A Fresh Perspective on Grocery Shrink

Jamie Grill-Goodman
Editor in Chief
Jamie goodman

For grocers, operational shrink is an issue that is cutting into profits and contributing to food waste, while consumers are growing more concerned about sustainability. In the U.S. alone, food waste is estimated at between 30-40% of the food supply. Currently, the grocery industry mainly relies on inventory management solutions to curb fresh food waste.

One interesting new way to engage shoppers who are concerned about sustainability is to offer discounts on expiring food that may otherwise be wasted. Solutions that enable grocers to encode data such as sell-by-dates into labels can help grocers automate a dynamic discounting program, such as this.

To get to the bottom of this complex issue, RIS interviewed Digimarc’s VP of Marketing Heidi Dethloff to discuss how fresh foods impact grocery shrink and what Digimarc is doing to help.

RIS: What is the impact of shrink in grocery retail?

Heidi Dethloff: Shrink is a major concern for grocers and the problem is getting worse. According to the FMI’s “2019 Food Industry Speaks” report, overall store shrinkage among grocers now exceeds 3%, accounting for many billions of dollars in lost revenue. General retail shrink is often associated with theft or product damage. But in the world of grocery, operational shrink — meaning profit loss caused during the conduct of normal operations — is a much more significant issue, accounting for more than 60% of all profit loss, according to the Where’s My Shrink website. Food waste is a major contributor to operational shrink.

RIS: What are some of the challenges associated with fresh foods? 

Dethloff: Fresh foods naturally have a shorter shelf life than packaged goods. Grocers rely on accurate inventory management to ensure they are balancing supply with demand to minimize waste and maximize returns. When cashiers are forced to hand key generic department codes — because of damage to the barcode on the fresh product label — those inventory counts become less reliable resulting in too much or too little of certain products. Some grocers have found success countering this uncertainty by discounting soon-to-expire foods. However, such strategies often necessitate large, complex relabeling efforts at checkout that place great strain on available resources.

RIS: How does the Digimarc Platform address this challenge?

Dethloff: Digimarc applies a relatively simple solution to what is clearly a complex problem. Our software integrates with existing scale printers to apply Digimarc Barcode across the whole surface of the label. Digimarc Barcode appears as a subtle dot pattern, hardly noticeable by consumers. By applying this more advanced code, grocers gain two key benefits. First, labels with Digimarc Barcode scan much better at checkout since it provides broad label coverage and damage to one part of the label doesn’t compromise its overall ability to be scanned. Second, the Digimarc Barcode has a larger data capacity than a traditional UPC barcode, enabling grocers to encode things like sell-by-date, allowing resource-constrained grocers a means to automate a dynamic discounting program.   

RIS: What is the process for deploying Digimarc?

Dethloff: Digimarc Discover software is designed to work within a grocer’s hardware environment and integrate with existing systems. The process of getting started is straightforward. We start by doing a quick evaluation of the store ecosystem, focusing on the scale printers, front-of-store scanners and point-of-sales (POS) software. From there, we provide an easy-to-install software package configured for that specific environment. After some initial testing, we’re basically off and running. We make our software available on a subscription model, so grocers have the flexibility to start small and build out or deploy company-wide to maximize ROI.  

Learn more about how the Digimarc Platform can reduce retail shrink.

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