It was a productive year. In January, the results of the first Efficient Consumer Response pilot programs were just being released. By December, the industry was well along the road to implementing a wide range of comprehensive ECR programs, from continuous replenishment to direct-store-delivery systems.
Retailers, wholesalers and manufacturers also began tackling, often with mixed results, the highly contentious ECR issues of efficient promotions and forward buying and diverting.
While the process of defining and implementing ECR dominated much of the news in
1994, other technology-driven areas also underwent fundamental change. Among them:
Computerization and Automation: Retailers and wholesalers, en masse it seemed, took major steps to substantially upgrade their computer systems.
Coupon Clearing: For the first time, a pilot program for electronic clearing of coupons was implemented at several chains.
Frequent Shopper Programs: The industry made major strides using the power of scan-generated, customer-specific shopping data to boost bottom-line profit with innovative frequent shopper programs.
Here are highlights of the top productivity events of 1994:
ECR: From Early Pilots To Published Reports
More than anything else, 1994 was the year ECR moved from the drawing board to the real world stage of comprehensive in-store testing. In January, studies from the earliest ECR pilot programs were just coming to light. Reports at the Food Marketing Institute's Midwinter Executive Conference in Boca Raton, Fla., for instance, highlighted several ECR Best Practices recommendations involving night deliveries and cross-docking procedures.
Throughout the year, results from ECR pilot projects, and debate about the potential merits of individual aspects of ECR, multiplied rapidly and formed the centerpiece for much of the industry's convention and seminar circuit. For example:
At the FMI MarkeTechnics convention in February, Cub Foods, Stillwater, Minn., revealed that a program eliminating excess duplication by slashing stockkeeping units resulted in net profit and sales jumps of almost 30% in one category.
At a Grocery Manufacturers of America seminar in May, results from a collaborative effort between Spartan Stores, Grand Rapids, Mich., and Procter & Gamble, Cincinnati, to streamline distribution were presented: product turn rates jumped from 12 to 18 and the wholesaler reaped $700,000 in savings.
At the National-American Wholesale Grocers' Association Productivity Conference in October, Associated Wholesale Grocers, Kansas City, Kan., shared the benefits it found from switching to a category management structure.
By the fall, with the two-year time-frame to establish ECR Best Practices nearing a close, the Joint Industry Executive Committee began releasing its final Best Practices reports, with all the ECR publications expected out by early 1995.
In a sign that a new era in the ECR movement was arriving as the year ended, the ECR Joint Industry Executive Committee began formulating plans to disband the massive array of Best Practices subcommittees and establish a series of user groups to help companies implement ECR. The new ECR organizational restructuring will be implemented in early 1995.
ECR Said Than Done: CRP and Efficient Promotions
When asked to cite ECR priorities this spring, a whopping 78% of retailers and wholesalers put continuous replenishment programs at the top of the list.
But while the CRP pilot tests led to reduced inventory levels and heightened distribution efficiencies, the initiative ran into trouble when it came to the thorny issue of giving up forward buying and diverting income.
A CRP test program at one Fleming Cos. division, for instance, succeeded in reducing average inventory levels by one-third. But the wholesaler questioned whether the benefits of the program outweighed the costs.
The feeling of the industry may have been best summed up by one speaker at the FMI MarkeTechnics Convention: "Don't take away the one dollar we can make by forward buying if it's only going to save us 75 cents," said Joe Bullara, senior vice president of marketing at Kash n' Karry Food Stores, Tampa, Fla.
When it came to efficient promotions, the situation was even more difficult. Few executives wanted to talk about the issue at all, and those who did often were met by a storm of criticism.
To tackle the problem, several executives during the year suggested that suppliers create a new transitional set of funds to replace retailer revenues lost by discontinuing forward buying and other practices. Suppliers greeted such calls warily and without action.
Even the official ECR efforts to prepare a report on efficient promotions stalled midway through the year when a planned ECR Best Practices survey was postponed and eventually was canceled.
Computerization: Managing Change
Front-end technology captured the spotlight as retailers upgraded their point-of-sale systems, in many cases replacing traditional cash registers with "open" personal computers.
Companies also invested heavily in new equipment, including omnidirectional scanners, speedy thermal printers and color computer monitors serving as customer interfaces. At the same time, the versatile platform opened the door to enhanced frequent shopper programs.
Among those launching major rollouts of PC-based front-end systems in 1994 were H-E-B Grocery Co., San Antonio; Community Cash Stores, Spartanburg, S.C., and Delchamps, Mobile, Ala. But an executive at Spartan Stores, Grand Rapids, Mich., may have said it best: "Open systems are going to give us a super ability to manage change."
Another dramatic change this year was the migration to client-server technology. According to one report, the percentage of applications running on a client-server platform rose fourfold in all business segments in the United States, including supermarkets.
In August, Kroger Co., Cincinnati, outlined plans for expanded use of client-server technology at headquarters and division level offices. In September, Associated Grocers, Seattle, announced at the FMI Information Systems Conference that about 40% of its applications were running on a client-server platform.
Other technology advancements were evident at Price Chopper Supermarkets, Schenectady, N.Y., and Smart!Market, operated by Overwaitea Food Group, Vancouver, British Columbia. Both chains tested customer self-scanning systems.
Couponing: Clearing Some Major Hurdles
The issue of couponing did not go unnoticed in 1994. While manufacturers struggled to devise the right formula for spending their promotional dollars, the industry moved to enact standardized bar codes for processing paper coupons electronically.
Two major coupon-scanning initiatives emerged during the year: Electronic coupon clearing pilots took flight and two new bar codes were approved by the Uniform Code Council.
The EAN-99 code, allowing retailers to distinguish between their own and manufacturer coupons, was approved. And the UCC/EAN-128 coupon code, designed to provide a standardized platform for manufacturers to encode additional scan data for electronic coupon clearing, also received approval after encountering last-minute technical concerns. While the technical side of coupon clearing was being worked out, the first comprehensive test of an electronic coupon clearing system in stores was launched in May at four Dick's Supermarkets operated by Brodbeck Enterprises, Platteville, Wis.
By the fall, a number of other retailers, including Kroger Co.; Giant Food, Landover, Md.; Safeway, Oakland, Calif.; Lucky Stores, Dublin, Calif.; Pathmark Stores, Woodbridge, N.J., and Dominick's Finer Foods, Northlake, Ill., were also testing the system developed by Catalina Electronic Clearing Services, St. Petersburg, Fla.
While industry observers agreed that the final system for ensuring coupon processing efficiency will require further development, the innovative system did represent the first on-line program promising to eliminate the process of manually counting billions of paper coupons, most often in Mexico.
Frequent Shopper Clubs: The Next Step
R etailers rang in New Year 1994 with a bid to "put golden handcuffs on their very best customers" by implementing card-based frequent shopper programs to build loyalty -- and profits.
The appeal came in the form of a study commissioned by the Coca-Cola Retailing Research Council that found more than 80% of a supermarket's customers shop their store less than once weekly and, in a year's time, as many as half stop shopping the store altogether.
Retailers, in part, responded by implementing new programs and injecting new life into old ones. But harnessing the full power of scan data to determine who was buying what, where and why -- and developing programs to boost profits -- remained an elusive goal for many retailers.
Those chains able to decipher their massive data bases to extract meaningful shopper patterns led the way to a new age of customer loyalty programs. Ukrop's Super Markets, Richmond, Va., and G&R Felpausch, Hastings, Mich., both early adopters of frequent shopper programs, invested in systems upgrades this year to get closer to the data, and in turn, their customers.
Other chains like Community Cash and Fred W. Albrecht Grocery Co., Akron, Ohio, upgraded their front-end systems, a move giving them entry to electronic frequent shopper programs.
In Belgium, an electronic frequent shopper program for the Delhaize le Lion chain helped drive a 3% same-store sales increase; a program at Gregerson's Food Stores, Gadsden, Ala., where 70% of total volume moves through its "Club Greg" program, will allow the company to slash advertising expenditures 30%.