CONTROLLING PRICES

CHRIS O'LEARY

Retailers are finding the road to assured price accuracy is traveled best when all systems are walking in step.

Making sure the technology and pricing procedures are working together to ensure price accuracy is especially crucial today as media reports of alleged scanning discrepancies continue to surface.

"There's nothing more important than maintaining our scanning system -- it's the heart of the company and we pay close attention to it," said Keith Gaudsmith, management information systems director at Rice Food Markets, Houston.

Public skepticism of supermarket pricing is alive and well today and it demands that price integrity be addressed, retailers said.

"It's certainly emphasized our need to ensure customer confidence that our prices are correct," said Ty Hitt, chief financial officer at K.V. Mart, Long Beach, Calif. "If you get a bad reputation with the customer, it's going to hurt you." "We've always been concerned about integrity, and I know what a problem it can be if it's not taken care of," added Jack Polakow, MIS director at Westward Ho Markets, Los Angeles. "But bad press makes you really dig in harder."

Retailers are taking a number of measures to ensure the same price from shelf tag to receipt. Many chains, for example, are moving toward more automation and more centralized control of their pricing operations.

Retailers are also strengthening their defenses: cracking down on inaccurate vendor pricing by computerizing direct store delivery, and using radio-frequency technology for regular price checks on the store floor.

But a growing number are moving further and improving their pricing systems. To create consistency between shelf tags, store signs and point-of-sale scanners, retailers are performing system upgrades to unify various pricing functions in one data base. Such upgrades mean substantial investments. Electronic shelf labels, which some retailers see as a prime way to reduce pricing errors, can cost more than $100,000 to partly equip one store. But payback will come from reduced labor, fewer payouts to consumers because of inaccurate scans, and -- with more consumer confidence in their stores -- increased sales. (See related story on Page 18A.)

K.V. Mart is one company that has committed to electronic shelf labels. Unlike some chains looking for substantial labor savings with the device, K.V. Mart is focused on price integrity and will retain its staff of scanning coordinators.

"We think the big payoff will be in more accurate pricing," said K.V. Mart's Hitt.

A common first step many retailers are taking is to increase responsibilities of their scanning coordinators and expand the technology available for conducting price inspections at the store level.

"We have radio-frequency units linked to price files in the store, and have regular crews that go around [verifying prices] all the time," said John King, director of MIS and electronic data processing at Hughes Family Markets, Irwindale, Calif. "Their job is to make sure prices are correct."

Rice Food Markets' scanning coordinator uses a similar portable reader to verify prices at the store level, and then compares prices to those on the store mainframe. But the retailer is planning ways to automate the process even further.

"We're getting into radio-frequency signal technology: matching shelf prices with the mainframe file to verify them," Rice Food's Gaudsmith said. "Right now it's a paper flow but what we're trying to do is make it an electronic process" beginning when merchandise is received.

"We're working on going from the back door to the front end with a perpetual inventory and then we're going to coordinate the pricing from the [scanner] to the mainframe," he said.

For Westward Ho, an area that needs constant vigilance is the receiving dock. Store employees need to keep an eye out for direct-store-delivery vendors whose prepriced goods -- marked down on promotion or given price increases -- have not been cleared at the corporate level or communicated to the store.

"We have some DSD vendors that may be marking product improperly," Polakow said. "That's why I need someone physically there to constantly verify [prices]."

The retailer is considering moving to an automated DSD system as a way to improve their price accuracy. "We're talking about going into that when funds become available," he said. When DSD is automated, "we'll be able to monitor prices even better through the back door."

Reducing the amount of not-on-file items is another way Westward Ho tries to improve its scanner accuracy, Polakow said.

"Our buyers are instructed not to authorize the purchase of an item unless it has a universal product code," he said. "And our manufacturers are instructed not to ship an item until it is entered into our system and we're sure it's going to scan. We've eliminated a lot of not-on-files that way."

Retailers are cleaning up their point-of-sale scan files to reduce the number of not-on-files as well. An industry source who wished to remain anonymous said many retailers are trying to keep their scan files at a manageable size.

"They're doing their best to keep point-of-sale scan files as accurate as they can," he said. "Often there are a lot of items that were delisted and sold out, but never deleted from the scan file. That takes up space in the data file and is just another opportunity for scanning an item and having the wrong product come up."

For Basics & Metro Food Markets, Randallstown, Md., one way to improve accuracy at the front end is to make scanning physically easier for cashiers and reduce the frequency of manually entering items. The retailer recently equipped some of its stores with more ergonomic front-end areas and more powerful scanners.

"We've upgraded our equipment and put in ergonomic front ends, and we've improved the for-scan ratio," said Charlie Roach, assistant vice president of information systems. "As far as front-end scanning is concerned, everything in the stores scans better than it used to."

While such steps improve a store's ability to react to and correct price irregularities, retailers are also taking initiatives to prevent discrepancies from occurring at all. One fairly inexpensive way some have found is to link sign and tag printing to the scanning data base. Hy-Vee Food Stores, Chariton, Iowa, is moving the printing of replacement tags and store signs to the individual store level.

"We're printing more of our shelf labels in-store, where the shelf-label printing device is actually tied-in to our in-store inventory so we can verify it is correct," said Ronald Waldbillig, assistant vice president of MIS.

Hy-Vee had previously ordered tags and signs from a third party, and also created labels at the corporate level. Bringing the process to each store makes the most sense, he added, since each store determines its own retail prices.

"The biggest benefit is the speed in getting the label: You can get it immediately. Before, you'd have to put a handwritten sign up," Waldbillig said. "It [requires] a lot less labor."

Rice has also considered a move to in-store printing, seeing it as a way to improve shelf tag delivery time and reduce pricing errors.

"We're looking at getting the printers in the stores as a possibility," Rice's Gaudsmith said. "Right now we're having another company do our signs and tags for us. If we do move printing [to the store level], that will eliminate the third party. The turnaround for them is usually a day, and they print tags generally once a week. So printing the tag right here will give us much more flexibility."

But in-store printing will not relieve stores of the need to conduct manual inspections, retailers said.

"We like shelf talkers, and any time you have a sign out there, you have to have the discipline to make sure it is accurate," said Hy-Vee's Waldbillig.