For both retailers and suppliers, shrink is a massive problem. It can even reach up to 20% of operating profits for some retailers which is a staggeringly large number.
One of the main causes of shrink is food waste. Every year, America alone wastes up to 160 billion pounds of food. When your profits are hinging on mere cents per dollar, this can make a huge difference. The worst part about shrink is that it isn’t going away, it’s getting worse. Retailers estimate that the amount of shrink they have is going up each year.
Shrink is officially defined as the difference between what retailers make on the product they sell, and how much they paid for it. Shrink is missing money. There are many different reasons for shrink, but the main one is expired and wasted food. Some other common contributors to shrink include employee theft, fraud, faulty processes, and error.
- Throwing Away Inventory — Food tossed in the garbage should be the first target for retailers. When it comes to perishable items, if you can’t sell them in 3 or 4 days, don’t order more than you can sell in that time. This will require diligently planned orders and paperwork but is truly a small price to pay.
- Product Placement — One way to make sure your product sells quick enough is to make sure it’s properly placed throughout the store. If you have a perishable product taking up multiple spots on a shelf, it will take longer to sell and restock, resulting in a quicker expiration. The less of a product you have placed in a well thought out area will help consumers purchase it before it starts to close in on the “Best Sold By” date. Take note of how much each product sells in which area and use this data to organize your store for maximum shrink management.
- Improper Handling — Perishable items are easily damaged, and their seals are easily broken when not handled with care. When an employee drops or damages the inventory, the items become much harder to sell and usually get thrown away. Selling “ugly” products can greatly improve profit margins on particular products, especially produce.
- Employee theft — hiring trustworthy employees is one way to reduce shrink. Use thorough background checks and verification of previous employment as well as surveys of written integrity to help make sure the employees you are hiring won’t steal. Making sure they are well paid and well treated and letting them know the implications of theft are also great ways to dissuade unjust activity.
- Check Out Operations — Educate your staff on checkout procedures. Logging items that are returned or deemed “unsaleable” will build you a record so you can quickly identify areas that impact shrink.
- Technology — Date Check Pro offers a system that is one of the most popular and effective methods supermarket retailers use to reduce shrink. With the Date Check Pro, retailers can develop a plan for items contributing to shrink because they can track and monitor expiration dates and inventory movement throughout the store. Using this software will allow you to position and sell items that are nearing their expiration dates and encourage customers to purchase based on product placement. These valuable insights can also be acquired through our full service and is a software-enabled solution to food waste.
“It is reassuring to know that we do not have any outdated products on our shelves. The program is easy to use, and we have seen an overall reduction in our shrink.” Mike Olwig, Store Director, Fox Bros. Piggly Wiggly
Shrink is a terrible thing to deal with as a retailer, as it cuts deep into your business. Implementing methods to reduce and control shrink will save you money and help the environment. By using quality assessments to weed out bad employees, and properly organizing the items in your store so that they can reach their maximum selling potential you can combat shrink head on. For contributing factors to shrink that aren’t related to your employees like food waste due to expiration—embracing technology, like Date Check Pro, can be the final step in reducing your shrink.