LOYAL SERVICE

MARC MILLSTEIN

BRISTOL, Pa. -- After several false starts, customer loyalty programs are about to emerge as powerful strategic tools for winning business across the supermarket industry.

In addition, customer self-scanning systems and shop-at-home services via the Internet, now in various stages of testing, will soon transform the supermarket shopping experience for a large portion of the population.

Those are some of the predictions about the future direction of the food industry and the forces that will shape the nature of the business -- and do so much quicker than most people expect, according to Bernie Greenberg, president and chief executive officer at Stores Automated Systems Inc. here.

"The fact that business is relatively flat makes it especially important for retailers to maintain their customers and not lose customers to the competition. It's also reflected in what manufacturers are doing to preserve and enhance brand loyalty," Greenberg told SN.

The rollout of increasingly distinct and effective customer loyalty programs "is a direction that's going to be very prevalent in the next couple of years in the supermarket industry," he said.

Among the key technology factors driving retailers of all sizes to consider or launch comprehensive frequent shopper programs today are the dramatic changes in product capabilities and prices.

Enormous leaps in computer storage capacity and processing power have resulted in a new playing field when it comes to collecting, storing, retrieving and analyzing customer shopping data -- all of which are crucial for launching highly targeted and successful loyalty programs, Greenberg said.

"Technology has gotten to the point now where we have these huge data bases. The buzz word everywhere in business today is data mining, which is crucial. The advent of less expensive hardware and more sophisticated software is allowing IS departments to do more things," Greenberg said.

"A couple of years ago you would have laughed at the idea of a 100-store chain compiling 15 months of information on each of its 15,000 customers. I still laugh when I say that, but that's where the industry is going," he said. The rollout of a new generation of powerful IS technology will result in retailers soon offering much more sophisticated -- and effective -- frequent shopper programs.

The successful program must feature a better incentive to attract customers than simply offering a coupon, Greenberg said.

Sweeping changes in consumers' comfort level and familiarity with using technology, as much as in the power of the technology itself, is also prompting the introduction and acceptance of systems.

For example, Greenberg predicted, many supermarkets will soon begin rolling out widespread self-scanning programs.

"We're seeing a lot of tests in the industry. For the retailer, the benefits are labor savings, space savings, better customer service and the speed of checkout.

"There's also a perceived advantage to many customers in being able to control the pace at which products get scanned, to verify prices are correct and so forth. There's a whole generation of people now who are computer literate and very willing to do this," he said.

While implementing self-scanning systems on a widescale basis will require a considerable investment by retailers, it will happen -- and probably sooner than many people think, Greenberg said.

"The next 12 to 18 months will be the test period for retailers to find out if the expected benefits are there. After that, I think retailers opening new stores or remodeling old ones may be willing to put in [self-scanning] systems," he said.

In terms of other future changes in in-store technology and applications, Greenberg also pointed to the potential for integrating systems in a much broader and dynamic manner.

"Think about how exciting it would be if certain electronic components in the store were tied together and could be used intelligently to make the customer more aware of particular products. There are things happening in technology that will allow retailers and manufacturers to target customers in very exciting ways," Greenberg said.

One of those areas involves shopping on the Internet.

"The systems out there now are going to have to become more sophisticated before retailers will be able to gain many of the potential benefits. The Internet is going to have to become a more friendly place for people to use," Greenberg said.

"There are nine million consumers on the Internet today. It's not as many as people think. But within two to five years, home shopping via the Internet will be significant enough that retailers are going to have to do it to survive," he said.