Grocery store shrink has been at an all-time high, costing the retail industry around $61.7 billion in sales. It’s a problem that can be mitigated.
Hint: It involves more than hiring a loss prevention officer or implementing video to catch the bad actors. A more holistic approach that includes implementing controls, training, and technology are needed, and are very affordable.
What is Store Shrink? What Owners Often Miss
Store shrink is the difference between what was recorded when a product is received, placed on the floor, and then compared to the number of items sold.
If 100 containers of milk came on a truck and two weeks later sales records show only 88 were sold, that would be a problem – especially if the other 12 cannot be reconciled, the issue persisted for weeks, and/or the same/similar instance occurred across multiple stores.
Store shrink shouldn’t be thought of as only loss prevention or reducing the number of shoplifters. Reducing shrink involves a more holistic approach within your entire store. It includes preventing injuries and accidents, human errors, inventory losses, fraud, pricing errors and theft.
A holistic approach to grocery store shrink includes:
- Improper tracking of floor records and sweep logs (potential slip and fall losses);
- The lack of proper receiving techniques (counting your products);
- TPR parameters and incorrect pricing (finding human errors);
- Employee training and onboarding (unknowingly making mistakes);
- Cashier tracking and fraud (deviant behavior);
- Balancing accrual accounts (looking for inconsistencies); and
- Reducing in-store theft (products being shoplifted).
Think of it like an iceberg. Store owners envision risk-reduction as preventing people from walking out with items, but looking below the “waterline,” the issues are much more significant.
We have worked with over 500 grocery stores and the majority of shrink typically comes from operational mistakes rather than stolen items.
3 Ways to Reduce Shrink in Grocery Stores
The top three ways we have found to reduce grocery store shrink are to:
- Correct your receiving techniques,
- Fortify your employee training methods,
- Use risk reduction technology to track all activity in your stores.
1. Correct Your Receiving Techniques
Sometimes your receiving process is not as accurate as it should be. Human errors often happen in this department and as a result, store shrink increases.
Some of the bigger issues we see in this area is when grocery stores do not count their products correctly or include the correct pricing. This could cause inconsistencies within the sales reports and drive losses if the product comes in with errors.
To help with this issue, there are a few things we recommend doing:
- Open all product cases when counting the items to ensure it aligns with the amount on the vendor ticket.
- Ensure price changes from vendors have been inputted correctly into the back door receiving system.
- Work any exceptions discovered between vendor cost and our system cost. Also, ensure the correct cost is in the system.
2. Fortify Your Employee Training
Hiring quality employees is tough.
What’s even tougher is bouncing back from the losses incurred from employees’ actions and behaviors specifically from a lack of proper training, whether it’s intentional or not.
One employee has the power to save or lose you thousands. And in extreme cases, they have the potential to do damage to your bottom line. For example, a 19-year-old employee was accused of stealing nearly $1M from a Gwinnett County Kroger, according to a news report. Hard to believe.
“Sweethearting” is also a big issue for grocery stores. This happens when an employee chooses not to charge family members for certain items. And without accountability or tracking, a store owner will likely never know.
To resolve common loss issues with employees, make sure they are trained in the areas of:
- Entering product codes;
- When to call a manager;
- Fraud precautions; and
- How to spot a thief.
Take just a little more time in your onboarding process to reveal the ways management is tracking and cracking down on any behaviors that are related to a loss for your store.
3. Use Risk-Reduction Technology
If you use technology in your grocery store, it will not be as if robots are taking over or preventing you from hiring quality people in your community.
Instead, technology and software should be viewed as a competitive advantage for your store. Big-box retailers like Walmart, Kroger, and Target all use technology to protect and boost profits. And now you can, too.
With the Storewise Platform, independent grocers now use powerful technology to prevent losses and improve their bottom line. Think of it as a watchdog that will track your entire store and alert you of any inconsistencies.
Grocery Automation and Risk-Reduction
Grocery Automation Software helps boost and protect a store’s profits. But as it relates to loss prevention, it can track all outbound sales at your POS and employee activities like voids, product codes, hand keys and price changes.
This feature allows your store management or loss prevention team to review specific receipts flagged due to anomalies. You can add a comment and select either training, research, ignore or investigate to make sure the ticket is reviewed.
Independent grocers see increases in their margins when they invest in grocery automation technology. Most grocers even see immediate results within 60 days after implementation.
What Shrink Looks Like In Different Departments (Produce, Meat, Etc.)
The research available to us shows that the biggest contributors to shrink in stores include:
- Perishables like meat (18 percent), deli (14 percent) and fresh produce (16 percent).
- Non-perishables like grocery (14 percent) and general merchandise (8 percent).
Other perishables also need some attention when trying to reduce shrink. A bakery’s contribution to shrink is 6 percent, and it has a department shrink of 8 percent. To compare, the department shrink of meat is 4.1 percent, while it is 7.8 percent for the deli.
Overall, there is more of a loss in the bakery department than any other food department. It’s likely that food isn’t well kept, or the grocery stores are ordering/making more perishables than they need.
This indicates a problem with understanding who the customers are and what they need. Stores need to figure out a way to foresee their desires to ensure shrink is minimized and food does not go to waste.
Grocery store shrink is a big deal. Store owners should take a holistic approach to understand how to protect themselves.
Looking at loss prevention through the lens of minimizing mistakes is a necessary tactic for independent grocers to better compete against larger rivals. The good news is there is technology that can integrate with your stores front and back office, to help you catch losses and minimize mistakes, thereby protecting profits.
To learn more about Storewise and its CEO, Christopher Greco, on our Experts page, click here.