Dynamic pricing and profit maximisation: a simulation-based approach for agri-fresh products retailing in India

Abstract

Fresh agri-food products, like fruits and vegetables (F&Vs), are perishable products having a very short shelf life. They are different from non-perishables in managing their inventories as customers are more concerned about the nutritious value and shelf life. Customers are becoming strategic and planning their purchase based on the markdown and other promotional activities. Retailers are finding it difficult to a trade-off between the prices and remaining shelf life for offering markdown. Therefore, decisions depending upon the value and timing of such markdowns for 'not so fresh' F&V are important. This paper attempts to address these issues based on previously published studies which suggested a simple procedure to identify the quantum and time of markdowns for perishable products inside a retail store. Extending the approach, Monte Carlo simulation is applied in order to generate randomness in probability of sales and demand for F&V. A questionnaire is used in order to get the primary data from 89 retailers from Delhi/NCR, India. Organised retail of F&V is still at starting stage in India and no such study has been attempted before.