3 Lessons from Walmart on the Future of Grocery Store Shrink Control

In 2015, Walmart reported $300m in revenue lost to theft alone. When combined with other contributors to total shrink, it’s no wonder why the retailer has recently launched a series of new initiatives to get a better handle on these losses.

Like other retailers, both large and small, Walmart’s plan to combat the industry’s alarmingly growing shrink problem through a mix of new technology and tried-and-true tactics.

To help grocers and supermarkets orient their own AP/LP programs in relation to the leaders throughout retail, we’ve summarized three of Walmart’s new programs for 2018 and beyond.

1. Blockchain for grocery: highly efficient farm-to-store tracking technology is on the way

Blockchain is a complex topic, but for the purposes of understanding how it’s being used here, a basic, functional definition will do just fine:

“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”
– Don & Alex Tapscott, authors Blockchain Revolution (2016)

To understand this at an even more basic level, picture a spreadsheet that is duplicated thousands of times across a network of computers. Now imagine that this network is designed to regularly update this spreadsheet everywhere. That’s blockchain in a nutshell.

So, how is Walmart applying this technology to its grocery operations? In June of 2017, the company released results of a test program which used blockchain to cut the time it took to trace food from its journey from the farm to the shelf from about a week to less than three seconds.

The accomplishment shows opportunities for both Walmart and the larger industry in tackling the cost of food waste, more quickly identifying and containing food borne illnesses and fraud while maintaining compliance with safety regulations and meeting customer demand for transparency in the food system.

Here’s how blockchain could be used by grocers in the future to cut down on food waste:

Tracking information for a food item, such as a piece of fruit, is first scanned and inputted to the blockchain-enabled software from a label on a package of fruit. Product information, such as details of the farm, batch numbers, factory and processing data, expiration dates and shipping details, is digitally connected to the items as they move through each node of their journey to the store rather than a complex mix of paperwork and multiple digital logistics systems.

A Walmart spokesperson said this process took nearly seven days using previous methods. Using blockchain, they revealed their origins to two farms in Mexico and their stops along the way, in 2.2 seconds.

Blockchain’s ability to provide a permanent record of transactions by grouping them in digital “blocks” that cannot be altered could serve as an alternative to traditional paper records and manual inspection systems could leave supply chains vulnerable to inaccuracy or fraud when applied to food safety.

While blockchain systems are still in their infancy as industries continue to discover how they can serve as solutions to unique problems, grocers should begin understanding how this technology is being applied to supply chains, in particular.

Here are some resources that serve as a great starting point:

2. Eroding barriers to online perishables sales

A recently published patent filed by Walmart sheds light on the company’s new initiative to overcome one of the barriers to ordering grocery items online by giving consumers more control over the fresh items they select.

Specifically, the patent details a system the company calls the “Fresh Online Experience,” or FOE. In short, the system would enable customers to see an actual piece of produce, meat, or bakery product when making an online purchase for pickup or delivery.

Here’s how it would work in a nutshell: When a customer logs onto Walmart’s online shopping system, they would see a selection of fresh item categories represented by stock images. After selecting the type of product they’re looking for, they can then view image scans (either two- or three-dimensional) of the actual items available in the store and select the ones they want. These products would have “edible watermarks” applied to them ahead of time, which would be used to verify the items they selected.

According to the patent, the system seeks to curb the reluctance of customers in buying fresh items online when they don’t get to inspect it for quality and appearance ahead of time––thereby increasing overall sales of perishables and avoiding shrink due to expired products.

“The Fresh Online Experience … may facilitate customers’ ability to visually verify the exact fresh item they will be receiving,” the patent application states.

3. Employee happiness will always matter when it comes to shrink control (even for Walmart)

While Walmart is primed to make big investments in technological solutions to shrink, they’re also combating the problem by bolstering employee happiness through training and pay raises.

On the heels of the newly-passed tax bill, Wal-Mart has increased its wage base to $11, in addition to adding bonuses (up to $1,000) for some employees. The company said it will also expand maternity and paternity leave benefits and is looking into other ways to reward employees following the opportunities presented by the softened tax laws.

Along with better pay, Walmart says it will be stepping up employee training around catching and preventing thieves as well as managing inventory better. The retailer also said last year that it is working on reinstating its door greeters as part of an effort to cut down on theft.

Learn how your can use technology to track and manage shrink in 2018.

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