/
Supermarkets CAN
The long-jrange forecast of retail
food prices reads one way—higher.
But up and down the marketing
chain, there’s much that can be done
to check the rate of increase.
Supermarkets are a case in point.
If they found the means to shave
their operating expenses, some of
the savings could be passed on to
the consumer.
Where If goat. Of each dollar con
sumers spent in a, typical supermar
ket for food in 1973, about 17 cents
went to the operator to cover costs
and profits for retailing. The costs—
amounting to 16 cents of this —were
divided about equally between fixed
overhead, such as buildings and
equipment, and variable expenses to
handle the products, such as labor,
packaging, and advertising and pro
motion. The remaining cent of the
retail margin was profit.
According to ERS economists,
there are ways for stores to cut both
their fixed and variable unit costs.
Fixed costs per unit of product
can be lowered by increasing the
sales volume. Total rent is the same
for a store no matter how many
items are sold—but as sales in
crease, the rent cost per item drops.
Overhead costs per unit of prod
uct can also be scaled down through
better use of space. For example,
we’re used to seeing meat and frozen
food in open or well-type cases, which
display few products in relation to
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the size of the case. But fixed costa
per unit of product displayed are
lower for multideck refrigeration—
freezer cases which extend vertically
up to 6 feet high and provide more
display area.
How well a store is using its avail
able space can be measured by look
ing at store sales per square foot of
selling area. If stores with 12,000
square feet of selling area selling
$4.50 worth of products per square
foot were able to up their sales to
$5.75, they could reduce store costs
by nearly 2 percent of sales, which
could then mean lower prices for
shoppers.
Som* disadvantages. But, the ERS
economists caution, there are draw
backs to larger volumes. If con
sumer demand remains the same,
some supermarkets and small stores
would have to call it quits for lack of
business. Then shoppers would have
to pay the additional cost of travel
ing to stores farther away.
Of the variable store costs, the
big three are “receiving” goods at
the store, “shelving” (including
price marking), and “checkout.”
These areas for cutting store costs
have received less attention than in
creasing sales volume, although they
all offer potential for cost reduction.
“Palletization” is a labor-saving
way of unloading goods from the de-'
livery truck at the retail store.
While hearing loss
problems occur most
frequently among the
elderly, over 20 per cent of
those afflicted with a serious
hearing handicap ex
perienced the onset of their
hearing loss began prior to
their 17th birthday, officials
of the Beltone Crusade for
Hearing Conservation point
out. For this reason, they
urge those of all ages to
safeguard their hearing
ability.
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Far-Out Inflation
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Boxes arrive from the manufacturer
or wholesaler already loaded on
wooded pallets or platforms. The en
tire pallet can be moved by forklift
from the truck directly to the store’s
loading dock.
In the short run, this method may
raise investment costs, since older
stores may not have docking facili
ties. Also, items ordered in small
quantities from wholesalers are
often not palletized and must be un
loaded by hand. But in the long run,
handling can be speeded up and la
bor costs trimmed.
Shelving the pallet. Pallets also of
fer pluses when it comes to shelving.
For fast-selling items such as may
onnaise, mass merchandising tech
niques may be the best alternative.
Instead of unpacking a pallet and
placing the items on store shelves,
the whole pallet is moved onto the
floor and used as a large display.
This practice reduces labor that
would have been used in shelving.
However, it payS off only in stores
that handle large volumes, and for
products that sell quickly.
Supermarkets may be using elec
tronic checkout counters in the near
-future. Instead of ringing up the
price of an item on the cash regis
ter, the checker simply moves the
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EUctronk* cost. A major drawback
to the use of electronic checkout
equipment is its high initial cost.
Also, if consumer complaints about
the lack of prices on each item force
stores to mark items individually,
the cost savings would be much less.
The meat department also offers
opportunities for labor cost reduc
tion. Presently, a number of meat
processing chores, such as cutting
larger pieces of meat into retail
cuts, are done at the retail store.
But the job could probably be done
more efficiently at the slaughter
house or wholesale level. The meat
could then be delivered to the store
in fresh or frozen form.
These changes might create prob
lems for consumers and store em
ployees, however. There has been
some initial resistance to frozen
meat by consumers, who are accus
tomed to buying fresh meat and
may not know how to judge the qual
ity of frozen meat. And if meat
processing is moved from the re
tailer to other levels, some of the
store’s meat cutters may face job
relocation or even job loss.
ANSWERS TO
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717-464-3321
ING
TORAGE
PROBLEM
7 r '