Imagine selling every item you bring into your store, without a trace of shrink.
As the Beach Boys once sang, wouldn’t it be nice?
I spoke recently to Karen Caplan, president and chief executive officer of Los Alamitos, Calif.-based Frieda’s Inc., about her company’s specialty produce lines. I mentioned how so many produce managers were afraid unsold specialty items would cut their profit margin.
That’s when Karen offered a wise observation: “There is good shrink, and there is bad shrink.”
As a long-time specialty proponent, I always wanted my variety to rival new-store presentations — you know, when a chain opens a new location and has every item in the book.
The effect this has on shoppers goes far. Customers return home and chat with their neighbors across the fence: “You really have to check out the new Acme grocer down the street, they have everything!”
Conversely, new-store produce managers usually can hardly wait until the grand opening hoopla wears off so they can discontinue much of the specialty offerings, all those pesky items corporate forced in that never sells.
Once the new-store aura fades, there’s not much left to set one store apart from all the others in the area, is there? Why not keep some of that specialty program going? Who said a store must sell 100% of everything brought in, anyway?
The same positive, new store-type first impressions can be regenerated and sustained on a regular basis if you give it a chance. It’s true a good deal of this specialty produce will become shrink, but this is “good shrink” — the total rarely much affects profit margin if managed well.
The bad shrink is when a store does any combination of the following (especially with nonspecialty items): Ordering too much, improper rotation, buying too much from pricey secondary vendors, careless handling or storage, overtrimming, poor cashier product identification. These examples represent the highest-volume source for lost profit.
Good shrink, on the other hand, is investing in sales generation, such as when you schedule a demo, knowing a few sacrificed cases will help sell a pallet or more of whatever you’re looking to push.
Same goes for maintaining a generous, fresh specialty line. When you carry what is perceived to be “everything,” customers know where to shop for all the normal items they count on every day.
Armand Lobato works for the Idaho Potato Commission. His 30 years of experience in the produce business span a range of foodservice and retail positions. E-mail firstname.lastname@example.org.
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