How to take a bite out of rising costs at supermarket seafood departments

The rising cost of operating supermarket seafood departments is making expense containment a greater necessity for efficiency-minded merchandisers.

While such elements as shrink and higher equipment and packaging prices are contributing to steeper operational costs, labor is the most significant seafood department expense and often exceeds 20% of sales, said Chuck Anderson, vice president and partner with Certified Quality Foods, a Dallas-based analyzer of seafood quality. Anderson previously was the vice president of seafood procurement for Quincy, Mass.-based Ahold USA, and has experience as category manager for seafood at San Antonio-based H-E-B.

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“This high labor cost poses a significant challenge to the profitability of service seafood departments,” he said, noting that the expense includes initial and ongoing training which is “vital” for a successful operation.

Department overhead, such as display cases, also can be high, Anderson said. “Everything needs refrigeration, which requires expensive cases, freezers, and square footage. Initial capital also is required, and few departments use more energy and water than seafood.” 

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Seafood packaging, with costs that can be 1% to 3% of sales, also is typically expensive because of the need to provide leakproof containers that enable the safe transport of products, along with boxes and cartons that can hold live seafood, such as lobsters and other shellfish, Anderson said.

To effectively manage seafood expenses, retailers should track and budget each element, as “what is focused on is what gets fixed,” Anderson said. He added, however, that boosting sales should be the first concern.

“The store volume, location, and demographics must be right for service seafood to succeed,” Anderson said.

Merchandisers should closely scrutinize seasonal sales swings and sales trends versus the previous year, Anderson said, noting that such data will enable operators to schedule the optimal number of workers for each shift.

“It is important to budget the right amounts of hours and not waste labor dollars,” he said. “Hours are added for holidays, the January dieting season, and planned promotions. In most stores, hours should be reduced in the late summer and fall when customer discretionary and impulse spending falls.”

However, because of varying store traffic, seafood counter staffing is not always necessary, Anderson said. “How many sales occur early in the week between 8 and 9 a.m. or 8 and 9 p.m.?” he asked. “Tracking hourly sales is the key to making the right decisions.”

Ensuring self-service cases contain the necessary varieties and volume of selections is important for generating sales when service counters are unattended, Anderson said. Attractive items can include case-ready seafood, such as raw fish filets; raw and cooked shrimp in extended shelf-life packaging; and value-added ready-to-eat and ready-to-cook seafood, he said.

It is important that retailers use packaging that can lengthen product shelf life, deliver better quality to customers, and significantly reduce shrink in self-service seafood cases, Anderson said, adding that operators should routinely rotate and promote the selections and use enticing signage. 

While replacing low-volume service seafood departments with self-service cases can lower expenses and even increase sales in some instances, “the negative impact on the high-quality image and the superior service perception of the overall store can be significant by not having service seafood,” he said.

Retailers can enhance efficiencies by situating the full-service seafood counter next to the service meat counter and/or deli and training workers to manage all three areas, Anderson said. Such measures will enable operators to always have a knowledgeable staffer present when a seafood specialist is absent, he said.

“Cross-training employees on the basics for each department is essential to prevent unserved customers from walking away,” Anderson said.

Reducing turnover also is an impactful cost-savings measure, as the newer employees who replace experienced counterparts are typically less efficient, deliver lower hourly sales, and generate greater shrink, he said. “Seafood departments need a qualified fishmonger or two who can cut fish, provide shoppers with product handling and preparation recommendations, and train other employees,” Anderson said.

Utilizing cost-saving measures throughout the seafood department can help compensate for the lack of available or willing labor in many markets, which is driving the expense of hiring and retaining employees “to new heights,” he said.

Shrink reduction can be a major cost-cutter as well, Anderson said, noting that retailers can slice waste by focusing on ways to maximize sales of best-selling selections while reducing the amounts of slow movers in cases.

“Watching every penny of expenses” should be the goal of each employee, Anderson said. “Supporting workers with the proper training and tools to execute their tasks is key. Keeping close tabs on orders, sales, quality, shrink, and each expense line is essential for controlling costs.”