Shrink is the bane of produce merchandising.
While the inability to merchandise some fruits and vegetables in a store’s inventory is inevitable, the potentially large hit to an operator’s bottom line from excessive shrink can be brutal.
“The best retailers might have shrink in the high 3% to low 4% range, while many independent smaller retailers range upward to 10% and beyond in troubled stores,” said Jonathan Raduns, chief executive officer of Merchandise Food Retail Consulting, a Greenville, S.C.-based specialty food, independent grocery, and fresh produce retailer advisory firm.
Shrink can result from such factors as product spoilage, misshapen selections, and theft, and minimizing occurrences can be tricky because of the plethora of possible retailer mistakes when managing operations. That includes quality control breakdowns when receiving inventory, including a lack of quality specifications; ordering amounts that exceed sales rates; overhandling; improper storage; and weak cull systems, he said.
Case sizes that are excessively large can be a limitation too, “so retailers might consider split cases, or sharing case quantities with other stores in the market area on slower moving items,” Raduns said.
Climacteric fruits, including bananas, tomatoes, stone fruit, avocados, apples, and melons, often generate severe shrink as the items continue to ripen when in storage and on store displays, he said. That can lead retailers to merchandise products that are “past their prime,” he said, which can then “strangle produce sales due to the customers’ lack of confidence and perceptions.”
While it is essential that produce department workers have the requisite knowledge for administering products if retailers are to limit waste, achieving that objective is often onerous, Raduns said. “Training employees to do a proper cull can be challenging if the employees are new to the industry or ‘don't get it,’” he said. “Because there are many different items in the produce department, it takes a lot to acquaint employees with the item-by-item process of what to look for in each specific commodity.”
To reduce losses, operators should use forecasting and ordering technologies to match inventory with anticipated demand and set, and abide by, strong product standards, Raduns said.
Retailers can further limit waste by taking steps to quickly sell the fruits and vegetables most susceptible to shrink by situating the items in highly visible and accessible store locations, he said, while also routinely cleaning the displays and storage areas to reduce the threat of microbial growth.
