Optimal Markdowns: Eliminate Waste and Protect Retail Profit
Tue May 26 2026
Author
Noah Xiao
Every year, over 1 billion tonnes of food is wasted, representing over $1 trillion in lost value. In Australia alone, over 7.6 million tonnes, equating to more than $35 billion, is lost to landfill each year. Beyond the massive financial blow and untapped margin opportunities, this waste severely impacts environmental sustainability and negatively impacts customer perceptions of brand freshness.
The public often sees markdowns as a simple transaction: a reduced sticker on a short-dated item creates a customer bargain and clears the shelf, a seemingly easy win for everyone. Yet, anyone with experience managing fresh food inventory knows the process is much messier.
Every markdown decision is a high-stakes race against the clock. Managers struggle daily with crucial questions: Is the discount effective enough to move stock before closing, but not so deep that it ruins the profit margin? Are we discounting too soon, possibly undercutting sales of similar full-priced goods? When these questions are answered correctly, retailers recover margin that would otherwise be thrown away. Incorrect decisions quickly accumulate high costs, including severely reduced profits, frustrated store staff, damaged customer perception of freshness, and a massive sustainability crisis.
Ultimately, most retailers have concluded that controlling short-life inventory demands a clever strategy backed by rigorous, scientific discipline.
The Markdown Dilemma
Once a product is on the shelf and ticking toward its expiry, the price point is the single biggest factor in mitigating waste. Yet, many food businesses operate with limited markdown processes. Those that do often rely on static, blanket discount rules, like "take 20% off today, and 50% off tomorrow", that fail to account for dynamic, real-world trading conditions.
Without a smarter approach, that combination is genuinely dangerous. A store manager under pressure to clear stock can, with the best intentions, execute markdowns that bleed margin unnecessarily, or conversely, hold onto a price too long and send perfectly good food to landfill. Manual decision-making and fixed percentage cuts inevitably leave money on the table.
The Optimisation Puzzle: A Scientific Approach to Waste
Solving this challenge requires shifting from reactive discounting to a demand-aware pricing engine. When you strip it down, finding the perfect markdown price isn't a guessing game; it is a highly precise, dynamic constraint optimisation problem.
Finding the exact price point that will clear stock before expiry, while preserving the maximum possible margin, requires balancing billions of potential combinations. A human cannot manually calculate this accurately without understanding the future demand associated with each price point, not to mention across thousands of SKUs in a store every afternoon. An elegant algorithm, however, can.
Our AI-driven solution continuously balances three critical outcomes:
- reducing food waste sent to landfill,
- protecting retailer margins, and
- delivering affordable value to consumers.
How Our Optimal Markdown Solution Works
jahanVerse End-to-end markdown solution
Our Optimal Markdown Solution automates and optimises in-store pricing by replacing static, blanket discount rules with a precise, demand-aware pricing engine. It catches at-risk inventory before it spoils by leveraging advanced forecasting and balancing flexible strategic objectives with business constraints. This approach transforms markdowns from a manual chore into a powerful tool for recovering margin and reducing waste.
- Item-Store-Specific Pricing:Machine-learning models simulate price elasticity in real-time to determine the exact optimal markdown price per individual product, in each specific store, at the specific time of the markdown.
- Advanced Predictive Engine:High-accuracy forecasts leverage hundreds of data points, including inventory levels, intraday sales patterns, local weather conditions, active promotions, and product life, to ensure the markdown price is relevant to the current context.
- Flexible Objectives & Compliant Pricing:Retailers can set strategic guardrails to maximise margin or minimise waste, while ensuring compliance with business and regulatory constraints (e.g., if an already promoted product needs further discount, the price should be lower than that).
- Intelligent Pricing Optimisation:The system intelligently balances the sell-through rate over a defined period given the defined objective and constraints, such as implementing gradual weekly price adjustments for products with longer remaining shelf life (e.g., coffee beans expiring in a month) rather than applying an immediate deep discount.
- Seamless In-Store Execution:The markdown application is designed for use on standard Android or iOS mobile devices, pairing directly with common label printers for immediate, actionable deployment in-store.
- jahanBot Integration:An embedded LLM-based agent assists store staff by explaining recommended pricing actions, completing compliance checks, and automatically raising support tickets when assistance is needed.
- Change Management & Training:A solution is only successful when it’s properly landed in the business. We provide a full suite of change management services, including in-person training, in-app tutorials, and continuous support (hypercare), ensures seamless adoption and compliance for both in-store team members and central office users.
Outlook
The businesses we see thriving in this environment aren't the ones applying blanket discounts. They are the ones treating markdowns deliberately, with clear guardrails, predictive intelligence, and tools that let store staff act quickly without slowing the business down.
By combining predictive forecasting, optimisation, and real-time execution, food markdowns are transformed from a manual chore into a scalable sustainability and profitability engine. Retailers can avoid their waste, capturing margin on stock that would have otherwise ended up in a bin.
Why Partner with jahan.ai
Partnering with jahan.ai means collaborating with a team that has extensive experience and a laser focus on your measurable return-on-investment. Our team is composed of top-tier supply chain business experts, data scientists, and engineers who speak your language and think in your shoes.
We combine deep retail and supply chain expertise with cutting-edge AI to deliver real, measurable value. Our platform, jahanVerse, is proven to deliver significant margin uplift and productivity gains.
Our clients typically get on average 60% reduced wastage, 12% incremental margin, and 37% faster sell-through.
If you are thinking about how your team handles short-life inventory, waste reduction, and margin recovery, we'd genuinely enjoy the conversation. No pitch deck required.
Drop us a line at info@jahan.ai. We're always keen to share what we've seen across the industry and help where we can.
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