When my kids were young, each night at bedtime I’d read them two or three books. One of their favorites was “Alexander and the Terrible, Horrible, No Good, Very Bad Day.” Maybe you’ve read it to your children or grandchildren. It details how poor Alexander’s day starts off bad (gum in his hair when he wakes up) and just gets worse. I’ll bet each of us has had at least one of those days.
I wonder if that’s how grocery retailers feel these days. It seems almost daily we see stories in the news or trade press about a new challenge they’re facing, and per the Washington Post’s The New Era of Grocery Just Claimed Its First Victims, some of them are really struggling. Why?
- New low-price competitors that are setting off price wars.
- Dramatic increases in freight costs due to a shortage of drivers and the implementation of electronic logging devices (ELDs).
- Changing consumer dining habits.
- New delivery channels that add costs, without the offsetting pricing power.
- The demand for increased visibility and transparency.
Each of these puts increasing pressure on product margins – and that’s in an industry where margins are already notoriously tight. With costs rising, prices falling under competitive pressure and a need for investments in new delivery channels, it’s no wonder grocers are feeling squeezed.
In today’s turbulent market and facing increasing financial pressures, grocers need to save every cent they can to maximize margins. To do that, they need to focus on offering products that bring customers into their stores and keep them coming back – and perhaps the biggest draw to the store is fresh food. Fresh food has always been a challenge to manage, resulting in high shrink – roughly 13 percent for national grocers. Traditionally grocers have absorbed waste into the cost of offering fresh food. In today’s commercial environment, however, grocers can no longer turn a blind eye to waste that eats into product margins.
What Can You Do?
The first step to reducing fresh food waste is to understand the cause. Many store operators believe the primary cause of fresh food shrink (combined waste and markdowns) is due to poor in-store handling. But waste or shrink doesn’t start at the store. It can start at harvest as produce is impacted by harvest conditions, processing, shipping and handling. Many studies show post-harvest handling can have a significant impact on remaining shelf-life, meaning the actual shelf-life of produce delivered to the store can vary by many days, and the produce manager has no way to tell. We’ve found as much as 16 days of variance for grapes received at a retail distribution center, for example. 16 days!
This impacts shrink, customer satisfaction and margins.
You may not think you have this problem, but chances are that you do.
Fortunately, pallet-level condition monitoring from the field to the store, combined with predictive analytics, can reliably be used to determine the remaining days of shelf-life of each pallet – like a dynamic date label. This can be used to match actual freshness with the freshness requirement for each store. This approach has been proven to reduce store level shrink by 50 percent or more – adding as much as 6 percent to 10 percent to your product margins.
Where should you start? We can help you perform a baseline study which measures the actual freshness from a sample of each pallet of the product you’re receiving now and determine the shelf-life variation that you’re currently experiencing. This determines the size and scope of your delivered freshness challenge, and how much it contributes to store-level shrink. Once you have isolated the primary contributor to store-level shrink, you can look to fix it and enjoy the improved product margin.
Learn more by reading our latest white paper Margins Matter or contacting me and asking about doing a Baseline Analysis.
And, if you’ve never read about Alexander’s bad day, you can learn more about it here and order it online. Let’s work together to eliminate terrible, horrible, no good very bad days!