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.
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