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The Easiest Way for Grocers to Reduce Shrinkage

September 12, 2022

These days, grocery store owners are facing a slew of emerging challenges — like inflation, rising food prices, changing customer preferences, cyberthreats, new omnichannel competitors, and more. With so many factors impacting the bottom line, reducing product loss — also known as shrinkage — is increasingly important for grocers. 

Read on to learn why inventory shrink harms grocery stores and how an integrated facilities management strategy can reduce the threat and help stores remain profitable and competitive.

What does shrinkage mean?

Shrink is a metric that describes inventory loss. It can stem from a variety of causes — including theft, damage, expiry, and administrative error. 

Shrinkage is one of the oldest challenges in retail. Today, it remains a common obstacle for grocery stores of all sizes — from mom-and-pop stores to global enterprises with thousands of locations, and everything in between.

While shrink impacts all types of retailers, grocery stores are at a much greater risk due to the high volume of perishable goods they sell.

How shrink harms grocery chains

One reason grocery shrink is such a big problem is that it directly eats into product margins. When you’re forced to routinely throw away products that you pay for because they’ve expired, your bottom line will no doubt take a hit.

According to one recent report, 60 percent of grocers agree that fresh products are important to their business. However, two-thirds of grocers are missing out on more than 1.5 percent of annual revenue due to expired or spoiled products. What’s more, a recent McKinsey study found that shrink levels are particularly high in the ready-to-eat and ready-to-heat categories, where it can impact as much as 15 percent of revenues.

In addition to denting product margins, shrink can also lead to significant brand and reputational harm. Grocers are also at risk from “unmeasurable” shrink, which occurs when customers have bad experiences like buying sour milk or lettuce that goes bad in two days instead of a week.  When this happens repeatedly, customers are likely to switch grocers altogether — and maybe even complain about the store on social media.

What causes grocery shrink?

In most cases, grocery store shrink stems from infrastructure limitations and poor management.  Common examples include power and HVAC outages, refrigeration problems, insufficient maintenance, and faulty engineering.

All this said, it’s possible to prevent shrink. Doing so requires taking a different approach to facilities maintenance and store support, and embracing a concept known as integrated facilities management. 

Reduce shrink with integrated facilities management

Integrated facilities management involves consolidating all store facility operations and processes and running them through a single third-party managed provider. Such a partner offers end-to-end support for all operational needs and avoids the unnecessary expense and inevitable miscommunications associated with using multiple vendors. 

In a grocery setting, shrink reduction requires: 

  • Expert refrigeration management
  • Remote monitoring
  • Remote temperature monitoring
  • Ongoing case cleaning
  • Mister system maintenance
  • Physical security
  • Strategically moving fresh products into freezers 

Taking this proactive approach to facilities management can have a big impact on shrink. To illustrate, remote monitoring can provide real-time visibility into store operations and expose issues like open refrigerator doors and unstable case temperatures. Armed with that information, grocers can take proactive steps to remedy such situations and, in turn, reduce shrinkage.

McKinsey’s report also reveals that stores can give shoppers more of what they want and reduce shrink by 20 to 30 percent by harnessing twenty-first-century solutions and mastering new approaches to shrink management.

Additional benefits of integrated facilities management

With all this in mind, here are some additional reasons to consider integrated facilities management.

1. Higher equipment uptime

An integrated facilities management provider proactively maintains and manages store equipment. This increases equipment uptime, enabling stores to keep food fresh, avoid spoilage, and reduce waste.

 2. A stronger customer experience

Most customers have multiple grocery stores in their area to choose from and the ability to purchase items online. If grocers want to keep them coming back, they need to provide strong customer experiences.

An integrated facilities management team delivers the infrastructure and supporting services that grocery stores need to ensure a great customer experience — like fresh food, clean and safe facilities, temperature control, air filtration, and more. 

3. Preventative maintenance  

Grocery stores require significant upkeep and maintenance. When systems like refrigerators stop functioning properly, it can impact shelf life and lead to product loss. Integrated facilities providers can reduce product loss through preventative maintenance and rapid action before small issues turn into large and more expensive problems.

4. Accelerated response times

Emergencies can happen at any hour of the day or night. Examples include break-ins, pest invasions, plumbing issues, refrigeration failure, heating failure, and kitchen fires, to name a few.

When these types of problems occur, store managers don’t have days or weeks to fix them. Instead, an integrated facilities management provider can step in, take command of the situation, and solve it in a timely and cost-effective manner — minimizing downtime and revenue loss.

5. Improved sanitation 

Grocery display cases and coolers are highly public, with thousands of customers using them during a typical week. Without regular cleaning, they can attract pests, harbor germs, and generate bad odors.

An integrated facilities management provider can help here, too. By regularly cleaning facilities and inspecting daily cleaning teams for quality and thoroughness, grocers can ensure their stores are clean day in and day out.

City’s approach to integrated facilities management

Working with a facility management team requires a significant amount of trust. After all, the company will be responsible for overseeing numerous critical operations and ensuring your facilities remain open and ready for customers. That being the case, it’s important to pick your partner carefully.

City Facilities Management builds its partnerships on transparency, data, and collaboration. Our proven implementation and management process ensures strong communication, accessibility, and proactive care across all touchpoints. 

To learn more about our unique approach to integrated facilities management and how you can leverage it to take your grocery business to the next level, check out our product page.

Watch the video below to see how City helps grocers reduce shrink:

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Category: Blog

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