Ask the Expert: Controlling Grocery Shrink

Interview with Jason DeVinney

Jason DeVinney

DeVinney is the business development manager supporting grocery retailers with shrink, sales, and inventory improvements that drive ROI with technology such as EAS and RFID hardware, software, and labels at Checkpoint Systems. With more than 25 years of retail experience with consumer goods manufacturers, retail merchandising teams, and loss prevention professionals, DeVinney has successfully deployed chainwide programs for some of the largest retailers in North America, Latina America, Europe, and Asia. You can contact him at jdevinney@checkpt.com.

What does the grocery industry look like?

Grocery sales in the US is big business and a major contributor to the economy while also providing an invaluable service of distributing food to all Americans. According to the USDA, the US grocery market had revenues of over $688 billion in 2018 from its huge population of over 115,857 grocery retailers. Stores range from some of the largest retailers in the US, to countless local “mom and pop” stores that exist all over the US.

An incredible 92.2 percent of all spending in the US on food and drink occurs in what are categorized as grocery stores (supermarkets and smaller independent grocers). Convenience stores make up the next highest proportion, a mere 4.5 percent. The remaining 3.3 percent is spent in specialized food stores, including markets, butchers, bakeries, candy shops etc.

What does shrink look like in the grocery industry?

The 2020 National Retail Security Survey revealed shrink was at an all-time high, accounting for 1.62 percent of a retailer’s bottom line, costing the industry $61.7 billion. Prior to the economic downturn caused by the pandemic, total shrink consumed 3.1 percent of a typical grocer’s revenue, much higher than any other retail sector according to the Food Industry Association (FMI).

When comparing grocery retailers to the overall retail industry, we find grocery has some of the lowest margins in retail while also experiencing higher shrink. The negative impact on the grocery retailer and the shopper is significant. From the products made available on shelf and increased pricing to cover shrink, to the products not displayed on the shelf, or not even sold by the retailer due to high shrink, the burden of lost sales and profits is shouldered by retailers and shoppers alike.

Now more than ever, reducing internal and external shrink is a major opportunity for grocery retailers to positively impact the overall value proposition to shoppers while also increasing net profits. Every dollar saved from internal and external shrink goes straight to the bottom line.

What are some high-theft categories in the grocery industry?

Store associates and LP professionals in grocery tell us a major shrink issue is meat, which is increasing over the last year in both prepackaged meat and meat packaged in the store. Another major contributor to shrink is wine and spirits with liquor being the main driver with product often defensively merchandised and locked in a glass cabinet or placed behind the counter, making liquor product difficult to purchase.

Based on Checkpoint’s annual survey with major US retailers, top shrink categories include health and beauty, cosmetics, and over-the-counter drugs. Grocery retailers have the unique shrink challenge of carrying both fresh food products such as meat, fish, and seafood, while also combating shrink for personal care items such as teeth whitening, body wash, shaving, and fabric-care products that you will also find in drug and big box retailers. Retailers have found that visible tagging will reduce shrink and increase sales on these high-theft items.

Is launching an EAS program difficult for grocery retailers?

EAS success in grocery is easier than ever based on two major developments. The first is improvements in radio frequency (RF) technology has enabled increased detection at the entry/exits and instantaneous deactivation at the point-of-sale allowing for automated deactivation by the cashier or at self-checkout. The second major improvement is merchandise protection where essentially anything in the store can easily by protected at source with a RF label that is product and package agnostic.

Loss prevention professionals we talk to make major shrink saving contributions to their organization by focusing on a small number of products that are driving a large percentage of overall shrink. According to FMI, average shrink is 3.1 percent of a typical grocer’s revenue. The fact is item-level shrink can be much higher in key high-theft categories, upward of 4 to 5 percent or even higher. An effective merchandise protection program will keep high-shrink products in the store, on the shelf, and available for sale. The result is increased sales and profits for the grocery retailer while enabling an improved shopping experience.

How long is the ROI for EAS and what are the contributors?

Based on a recent survey conducted by Checkpoint Systems, 90 percent of North America food retailers utilizing EAS systems recognized an ROI in the first twelve months, and 100 percent recognized an ROI by the eighteenth month. The ROI is driven largely by a shrink reduction on a select list of high-risk, high-volume products, with the shared objective of increasing profits via greater on-shelf availability (OSA) and increased sales across many stores. All the food retailers we spoke to recognize a shrink reduction ranging from 10 to 40 percent on protected items, which improves OSA, thereby making the product available to customers for purchase. Retailers are demonstrating that everyone wins with EAS, from the shopper to the consumer goods manufacturer to the grocery retailer.

Stay up-to-date with our free email newsletter

The trusted newsletter for loss prevention professionals, security and retail management. Get the latest news, best practices, technology updates, management tips, career opportunities and more.

No, thank you.

View our privacy policy.

Exit mobile version