What are you “Culling” about?

It’s an irrefutable fact: we all must eat. For many, that means there is a common, mostly weekly chore that must be planned for: grocery shopping.

Throughout my retail career, I have learned that there is one area of the grocery industry that needs constant attention: fresh produce. Why? Well, produce can spoil in the blink of an eye, and there is no automated process to remove tainted produce from the shelves without manual workflows – at least, not yet. Additionally, the closer an item of produce is to the end of its shelf life makes it more susceptible to spoiling, as customers want what’s fresh.

Ensuring produce freshness is critical for many grocers, because the quality of the produce that you offer your customers leaves a lasting impression on them, with the potential of turning them from a first-time shopper to either a loyal customer or a last-time guest.

Therefore, the attention the produce or fresh food areas of a grocery store receive is constant. Through my observation of grocers worldwide, the fresh produce area takes up a large footprint in nearly all of them, meaning that fresh produce is one of the key indicators as to how well a grocery chain will do with its customers. In this article, I will highlight the impact produce has on grocery retailers, and the impact it makes to their staffing and productivity. 

Like money down the disposal:

The impact of food waste for grocery chains is quite astonishing, even though the exact cost of food waste for global retailers is difficult to estimate because of varying attributes. According to a 2018 report by the World Wildlife Fund (WWF) and the Waste and Resources Action Program (WRAP), food waste costs the global retail industry around $90 billion annually. This figure considers the cost of wasted food as well as the costs associated with managing and disposing of that waste – which is largely staffing and payroll. ^[1]

Another report by the Boston Consulting Group (BCG) estimates that the total cost of food waste for the entire food industry (including retailers, processors, and farmers) is around $1.2 trillion annually. ^[2]

So, how can grocery retailers manage this cost and mitigate how waste impacts their bottom line? First, let’s define the process. Managing food waste in retail is known as “culling”, which means the practice of removing or destroying unsold or unwanted merchandise, typically due to overstock or the product being outdated. Culling can have a significant impact on retailers' profits in several ways – let’s take a look.

Wasted inventory costs:

When retailers must cull unsold produce, they are essentially throwing away inventory for which they’ve already paid. This can result in a significant cost to retailers, as they may have to absorb the full cost of the products they are discarding. It is also important to mention that the product does not throw itself out, associates or employees must remove the product for disposal. 

Missed sales opportunities:

When retailers cull products, they are potentially missing out on sales opportunities. Even if a product is not selling well currently, there may be a future demand for it. If the product is no longer available, the retailer may lose out on potential sales and revenue.

Negative impact on perception and satisfaction:

If customers see retailers culling large amounts of merchandise, they may perceive the retailer as unreliable or untrustworthy. This can leave a lasting, negative impression in customers’ minds and result in damage to the retailer’s reputation at large, making it difficult for them to attract new customers. For those that do grocery shop on a regular basis, it can be a common sight to notice either spoiling food, or distinct smells from a rotting piece of produce. While it may not deter you from the conveniences of the grocer due to proximity of your other daily tasks, it may make you consider other grocers in the area to experiment.

Increased markdowns:

If retailers cull a large amount of merchandise, they may be forced to increase markdowns to clear out excess inventory. This can lead to lower profit margins and reduced profitability. Retailers are constantly looking for methods to gain even a few cents to each dollar to help drive overall profitability.

To Cull or not to Cull – There is no question:

When it comes to culling there are many operational improvements or implementations that retailers can add to address these challenges. Retailers should focus on optimizing inventory management and implementing effective strategies to prevent overstocking and minimize waste. By partnering with a solution-based partner, retailers can greatly benefit from improved workflows that help expedite the process, as well as achieve better analytical insight into how they can improve their restocking operations. By implementing more automated operations into fresh produce areas, grocery retailers can put their best foot forward in providing high-quality service to their new and returning customers.

That’s why Honeywell is constantly evolving its solutions to incorporate more and more innovative technology to help grocery retailers improve their end-to-end operations. Our solutions are purposefully designed to help improve workflows and customer experiences alike, making you stand out among the competition. To learn more about how you can achieve better growth, talk to a Honeywell retail expert today and begin your digital transformation journey. 
 

[1] https://www.worldwildlife.org/initiatives/food-waste

[2] https://www.bcg.com/publications/2018/tackling-1.6-billion-ton-food-loss-and-waste-crisis