In a recent presentation, Wasteless, a developer of AI-driven dynamic pricing solutions for grocery stores, updated its development status. Its current business model is to charge customers (i.e., food retailers selling fresh produce, dairy, and meat) a one-time fee for platform setup and then a monthly service fee for each stock-keeping unit (SKU) in a store. Its platform informs consumers about product discounts through both physical channels (electronic shelf labels in stores) and digital channels (websites and mobile store apps). The company will next deploy its system in 40 stores of the EU-based food wholesaler Metro in Q3 2021 and is seeking $5 million for business expansion in the U.S. and EU markets.
USE CASE AND BUSINESS IMPACT
Wasteless' release signals that the company has moved beyond its early development stage and is at a tipping point toward achieving scale-up in the food sector. As a component of its advancement, the company has passed the exploratory phase of technology development, as its technology appears able to serve large customers for scaled deployment rather than only pilot projects. Deployment in 40 Metro stores indicates that Wasteless has convinced Metro of reductions of in-store food waste (between 40% and 80%) and improvement of store profitability.
Wasteless will no longer be in the phase of conducting free pilot projects, and it has already established a business model to generate revenue. Additionally, it's highly likely that the company will see fast revenue growth in the next two years given that the fundraising will fuel business expansion in the EU and U.S. We expect the company to first see growth in the EU market, where it has focused its pilot efforts. The U.S. market will likely take some time to explore, as Wasteless may need to refine its AI models using local data like supply and demand, consumer behavior, and regional supply chains.
From a technology perspective, the core expertise of Wasteless is the AI models, which optimize the price reduction schedule to incentivize consumer purchases while boosting store sales and profits. The company's competitive advantage is that it has proved the effectiveness of the models by conducting pilot projects. From an operations perspective, Wasteless' solution requires stores to link product information (like receiving data and expiration date) to RFID tags and apply the tags to every item in a batch at receiving. This is a labor-intensive process, but it seems Wasteless' customers can justify this process by receiving tangible value in waste reduction and sales increases.
Companies in food retail via in-store or online channels should consider testing Wasteless' system given the above progress in both technology and business development. More importantly, we see increasing opportunities for companies in food development (especially perishable food) to collaborate with Wasteless. First, food developers can obtain tangible benefits by participating in Wasteless' projects for retailers. Its AI system can optimize when and how much to adjust price points as the product expiration date approaches, which not only increases product sales but also provides better visibility of real-time market demand to minimize out-of-stock situations. Second, as the whole CPG sector is shifting to online sales through direct-to-consumer (DTC) channels, many food brands, such as Chobani and Impossible Foods, are becoming DTC, and they may need Wasteless' solution. These brands will have to deal with the retailer's problem of how to balance the supply of perishable products with the fluctuation of consumer demand, where Wasteless' user engagement through digital channels for price discount information will have a chance to fit in.