As the calendar turns to the months that end in “-ber,” that sigh of relief you hear is produce retailers collectively breathing again as the summer season winds down.
While summer creates all sorts of opportunity for promotion, summer also presents a huge shrink challenge, which can hamper retailers if the fear of shrink is too great.
Shrink is never out of mind for a retailer. It’s like playing a poker game.
If a retailer shows their cards too early, such as aggressive merchandising, they stand to lose. On the other hand, if they are too conservative, with a “clean” floor and limited promotions, someone will beat them anyway.
If retailers played it too safe in summer, they might not have achieved their sales goals. If they were too aggressive, however, they may end up with excessive shrink numbers and worse, an erosion of gross margin. So what is the right approach?
It’s a tricky proposition but one that can be overcome. I spoke to a vice president of produce in the Southeast recently who told me that his shrink ran 6% over the summer, which he was pleased with because his produce department’s performance over the June-August period surpassed the goals that were targeted.
This intrigued me because we all hear that we must lower shrink at retail. But do we? And at what cost? What is the “right” number for shrink? Well, that is in the eye of the beholder – in this case, the retailer.
Having an exit strategy is critical and does a couple of things.
It puts a plan in place to reduce true loss of goods, also known as shrink, and while a product may not be sold as it was intended, if that product is used in a safe way then it’s a win-win.
One thing is for certain: Shrink is part of the everyday lives of retailers, and understanding what is acceptable to the retailer will go far in determining the statement a produce department makes on consumers.
For those retailers who are high-fiving over a successful summer, congratulations! Your plan was well thought out and executed. For the remainder, rest assured the sky is not falling. In fact, the fall season is arriving soon to rescue those who may have fallen short over the past three months.
Shrinking the shrink and fall recovery period
Hard goods and hardy products will be ample throughout the remainder of the year. Expect to see retailers taking full advantage of these opportunities and cooler weather to promote these items heavily while managing shrink to achieve their sales goal for a successful conclusion to the year.
Joe Watson is the Produce Marketing Association’s vice president of member engagement for the eastern U.S.