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Coverage
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Shopping 2010
American Executive, August 2005 issue
Technology along the supply chain has revolutionized the way goods flow from manufacturers to distribution centers and ultimately to retail stores in a cost-effective and efficient manner.
Although shoppers certainly appreciate savings that come their way through the use of technology, it does nothing to change the way customers select and purchase products. But as technology continues to permeate modern society, savvy retailers are experimenting with new tools and processes that help customers narrow their choices, make buying decisions, and speed checkout.
They're using some of those same tools to keep better track of inventory, price products according to their position in the market, and safeguard proprietary information about their businesses.
"The key to any successful technology is that it has to benefit the shopper," said Michael Sansolo, senior vice president at the Food Marketing Institute. "It has to make the experience better, easier, less of a hassle. The consumer doesn't care how the product ends up in the store. They only care that the products they're looking for are there and displayed at prices they think are a good value."
The grocery store segment that FMI represents is highly competitive, with stores operating on paper-thin margins, so a successful technology investment quickly can boost bottom lines. Because of this, grocery store chains often are early adopters of technology that will filter into other retail segments.
Grab and go
Self-scanning checkouts have been around for 15 years, but their acceptance has mushroomed in the past five and now can be found in 40% of all grocery stores, a figure that's expected to surpass 50% in the next decade. Hand-held scanners that allow shoppers to scan items as they're put in the shopping cart are being tested in Europe and, to a lesser extent, in the US by grocery retailers such as Bloom. This new concept from Food Lion is geared around lifestyle-type shopping that features grab-and-go items where the produce section can usually be found and technology that allows shoppers to get in and out quickly, Sansolo explained.
Once shopping is complete, the scanner can be tallied at a self-service or staffed lane, the groceries quickly paid for, and the shopper on his way. Random checks keep shoppers honest, but Sansolo said that has not been a problem.
Radio frequency identification tags have been hailed as the next great inventory tracking system, but the benefits have not yet filtered down to the retail customer level. "We have a long way to go on RFID," Sansolo said. "The price of the technology will have to come down dramatically, and there are legitimate pricing concerns. You have to think about the human elements."
Humans are conditioned to recognize a good value, a tendency that Khimetrics' Customer Demand Modeling software uses to help retailers price products according to demand, season, and their retail price image. Clients include grocery store chain Albertson's, Lowe's, Petsmart, and 7-Eleven.
"Customers perceive value to prices they are sensitive to while allowing retailers good margins and incremental profits on other items that aren't as price sensitive," said Tim Manning, vice president of marketing at the Scottsdale, Ariz.-based company founded in 1998.
The process begins with a rigorous analysis of point-of-sale data, including number of units sold, price, seasonality, promotions, and geographic information. For Albertson's, that equates to 345 billion pieces of information from 150,000 bar codes across 2,300 stores. By looking at the data trends that emerge, individual stores can raise and lower prices based on their overall expected profit margin, market share, and price image, concentrating on those products that are important to customers.
Manning said customers can expect a 200% ROI within the first calendar year. For a grocer, the Khimetrics product can increase net profit by 10% in an industry where every penny counts, he said.
Online guidance
Helping shoppers make informed decisions is another area where technology is coming to the fore. ActivePoint offers a natural language search and guidance engine that helps online shoppers find products with complex descriptions.
Company research has shown customer conversion rates soar from 1% to 2% to 10% and higher after the software is deployed, said Moshe Ofer, CEO of the New York-based company.
Fort Lauderdale, Fla.-based CableOrganizer.com uses the ActivePoint product to help customers find computer cabinets, racks, and accessories from the wide selection offered on the Web site. Sales went up appreciably after customers began using the product, said Paul Holstein, senior vice president of the online retailer.
"Shoppers are much better informed, and the sales process is much smoother. If there is no other benefit, that is great," Holstein said. " I'm a Web freak, and I've tried a lot of natural language tools. This is the best one I've seen."
Retailers are increasingly using technology to safeguard their intellectual property and control access to sensitive areas of the store, such as cash registers and locked vaults for high-priced items.
It also can be used to store fingerprint information so that shoppers who have registered their payment information with a particular retailer can make a purchase by touching a fingerprint device, said Gary Brandt, vice president of the biometric division at Silex Technology America. He stressed that actual fingerprints are not stored, but rather certain characteristics of the print.
Silex is using biometrics to help retailers safeguard the information on laptops and computer systems, reduce losses by tracking who is writing off debt and spoiled goods, and control printing of sensitive documents to authorized users.
On the point-of-sale side, the use of fingerprints to make purchases is in the pilot phase, but Brandt expects wide adoption as retailers push customer loyalty and ease of use. "Everyone I know is looking at this, "he said. " Most chains will be willing to pay for it themselves, looking at it as a loss leader."
Grayson Walker, grwalker@mindspring.com, is a freelance writer based in Atlanta.
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