestamps, price and display order might convince a customer to choose an item or pass it over. 

Their findings have been published in the academic journal Management Science. 

One tactic for selling premade foods is ‘first-in, first-out’ (FIFO) in which items that are prepared earlier are displayed more prominently. But some stores favour the ‘last-in, first-out’ (LIFO) strategy, which prioritises the most recently cooked items for display and easy access. 

Different advantages 

According to Park, both approaches offer different advantages. 

“FIFO can work better when holding items on the shelf is costly – for instance, due to heating or labour costs. Premade items that spoil quickly also benefit from the FIFO method,” Park explains. 

“But when items can sit longer and freshness drives customer satisfaction, a LIFO-type strategy can work better. And timestamps are most useful when shoppers differ in how much they care about freshness.” 

However, the LIFO approach means that more items accumulate on shelves, which can increase costs for the store and lead to more waste. 

Higher sales, lower waste 

Park’s model determined sales rates by calculating various factors such as freshness, item shelf life and customer traffic. The researchers also analysed decades of data going back to the 1980s, much of which suggested that FIFO was generally better for managing perishable inventory because it prioritised selling older items first. 

But the new model showed that this was not always true. For certain foods – rotisserie chickens, for example – customers are highly aware of freshness. In those cases, selling the freshest items first can be optimal. 

The model also suggested that adding timestamps cut down on sales by reducing an item’s shelf life, creating more waste.  

In the study, the scientists suggested that retailers could sell more by omitting timestamps. Even in circumstances where retailers used timestamps to reduce prices for older items, sales were higher if all items were the same price and not timestamped. In the absence of timestamps, customers judged the quality of an item through visual comparison rather than the listed age. 

“Retailers could see higher sales, lower food waste, and better alignment between operational efficiency and consumer preferences,” Park concludes.  

“Importantly, our results suggest that these gains do not have to come at the expense of customer welfare, which makes the findings particularly relevant for sustainability-focused retail strategies.” 

You can find out more about the study here.