Eli5 How do grocery stores around the world afford to be fully/half stocked in a product 24/7 simultaneously even in small towns where not everything’s bought?

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Eli5 How do grocery stores around the world afford to be fully/half stocked in a product 24/7 simultaneously even in small towns where not everything’s bought?

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this is a good question, very off the wall though. ive worked in several grocery stores/reatil spaces and theres A L OT of waste/shrink. Id like to know to, maybe the profit they make on selling just enough of a few products (upselling) out ways or matches the expenses of the total in stock product and waste.

Every single store I’ve worked at ran at or near a loss. The last one I was lead in the dairy department so I had full access to the shrinkage data. Just my department was losing thousands a week from damaged product, spoilage, and theft. Quite often there would be damaged stuff on the pallets and it went straight into a bin to be thrown away. The store ate the cost of all of it. They manage by selling a lot of stuff and cutting costs everywhere they can. Part time employees, minimal benefits if any, maintenance was always just bare minimum. Also never enough of those part time employees and the job always felt stressful. Never enough time in the day. Which drove a lot of people out before they could get many raises. Hire new teenagers at lower rates and keep on burning through them.

If the product is a slow seller, you could be seeing literally the same product every time you go shopping. As in the store orders one case, puts it on the shelf, and it sits there for months. Can be the case for non-food items that aren’t bought all the time like toys, or seasonal items. Other times, the store gets a kickback from the vendor so the vendor pays a certain amount of money for the store to carry a product whether it moves or not. Sometimes the profits of other products are enough to cover the losses of another product.

Mostly though, stores will keep slow movers in stock and take the loss from shrinkage because it helps to maintain the image of a store that is fully stocked. If your store is poorly stocked, it can be perceived that your store is failing and is on its last legs. Perception is reality.

Chain stores are able to do this much better than independent stores because entire stores can be loss leaders and they will use the other stores to prop up one of these loss leaders. I used to work for a company where we had stores whose entire purpose was for experimenting new programs and stuff, and some of these required large upfront investments. This store was projected to lose money because of this, and other stores would make up the losses through profitable sales.

TL;DR: someone at the company is getting paid for it, or they make enough money elsewhere to justify the cost of it.

They underpay employees and often benefit from direct and indirect government subsidies (in industrialized countries).

Having worked in a number of grocery stores over the years, I can tell you that there are a number of factors at play in keeping a store stocked. But that would likely expand way beyond the scope of a ELI5 comment, so I will try to keep things as straightforward as possible:

At the end of the day, everything simply comes down to math. “Shrink”, which is essentially any time the store loses a product to anything other than someone paying for it, is baked into the price for everything. It’s just a fact that a lot of milk and eggs and meat are going to be thrown out without being sold. Same with vegetables. And the prices for each “unit” of product reflects that anticipated waste. Which is kind of gross when you think about it, but that’s just the current nature of the business.

Secondly, a lot of stores rely on something called “rolling stock” which is essentially keeping storable goods constantly loaded on to trucks and moving around from store to store, rather than in a warehouse somewhere. Not paying for a huge system of warehouses, and maximizing storage through tools that are already around, helps to keep costs down. This is also how shelves can stay full, or at least fuller, without each store having a huge supply of Graham crackers and peanut butter stashed in the back: “trucks coming tomorrow morning; if we’re out now, we’ll have it then.”

Third, a lot of things on the shelves will last for a pretty good chunk of time. Potato chips, breakfast cereal, soda, bottled water, popcorn, canned goods: all of that packaged product can sit for a hot minute and still be perfectly sellable. “If it’s not selling now, it can sit there until it does”. And that’s not even counting non food products that are still sold in grocery stores. I’ve never seen a Hallmark card get thrown out for being past sell by.

TL;DR- folks higher up the chain than I ever was had done the math and figured out how to keep higher shrink products like milk that often ran at a loss balanced out with products that can sit on the shelves longer and still sell.

Grocery stores use a variety of methods to keep their shelves stocked. They may have agreements with suppliers that guarantee a certain amount of product will be delivered on a regular basis. They may also use inventory management software to help them track stock levels and predict future needs. In some cases, stores may even stock extra items in the back room or in storage in case of sudden increases in demand.

this is b/c of all the attention to Inventory management and supply chain organization. People get university degrees in that.

common approach that the store is visited by a supplier truck daily. The truck carries many different products in it, and truck driver (or a dedicated merchandiser) re-fills the shelves with whichever products are running low. The science is used to compute how many units of product is “running low”, and how many to put on the shelf when restocking.

Despite this, stores do run out of things. They try to hide it by rearranging remaining products so you cannot see any “empty shelves”.

Software. Stores use barcodes to track each individual item, and then looking at purchasing trends, buyers make decisions on what to buy and how much. Sometimes they succeed and sometimes they don’t (that clearance section is when they fail). The rest is just part of the amazing supply chain, of farms, distributors, trucks etc. Source: I worked in the supply chain industry.

Different products are reordered at different intervals. So the jar of off-brand mayo you’ve never heard of has probably been there a while, but the soda aisle might get refilled multiple times a week.

They do basic math to see what sells more and what sells less on each location. That way they can optimize their stock per location to have the less waste as possible.

The most direct answer is that food is cheap for them and there’s a lot of waste. Also, it’s pretty normal that the store doesn’t own or manage much of its own product. Like when you see a shelf of coke… That’s probably from a coke vendor basically leasing space on those shelves. And so some of those costs are pretty distributed.

In 2019, I drove from Toronto to Tofino BC through Canada, and back through the US Northwest. We stopped at a gloriously named ‘Kum and Go’ in some small town in Montana for gas and snacks.

Tired of the usual chips and chocolate bars, I was amazed to find Ritter sport bars, and *flavoured* Perrier. I remarked to my GF that the North American distribution system is a wonder; that here we were, in the relative middle of nowhere, but German chocolate bars and varieties of French sparkling water were available in a gas bar, not some specialty shop or even a supermarket.

This is Adam Smith’s ‘invisible hand’ in action. Who ever the buyer was for that store, he had no idea I was coming, or that I would be sick of chips and diet Coke at the time. But at some point, some buyer must have tried an order of Ritter bars, and when they sold, kept ordering them. Presumably, if the demand for them was high, he’d order even more. If the demand dropped off, he might not order any more. At some point, a steady state is reached where the orders and the sales more or less match.

So, that’s the answer, OP. Through an organic process of trial and error – some stores will buy products that don’t sell, and eat the loss on those, e.g. – retail outlets match their orders to what sells. If I were a retail buyer, I’d certainly allocate some percent to ‘new products’, so that I can see what new things my customers like or don’t like, but in a high volume retail space, managers can do a good job of matching orders and sales for existing products.

They analyze the data for long how each product sits on average and compares it to the shelf life. Then they overstock to be safe, and to have a buffer against spikes in demand.

Bakery department manager here, most perishable departments are considered to be run at loss. But honestly once you are in a store for a bit you learn the buying habits of your customer base and you then account for your levels on the sales floor for that. Say a tub of brownies has a 10 day sell code and I know that on average that 15 will sell in that time I will keep that product level around 15 items on the sale floor, if a box of donuts only sells 4 in its 5 day code I only ever keep the 4 out there. Even with a hundredish products you get the gist of it and can have low losses

Possible by **very long shelf life**. The products don’t expire fast and don’t need constant flux of replacements, very small waste, if any, at the end of each batch. One transport once in a blue moon is enough to stock anything necessary. So it’s a small cost for having a lot of products available on the shelf all the time.

With short shelf life everything is reversed, costs grow exponentialy, being permanently supplied gets next to impossible.

I know Bimbo Bakeries owns many different brands in category and actually has outlet stores for almost expired product. I imagine, because they have their own merchandisers, they cycle out the older product at each retail location and then bring all of that product to their outlets to sell at a lower price. The one near me is branded as a Friehofer’s Outlet Store but it carries Sara Lee breads, Ball Park hot dog rolls, Entenmann’s baked goods, Utz chips and snacks and a large list of other similar items. I can buy a $9 danish for $2.50. Loaves of Artesano bread for $0.99-$1.50.

I don’t think OP does much grocery shopping, because things are *constantly* out of stock. I’m not talking about items like produce or meats & fish which run out because of being on sale or related to a holiday (think burger buns on the 4th or elbow mac around thanksgiving). But run of the mill things.

I was just at the store last Sunday for the weekly grocery run and for the 5th time in the past year individual bottles of either soda or tonic were out. Until a few months ago, the small 8oz bottle of Ocean Spray cranberry juice were missing and even Costco didn’t have them by the case for about 4 months.

Sliced kalamata olives was another that will go missing every now and then at my Ralphs.

Fully stocked displays of product look more appealing to customers, making them more likely to get noticed and bought (psychology is a really big part of retail). Those additional sales make up for a bit of shrinkage due to product expiry. Also, having some additional stock helps ensure that you do not miss some sales due to shortages.

Sometimes the vendors require a certain amount of shelf display and prominence and to have a lot of stock as part of the agreement to sell their items. Sometimes they pay extra for it.

Supply chain. Most grocers are big corporations, or they participate in a sort of co-op. The central warehouse has lots everything and ships it out to the stores as they need/order. That’s part of the job of the store manager, to make sure the product is ordered from the warehouse at the correct quantity to minimize waste while maximizing profit. Most stores take a semi truck delivery once a week. Particularly busy stores can see a truck daily.

I was a Produce Manager for 5 years for a big chain Grocery Store.

We used precise inventory management to keep shrink down. Inventory shrink goals were to be between 2.5 and 5%. Anything more you would have to go through a correct action plan and hounded by your District Specialist and Loss Prevention until you fixed your numbers. Bad managers often would get moved around/bumped down if they couldn’t keep good numbers.

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There’s a ton of data involved when ordering product. Whenever you see someone with a scan gun, they can pull up sales and order data for whatever item they want. Let me give you perspective. Say I scan Bananas PLU code 4011. I can see that on Mondays I average the sale of 7 cases, Tuesday 8, Wednesday 10, Thursday 12, Friday 4, Saturday 12, and Sunday 13. Armed with this data and knowledge of my inventory shipments, I can order the correct amounts of product required to keep my shelves full.

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Sales forecasting is also a major factor in this process. The number crunchers over at corporate will run numbers of past years and forecast the amount of cases of product I’ll sell for the upcoming period. Based off sales forecasting numbers and my own site level knowledge, I make as accurate an order as I can of the product. Woe to the manager who UNDER orders on a sale product. This is why you there is so much waste in the produce industry.

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There’s a lot of waste mitigation options available for a produce manager. They can transfer product over to a sister department (say Fresh Foods/Deli). Perhaps the Deli can use some Lettuce or Tomatoes I have that are perfectly ripe. Perhaps the Chef Case can use this batch of zucchini in their soup of the day. Another option I have is to transfer it over to a sister store in the area. Too many cases of strawberries? Maybe the sister store down the road can use some!

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There’s a ton more nuances to the industry, but hopefully this gives you a good picture of what goes behind keeping your shelves full.