Managing inventory shrink is just one more obstacle independent grocers face in protecting their bottom line. Without proper shrink management, your profits could either be spoiling on the shelves or walking out the door. While frustrating– shrink can never be completely eliminated – but some retailers are doing a better job at reducing it, and it’s showing in their net profits.

 

Total store

Dry grocery

Dairy

Meat

Produce

Prepared foods

Overall

3.2%

1.1%

2.2%

4.7%

5.8%

8.3%

Perhaps it should be no surprise that, according to the results in the 2018 Independent Grocers Financial Survey, retailers who are more active in tracking shrink and implement shrink management programs report lower than average shrink.

Track and Measure:
Independents are about evenly split between measuring shrink at cost (53.8 percent) and using retail prices (46.2).

The cost-based reporting system is useful for accounting purposes but measuring shrink at retail price helps highlight its importance to the bottom line and may prompt greater motivation for performance improvement. Stores that use the retail method have lower-than-average shrink, at 2.7 percent.

Staff training and Store Layout:

Training staff is a key factor when it comes to security operations. Employees should understand how to best prevent theft and what is the process to report a situation in case of happening. However, being mindful of the store layout is as important. Some stores are more conducive to customer theft than others. If a store is filled with high shelves and blocked aisles it makes it more difficult for employees to detect any suspicious actions as customers walk through the store. Training your staff and ensuring a good range of visibility across the store will prevent possible shoplifting attempts.

Shrink Management Programs and Audits

Across all independents, 38.3% percent have shrink management programs in place. However, developing a formal shrink management program may be greatly beneficial in helping curb perishable and theft-related losses — underscored by the 2.8 percent average shrink among companies with formal shrink measures in place.

At a minimum, shrink is a cost and a reduction in this cost generally presents an improvement in sales and profits. But beyond that, improvements in shrink lead to a better in-stock position, which drives higher shopper satisfaction. Ideally, data should be available at the lowest level of granularity, by item and location, and possibly even time.

These findings are documented in the 2018 Independent Grocers Financial Survey along with several other data points, such as sales, margins, expenses, and net profits. The survey breaks down these data sets by region, company size, and net profits. To purchase your copy of the 2018 Independent Grocers Financial Survey, click here.