Communication, communication, communication" may well have unseated the longstanding "location, location, location" maxim for retailers in 1996.
At the heart of nearly every technology investment and strategy this year was the desire to improve, excite, streamline and cut costs of communicating information from person to person and system to system.
Retailers beefed up networking capability to speed productivity at the point of sale and improve data access at headquarters, while at the same time pursuing loftier goals with multimedia computer technology and the Internet.
High-performance computers, for example, brought new action, interaction, color and graphics to the task of staff training. Internet projects that link retailers to one another through e-mail became prevalent in 1996 and look to be followed soon by live electronic "chat sessions" hosted on company World Wide Web sites.
Communicating useful information -- not merely static data -- about personal-behavior patterns became increasingly sophisticated in the areas of loss prevention and frequent-shopper programs.
Using advanced systems that collect and analyze data about their cashiers' activities, retailers became more adept at reducing their exposure to employee theft. In similar ways, retailers studied the behavior patterns of frequent-shopper club members and used the resulting data to develop effective promotional incentives to reward and retain their most profitable shoppers.
Here are some of the retail systems and marketing highlights of 1996:
Multimedia computer-based training systems enjoyed a stellar year in 1996, with a wave of retailers, both big and small, testing and then quickly rolling out the technology.
The rapid return on the investment from the systems, which consistently cut training time and related labor costs by half, is the key driver to the wide acceptance of the technology, retailers said. Those tangible results, in combination with dropping costs of personal computers, made the systems an easier sell to top management than perhaps other developing technologies.
Once convinced of these systems' ability to effectively communicate information about front-end procedures, retailers quickly went to work to expand applications to include other store areas, such as deli and bakery operations, customer service, safety procedures and even corporate sexual harassment policies.
The program under way at H.E. Butt Grocery Co., San Antonio, stands out among some of the others perhaps because of the level of creativity involved. The chain is developing its own software and intends to exploit the interactive and graphic capability of personal computers.
Early this fall, H-E-B was working on a program that drove home the importance of safe food handling with computer-animated growth of bacteria displayed on the computer screen in full color.
Meanwhile at Finast, Maple Heights, Ohio, the areas of training earmarked for computers run the gamut from telephone etiquette to cash-office management and Occupational Safety and Hazard Administration guidelines.
Finast rolled out the systems to 42 stores early in the year and saw average per-person training time plummet from 24 hours to 12 hours. Payback on investments in the systems were projected at 14 months, a company executive told SN during the MarkeTechnics conference in February.
Smaller chains such as 17-store Scott's Foods Stores, Fort Wayne, Ind., and 23-store Niemann Foods, Quincy, Ill., said their programs resulted in fewer cashier errors and faster scan rates, due in large part to the heightened level of confidence their computer-trained staff developed.
Looking past the allure of on-line home shopping, retailers began to refine and redirect their Internet strategies in 1996 by focusing more on opportunities to improve internal communications.
The attractive interface of the World Wide Web lends itself well to an array of business applications from the widely embraced e-mail to more ambitious endeavors such as "chat forums" that enable employees to exchange information in real time less expensively than by telephone.
Piggly Wiggly Corp., Memphis, Tenn.; Independent Grocers Alliance, Chicago; and Smart & Final, Vernon, Calif., are among those who led the way this year in exploiting the Internet for business purposes.
Early in the game, IGA outlined its plans to unify its retailers scattered throughout the world by providing a web site as a common gathering place to discuss issues relating to promotions, merchandising, supply chain concerns and other issues. The password-protected site was being accessed by 300 retailers this fall and by year's end, IGA was pushing to triple that figure.
IGA allows selected manufacturers access to its site as does Smart & Final, which by summer had 250 manufacturers doing so.
At Piggly Wiggly, the web page designed by its wholesaler, Fleming Cos., Oklahoma City, links retailers with one another and with corporate headquarters. The company said it hopes to host electronic "chat rooms" eventually that will enable store owners to communicate inexpensively with other Piggly Wiggly retailers.
As for the Internet's potential to supplement or replace the infrastructure for electronic data interchange, the jury is still out. While some retailers and wholesalers are experimenting by transmitting the least time-sensitive EDI transactions over the Internet, many believe reliability remains too questionable to go further with more critical transactions.
Dealing With Cards
Mindful of the fact that card usage -- credit, debit, electronic benefits and now smart -- is going nowhere but up as a form of payment in their stores, retailers moved swiftly this year to install and upgrade technology for cheaper, faster processing.
At the very least, that meant enhancing point-of-sale systems by adding or integrating card readers that otherwise worked in a stand-beside mode. Much of these investments were driven by growth in electronic benefits transfer programs nationwide. Other retailers stepped up capacity of their communications networks so card authorizations could be approved more quickly.
However, the most ambitious retailers turned to in-house financial switches to process credit, debit and EBT transactions with banks and other networks directly, rather than pay fees for a third-party processor to do so on their behalf.
Retailers like Lowe's Food Stores, Winston-Salem, N.C., for example, installed a switch linked to its 50 stores this summer to cut processing time from 30 seconds on dialup to six seconds via the switch, while at the same time saving on third-party fees.
Perhaps the most significant new development in this area took root on the West Coast during the summer when Associated Grocers, Seattle, and United Grocers, Portland, Ore., teamed up to form a new company providing in-house switching capability to independent retailers.
The joint venture, called Supermarket Transaction Services, will initially process transactions for its own retailers. However, industry observers say the company may emerge as a low-cost alternative to third-party processors for retailers in other parts of the country.
Smart cards, which contain computer chips for off-line processing, hold promise as a payment option, but projects in this area moved slowly in 1996.
The most notable retailer-driven effort was launched by Sutton Place Gourmet, Rockville, Md., which converted its paper gift certificates to smart cards. The most notable EBT-driven smart card program is under way in Ohio, where retailers are preparing for a statewide rollout of a smart-card-based EBT program.
An Ounce of Prevention
In a clear sign that they are growing less tolerant of employee theft and shoplifting, retailers stepped up investments in loss prevention technology in 1996.
The serious need to stem losses is highlighted by alarming findings from a new SN survey to be released in February. Nearly 20% of 109 companies polled said their shrink exceeded 3% of sales this year and more than 9% of chain respondents said shrink was as high as 5% or 6%.
Electronic article-surveillance systems, which call for security tags to be applied to high-theft merchandise, was a popular option for several retailers this year, as was expanded use of cashier-monitoring software.
Several companies testing EAS systems expanded their programs to include more stores. Those in the best position to justify the investment meticulously tracked inventory to measure the impact before and after implementation. Among them are Raley's Supermarkets, West Sacramento, Calif., and Mars Super Markets, Baltimore, which tested EAS in two stores, documented a 65% reduction in shrink and quickly brought the systems into its remaining 15 stores in July.
Cashier-monitoring software, designed to identify suspicious cashier behavior by monitoring transactions that fall outside preset norms, continued to gain in popularity. Retailers such as Safeway, Pleasanton, Calif., and Meijer, Grand Rapids, Mich., took the technology a step further by integrating it with closed-circuit video surveillance systems.
Truly innovative approaches to loss prevention were rare in 1996, however, Winn-Dixie Stores, Jacksonville, Fla., did try a test run of a system designed to thwart "sweethearting," a dishonest cashier practice in which a low-priced item, like a pack of gum, is scanned in place of a higher priced item, like packaged meat.
The test was launched in March and involved digital cameras that captured images of product moving down the conveyor belt and compared those images to digital equivalents corresponding to Universal Product Codes stored in a database. When the image of the scanned item, such as gum, failed to match the item moving down the belt, such as the meat, an alarm was triggered.
Retailers continued to vigorously champion the cause for frequent-shopper programs and their potential to attract and capture profitable shoppers. However, the strategic approaches and quantifiable results revealed in 1996 were more or less of a "me-too" nature, a mirror of 1995.
While some companies, usually the more nimble independents, attempted to break new ground with clever direct-marketing campaigns, many chains had little news to report about their programs, only saying that analysis of their frequent-shopper database confirmed the "80-20 Rule," that 20% of the shopper base accounts for 80% of all sales.
However, two important trends that indicate frequent-shopper programs are having an impact on the business did build momentum in 1996.
Retailers grew more comfortable with the idea their shopper base may become somewhat smaller, with the loss of unprofitable "cherry pickers." And secondly, retailers became more willing to abandon traditional advertising for the masses in favor of more selective mailings and newsletters.
Single-store Lees Supermarket, Westport, Conn., and two-store Dorothy Lane Market, Dayton, Ohio, gleefully waved goodbye to costly circulars and cherry pickers in 1996. Both retailers opted instead for direct mailings to their better customers only.
Meanwhile, Gerland's Food Fair, a 20-store Houston chain, closely examined its shopper spending patterns with trend analysis software. Using data on how recent and how frequent shoppers in specific spending brackets visited the store, Gerland's developed promotional campaigns that effectively increased the number of households shopping the store weekly store visits.
Kevin Doris, chief operating officer of Gerland's, called the use of this data to guide shopper behavior "customer category management," a term that gained in popularity within frequent-shopper program circles.