The first store to carry the name Piggly Wiggly, which opened in Memphis in 1916, is also considered to be the nation's first self-service grocery store, according to Wikipedia.org. Since then the Piggly Wiggly banner has been franchised to hundreds of independent stores, including its largest franchisee by store count, Piggly Wiggly Carolina, Charleston, S.C.
The spirit of innovation reflected in that inaugural Memphis store continues to manifest itself in Piggly Wiggly Carolina, known affectionately as “The Pig.” In particular, Piggly Wiggly Carolina, which operates 85 corporate stores while supporting another 30 independent outlets, has shown a marked propensity in recent years for pursuing cutting-edge technology to support its business.
Piggly Wiggly's 48-member technology department is led by Rachel Alvarado Bolt, who became director of information services in April 2006, capping a 22-year career working in technology operations for the company.
In recent years, the efforts of Bolt and her predecessor as director of information systems, Rich Farrell, have landed Piggly Wiggly on the short list of the industry's most proactive users of retail technology. Their initiatives have included the first major rollout of biometric checkout technology; an aggressive loyalty marketing program that now includes personalized-offer kiosks; price optimization; item and price data synchronization; a sophisticated PCI (Payment Card Industry) data security compliance program; and the implementation of ASNs (advanced shipping notices) for direct-store-delivery products as well as warehouse-delivered products.
Bolt put IT's role at the company in perspective: “Our executive team believes in technology, but the No. 1 focus Rich and I have had over the past 10 years has been ‘whatever it takes to improve the business,’” she said.
Keeping business needs in mind, Bolt always pushes for “executive sponsorship” of any initiative undertaken by the IT department. “Take global data synchronization,” she said. “That's driven by the director of merchandising, not by [IT].” She also assembles a task force consisting of executives from warehousing, store level, corporate and IT. “They will look at an initiative and make the determination of whether it will truly impact our business.”
FIRST IN BIOMETRICS
In June 2005, Piggly Wiggly surprised the food retailing world by becoming the first supermarket chain to roll out biometric payment technology chainwide (at its corporate stores). The technology, from Pay By Touch, San Francisco, allows shoppers to pay at the checkout by placing the tip of their index finger in a biometric reader, which scans a set of data points to uniquely identify an individual. Shoppers preselect the payment mechanism — credit card or checking account — to be debited after the ID has been made.
In May of 2005, Piggly Wiggly was recognized for its groundbreaking adoption of biometric payment with a Retail Systems Achievement Award for Best Customer Touchpoint System. The award was presented by the Retail Systems Alert Group, Newton Upper Falls, Mass. Since 2005, hundreds of additional store operators have used the Pay By Touch biometric payment system.
What was Piggly Wiggly's primary motivation for installing biometric payment? More than convenience or security, Bolt said Piggly Wiggly was attracted by the technology's ability to steer consumers away from credit and debit card payments and toward ACH-based checking account payments, thereby lowering the chain's interchange fees. “Credit and debit card fees — oh my gosh, they are out of control!” said Bolt. “We as retailers have got to do something to stop lining the pockets of banks.”
When shoppers sign up for the biometric payment program, they can choose to have their payment made via their credit card (including signature debit) or via what's called express checking, which uses the ACH system to charge their checking account. ACH-processed payments “save us two-thirds the cost of a credit card transaction, at a minimum,” at least 23 cents per transaction, said Bolt.
Piggly Wiggly conducted a three-month study in which it demonstrated that the biometric payment program had converted credit and debit card users to express checking. “I'm a conversion myself,” Bolt said. She also did an analysis last year in which she concluded that because of biometric payment, “we have seen a reduction in our processing fees.” On the other hand, the company has seen an increase in the number of credit card users.
On balance, the program has covered the cost of equipment — about $300 per lane — and is “probably breaking even” on the cost of enrollment, literature and replacement sensors, Bolt said.
Piggly Wiggly has determined that from July 2004, when it began its first biometric pilot, through April 30, 2007, it enrolled about 25,000 customers in the program, 11,197 in express checking, and 10,275 via credit cards. Almost 23,000 shoppers signed up for the loyalty benefit, usually with a form of payment; those shoppers can collect the company's Greenbax points as well as store discounts by putting their fingertip on the biometric reader. “Loyalty was a key driver, because people didn't want to carry their card,” Bolt said.
The number of biometric transactions has grown to about 4,700 per week, almost half of them express checking transactions.
In addition to providing pamphlets explaining express checking, Piggly Wiggly has held promotions aimed at encouraging enrollment. In October 2005, shoppers who signed up for express checking and used it twice got a free turkey. The first week of the turkey promotion, the company enrolled 4,629 shoppers, almost as many as enrolled in the four months after the program was launched; that week, 4,230 biometric transactions took place, compared with 2,497 in the preceding four months.
Store employees still need to be educated on how to promote the express checking option to shoppers enrolling in biometric payment. “If someone enrolls with a debit card, even a MasterCard or Visa, give them an envelope, tell them to put a voided check in it and send it to Pay By Touch,” Bolt said. “It's not rocket science.”
Overall enrollment in biometric payment remains low, at about 3% of total customers — or about 10% of the “loyal shoppers” who are responsible for 80% of the business, Bolt said. “Biometrics is easy and convenient, and it's such a safe transaction compared to debit cards,” she said. “But getting the message out has been very difficult. Some stores get it and have been doing tons of transactions. Others don't get it; their shoppers like their paper checks, don't feel threatened by identity theft or use debit cards for air miles.”
Still, Bolt remains confident in biometric payment's potential. “Biometrics is getting out there; people are seeing it more and more,” she said. Moreover, security breaches, such as the one that occurred this year at TJX stores, may encourage more shoppers to enroll in biometric payment “as a safe way to pay,” she said.
“We still need to push the program,” she acknowledged. “We'd like to increase it. We're probably at about 50% of our goal for enrollment.”
TARGETED PERKS
Piggly Wiggly's loyalty card program, called Pig's Favorite Customer, allows shoppers to earn Greenbax points (a Piggly Wiggly-developed program), automatic discounts on selected items and entry into a monthly sweepstakes. Greenbax points can also be earned at local retailers.
A new spin on loyalty is an in-house-developed targeted marketing program called Pig Perks, which is being tested in eight stores. Using transactional information about its top shoppers, the program makes targeted offers available to them on printouts via a store kiosk that can be activated biometrically or by the loyalty card. It is similar to a kiosk called SmartShop now being marketed by Pay By Touch. Piggly Wiggly is partnering with manufacturers to support the discounts selected for shoppers. “We're trying to make offers useful to a particular shopper,” said Bolt.
For everyday pricing, Piggly Wiggly has been using a price optimization system from DemandTec, San Carlos, Calif., for two years, and has just started using it for promotional pricing. The system employs demand forecasts to set prices. “It helps us make sure we remain competitive while meeting gross profit needs across categories,” Bolt said. “It makes sure we have the right price on the right product. But we would never use it on milk or eggs — they are way too price-sensitive.”
Piggly Wiggly has also taken an aggressive approach to complying with PCI data security standards, using technology from Cisco Systems, San Jose, Calif. (See “Card Swipe,” SN, March 12, 2007.) “I'm really proud of our PCI program,” said Bolt. “We have one guy — Mike Bell, technical support manager — who really identified our issues and pushed our team to become PCI-compliant.”
Bolt said the company still has three or four more areas to address at the corporate level to be in complete compliance with PCI standards by the September deadline. “We're about 70% done, which is incredible for a company our size.”
This year, Piggly Wiggly started receiving ASNs for some direct-store deliveries — an unusual practice in food retailing. “The majority of the time, the ASNs are accurate, and it's been a huge time savings to the receiving process at the store level,” Bolt said.
Invoice discrepancies, for one thing, are easily resolved between the delivery driver and store receiver. In addition, no scanning is required. So far, Kraft/Nabisco and one wine vendor are participating in the ASN program for direct-store deliveries. “We'll work with anybody willing to do it,” she said.
Piggly Wiggly started receiving ASNs from vendors at its warehouse this year, though the company is still trying to resolve issues that are preventing it from automating the receiving process. Meanwhile, the EDI team is bringing on new suppliers to the ASN program.
Data synchronization is another new area for Piggly Wiggly. The company was one of a small group of retailers that participated in a recently completed pilot of price synchronization, helping to create the standard for price synchronization, to be released this year. In addition, Piggly Wiggly is working on item synchronization with two divisions of Kraft. But Bolt said Piggly Wiggly is still trying to assess the value of data synchronization. “We're trying to see where the biggest wins are going to be for the business,” she said.
Bolt has spoken publicly about Piggly Wiggly's interest in RFID at the warehouse level, but the company has not done a test yet. RFID probably won't be addressed until after the company finishes implementing ASNs and voice-based picking.
A Bandwidth Challenge
CHARLESTON, S.C. — “I can't get affordable high-speed connectivity to 30 stores,” said Rachel Alvarado Bolt, director of information services, Piggly Wiggly Carolina here. “It's my biggest IT challenge.”
Some of Piggly Wiggly's 85 corporate and 30 independent stores reside in remote areas of South Carolina and Georgia that are not yet fitted for broadband connections by local telecommunications companies. But a few of the stores without high-speed connectivity are in the Charleston area, Bolt said. “They're testing wireless DSL in the Charleston area, but it's not available to us yet.”
Bolt said the company has tried technology solutions to get around the problem, including an Internet acceleration system, but did not find them cost-effective. “So we're waiting on DSL,” she said. Meanwhile, the 30 underserved stores are making do with a 56K frame-relay connection.
The slower network has not prevented those stores from tapping into corporate resources, though they might have to wait several minutes before signing on. One example is Piggly Wiggly's corporate document server, from which stores can retrieve reports electronically. The low-bandwidth stores “find it so useful they don't mind waiting,” said Bolt. At corporate, “the amount of paper we stopped printing is incredible.”
In one instance — involving Piggly Wiggly's new Pig Perks personalized-offer kiosk — Bolt has found ways to compensate for the slow data traffic to and from stores. “There are little things you can do with graphics, such as whether or not there's a border around something,” she said. “Or using colored boxes that are really not colored, but it's undetectable to the human eye. That's one of the benefits of developing in-house.”
— M.G.