Expired Products Cost Retailers Big
Are
expired products on store shelves a manageable issue for retailers or
a time bomb waiting to severely affect the ability of stores
to attract and keep shoppers? Recent settlements involving CVS, Rite
Aid and Target with New Jersey and New York raises the question
as the chains, that have admitted no wrongdoing,
write checks for hundreds of thousands of dollars to the states.
In
New Jersey this week, Target agreed to pay $375,000 to settle charges
that it sold expired baby formula and non-prescription medicines to guests
at its stores.
According
to a statement released by New Jersey’s Attorney General’s office, Target agreed
not to sell product beyond its expiration date and “check the expiration dates
before displaying such merchandise for sale, to conduct weekly checks of the
expiration dates of the merchandise offered for sale and to arrange for the
destruction or return to the manufacturer or supplier of any expired merchandise
removed from the store shelves.”
New
Jersey previously settled similar cases against Rite Aid ($475,000) and Duane
Reade ($200,000). The state has cases pending against Wal-Mart and Drug Fair.
Also
this week, CVS agreed to pay New York $875,000 over the sale of expired
goods including baby formula, food and over-the-counter remedies. According
to New York Attorney General Andrew Cuomo, investigators for the state
bought expired products in 60 percent of the stores they visited including
some items that were two years past date.
"New
Yorkers should not have to worry that their neighborhood pharmacy is selling
expired over-the-counter drugs that may be harmful to themselves or their families,"
said Mr. Cuomo in a statement. "Today’s settlement with CVS and our past settlement
with Rite Aid – which total approximately two million dollars – send the message
that companies have a responsibility to put the safety of their customers ahead
of boosting their profits."
Discussion
Questions: How big a problem for retailers are expired products on store
shelves? Why does the problem exist and what is the fix?
If products are expiring on the shelf, then retailers are doing a bad job of managing the category from an assortment and layout perspective. Products should be allocated space so as to move through before they expire.
There is no excuse for having expired product on the shelf. If that happens, it means your floor associates are not checking stock and rotating as needed. Some employee had their hands on that stock at some point in the merchandising chain and it’s that person that should be rotating and checking stock. This incident also means that whoever is maintaining the section isn’t checking critical items while facing and merchandising.
If I was the store manager or director and my store was the cause of the fine, written and verbal coachings would be flying off my desk. Everyone who works that department would be held accountable. Don’t even talk to me about payroll or the lack of it, this is retailing 101 (or even preschool!).
Is the expiration date on products totally time accurate or is it to force product rotation on retail shelves? Perhaps, just perhaps, it’s a little of both. If so, it becomes a mutual manufacturer-retailer problem.
To fix the problem, manufacturers and retailers must come up with a plan to remove all outdated products from getting into the hands of consumers. How? Retailers could request that their procurement be on a consignment basis and that manufacturers police outdated products and remove them from retail shelves. If that isn’t practical, retailers must be more operationally vigilant in removing outdates.
Now–just imagine what Wal-Mart would do if/when they were to come up against this situation.
Pretty alarming, but this is top of mind for me based on several experiences I’ve had at a local “health food” store. On my last visit (and I mean “last” literally), at least half of the items on my list were severely expired (some dating back to early 2008). I had learned to check every label based on prior visits and wouldn’t you know, a woman was returning expired frozen fish fillets while I was talking to the indifferent manager about the problem.
The interesting thing is, I never check expiration dates on packaged goods at major retailers because I assume it isn’t an issue. Note to self: Check dates everywhere!
There are a lot of angles to this question. The obvious one is “bring on RFID,” maybe more fines will finally make it an affordable investment. Another is “back to basics,” both manufacturer and store personnel are wrong if expired product is on the shelf. What happened to the manufacturer representatives visiting stores or store personnel rotating and culling shelf stock? Finally, the consumer has a little responsibility here also, not just for themselves but if they discover outdated product on the shelf, they should say something to the store personnel (who shouldn’t respond by shooting the messenger).
In general, the state budgets are tanking and the state governments are going to be looking everywhere to collect money. This means greater scrutiny in all areas of store operation, including stock rotation but also things like unit price tags, fresh department operation, and general store environment. The irony is that fines will just raise the cost of a brick and mortar operation and send more retailers into the virtual world.
I think a little responsibility has to go on “you” as a consumer, especially when buying items such as over the counter medications and baby formula. Expiration dates on some grocery items are just as important as on fresh items, like produce and perishable items. For instance, you wouldn’t buy yogurt, cheese, or meat that was past its expiration date. And if you do notice something at your store that is out of date, you should definitely let someone know about it.
I believe this will be a major focus in the immediate future. One way to avoid these situations is to make sure all checkout personnel are checking dates before ringing up the product. No matter how well organized and diligent the department manager is, some expired product can slip through.
Expired product is solely a management issue. When retail management is in a situation where they are selling perishable product, they have an obligation to TRAIN their personnel and inspect the work they do. I seriously doubt that many grocery chains have tracking systems that can show expiration dates on merchandise in their supply chain or if they do, they don’t make FIFO a warehouse priority. This places the burden on the store manager, but it isn’t communicated to him as a priority.
Kroger used to reward shoppers who found OOD product on the shelf by giving them a like (in date) product. My oldest daughter’s roommate fed them the whole way through college by finding OOD in their local Kroger. It all goes back to “you get what you INSPECT not what you Expect.”
Any retailer selling OOD product should have their business license suspended for 90 days for the first offense, 6 months for the second and revoked for the third. Every retailer should have a published OOD product policy and it should be displayed at the entrance. If the policy is crafted correctly the merchant’s customers will police the store and may even allow him to reduce his payroll.
This is just another consequence of retailers not controlling or even understanding the management of inventory. Chains generally will not take product with less than a 1-year expiration. For major wholesalers, the limit is 18 months. Another six months is often added to slower-moving items.
How can this be? Other than inventory on gross reports, real inventory management is not a high priority issue. Inventory is controlled by HQ and that is the problem. HQ would say otherwise and they would point to all the rules in place to “control” inventory. But, inventory control is not about rules, it is about understanding the dynamics of the retail stores and that each may be different.
Not every large retailer has these issues, but it should be no surprise to anyone that the retailers cited are having these issues.
I was a little surprised by the hard line taken by the commentators here. That having been said, my question is: how big a problem is this? Is it armloads of merchandise on every shelf or is it a scattering that one finds only after visiting dozens of stores? If the fines are any indication, it’s perhaps something in between; and I know consumer activists–and some customers–won’t like to here it, but fines in the low hundreds of thousands of dollars against multi-billion dollar companies are likely to be regarded as a minor concern.
This reflects poor category management, combined with bad purchasing and product placement at shelf level. Any retailer who is not actively managing their products on the shelf, including FIFO rotation policies as well as strong pre-expiration mark-down policies deserves to suffer penalties that are 10X these amounts.
Retailers do not treat their inventory like tomatoes, which is what they should do. This requires regular inspection, cleaning and rotation to ensure that the consumer is getting the best product when they make their purchasing decisions. Managing their products at store level will ensure better inventory management combined with higher customer satisfaction. What can be better than this?
Expired product costing retailers fines is totally unnecessary and a huge waste. Re-merchandising product periodically (cleaning, insuring plan-o-gram integrity, rotating stock based on expiration date, restocking, etc.) is not only good retailing, it is essential to profitability.
Given the tough economic times we are in, why not have retailers take this process one step further and catch merchandise a few days before expiration date, work with suppliers to help offset the loss and instead of throwing it away, donate it to area food banks so America’s growing number of hungry families can be fed. Logisitically it would not be difficult to do, huge fines could be avoided, and maybe fewer than 1 in every 10 people in America would not go to bed hungry.
Well, I think it’s a major inventory and assortment planning issue. I have worked with several retailers’ data and have seen some big surprises where the product sits on the shelf for over 100 weeks. Such products are bound to expire if they’re not moving. There are a few measures retailers could take to avoid spending millions in lawsuits
1. Only the latest manufactured products to be accepted by retailers. Based on the movement of the product, a cutoff period from the expiry date needs to be negotiated with the vendor.
2. Presentation quantities must consider shelf life along with case pack constraints. If the product cannot sell a case pack in its lifetime (shelf life), there is bound to be an expired product on the shelf.
3. Batch code could be bar-coded/RFID tagged, so that when the item is billed at the till, an alert is popped intimating its expiry.
4. Increasing inventory turns will definitely help with reducing the expiry issue, however, it’s easier said than done. Localization of assortments could help increase the turns.
Glad to see that I’m not the only one who recognizes that RFID (specifically, item level RFID) can play a very helpful role here. I do however disagree with the suggestion, made by Bill Bittner, that more fines by regulators will “finally make RFID an affordable investment.” As always, context is paramount. There are already several product categories–like apparel, footwear and books–where disposable RFID labels are proving their worth. Heck, these disposable labels are even being used today in US clothing stores on items that retail for as little as 5 dollars.
If Bill is talking about boxes of cereal and other dry goods, then I would have to agree with him. In drug stores, there are no doubt a number of items on the store shelves that can support the cost of a disposable RFID label, not to mention all the high-value items sitting behind the pharmacy counter.
How would RFID help solve the expired product problem? In the future, the use of Smart Shelves will be more common. These shelves literally take their own inventory. Therefore, the system can provide alerts to employees and automatically generate lists of the items that need to be pulled (as well as their precise shelf location). In the meantime, since Smart Shelves are not yet “ready for prime time,” employees can use handheld RFID reader guns to rapidly check different parts of the store. The system will flag any items that have past (or are nearing) their expiration date and identify their shelf location.
This capability would be very helpful to the drug store chains since they have the ability to return product for refund. Often though, they fail to spot product in time to capitalize.
The bottom line? The expiration date issue highlights a facet of the business case for item-level RFID that exists for chain drug retailers and, to a lesser extent, grocers.