Effectively Managing Retail Product Waste – Week 6

From the outside looking in, most consumers do not give a second thought to the vast amounts of unsaleable product that retailers accumulate. Yet for the manager of one of these retailers, the story is much different – and the consequences of the waste ultimately lead to higher prices and reduced product availability for consumers. In this article, I will break the topic down into two sections. First, we will trace the sources of unsaleable product to find out what creates it. Then, in the second half, we will suggest solutions that can help mitigate the threat of product waste. As a bonus, I would like to ask you, the reader, to write any ideas you have in the comments below.

Where does unsaleable product come from?

Accidents during transport, weak packaging, customer returns, shoppers demoing the product, improper merchandising and storage, lack of price maintenance, attempted theft, and unexplainable “mystery” damage are some of the biggest reasons product waste exists. Clearly, a problem with such a wide range of contributing challenges will require more than one solution to fix – and that is precisely what makes product waste such a difficult issue to fix. In fact, in realistic terms, it is practically possible to completely eliminate. Aside from shipping product to a store in armored boxes and never allowing employees or customers to touch it, the problem will continue. But all hope is not lost. Even when total elimination is not possible, drastic reduction of the epidemic is. With that in mind, let’s take each reason for unsalable product and assign solutions.

Let’s solve this

Accidents during transport: Allowing one product to share a container with another product that can spill is a big no-no. One bump in the road and the nail polish just ruined five other products around it. Additionally, the use of water-resistant packaging like plastic (paper can be quickly destroyed by moisture) can allow the salvaging of most products – even when a spill occurs.

Weak packaging: It’s a shame when a retailer has to throw away a perfectly good product because the packaging is damaged. Nevertheless, it’s a reality. Aside from marking down the price of a product, there’s no way the product will sell (and marking down products can lead to negative quality perception). At a store level, there isn’t much that can be done to reinforce weak paper packages, but using clear packing tape across the box can help.

Customer returns: Customers return products for many reasons, but not needing the item and not being able to use the product for one reason or another are two of the most common reasons. This is why it is necessary for product packaging and retail staff to provide useful information about what the product is or isn’t. Additionally, asking the customer what they are trying to accomplish instead of simply which product they want can go a long way towards helping them find what they need – all the while reducing the possibility of returns later.

Shoppers demoing the product: Have you ever been curious about a product and wished you could touch it? You’re not alone. Humans are tactile beings, so we like to touch and feel things. But all too often, product packaging doesn’t allow the customer to feel the product. As a result, some customers take the problem into their own hands by opening a product, which often results in it becoming unsaleable. One solution here is for the retailer to provide demonstration products when they notice a particular item being repeatedly taken out of the packaging.

Improper merchandising, storage, and pricing: If a product isn’t priced correctly or straightened to look good (or even on the sales floor in the first place!), the chances of a sale are reduced. This results in the product being on the shelf longer, which in turn results in more wear and tear on the item as it is handled by more people. That is one of many reasons why keeping items straight and neat on store shelves is so important: it decreases sale time and protects against loss.

Attempted theft: I’ll be writing an entire article about this topic soon, as it costs retailers millions of dollars each year. And although some items are stolen, other times the thieves are caught red-handed. When this happens, however, the product that was being stolen is often damaged. Crushed boxes and cut plastic are not uncommon as a shoplifter wants to leave behind the packaging to an item in case they are stopped by a store employee. Solutions to shoplifting are complicated, and we will tackle them in the later article.

Unexplainable “mystery” damage: “How on earth did that product end up like that?” Sometimes, it’s hard to explain what happened. But one thing is for sure, having an awareness of products, quantities, and their locations will reduce the likelihood of this scenario. When products are where they belong, they’re less susceptible to damage.

What other ideas do you have that can help retailers manage product waste? Comment below!

What did you think? Leave some feedback! :)

7 thoughts on “Effectively Managing Retail Product Waste – Week 6

  1. Hello Austin,
    Effectively Managing Retail Product Waste is always an interesting subject because waste is such a scary thing and in most Pro Forma’s I do not think I saw this as a line item and probably should.
    I think that more security of seeing the product through all stages is important. It may be through camera surveillance or checking on the product and holding different people accountable for each stage from manufacturing, shipping and retail sales if needed.
    Mary

  2. You may not be a big fan of Amazon but their model addresses many of these issues. This topic is yet another reason why Amazon will continue to grow and expand and put some retail stores out of business.
    Accidents during transport: Amazon can standardize transport to the home. Damage in shipping can be UPSs fault not theirs. Damage on the way to their warehouse isn’t their fault.
    Customer returns: The reviews and abundant information assure that for most the product is what they expected
    Shoppers demoing the product: If you return a product too often and it looks like you are mostly just testing the computer picks up on it and drops you as a customer
    Improper merchandising, storage, and pricing: They have dynamic pricing to move product that isn’t selling.
    Attempted theft: Not really an option
    Unexplainable “mystery” damage: Not really an option.

  3. Austin,
    Great topic for all of us to think about within our own industries. I recently went to talk about food waste and food reclamation. In this country alone there is over 35 million tons of food wasted every year. Here is an article discussing what companies including Walmart are trying to do about waste.
    http://www.huffingtonpost.com/entry/huffington-post-reclaim_us_576be8c4e4b065534f490c1f
    Here is the EPA’s site with information about how not to waste at home. https://www.epa.gov/recycle/reducing-wasted-food-home
    Their is a lot of opportunity for entrepreneurs who can fight this battle as well as developing new ways to feel all the million whom are food insecure. Chobani even has a grant/funding program to encourage work in these areas.
    Cece

  4. You know I joke with my wife all the time about places like the Dollar Tree, and Ollie’s because I think that they are the store that get the items that are wasted in other stores but the still have some value at stores like them. It seems that most of the items sold are either about to expire or are not a popular sale at the Wal-marts and other stores. If that is the case, and stores do ship there items that are wasted to Ollie’s and Dollar Tree it is a great idea.
    Great Post.

  5. Austin
    Great post.

    To answer your question, for samples, ordering specifically for customers to try along side of my regular order.
    To limit accidents in transit, require vendors to have reliable packaging that reduces any and all spills or spoils.
    Lastly, ensuring that I have quality inventory storage that is maintains the 5 S standard

    5 S is:
    1. Sort
    2. Set in order
    3. Shine (i.e. clean area)
    4. Standardize (Efficiently organized with labels and pictures of how items are to be placed and shelved) Items used most often are chest level and in the front. Items used less often are closer to the floor or up above with proper elevated equipment to retrieve.
    5. Sustain (Employees should be able to tell what items need to be restocked or unpack-aged based off the organization)

  6. Austin,

    I love reading all of your posts/articles! Product waste is so real, right? From your examples, I kept picturing a retail chain, and thought, yep I’ve seen this happen! As a small business owner, we have to be even more aware of waste. What are we doing? How do we correct it? To add to your list, I think over ordering is wasteful. What do you do with that left over inventory that no one wants? You’ve already paid for it (wasting money), if it doesn’t sell. We need to look at our business regularly for these types of things.

    Great job!

  7. This is a good topic; I never thought about wasted products and the money loss.
    These are items that still need to be accounted for – but we still lose out on making profit.
    I need to think about this – because my items are custom made – wow – thats time and money and creativity.

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