How Dynamic Markdown Pricing Can Reduce Waste and Boost Profits

Traditional retail markdown pricing is a broken system costing millions 

Retailers have long struggled with markdown pricing. Whether it’s manual pricing decisions, inconsistent execution across stores, or deep discounts applied too late, the result is the same—millions in lost revenue and excessive waste. 

A recent study from GreenMatch found that 118 million tonnes of food, or 13% of the total annual amount, gets wasted at grocery stores from unsold produce, expired products, damaged goods, and overstocked items. This has a significant impact on both environmental sustainability and financial performance. Instead of writing off unsold products as waste, retailers can sell more, waste less, and meet sustainability targets without sacrificing revenue. 

We have already explored the scale of the problem and why traditional markdown approaches are failing. In this blog, we move beyond the problem to focus on the solution—how AI-powered markdown pricing is transforming retail by reducing waste, improving sell-through rates, and driving profitability. 

The smarter way to reduce waste and boost revenue? AI-Powered Dynamic Markdown Pricing 

For years, retailers have relied on manual markdowns or rule-based pricing, both of which are slow, inconsistent, and prone to error. Dynamic markdown pricing changes the game by using real-time data, machine learning, and automation to dynamically adjust prices, ensuring markdowns happen at the right time, with the right discount, in the right store. 

Unlike traditional methods, which often lead to excessive price cuts or unsold stock lingering too long, dynamic markdown pricing takes a data-led, strategic approach. Every price adjustment is based on actual demand signals, store-specific trends, and historical performance, rather than arbitrary discounting rules. 

How AI determines the right markdown price 

Historically, markdowns have been a reactive process—stores discount products only when they are approaching expiry or when sales are lower than expected. AI-powered dynamic markdown pricing shifts this to a proactive strategy, using predictive analytics to anticipate markdown needs before they become an issue. 

By analyzing sales trends, seasonal fluctuations, and external factors like promotions, AI can help retailers: 

• Identify the best timing for markdowns based on historical demand patterns. 

• Adjust pricing dynamically based on real-time sales performance. 

• Ensure markdowns are executed with consistency across all store locations. 

• Align retail markdown pricing strategies with broader retail pricing and inventory goals. 

This level of precision and automation means retailers can maximize sales opportunities, minimize waste, and improve profitability—all without requiring additional manual effort. 

At the heart of AI-powered dynamic markdown pricing is a continuous feedback loop of data analysis and price adjustments. The system considers multiple factors in real-time, including: 

• Stock levels at each store, ensuring markdowns reflect actual inventory on hand. 

• Sell-through rates to determine how quickly a product moves at different discount levels. 

• Time of day and day of the week, factoring in when customers are most likely to purchase markdown items. 

• Seasonal demand fluctuations, ensuring markdown pricing aligns with shopping behavior. 

• Compliance requirements, preventing stores from deviating from the optimal markdown strategy. 

By processing all these inputs, AI generates precise markdown recommendations, ensuring each discount is optimized to maximize sales while minimizing unnecessary revenue loss. 

The business impact of AI-powered dynamic markdown pricing 

Retailers who switch to dynamic markdown pricing quickly see measurable improvements in their bottom line and waste reduction efforts. The benefits go beyond just better pricing—they fundamentally transform how markdown execution is managed across stores. 

One of the biggest advantages of dynamic markdown pricing is its ability to sell more products at a higher price point, reducing the need for extreme discounting. By optimizing markdowns in real time, retailers can capture more revenue per item while still clearing stock before expiration. 

For example, Lincolnshire Co-op saw a 2.6% improvement in sell-through rates after implementing a dynamic markdown pricing system. Instead of relying on reactive, last-minute discounts, the AI-driven strategy allowed them to adjust prices at optimal points, ensuring stock was sold before it needed a steep markdown. 

How dynamic markdown pricing improves productivity

One of the hidden costs of markdowns is the labor required to execute them manually. Store teams often spend valuable hours reviewing expiry dates, deciding markdown levels, and manually updating labels. AI-powered markdown solutions eliminate much of this inefficiency by automating the entire process. 

Retail staff can simply scan a product and instantly receive the optimal markdown price, removing guesswork and ensuring compliance with company-wide pricing strategies. This not only improves consistency across stores but also frees up staff to focus on more valuable tasks like customer engagement and inventory management. 

For retailers using electronic shelf labels (ESLs), the process is even more seamless. Prices update automatically as soon as the associate actions the markdown on their hand-held terminals.  

Why AI-powered dynamic markdown pricing is a must-have for retailers 

With tightening margins, increasing sustainability pressures, and shifting consumer behaviors, retailers can no longer afford to rely on outdated markdown strategies. AI-powered dynamic markdown pricing isn’t just about reducing waste—it’s about driving profitability, improving efficiency, and staying competitive in an increasingly data-driven retail environment. 

 Retailers that fail to modernize their markdown processes risk: 

• Missing out on revenue by discounting too steeply or too late. 

• Losing efficiency with manual markdown execution. 

• Failing to meet sustainability goals, leading to regulatory and reputational risks. 

Conversely, retailers that embrace AI-powered dynamic markdown pricing will outperform competitors, reduce waste, and create a more agile, responsive pricing strategy that adapts in real time to market conditions. 

The shift is already happening, and those who adopt AI-driven markdown solutions now will be best positioned for success in the future of retail. 

Are you ready to take control of your markdown pricing execution?  

Markdowns don’t have to drain profits—when executed with the right strategy, they can be a powerful tool for optimizing revenue and reducing waste.  

If your stores are still relying on manual markdown processes, you’re leaving money on the table. With WasteInsight's AI-powered dynamic markdown pricing, you can: 

• Reduce markdown waste by optimizing price reductions at the right time. 

• Increase sell-through without unnecessary deep discounts. 

• Ensure markdown compliance across every store location. 

• Create labor efficiencies by automating pricing decisions. 

WasteInsight offers an innovative approach to managing food waste and enhancing sustainability within your operations. By providing real-time data analytics, WasteInsight helps you identify waste-generating items, streamline your processes, and ultimately reduce costs. With its user-friendly interface, you can effortlessly track waste patterns and implement strategies that align with your markdown efforts.  

Integrating WasteInsight into your markdown strategies not only improves efficiency but also supports your commitment to sustainability. By minimizing waste, you enhance profitability while contributing to a greener future.  

Ready to see how AI-powered markdown pricing can transform your business? 

Book a free demo today!