EUROPEAN RETAILERS PREDICT ECR SAVINGS WILL INCREASE

JAMES FALLON

AMSTERDAM, Netherlands (FNS) -- European food retailers have boosted their forecast of expected savings from instituting Efficient Consumer Response programs to 6.1% of total costs, or more than $30 billion.

That estimate was released at the second official Conference of ECR Europe, held here March 13 and 14. The conference attracted nearly 1,700 delegates from 35 countries. Manufacturers represented 52% of attendees, retailers 16%, service industries 18% and other sectors 14%.

The centerpiece of the conference was the recognition that ECR is now firmly established as a strategy among European food retailers and manufacturers. "ECR has taken Europe by storm," said Jan Andreae, president of Albert Heijn, Geldermalsen, The Netherlands, and co-chairman of the ECR Europe executive board.

"ECR is now an indispensable strategic instrument for delivering consumer value," Andreae noted. "Retailers, wholesalers, manufacturers, suppliers, importers and brokers supported by service providers are all in it, and all in it together."

The significance of ECR is evident in the increased forecast of potential cost savings.

Philip de la Chambre, partner-in-charge at Coopers & Lybrand Europe, told the conference the 6.1% savings now predicted from ECR compares with estimated savings of 5.7% at last year's conference in Geneva. This level excludes the potential benefits of efficient unit loads, which could add another 1.2%.

Coopers & Lybrand found that European retailers on average have progressed further than manufacturers in implementing the initiative. "Especially within the supply side, leading European retailers have worked hard to build ECR-like capabilities that are now beginning to pay off for them," de la Chambre said.

On the demand side, however, retailers and manufacturers are at about the same level of maturity in implementing ECR programs. The same applies to installing such enabling technologies for ECR as electronic-data interchange and activity-based costing.

Kurt Salmon Associates (KSA), in its second ECR Europe tracking survey, found that ECR is progressing through its expected phases of change: The commitment to the initiative is high, but a greater realism is beginning to emerge about its potential; retailers and manufacturers are equally involved in ECR projects; and there is an increasing appreciation of ECR as a core business tool.

Massimo Visconti, managing director of KSA-Italy, said a KSA survey of 135 manufacturers and 31 retailers found that 81% of European retailers claim to be implementing some ECR projects, compared with 91% claiming to have done so last year.

These retailers generally are focusing on efficient replenishment, product assortment and introductions, and promotions.

In enabling technologies, 71% of retailers claim to have begun installing such tools, compared with 66% the previous year, Visconti said.

About 43% of retailers said they have begun implementing category management, while about 45% of manufacturers are doing so.

Among retailers, the most common problems in implementing ECR are conflicting priorities in allocating resources; functional territory issues; inflexible information systems, and inadequate supplier capabilities.

"But the main challenges do not involve it -- they involve people," said Peter Brown, vice president of KSA-Europe. "All the ECR initiatives call for changes in management strategies. ECR Europe last year was in its first phase of uninformed optimism. There was a high level of interest but limited experience.

"Now it has moved into the phase-two stage of hopeful realism and the challenge will be to break through to phase three, which is informed pragmatism. This year will be about a combination of active change management and synchronization of a number of initiatives."