RANDALLS OUTLINES ECR PROGRESS, PROBLEMS

MARC MILLSTEIN

CHICAGO -- Randalls Food Markets posted large sales gains and achieved heightened market share in several core categories as a result of Efficient Consumer Response programs.

The 120-store chain boosted sales per section foot in the salty-snack category by 26%, for example, while reducing stockkeeping units by 20%, said R. Randall Onstead, president and chief executive officer of the Houston-based chain.

Similarly, an SKU rationalization program in the wine category led to a 48% hike in market share and a steep reduction in units carried, he said.

But Randalls, and the supermarket industry overall, has a long and difficult road to travel before it reaps anywhere near the full benefits of ECR, Onstead said at the second annual Joint Industry Conference on Efficient Consumer Response here March 20 to 22. The event drew more than 1,500 manufacturers, vendors, distributors, consultants and brokers.

"Where is Randalls in relation to ECR? Well, overall, I can state unequivocably we are definitely not where we want to be in this area. Even though we have a high level of commitment to ECR, progress has been painstakingly slow," Onstead said.

The original Kurt Salmon report predicted that companies forging ahead with a comprehensive ECR strategy could achieve the major benefits of ECR in three years, he said.

"Well, that was 1993. It's now three years later and I can honestly say that, from what we've seen at Randalls, the original prediction was, at the very least, overly optimistic," Onstead said.

The Randalls executive, though, took pains to underscore the importance of ECR for the industry and to acknowledge progress achieved thus far -- despite the failure to achieve widespread implementation in a broad range of areas.

One highly successful ECR program at Randalls, for instance, involves the wine category. Using category management processes, the chain, in cooperation with several trading partners, conducted an extensive analysis of the category and made some startling discoveries about product assortment and sales.

"What we found astounded us. In Austin, Texas, there were 1,800 SKUs of wine available to buy, of which Randalls

carried 1,250 SKUs in our largest store. But of those 1,250 SKUs, about 600 SKUs represented 95% of our business. The remainder was relatively dead inventory," Onstead said.

As a result of these findings, Randalls launched a test program in Austin to discontinue wine SKUs that were nonperforming and didn't add value to the mix.

"The [changes] in our target stores were dramatic. We reduced our items to 625 SKUs in our large stores and 390 items in our smaller stores," he said.

The result was that the stores now have much "better in-stock conditions in [wine SKUs] really selling and the right amount of shelf space allocated to them. In addition, customers thought variety increased, because we brought in some items we never carried before to replace some delisted SKUs," Onstead said.

The next step was to roll out the wine program to Randalls Houston stores, which were divided into three categories, "A" stores featuring 359 SKUs, "B" stores carrying 307 SKUs and "C" stores with 245 SKUs.

"The results were beyond our expectations. Within one year, Randalls' fair share index of the Houston wine market was 148, that is 48 basis points over our market share," he said.

Randalls also undertook a similar program in the salty-snack category. "The results in the salty-snack area were just as dramatic as in the wine. We found that the top 20 SKUs in salty snacks accounted for 81% of sales in Randalls units and 79% of sales in Tom Thumb in Dallas.

"Overall, we ascertained that 40% of the items accounted for 92% of our sales. As a result of changes made in the category, we were able to increase overall sales per section foot in the salty-snack category by 26% while reducing SKUs by 20%," Onstead said.

Significant obstacles, though, are still preventing Randalls from achieving widespread ECR success. Some of the impediments involve industry lack of progress in understanding and implementing basic category management principles.

"Some manufacturers, vendors, brokers still don't understand what category management is or what it is intended to do. Some claim they are looking out for the best interests of the retailer and the consumer, but what they are really doing is looking out for their own best interests.

"They cannot seem to get to look at the category without bias, and that becomes readily apparent to retailers, especially if they have access to the same information as the manufacturer, vendor or broker," he said.

Onstead readily admitted, however, that Randalls was also responsible for many of its problems in failing to roll out successful ECR programs more rapidly.

"In some instances, we were not ready to proceed. In some areas unforeseen capital expenditures made it hard for us to proceed. Sometimes our progress was impeded by what I like to call self-inflicted injuries."