At the Food Marketing Institute's annual convention earlier this month, Michael Sansolo, FMI's senior vice president, presented the results of FMI's annual survey of the industry, and there were some decidedly mixed signals.
On the one hand, same-store sales in inflation-adjusted terms fell 1.1% in 2001, worse than the decline of 0.5% in 2000. But on the other hand, average net profit after tax increased by 1.25% last year, growing for the third year in a row.
The reason that profits have been able to grow despite the decline in same-store sales is that supermarkets have become more productive and efficient. As Sansolo put it, "Clearly, we are finding ways to get money to the bottom line."
Food retailers are not alone in boosting productivity. According to the Department of Labor, productivity growth in the United States surged in the first quarter by 8.6%, its fastest rate in nearly two decades. And this wasn't an anomaly; we have seen a series of positive productivity figures throughout the recessionary period of the past year.
Still, these strong productivity figures raise the question: How did we become more productive? It surely wasn't because we took up exercise programs and cut out the junk food. The reason, of course, is that the Internet happened. Yes, the big, bad Internet, once the darling of Wall Street but now so out of fashion that even companies based on Web technology are loath to have a "dot-com" in their name.
The truth is that, though its capacity as a sales vehicle may not have lived up to expectations, the Internet did change the world and make businesses a lot more productive. For example, in this week's Technology & Logistics section feature story on labor management systems, which begins on Page 21, the Web plays a prominent role. It is making human resource data and benefits information available to employees in their own homes. It is enabling employees to sign up for health benefits the day they start on the job. It is even being used to streamline the job application process.
In both news stories on Page 21, you will see the Web at work. Sainsbury's is using it to collaborate on private-label development with its suppliers, and Associated Grocers is tapping a data mining tool hosted at its technology vendor via the Web. And, of course, the list of Web-based systems goes on and on.
But that doesn't mean that food retailers are making full use of all the Internet applications out there. One of these, described at length in last week's Technology & Logistics section, is UCCnet, the subsidiary of UCC that has established a Web-based product registry that manufacturers and retailers can utilize to synchronize their databases. Such synchronization can reduce invoice discrepancies and serve as a foundation for CPFR.
Unfortunately, not enough retailers have signed onto UCCnet to make it as powerful as it could be. Indeed, a consortium of major retailers and manufacturers recently issued an open letter asking for more industry participation.
If retailers want to make sure that their profits continue to grow in the face of a still-uncertain economy, then they've got to keep leveraging valuable Internet systems and other technologies to stay productive and efficient.