SCAN-BASED TRADING TEST SAVES H-E-B MONEY -- SO FAR

RICHARD TURCSIK

DALLAS -- Implementation of scan-based trading for magazines will substantially reduce labor costs for retailers, according to an official with H.E. Butt Grocery Co., San Antonio.

H-E-B is testing scan-based trading in several stores and results have been astonishing.

"Moving to scan-based trading for our company -- just in labor savings alone are well in excess of $1 million a year. This savings is just from the elimination of back-room checking," said Bob Callahan, director of category management.

Callahan spoke at the recent Magazine Publishers of America's annual conference here.

Scan-based trading aligns the interests of retailer and supplier by using daily point-of-sale data, Uniform Communications Standard transaction sets and electronic data interchange to focus the whole direct-store-delivery business on sell-through and payments for merchandise based on scan data.

But Callahan cautioned that scan-based trading might not be right for every retailer.

"We are doing testing with our wholesaler right now, and neither H-E-B nor our wholesaler will continue the process if the economic model does not create value in the distribution channel," Callahan said.

"Whether or not it is the right thing to do long-term for the industry, I'm not sure. I know what we have today is certainly not in the best interest of the business. Whether scan-based trading is the model that has to be put forward remains to be seen," he said.

But Callahan said scan-based trading wouldn't work at a retailer where the cashier ringing up a magazine punches the general merchandise key and enters $1.99.

"That shows up as shrink. You can't record it, because you don't know what that item is. When you have that situation, you lack integrity at the front end," he said.

As a result, Callahan said shrink should not be passed along to the publishers.

Callahan said the future looks bright for magazines and books, despite -- and probably because of -- the development of the Internet and other new technologies.

"Information is becoming the cornerstone of consumer purchasing patterns in our stores," he said.

"We are beginning to sense that consumers are looking and reaching out for trusted sources of information. That has created a huge opportunity for this category, both for retailers and for publishers," Callahan explained.