[5 TIPS] How To Reduce Shrink in a Grocery Store

Industry Insights

[5 TIPS] How To Reduce Shrink in a Grocery Store

Nov 09, 2023 • 5 min read

It’s a frustrating fact: Grocery stores have the lowest profit margins and highest shrink rates.

Profit margins sit around 2.5 percent, with shrink rates at 2 to 3 percent. How can you overcome these statistics? The first step is minimizing shrink as much as you can. With a few smart changes, you can deter shoplifters, turn poor inventory practices around, and train your staff to be vigilant.

This article outlines five actionable tips you can put in place to reduce inventory losses and the tools you can use to support them. Follow these tips to ensure your grocery store minimizes shrink and increases profits.

How To Reduce Shrink in a Grocery Store (and Why You Need To)

There’s no denying it — shrink is a major drain on your already slim profits. Inventory losses from theft, spoilage, and, most frustratingly, errors, cause so many headaches.

Employee theft and shoplifting account for a large chunk of shrink — similar to many retail stores — but grocery stores have to deal with perishable items, too. Products reaching their expiration dates and spoiling can chip away at your bottom line. Even small administrative errors and mistakes are a factor.

And you don’t just take a financial hit. Inventory losses lead to inaccurate records, making ordering and merchandising decisions more difficult. Theft can also sour your customers’ shopping experience.

Reducing shrink should impact your grocery store’s profitability. With tighter inventory control and loss prevention measures, you’ll lose less product and sales. And with accurate, real-time data, and effective management of perishable goods, you can make better decisions for your store.

One of the best tools for managing shrink is your point of sale (POS) system. You can use analytics to identify high-risk areas and loss prevention tools to reduce theft. Effective inventory management and employee training minimize spoilage, and robust reporting can eliminate administrative errors.

Let’s dive into five actionable tips to reduce shrink in your grocery store.

Tip #1: Implement Effective Grocery Inventory Management

Proper inventory management is crucial for minimizing shrink in your grocery store. For example, you might sell expensive steaks in your meat department. You notice that inventory levels are lower than customer demand and sales would indicate.

By tracking sales and current stock counts, you might identify that more steaks are disappearing than are being purchased. Why could this be?

Signs point to potential theft — either by customers, employees, or vendors falsifying deliveries. Without detailed inventory data and analysis, this high shrinkage rate for steaks could go unnoticed for a long time, leading to substantial losses.

With granular inventory and sales reports, you can identify red flags, investigate the cause, and take steps to resolve them. Here are some other ways your POS system and inventory management reduce shrinkage:

Tracking expiration dates
Reducing overstocking and waste of perishable products
Securing high-shrink items and controlling access

Tip #2: Improve Store Security

You can limit theft by strengthening your store’s security. Both customers and employees might participate in stealing from your store, so thwarting them should be your number one priority.

Start by keeping your store organized. You need clear sightlines to monitor customer activity and suspicious behavior. Next, train your staff to recognize suspicious activity and common shoplifting tactics. Last, install or upgrade your security cameras and place them near entrances, exits, aisles, and blind spots.

Self-checkout stations are convenient but also pose a risk for potential theft. Security features like anti-tampering mechanisms and weight sensors help secure these stations. You should also place self-checkout stations in well-lit areas and have staff monitor them.

Your POS system is a valuable tool in fighting against theft. You can link your security cameras to your POS system to provide visual evidence of suspicious transactions, and generate sales reports to identify unusual patterns. If your employees are stealing or helping acquaintances steal, you can set employee access controls to deter them.

Tip #3: Audit Your Store Regularly

Performing regular, routine audits is vital for detecting and resolving shrink issues. Inventory reconciliation is a great starting point. This is where you compare the data in your POS system to what’s physically in stock. You can identify discrepancies and start with a clean slate.

Setting up regular spot checks is important. For example, you could conduct monthly spot audits of high-shrink departments like meat and deli.

Let’s say one month, you find the on-hand quantity of premium steaks to be significantly lower than the level in the system. You investigate, and the data reveals a high number of refunds issued for that steak SKU. You can then look at camera footage to identify which cashier processed the fraudulent refunds and put additional security procedures in place.

Your POS system provides the granular data you need to spot discrepancies and take action.

Tip #4: Train Your Staff

Your staff is your first, and sometimes last, line of defense against theft. They’re also heavily involved in inventory management, so proper training is crucial. Ask yourself:

Are my staff following first-in-first-out (FIFO) rotation for perishable items?
Are they spun up on proper receiving, stocking, and storage procedures?
Have I set employee restrictions and controls on our POS systems?

If the answer to all of these questions isn’t yes, you’re opening yourself up to shrinkage headaches. Custom staff video tutorials are helpful, but roleplaying situations help training hit home.

Show staff what to look out for, how to engage with and handle potential shoplifters, and emphasize safety and legal compliance to protect your store. POS security measures and cashier training help reinforce behaviors that minimize shrink.

Tip #5: Take Steps To Reduce Spoilage

Spoiled produce and dairy products can add up to thousands in lost profits annually. But how do you combat spoilage?

Start with implementing FIFO procedures. Ensure you sell your oldest inventory first. Proper date labeling is essential for FIFO to work. You’ll need to mark products with receive and expiry dates, and store older inventory in the front of storage areas, so staff knows to pick older stock first.

Robust inventory software and hardware are also essential. With 24/7 access to inventory data, you can track shipments, analyze sales, and make smarter purchasing decisions. You can track products to the SKU level, track expiry dates, and optimize rotation and markdowns. On the hardware front, barcode scanners speed up the receiving of inventory — and when linked to your POS system, automatically update stock levels.

Answered: How To Reduce Shrink in a Grocery Store

Taking proactive steps to reduce shrink is critical for your store’s profitability. Effective inventory management helps detect issues early. Better security deters theft, and training staff reinforces proper procedures. Performing routine audits and optimizing perishable management also minimize losses.

You’ll never fully eliminate shrink, but the steps above will help reduce your shrink rate. And your POS hardware and software are potent tools for tackling shrinkage issues. From security settings to customizable reporting, you have loss prevention tools at your fingertips.

Markt POS provides a POS solution designed by multi-generational grocers who understand the problems local market and grocery store owners face. We provide a comprehensive solution to help you run every aspect of your business.

If you're ready to take control of your inventory losses and maximize profitability, schedule a demo today!

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