PARIS -- Efficient Consumer Response has traveled across the Atlantic to find a strong response in Europe.
European supermarket operators are now embracing the U.S.-born concept with their own special spin, according to Etienne Laurent, president and chief executive officer of CIES, The Food Business Forum, here. But the dynamics of achieving efficiencies and the potential rewards are quite different in Europe, Laurent stressed.
"ECR Europe has been born, and we are very excited about it," said Laurent in an interview. "If critical mass on ECR is reached in Europe, it will benefit the whole industry. The problem is to convince some companies of the virtue of sharing information and practices with other retailers and the entire supplier community."
Laurent was interviewed in advance of CIES' Annual Executive Congress, which will be held June 22 to 24 in Vancouver, British Columbia. The program will attract retailers and suppliers from around the world, many of whom are grappling with issues ranging from generating higher efficiencies to improving consumer marketing.
Laurent stressed that the estimated industrywide savings in Europe from ECR won't reach the U.S. level, which has been forecast at $30 billion a year.
"Europe is already more advanced than the United States," he said. "Here we've had practices like cross-docking for a long time. So in certain aspects of ECR, there's lower potential benefit." Still, the possible savings are enormous, he stressed. Laurent cited estimates that European savings could be about 2.3% to 3.4% of overall retail sales.
CIES is playing a major role, along with other associations and operators, in making ECR a reality in Europe. The program was launched last July by operators and groups including CIES; AIM, the Brussels-based European Association of Industries of Branded Products, and Eurocommerce, the lobbying arm of the retail and wholesale trade, also based in Brussels. As in the United States, an ECR bureaucracy has been formed with an executive board, committees for various projects, and the inclusion of suppliers and consultants. The early focus is on efficient replenishment and electronic data interchange, and the ECR participants are also working to improve logistics involving pallets.
The EDI challenge is to push all the countries to rally around the Eancom standard. "There's an agreed standard, but it needs heavier adoption," Laurent said. "We need to accelerate these efforts because countries are at different stages of development."
Efficient replenishment efforts will have a wide scope. "It's not just computer-assisted replenishment," Laurent said. "It will also include Quick Response and Just-in-Time practices, closely linked to EDI. It involves the whole supply chain, as well as third-party contractors and logistics providers."
The challenge on the pallet front is multifold, but Europe already has a head start, Laurent said. "The United States has many complications with pallets, but in Europe there is more standardization and better quality," he said. "But we still need to focus on more efficiency in pallet loads. We need to move from the dual pallet standard to a single standard, and we need to work on modularity, which involves the best packaging to accommodate pallets."
The first results of Europe's ECR efforts are expected in the form of committee reports this fall. That will include the results of an activity-based costing study. No timetable has been set for ECR projects to be completed.
"CIES will play an active role in disseminating information, which is a part of our mission," Laurent said.
Laurent noted a few reasons why Europe has been more advanced than the United States on the efficiency front. "The European trade is more concentrated," he said. "Distances are shorter in Europe, and there is a large density of populations."
In Europe, efficiency of operators varies by country, Laurent stressed.
The upcoming CIES show will draw some 1,000 to 1,100 attendees from around the world, with a strong showing of retailers and suppliers. Attendees will represent more than 30 nationalities, with the heaviest attendance from Europe, North America and Japan. These executives are typically CEOs or other members of senior management. CIES member retailers operate more than 180,000 stores in more than 45 countries.
Speakers at this year's event are to include Daniel Bernard, CEO of Carrefour, France; Hans Christian Bremme, managing director of Tengelmann, Germany; Richard J. Currie, president and CEO of Loblaw Cos., Canada; Thomas Mienl, deputy chairman of Julius Meinl AG, Austria; Brian Mulroney, former prime minister of Canada, and Bill Gates, chairman and CEO of Microsoft, United States. The theme of this year's convention is "Consumer Renaissance: The Knowledge Buyers," which refers to the consumer's increasing sophistication and infinite whims and demands, Laurent said. The knowledge buyer represents an advanced stage of consumerism, he added. Stores need to realize that providing value-added items and bundles of services is more important than just products, Laurent said.
"The consumer is more and more informed and powerful and driving the supply chain. Consumers have different behavior on different days. They can eat fast food during lunch and elaborate meals for dinner. The market is defined by whim. Retailers must learn more about consumers by interpreting the wealth of data they have now compiled."
Consumers are entering into new relationships with their supermarkets that break the traditional grocery store-shopper roles, Laurent stressed. Some examples:
The search for more information about products has led some consumers to seek out corporate profiles of suppliers to determine environmental stances, labor rules and other practices.
Customers are responding positively to retailer attempts to teach cooking in stores (primarily for recreational purposes) and to cross-merchandise products for easy meal preparation.
Retailer private-label programs are helping stores win the loyalty of consumers, who view the sharp-priced operators as consumer advocates. Some supermarkets have even become involved in lobbying governments for causes that benefit consumers, such as deregulation.
Retailers in many European countries have moved into travel planning, financial services and other areas that go beyond the conventional role of food and general merchandise marketers.
"The consumer now seeks intellectual enrichment, satisfaction, value and other rewards," Laurent said. "What we need to do is understand the behavior of customers before they come into the store."
