In the four years since the Efficient Consumer Response initiative was launched, the supermarket industry has undoubtedly become more efficient.
Excess inventory has been taken out of the pipeline, many underused warehouses have been shut down and electronic data interchange is replacing much of the paper in the system.
The question some have asked, however, is whether ECR has truly benefited the consumer. Many say it's a key piece of the ECR puzzle.
Proponents of ECR say shoppers have profited from lower prices, fewer out-of-stocks, fresher merchandise and better assortments.
In addition, there should be more emphasis on improving the delivery of product to the consumer in the years ahead as the basic principles of ECR are extended into areas like electronic commerce over the Internet, food-solutions selling and targeted marketing efforts.
ECR groups also are preparing reports on methods to improve the way merchandise is promoted and new products are introduced, two of the more sensitive ECR topics.
The results of ECR efforts to date and future objectives will be among the issues discussed at the third annual Joint Industry ECR Conference this week in Atlanta. About 1,700 executives are expected to attend.
Gary Capshaw, senior vice president of product supply, at Fleming Cos., Oklahoma City, and a co-chairman of the ECR Operating Committee, said he doesn't agree with the assessment that ECR has not really focused on the consumer, but he can understand why that perception is there.
"The first and easiest thing to attack in ECR was efficient replenishment," he explained. "That was easy for a lot of reasons, including the fact that a lot of the industry was already doing it."
Other hot topics from the early days of ECR, including EDI and activity-based management, also may have given the impression that the consumer was being overlooked. These cost-control efforts, Capshaw noted, are one of the reasons consumers have been spending less and less of their disposable income on food every year.
"Things have kind of focused on controlling costs for the system rather than addressing consumer needs," he acknowledged. "But I would still go back to the fact that in this country we have made food cheaper to the consumer every year for many years."
Indirectly, ECR also has led to the increased testing of new technology that could result in lower shelf prices, according to James Horton, national director, retail at Kurt Salmon Associates, Atlanta. This includes electronic shelf tags, self-scanning checkouts and even grocery carts with video screens.
KSA helped produce the initial ECR blueprint in 1993 and has prepared annual status reports on the initiative for the past three years.
"The whole focus of ECR has been on the consumer," Horton said. "ECR has probably led a lot of retail grocers to focus on banking, pharmacy and service things because the whole focus is to take care of your consumers and better understand their needs."
According to Capshaw, initiatives more obviously oriented to the consumer, such as efficient assortment and efficient promotion, are being studied. An ECR committee last fall published an extensive report on efficient assortment, which found the primary benefit of the process is "consumer needs are better met by having the products in the right stores at the highest efficiency."
Capshaw also noted that work is under way on the issue of efficient new-item introduction, the fourth of four "efficiency" pillars within the ECR initiative.
"Efficient promotion has been tough from a legal standpoint [regarding possible antitrust concerns]," he noted. "I will say there's work being done on that by consultants and the industry will see results."
Many distributors and suppliers already are reporting significant results from continuous replenishment and efficient assortment efforts.
In addition to helping keep excess inventory out of the system, CRP impacts the consumer by ensuring that merchandise on the shelf is fresh, said Robert Drury, vice president of management information systems at Schnuck Markets, St. Louis.
Even goods like laundry detergent have limited shelf life and shouldn't remain stacked up in the warehouse, regardless of whether it's the distributor's or manufacturer's.
"Old product is never good news," he said, noting that freshness is among supermarket shoppers' highest priorities. "So the consumer definitely benefits from [CRP] and, of course, we benefit from the advantage of having lower inventory value and lower working capital. Ultimately everything [in ECR] hits the consumer, even if it seems indirectly."
In the near future, Drury said he expects the industry to begin utilizing the Internet and intranets to further collaborative efforts between supplier and distributor.
For example, if a supplier could provide sales forecasts for new promotions over the Internet, rather than sending a sales representative with a lengthy sales pitch to a retailer's headquarters, it would be an advantage for time-pressed category managers who have to evaluate the offering.
"We've got to use the Internet and collaborative tools like that in ways that reduce the paper load and get a more efficient and effective flow of information targeted at the consumer," he said. "That's the next wave."
Drury said he believes there will be a point when there's an industry intranet that's more secure than the Internet and allows manufacturers and retailers to communicate. "I think there's a lot of support for it," he added.
Among the ECR initiatives that more directly impact the consumer is the focus on targeted marketing, or customer segmentation programs, which could help stores deliver to consumers more of the products they really want. One way supermarkets are doing this is by stepping up their efforts in building frequent-shopper programs with large databases.
Brodbeck Enterprises, Platteville, Wis., which operates eight stores under the Dick's Supermarket banner, has about 80% of its shoppers using a frequent-shopper card every week. This represents just under 90% of total sales, which is attributable to "a very deliberate effort over the last 2.5 years," said Ken Robb, senior vice president of marketing.
He said the retailer hopes to get a better understanding of its customer as it analyzes data from the household level for about 48,000 active customers.
"Traditionally, supermarkets -- as well as many other retailers -- have always tried to be all things to all people," he noted. "But as other retail formats have successfully chipped away at our business, one strategy we need to look at more carefully is segmenting our customer base into identifiable targets and then doing the research necessary to find out what it's going to take to capture a majority of their business."
The next step at Brodbeck will come in a few months with the launch of a "baby club" targeting families with children under 2 years old. The targeted marketing effort will include an "attractive package of incentives directed toward that segment," Robb said, noting that the company has already had several focus-group discussions with this customer group and plans a few more.
"Of course, it's not efficient at all if you don't do the research properly and don't have the individual household purchase data," Robb said. "Without the technology to support the effort, you would just be approaching the opportunity as the industry has traditionally done, which is to run an ad and hope somebody reads it."
Capshaw of Fleming agreed that the strategic value of point-of-sale data is just beginning to be tapped. He noted that "one of the big learnings from ECR is that POS system data is grossly underutilized" and that POS systems have basically just been used as front-end productivity enhancers.
"The industry is starting to know what's being sold, and when," he added. "As we can get systems in place and get our arms around that data, we are going to be able to react to what the consumer wants much quicker."
Another area where consumers should see some benefit from ECR implementation is through category management, a process that has taken on increasing importance as many individual distributor and supplier success stories trickle out.
"Stores that are following category management practices are probably are giving consumers a better selection of the products they actually want," said KSA's Horton.
"Instead of having 25 types of some [product], maybe through category management there are now only 12 types -- but they are the 12 that people really want," he added. "The other 13 are done away with."
Last year, Giant Food, Landover, Md., noted that category management efforts in 27 major categories led to higher sales, lower costs and market-share gains, evidence that customers are finding more of the merchandise they really want.
At Schnuck, category management has been a standard procedure for several years and the chain recently took steps to put even more emphasis on this critical area, in part by adding to its merchandising staff.
"Category management is a guiding force here at Schnuck," Drury said. "It's how we evaluate how well we are doing internally, as well as how we are doing with the consumer."