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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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 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.
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.
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.
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.
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.
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!
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.
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