Supermarkets Turn to IT for Survival

1 2 Page 2
Page 2 of 2

Grocery chains should also focus on providing the best assortment and product placement for their customers. One way to do that is to use software that sets prices based on customer demand, a sharp contrast to Wal-Mart’s lowest retail across-the-board philosophy. D’Agostino Supermarkets, a family-owned 23-store chain in New York City, says it has seen revenue grow 9.7 percent and gross profit dollars rise 16.1 percent since it started using software from DemandTec of San Carlos, Calif. Such software helps D’Agostino and others understand which grocery items are key to their customers so that promotions are successful.

At Giant Eagle stores, based in Pittsburgh, the IS department has been working with colleagues in the retail operations group on a knowledge management project they hope will boost the chain’s competitive edge by allowing individual stores to share money-saving practices. "We’re facing competition all along the line from the new mass market, including Wal-Mart, Costco and Target," says Bob Garrity, senior vice president of IS at Giant Eagle. "We’re always looking for opportunities that will help us stay competitive by improving customer service."

Giant Eagle began work on the knowledge management project four years ago and kicked off its pilot program two years later. Now, 120 of its 216 stores are equipped with new PCs so that employees in the meat, dairy and produce departments can log on to the company portal, known as KnowAsis, and share or receive tips on product assortment and how best to arrange products. The company invested $1.5 million in new PCs and says the entire initiative has cost more than $2 million. Giant Eagle has already seen an ROI from the project, says Bob Guy, director of retail operations, information and knowledge. He declined to provide a number but says the company no longer has to publish some 200 procedure manuals (such as how to cut meat or arrange products on display) because they can now be automatically updated online. So when the chain decides to change the "planogram" for its meat department displays, it can now send out digital photographs instead of sending someone out to each store.

Supermarkets of the Future

Ask people what bothers them most about their local supermarket, and they’re likely to reply: long lines, empty shelves and missing price tags. To address those complaints, among others, supermarket retailers are asking shoppers to do a lot of things themselves. Bar codes and scanners are giving way to self-checkout lanes, where shoppers scan and pack their own paper or plastic shopping bags. Internet kiosks offer store information and allow shoppers to preorder cold cuts from the deli counter or locate hard-to-find items. In some stores, you can pay without taking out your wallet by using a biometric fingerprint system. While some of these technologies are still unproven, supermarket chains should be experimenting with them to improve the shopping experience and to save money by cutting down on labor costs.

Kroger started testing a biometric payment system in April in three stores near Austin, Texas, and says early indications show that customer acceptance is good. Customers who have enrolled in the program pay for groceries by punching in their password, swiping their loyalty card and placing their finger in the device from Roundrock, Texas-based Biometric Access, which charges the customer’s credit card. "This kind of new technology improves customer service and reduces cost by speeding up service," says Gary Huddleston, manager of consumer affairs for Kroger in Texas and Louisiana.

Stop & Shop has been testing wireless Internet tablets that allow customers to order deli items from an aisle, log on to the Internet while they are shopping and find out what’s on sale in the store. The chain reports that eight out of nine customers using the system liked it and would use it regularly.

Internet kiosks have had mixed results, but grocers see potential. Syracuse, N.Y.-based Penn Traffic, which has 216 supermarkets in the Northeast, has installed kiosks in six of its stores in a pilot program. The kiosks, known as Endless Aisle, allow customers to order products they can’t find, such as imported or gourmet foods. Penn Traffic says it is still evaluating the pilot, but Stop & Shop, which also piloted Endless Aisle in six of its stores, says it has found that customers are using the service more often from their home computers than from the store kiosks.

Looking ahead, grocery retailers are eyeing radio frequency identification, or RFID, a "smart tag" technology that could replace 30-year-old bar codes. So far, RFID is too expensive to tag all individual merchandise, but trial runs at companies such as the Marks and Spencer Group, one of Britain’s largest retailers, show it can pay for itself in increased efficiencies and less spoiled food when used on containers that carry food from suppliers to stores. RFID devices contain computer chips that can store a much larger amount of data than bar codes. If it catches on and the price comes down, shoppers could conceivably check out without removing items from the cart and grocers could more easily track their merchandise as it flows through the supply chain.

Says Pathmark’s Schoening: "It’s not for tomorrow?or maybe not even for five years. But the possibility is there to revolutionize the way we operate supermarkets."

Copyright © 2002 IDG Communications, Inc.

1 2 Page 2
Page 2 of 2
Download CIO's Roadmap Report: Data and analytics at scale