In the world of supermarket retail, the mere mention of the word “shrink” causes store managers and department heads to break out in a sweat. The fact is, the sooner we accept shrink as a tool to measure success and a cost of doing business, the sooner we can increase sales, lower shrink exposure and rest easy.

At the root of the shrink solution stands sales expansion. Increasing incremental sales at a healthy rate will ultimately correct and minimize shrink exposure for long-term results. Along with increasing sales, shrink management is all about analysis, education and balance.

The first order of business is to analyze the effectiveness of the current assortment and the performance of vendor partners. This analysis should be a welcomed concept to committed suppliers, as these partnerships should also help in identifying opportunities and recommending actions to improve shrink.

Data integrity is the low hanging fruit of shrink improvement. Monitoring packs, inventories, costs and retails on a daily basis are the best way to ensure receiving and store billing is accurate and ultimately minimize paper shrink.

Continued pressure to lower the cost of goods and increase gross profits, poses the question — at what cost? In fresh categories, low costs may be a direct reflection of how the product is grown, graded, or handled. Being familiar with supplier production practices will help one understand their impact on shrink.

Date coding practices can be used to lessen shrink, but can be a short-term solution. Although date coding is at the discretion of the buyer, there are limitations to how long product should be kept on hand or on the shelf. Excessively long date codes shorten the customers’ positive experience and adversely affects repeat purchases. Again, collaboration with vendor partners will help with informed decisions.

Store segmentation is another analysis that identifies those stores with the highest sales potential and sets boundaries for those stores with sales limitations. This analysis can be executed by in-house marketing staffs, supplier-sponsored analysts, or outside organizations to evaluate consumer purchasing. Store segmentation is the answer to one-size-fits-all retailing, which exacerbates shrink.

When collaborating with suppliers, inevitably the topic of changing packs is offered as a way to reduce shrink, yet pack reduction is a double-edged sword. Lower packs may initially lower shrink but the cost is usually lower sales due to less product in the supply chain. Pack analysis should always be viewed in conjunction with store segmentation.  

Training store associates on product care and handling has the highest return of effectiveness on shrink reduction. This can be accomplished with internal best practice communications and through vendor partners. Suppliers have a vested interest in knowing their products are properly maintained at store level and can assist in store associate education. Along with store care and handling, supply chain checks and balances are critical to prevent the mishandling of product. Temperature, slotting, ethylene, selecting, and proper transportation measures are a few of the topics that should be discussed.    

Once prudent action is taken to minimize obvious shrink contributors, one has to take a hard look at sales, satisfied customers and repeat business. Fresh departments need to continue to offer the right assortment at competitive retail prices, however, providing the freshest product will build customer loyalty, which will ultimately increase sales and minimize shrink impact.

Valerie Johnson is sales manager at Sunshine Bouquet Co. in Miami. She can be contacted at [email protected].