This week it was reported that supermarket retailer Kroger Co. has begun issuing $500 fines to suppliers for late deliveries.
Kroger To Fight Out-Of-Stock Sales Losses By Fining Shippers
In an attempt to keep up with online retailers like Amazon, Cinncinnatti-based grocery chain Kroger has put forth a new policy that fines suppliers $500 for deliveries that are two or more days late to any of the company’s 42 warehouses, according to new reporting in the Wall Street Journal.
THE WALL STREET JOURNAL: Traditional grocers like Wal-Mart and Kroger want to claw back sales lost when items are out of stock https://t.co/dE2Za4E6fy
— The Briefing Room (@TheBFRoom) November 27, 2017
Robert Clark, senior vice president of merchandising for Kroger, commented, “It’s a massive opportunity from a financial and customer standpoint. If it was an occasional issue, it wouldn’t have been worth the time and effort [to police deliveries].”
The crackdown on shippers is meant to keep Kroger stores competitive by ensuring that products are restocked quickly — which they hope will keep their brick and mortar customers happy.
Out of stock items cost retailers big time. According to the Harvard Business Review, when a customer finds that a desired item is out of stock, 21% — 43% of shoppers will leave the store to buy the item elsewhere. These shoppers cost retailers losses of as much as 10% of sales. The new fine is intended to help Kroger recover some of these lost sales costs.
Data shows that grocers lose $75 billion a year in sales when products aren’t in stock or otherwise can’t be sold, and @kroger wants to lessen that blow https://t.co/KscTJ8GxRw
— Cincinnati Business Courier (@BusinessCourier) November 29, 2017
Walmart Also Cracking Down On Late (And Early) Deliveries
One of Kroger’s major competitors, Walmart, made a similar move in August when it rolled out the “On Time, In Full” program. This policy requires shippers who provide full truckloads of fast turn goods to “deliver what we ordered 100 percent in full, on the must-arrive-by date 75 percent of the time.” Shippers who fail to comply with the On Time, In Full requirements a month by month basis are subject to a 3% fine on the value of the load — meaning that late shipments will be fined, but so will early shipments.
With Walmart and Kroger leading the way, it is possible that other retailers could follow suit in the crackdown on shippers — a move that could prove costly for truck drivers as winter (and the inevitable weather delays that it brings) moves closer.