Grocery Store Density and Food Waste

Abstract

Problem Definition: We study the impact of grocery-store density on the food waste generated at stores and households.

Relevance: Food waste is a major contributor to carbon emissions (as big as road transport). Identifying and influencing market conditions that can decrease food waste is thus important to combat global warming.

Methodology: We build and calibrate a stylized two-echelon perishable-inventory model to capture grocery purchases and expiration at competing stores and households in a market. We examine how the equilibrium waste in this model changes with store density.

Results: An increase in store density decreases consumer waste due to improved access to groceries, while increasing retail waste due to decentralization of inventory, increased variability propagation in the supply chain (cycle truncation) and diminished demand by customers. Higher density also induces more competition which further increases (decreases) waste when stores compete on prices (service-levels). Overall, consumer waste reductions compete with store waste increases and the effects of increased competition. Our analysis shows that higher density reduces food waste up to a threshold density; it leads to higher food waste beyond this threshold. Put differently, in so far as food waste is concerned, there exists an optimal store density.

Calibration using grocery industry, economic and demographic data reveals that actual store density in most American cities is well-below this threshold/optimal level, and modest increases in store density substantially reduce waste; e.g. in Chicago, just 3-4 more stores (per 10 sq-km) can lead to a 6-9% waste reduction, and a 1-4% decrease in grocery expenses.

Managerial Implications: These results arise from the principal role of consumer waste, suggesting that activists and policy makers' focus on retail waste may be misguided. Store operators, urban planners and decision makers should aim to increase store densities to make grocery shopping more affordable and sustainable.

Keywords: Sustainability, food waste, perishable inventory managent, spatial competition, variability propagation in supply chains, grocery retailing