Grocery stores deal with fragile inventory every day, such as fruit that quickly spoils and boxes and cans that are vulnerable to damage. In fact, the inventory shrink rate at grocery stores is more than double that of retail stores across the board. While inventory shrink may be considered the ‘cost of business’ and factored into overall pricing strategies, unreliable equipment including inferior refrigerated display cases can disrupt even the smartest business plan.
The true cost of equipment breakdown has been estimated to cost as much as 15 times that of maintenance costs – including loss of immediate sales due to a product not being where a shopper expects it to be and the longer lasting expense of lost shoppers due to a bad experience which can turn into even bigger losses due to bad ‘word of mouth’ reviews.
So, what does your refrigerated display case have to do with it?
Every second a display case is down, your store is losing money – lost production, cost of repairs or replacement, labor costs to relocate goods, substituting spoiled food – and it often happens without any warning.
Fixing equipment means key staff or technicians are forced to stop what they are doing and manage the crisis. You need to order supplies, spare parts, tools and trained repair personnel… leading to expensive downtime. These costs can quickly add up in terms of materials and labor, as it takes workers from value-adding tasks. The result is lost profits.
Notwithstanding downtime where you must replace the refrigerated display case altogether, consider the cost associated with sub-quality products as the equipment starts to fail. This could translate into spoiled fruits and vegetables, faster expiring meats, and botched cross-merchandising plans (imagine it happening the night before a holiday or your big Super Bowl promotional campaign).
Poor quality can quickly erode customer trust in your products and brand, not to mention put you at risk of penalties and costly recalls.
The cost of bad PR for your supermarket
It’s difficult to determine a universal cost of a bad reputation, but one source estimates it to be more than $537 billion in the United States alone. The magnitude of that figure illustrates how common the problem is, but how does it translate to supermarkets? Compared to overall retail consumers, grocery consumers tend to consist of a slightly higher percentage of “loyalists”, a slightly lower percentage of “neutrals”, and the same percentage of “roamers” (check out this interesting study on retail loyalty). But over time, poor quality products and bad shopping experiences can erode that loyalty and lead to lost business.
According to a BrightLocal survey, 93% of consumers read online reviews and a separate study found that 4 out of 5 customers won’t buy from companies with negative reviews. Quantifying the impact of losing 4 out of 5 customers in a supermarket is relatively simple. The average grocery bill for a family of four is just about $800/month, according to the USDA Cost of Food at Home report. If you lose four of these customers, you’ll miss out on $3,200 in sales monthly. This would add up to $38,400 in lost sales annually. That’s a big price tag for a bad review that could have been prevented.
Mitigate costly failures by being proactive
Preventative maintenance can help mitigate a lot of equipment failures – replacing the “fail and fix” approach with an alternative “predict and prevent” strategy that includes:
• Cleaning coils monthly
• Checking refrigerant charge
• Testing electrical connections and power draw
• Checking motor operations, drain lines, and gaskets
• Calibrating thermostats
In addition to adopting preventative maintenance for longer lasting equipment, there are some key criteria you can add to your vetting process when choosing where your display case comes from:
• Check that every display is accompanied by a verified and signed testing tracker. This will include the metrics from the testing and should be validated by a third-party lab.
• Make sure your suppliers have robust in-house lab capabilities to ensure faster service
• Choose self-contained compressors with raised air flow vents to help maintain critical temperatures while allowing mobility and maximum efficiency
• Order display cases that have slide out compressors for fast and easy service
The supplier who checks off all of these boxes is likely a partner who cares about your store’s profitability, reputation, and compliance with important regulations. Learn more about some important compliance considerations here.
JSI provides the highest quality refrigerated displays that utilize industry-leading components and LEAN manufacturing principles to can ensure that each and every unit meets our strict quality guidelines.