The theme of our blog the past few weeks has been grocery margin management. While a number of these articles focused on addressing specific situations, last week we started a list of some potentially overlooked techniques and technologies to help you improve or, at least protect, your bottom line.
So, without further ado, here’s Part 2 of More Ways To Improve Your Grocery Store Profit Margins.
#7 Shelf inventory optimization using perpetual inventory
Perpetual inventory means electronically recording every piece of inventory as it comes into the back door and as it leaves. Properly done, at any given time you could run a report that tells you exactly what inventory you have on hand. In theory, you could order and restock your shelves based solely on a computer-generated report.
Except that it isn’t really simple, is it? There is always a certain amount of inventory shrinkage, waste, and damaged or stolen items for which a report can’t account. Which means you need regular physical counts of actual inventory. As with most retail inventory management best practices, a true perpetual inventory is a discipline that, properly done, would save the labor expense of those constant recounts.
#8 Forecasting can save on costs, even after a promotion
Most grocers think of forecasting only in terms of how much product they’ll need to stock to meet demand for a given week. But what if your suppliers are running a special price on soft drinks—say reducing the price by $0.20 a bottle—for the week of the “Big Game”? Why not take advantage of that lower price to stock your shelves beyond that special week, generating yourself some extra margin?
Obviously, you don’t want to overbuy, especially if stockroom space is at a premium. But by forecasting based not only on volume, but also on vendor specials, you can buy low, sell high, and increase your margin.
#9 Out-of-stock management needn’t be fancy
Lately a number of companies have introduced—or at least piloted—robots that wander up and down the grocery aisles, scanning for shelves where no product is on display and then reporting to management. Ideally, these devices would also integrate with the inventory and ordering systems to simplify and automate portions of the ordering process.
How long until such robots are readily (and reliably) available is hard to say. What isn’t up for debate is the problem they’ll attempt to solve, namely that you can’t sell product if the product isn’t on the shelf. In the meantime, make sure you have someone walk the aisles on a fixed schedule, so that you can spot and stock bare shelves, or at least order more product in a timely fashion.
#10 Cashier productivity reporting and labor optimization
One of the biggest costs every grocer has is labor. Almost any store has productivity reporting from the POS that can determine which cashiers are costing you the most money simply because they are slower than others. That doesn’t mean these are “bad” employees, rather that they may need to be retrained or shifted into a different position where they can be more efficient.
However, there are other potential savings to be had. Most retail systems can also help you identify cashier and employee theft, better known as sweethearting. By looking at the percentages and allocations of different departments and products, you can identify cashiers whose percentages too often fall outside the norms. Consistent deviations could indicate undesirable or even illegal activities that may be costing you more than just labor dollars. At the least, you’ll need to investigate further.
#11 Labor savings with self checkout
A customer might spend an hour in your store, yet when it’s time to check out, five minutes suddenly seems too long. A few years ago, grocery stores made a push to add extra “express lanes” to more quickly accommodate shoppers with a few items. But these days, 87 percent of self-service shoppers opt for self checkout because it is faster, and not having these lanes could be a deterrent to shoppers even entering your store—damaging your bottom line.
Since labor is still one of a grocer’s highest expense, the main reason for adding self checkout lanes is the labor cost savings. A typical pod of self checkout machines means four customers can checkout and pay at once with only a single employee monitoring. Especially at times of day where item counts are lower—right after work, for example—this can reduce the total number of cashiers needed significantly, while allowing customers to feel happier and more in-control at the same time.
#12 Electronic payment routing optimization
Are you taking advantage of the options and algorithms in your payment processing system to reduce the fees you pay for those services? Many payments cards can be used as either credit or debit cards, but there is quite a difference in the fee a bank charges these transactions. For example, most debit networks will charge about $0.21 per swipe, meaning a person just buying a $5 item nets you $4.79, making your tight margins even tighter. Yet run as a credit transaction, the charge is about 1% of the total. But how do you determine which way to go on the fly?
The payment systems TRUNO provides, including our NCR ISS45 systems, can determine which payment type to use automatically, though you have to enable that feature to take advantage of it. If your POS system doesn’t have this capability—meaning your cashier has to stop and mentally make this decision—you’re likely paying more than you need to. In that case, you’ll want to invest in a little extra cashier training.
We’re not done with tips for improving your grocery profit margin yet
I hope the second half of our tips list has given some insights into even ways to improve or protect your bottom line. But you can count on our keeping you up-to-date on the latest right here in our blog.
Ready to find out how TRUNO retail technology solutions can improve your overall profit margins from the front to the back of the store? We’ve compiled Four Mindsets for Maximizing Grocery Store Profit Margins: