PRICE CONTROLS

CHRIS O'LEARY

Retailers are turning to a new line of inspectors to bolster pricing accuracy rates.

Well aware that relying solely on store-level staff audits is not enough to guarantee nearly perfect scanning accuracy, a growing number of retailers are instead bringing in nonstore personnel, such as corporate-level officials and third-party inspectors.

Because such nonpartisan

personnel are as removed from store operations as a typical shopper, retailers believe they can review store pricing as effectively as a shopper. The price-conscious consumer is clearly a store's toughest auditor.

"A third party is the best," said Bob Ramsey, manager of pricing systems at Raley's, West Sacramento, Calif. "The people we have doing [price verification] function like internal auditors. They have no vested interest in reporting all is well."

Store managers should not consider the growing use of nonstore auditors as an intrusion on their operations, officials said. Rather, such inspectors can help minimize pricing-related losses.

"We're not trying to play Big Brother. We're trying to just instill disciplines," added Doug Mills, director of retail services at Associated Grocers, Seattle.

"All we're trying to do is get [our members] to think about the fact that they owe pricing accuracy to the consumers shopping in their stores," he added.

Among the methods retailers are using to push for heightened accuracy:

· Internal Auditors: A group of corporate-level employees with no ties to a particular store conduct store audits. Stores that pass muster are rewarded while poor performers draw heightened observation and may be penalized.

· Third-Party Firms: Independent firms with dedicated staff and technology conduct full-store scanning audits and provide detailed reports about a store's strengths and weaknesses.

· Industry Associations: Retail organizations are developing price verification programs. For example, the Pennsylvania Food Merchants Association, Camp Hill, Pa., reports that the 200 stores participating in its voluntary certification program earn 98.5% price accuracy ratings on average.

Scanning accuracy is especially important today as the industry seeks to defend itself against continued, if sporadic, media attacks on pricing errors. Another driver is retailers' increased interest in using scan data -- reliable scan data -- for continuous replenishment and computer-assisted ordering programs.

For some retailers, the key to improving accuracy lies in creating inspection teams at the corporate level.

Associated Grocers is currently running a voluntary inspection program with about 30 of its retail members. The wholesaler, which expects to have about 100 of its 350 members enrolled by June, has boosted accuracy rates to 99.6% on average, Mills said.

"People who work in my store systems department will go out and perform an initial 200-item verification in the stores," he said. Stores with 98% or higher accuracy rates are certified.

The wholesaler will not allow its certified member stores to rest on their laurels, however. "Subsequent to being certified, our specialists will go in unannounced and conduct the same procedures that [the Department of] Weights and Measures would use in an inspection," Mills said.

"If the store fails to meet the 98% accuracy rate in this inspection, it will be reinspected in 10 days," he added. "If they do not pass that second inspection, then they lose their certification."

Raley's conducts pricing inspections with internal teams as a way to keep stores in line with corporate pricing policies and minimum scan accuracy rates.

Inspectors focus on shelf and product tags at Raley's. Auditors are trained to recognize categories with a history of tagging errors, such as cosmetics or summertime general merchandise, Ramsey said.

"Seasonal merchandise is in and out so fast, and shelf sets and footages expand, so it's hard to keep the correct tags in front of the items.

"The people who do our auditing know that and they really go in after that stuff," he added. "We zoom in on areas where we expect to find a problem."

Conducting inspections allows Raley's to hold its stores to a higher level of accuracy than regulators require. For instance, Raley's considers not-on-files to be a mark against its stores, although they are not technically considered an error. "A significant number of not-on-files will bring more attention than the people at store level want," he said. For Copps Corp., Stevens Point, Wis., the most successful course has been to relinquish inspections to an independent third-party firm.

The retailer's decision was driven by disappointing results of some recent store inspections by state officials.

"If you have the department heads scan their own section they may say, 'This isn't a mistake; the tag was just moved' and then they will move the tag back. To them, that's not an error," said Mark Uebelher, director of store systems.

"You really need somebody who's not working in that department to do a test scan in the eyes of the customer," he added. "If you have a third party come through, they just zap the Universal Product Code on the product and look on the sign they think matches it."

Copps gains some improved accuracy just by keeping its stores wondering where auditors will strike next. "None of the stores know when this crew might pop in to do a total store scan audit," he said. "That keeps them on the ball."

A less confrontational but equally effective method of improving accuracy has begun in Pennsylvania. Retailers like Giant Food Stores, Carlisle, and Clemens Markets, Kulpsville, are participating in a state retail organization program.

"Through a voluntary program we're able to work more closely with the stores and help them out with training," said Jennifer Hawbaker, manager of the PMFA's scanning certification program.

"We abide by PFMA," said Paul Roesner, manager of systems automation management at Clemens. "After our stores are certified, we hang banners up to let our customers know we are certified. We're very satisfied with our accuracy rate."