Every penny counts during an economic downturn, and those pennies quickly add up to big dollars if you’re not careful.
Shrink rates can range from 5-10%, with most produce departments experiencing a rate of 6-8%, estimates Roberta Cook, cooperative extension marketing economist for the department of agricultural and resource economics at the University of California, Davis.
But if you ask a retailer, he’ll typically estimate his produce shrink rate at 2-3%, says Ronnie De La Cruz of New York-based De La Cruz Consulting and Training.
If your shrink is on the higher end of the scale, De La Cruz says you may be able to cut it in half by tweaking your produce operation just a bit and implementing practices such as these, culled from several industry professionals:
1. Order carefully
“The No. 1 thing is the ordering,” says Mark Luchak, vice president of produce and floral for Rice Epicurean Markets, a group of five Houston-based stores. “You’ve got to order correctly.”
The company has a procedure that helps keep shrink in check. First, produce managers take inventory of what they have in the back room. “Then you write your order on the sales floor, looking at your displays, knowing what you have in the back and having a record of what you’ve sold in the past,” Luchak says. “It helps cut down on any guessing.”
And consider ordering smaller pack sizes for products you find hard to sell, adds Kate Reeb, vice president of retail services for Coast Produce Co., Los Angeles. For example, Coast Produce will pack a 10-pound box of jalapeno peppers for stores that don’t need the traditional 40-pound wire-bound case.
2. Start with good quality
“You have to rely on your supplier to make sure that the product is being purchased properly and the quality is where it’s supposed to be,” says Joe Pagano, director of produce for Inserra ShopRite Supermarkets Inc., a chain of 21 stores based in Mahwah, N.J.
If something does not meet his standards, Pagano says, “I would rather not have the product than for a consumer to take it home and in two days say we have bad produce.”
“One way to reduce shrink is to stay in your quality range, don’t drop out of it to save a buck,” adds Dick Spezzano, president of Spezzano Consulting Service Inc., Monrovia, Calif. You can offer shoppers a more aggressive price without cutting back on quality by ordering smaller sizes or by buying bulk rather than packaged product.