We all know the numbers: average supermarket shrink is about 2.5 percent of retail sales, and even "best in class" retailers are at 1.5 percent of sales. We know that, overall, shrink costs retailers and their shoppers more than $60 billion each year. And, we know that loss prevention always becomes a bigger challenge for retailers when the jobless rate grows or stagnates at high levels. What attendees at a workshop during the National Grocers Association 2010 Annual Convention held last week in Las Vegas heard is that the current economic downturn also creates a significant opportunity.
Larry Miller, president of Retail Control and a loss prevention expert, said that shrink control starts from the top corporate and store levels and must permeate the entire business. He then listed the following best practices for controlling shrink:
1. A disciplined manager store walk
2. Backroom security, inventory control and organization
3. Inventory turnover goals by department. (Perpetual Inventory)
4. Cashier KPIs and targeted goals
5. Empty perishable coolers on receipt of delivery
6. Cutting lists and production planning
7. 9am perishable readiness / 6pm MIC perishable walk
8. Loss prevention night visitations
9. Store manager loss prevention checklists
10. Sanitation standards and practices
11. HR/LP training, orientations, "The Coaching Culture"
12. Customer service
Kevin Weatherhill, president & CEO of The Markets, a chain of 21 supermarkets based in Bellingham, WA, reported that by following this series of practices, focusing on training the store team and supporting the store manager, his stores reduced perishables shrink by up to 30 percent and increased profit in the departments by 30 percent. In addition, refunds were cut in half. "We did it by making shrink a team sport," he said.
A factoid that sums up the importance of loss prevention is that a 10 percent reduction delivers the same bottom line benefits as an 18 percent increase in sales, according to Mr. Miller.
Discussion Questions: Do you agree with all the suggestions on Larry Miller's list? What loss prevention strategies do you think are most effective today?