In its Nov. 23 issue, BusinessWeek magazine devoted a special report to identifying what it called The Web Smart 50: 50 companies that have excelled in leveraging Web-based technologies, and information technology in general, to boost their businesses.
Besides the companies you'd expect to see on the list, like IBM, GE, Lockheed Martin and Charles Schwab, a surprising number of these high-tech standouts hail from none other than the food-distribution and CPG industries.
Among companies cited for cutting-edge performance: Wegmans, Wal-Mart, Germany's Metro Group and New York online retailer FreshDirect. Stop & Shop placed in the best-at-customization category. On the consumer packaged goods side, Procter & Gamble and Bristol-Myers Squibb made it onto the list.
After many years of being overshadowed by other industries, food retailers and distributors are finally starting to gain attention for their technology initiatives.
While their efforts have been building gradually over the past few years, 2003 may be looked back upon as a true turning point in the development of foundational technologies in food retailing for the 21st century.
In some regards, the companies on the BusinessWeek Web Smart list are reflective of the tech trends impacting the supermarket industry. First there's the feared 800-pound gorilla, Wal-Mart Stores, which is cited for its adoption of RFID (radio frequency identification) tags containing the new Electronic Product Code (EPC), which could one day replace bar codes as the ubiquitous identifier of packaged goods. In June, Wal-Mart's chief information officer, Linda Dillman, laid out Wal-Mart's RFID agenda to its top 100 suppliers, asking them to put the tags on all pallets and cases by 2005.
RFID is not the only leading-edge technology that Wal-Mart is spearheading. The retail giant is also embracing data synchronization through UCCnet and Web-based EDI (electronic data interchange).
Wal-Mart has thus become the technological standard-bearer that its competitors in food and mass discounting are forced to emulate to some degree. Its effect is to advance the state of technology as well as to drive the rest of the retail industry to keep pace, which ultimately benefits Wal-Mart.
Wal-Mart did not shape the RFID agenda alone. Indeed, it may have played second fiddle to the technology itself. This year marked the official transition of the EPC from a closely guarded, research and development phase to its release as a commercially viable entity.
That transition occurred this fall: first in September at the EPC Symposium in Chicago, where the version 1.0 of the EPC was announced, and then in November, when the Auto-ID Center at MIT -- which spearheaded the R&D efforts behind the EPC -- closed shop. A new organization, EPCglobal, was created by the Uniform Code Council and EAN International to lead the standardization and commercialization efforts for the EPC. The Auto-ID Center's research activities will be carried forward by another new group, Auto-ID Labs.
Much of the media attention surrounding the EPC this year focused on the privacy issue: Could the RFID tags, with their ability to uniquely identify products via invisible radio waves, impinge on consumers' privacy? Those concerns prompted Wal-Mart to cancel a store-level test of the tags, and concentrate on the safer supply chain application of the tags to tracking pallets and cases. However, industry experts agree that as tags come down in cost and get applied to products, the privacy issue will need to be addressed.
Getting in Sync
Besides Wal-Mart, another food retailer on the BusinessWeek list that has distinguished itself in the data synchronization arena is Wegmans Food Markets, Rochester, N.Y. A longtime advocate of data synchronization through UCCnet, the UCC's data synchronization service, Wegmans was at one point synchronizing data with 80 suppliers this year, a number that has reportedly grown.
Yet, it wasn't just the pioneers who drove data synchronization in 2003; many others got on board. UCCnet, whose global registry is integral to the data synchronization process, saw its membership skyrocket from 400 companies in February to nearly 1,800 in November. While retailer/distributor membership remains low -- it reached 27 this month -- some of the largest names in food retailing joined this year, including Albertsons, Kroger and Safeway, as well as major regionals like H.E. Butt Grocery, Pathmark and Price Chopper.
For all its progress, data synchronization is just beginning to make a dent, observers said. That's because the focus has so far been purely on synchronizing basic item data. While that alone can save millions of dollars in data entry errors and faulty invoices, the real money will be reaped when other data, notably prices and promotional information, become synchronized.
Befriending the Shopper
On the store side, Stop & Shop was one of several companies that began to finally make innovative use of loyalty data to bring targeted discounts to shoppers. In Stop & Shop's case, it took the form of the "Shopping Buddy," an interactive shopping-cart screen device being tested in three Massachusetts stores. By simply scanning their loyalty card, shoppers receive targeted offers on the screen as they traverse the store. The device also provides locations of products and self-scanning for speedier checkout.
Other chains are sending electronic offers to shoppers in the store as well. Marsh, for example, recently extended its "My Marsh" POS program to in-store kiosks and shelf-edge devices. Giant Eagle is testing the same system in six stores. Jewel-Osco is testing a portable "personal shopper" device that scans while displaying customer-specific discounts.
Coupons, especially of the online variety, made plenty of news this year. A wave of fraudulent coupons apparently obtained online caused some chains like Harris Teeter and Kroger to stop accepting them in some markets. Yet other chains, like Meijer, which launched a CoolSavings online coupon program this year on its Web site, staunchly defend them.
Online shopping also had mixed results this year. While Albertsons and Peapod continued to expand their programs, and independent FreshDirect generated countless headlines with its upstart Web business, Publix decided to shut down its online operation. Other in-store systems making news this year included Linux-based POS at Hannaford Bros., biometric and RFID-based payment and store-based ordering. Albertsons made a splash recently with its selection of price optimization software. Chains like H-E-B and Albertsons began applying technology to the problem of out-of-stocks.
Under the covers, of course, many retailers were starting to get serious about adjusting their in-store and back-office systems to accommodate 13-digit (and even 14-digit) bar codes, which exist on products outside of North America. They only have a year left before the Jan.1, 2005, Sunrise 2005 deadline effectively makes that a mandatory practice.
Finally, 2003 will be remembered as the year the outside world really stepped up the technological demands on retailers. For example, new product-tracking bioterrorism rules that went into effect this month call for new uses of warehouse management systems. The Sarbanes-Oxley rules concerning auditing of promotional funds have many IT directors working overtime -- as if they weren't already busy enough dealing with the wave of viruses afflicting computers worldwide.
