A mathematical model for pricing perishable goods for quick-commerce applications

Quick commerce (q-commerce) is one of the fastest growing sectors in India. It provides informal employment to approximately 4,50,000 workers, and it is estimated to become a USD 200 Billion industry by 2026. A significant portion of this industry deals with perishable goods. (e.g. milk, dosa batter etc.) These are food items which are consumed relatively fresh by the consumers and therefore their order volume is high and repetitive even when the average basket size is relatively small. The fundamental challenge for the retailer is that, increasing selling price would hamper sales and would lead to unsold inventory. On the other hand setting a price less, would lead to forgoing of potential revenue. This paper attempts to propose a mathematical model which formalizes this dilemma. The problem statement is not only important for improving the unit economics of the perennially loss making quick commerce firms, but also would lead to a trickle-down effect in improving the conditions of the gig workers as observed in [4]. The sections below describe the mathematical formulation. The results from the simulation would be published in a follow-up study.