INFORMATION IS KING

PETER PERROTTA

Now that we have all this technology, what do we do with it? That was a key element of the second part of an informal SN discussion forum on how technology has impacted customer service and profitability for retailers [see SN Jan. 21 for part one].

SN's panel participants pointed to the interesting challenge retailers face: using new found data garnered from these advanced technologies to drive sales and profits.

The forum participants said improving customer service and supply chain efficiencies are the means to that end.

In this regard, the forum participants reveal that in many ways the new technologies have made information "king."

"With a customer database at the fingertips of most associates in the store, decisions that once were based solely on instinct can now be made from real-time customer information," said Lisa Piron, director of management information systems, Green Hills Farms, Syracuse, N.Y. Piron was one of five participants in the forum.

"Suddenly, information that was previously unavailable or exceedingly difficult to find has become accessible," said another participant, Judy Sprieser, chief executive officer, Transora, Chicago. Transora is one of the three major exchanges serving the food industry.

The other participants were Bruce Cross, senior vice president, business transformation, Nash Finch, Minneapolis; Jim Mills, owner, Snyder's IGA Supermarkets, Edmond, Okla.; and Ken Fobes, chairman, Business Strategy Group, Ponte Vedre Beach, Fla.

The discussion was conducted prior to this week's Food Marketing Institute's Marketechnics show [Feb.3 to 5] in San Diego.

Most of the panel pointed to CRM -- customer relationship management -- as one of the major new technological tools developed that is driving the move to provide better customer service.

"One way leading retailers are using CRM most effectively is in targeting offers to particular households," Sprieser explained.

Ken Wyker, president of Wyker Marketing, Charlotte, N.C., told SN in an earlier interview that in the future, supermarkets will use Internet-based technologies to enable more personalized communication designed to develop more targeted offers, couponing and pricing for consumers.

"The industry has capabilities right now from a pricing and promotional standpoint that are not fully utilized," Wyker said. "But, over time, customers will get accustomed to it, the infrastructure will be able to handle it, and individual customer pricing will become more prevalent."

On the supply chain side of the coin, conservative industry estimates point to the fact that there are billions of dollars of waste in the supply chain.

Our forum participants acknowledged this and the increasing need to use technology to get at the waste.

Here is what participants had to say:

SN: On a more practical note, to what extent has technology improved customer service for retailers?

SPRIESER: Some customer relationship management platforms have improved the relationship retailers maintain with their customers, particularly those that can help identify higher margin customers. At the same time, improved forecasting tools help to ensure that customers will find an advertised product on the store shelf.

One area in particular is couponing. Consumers continue to search out values, particularly in these challenging economic times. One way leading retailers are using CRM most effectively is in targeting offers to particular households.

FOBES: There have been a number of customer service checkout improvements with such things as the portable shopper, self-checkout, adaptable checkouts, kiosks and even home-shopping alternatives.

CROSS: Technology has resulted in savings through improvement in automation, more accurate and timely information exchange, lower cost of goods and the ability to target market to consumers.

MILLS: Any technology that speeds up the customer transaction process, improves the selection and variety of goods and services offered by a retailer, or lowers the retail price of products benefits the consumer.

PIRON: With a customer database at the fingertips of most associates in the store, decisions that once were based solely on instinct can now be made from real-time customer information.

At Green Hills, every process from donation requests to customer complaints to category management is managed by our customer information. No longer are best customers displeased because of discontinued favorite items.

SN: To what extent has technology improved profitability for retailers?

SPRIESER: Technology solutions that wring excess from the supply chain help improve margins and ultimately boost a retailer's bottom line, especially in the face of a more challenging sales environment. Retailers cannot afford to hold excess inventories, but at the same time cannot alienate their customers by running short on stock. Solutions like collaborative planning, forecasting and replenishment create better information alignment between retailers and their suppliers.

FOBES: Systems like those dealing with "knowledge discovery," pricing optimization and inventory optimization are having such a significant impact on profitability by improving margins, increasing turns and lowering overall inventory costs.

CROSS: As a food distributor we offer NashNet, an Internet retail solution, to our independent retail customers. Initial features include introduction of new merchandising items, promotional offerings, online catalogs, reports, invoices and e-news. All of these powerful tools help a retailer become more profitable. We reduced the new item cycle by 24 days through the use of NashNet.

MILLS: When technology reduces expenses from a "total cost concept," improves the sales or improves the productivity of a retailer, then all of these factors contribute to the retailer's profitability. To be competitive, a retailer has to look for ways to be as efficient and productive as possible.

PIRON: With technology playing an enormous role in customer service, higher profitability can only be expected. Everyone knows that loyal customers are more profitable than occasional or deal-driven customers. So, by increasing services and products that are favorable to loyal customer retention, sales dollars increase, thus causing an increase in profitability.

SN: At SN we have noticed that during the past year technology spending has shifted from investing in "fancy" new software application suites full of "bells and whistles" on the retail side to more practical matters like streamlining warehouse operations and other supply chain issues. Do you concur?

SPRIESER: I couldn't agree more.

Retailers have been able to ignore the hidden sources of cost in supply chain wastes for years, but technological improvements and willingness to share information with suppliers have opened companies' eyes to a host of savings opportunities.

Suddenly, information that was previously unavailable or exceedingly difficult to find has become accessible and is helping retailers and their suppliers manage inventories with greater precision. From transportation logistics offerings to supplier-managed inventory, these services offer enormous savings.

FOBES: The industry has been struggling with the "promise" of enterprise systems for some time and we've all heard the investment "horror stories." Whether these systems will ever fulfill their promise remains to be seen, but there have been definite success stories in terms of improving supply chain efficiencies. The question is: Is this enough? We do not think it is. Chains must concentrate on getting it right at the store-specific level, where the demand is, in order to gain real efficiencies.

CROSS: Yes. While many of the technological "bells and whistles" seem appealing on the surface, often these applications simply fail to meet our stringent requirements for ROI [return on investment] and are difficult to implement. With today's business climate, it is critical to carefully look at the business objective, find a simple proven application and implement it correctly.

MILLS: Yes, the "bells and whistles" are nice when everything is positive from a sales and profit standpoint. But, when things get tight, a retailer is forced to eliminate those pioneering-type investments in technology and concentrate on the basics of the business.

PIRON: With retailers being more cautious about spending, streamlining will be an important part of the IT budget. This and systems integration will be where we'll be for the next year.