SCANNING TRANSFORMS THE STORE

Michael Garry

It's rare that a seminal event in an industry can be traced to a single moment in time, but that is the case for supermarkets.

It was on June 26, 1974, at 8:01 a.m. in a Marsh Supermarket in Troy, Ohio, that the first product -- a 10-pack package of Wrigley's chewing gum -- was scanned at a supermarket checkout lane.

The cashier, instead of keying the transaction into her register in the accustomed way, moved the Universal Product Code (UPC) bar code on the package across a window on a very large scanner developed jointly by NCR and Spectra-Physics (now part of PSC). A laser beam in the scanner "read" the bar code and sent the information to an in-store computer that looked up the price and transmitted it back to the NCR checkout terminal. The price was recorded.

Within days of this first scanning transaction, stories about the event along with photos of the Marsh cashiers, in their red-and-white striped smocks, appeared in countless newspapers and magazines, from The New York Times to in-flight airline magazines.

SN reported on the Marsh test in its July 15 issue. The article quoted a Marsh spokesman as saying, "It was a little slow going at first while employees learned the system, but the equipment is working quite well."

That package of gum scanned at Marsh now resides at the Smithsonian Institution's National Museum of American History.

While 1974 was a pivotal year for scanning, there were some other important, prior events that made the Marsh scanning test possible. In 1952, the year SN debuted, Norman Joseph Woodland received a patent for a bar code and a scanner, which used a 500-watt incandescent light bulb and a photo-multiplier designed for movie sound systems. And in 1973, a committee of grocery industry executives chose the linear bar code with 11 digits as the present-day Universal Product Code. Peter Abell, research director, retail, AMR Research, Boston, then representing Jewel stores, was on that committee. He said 10 types of bar codes were considered, including colored codes, codes with optical-character codes, and a "bull's-eye" code that would have been "easier to read but more expensive to print" than the version finally selected.

According to the Uniform Code Council, Lawrenceville, N.J., PricewaterhouseCoopers, New York, did a study in 1999 assessing the impact of the bar code on the U.S. food industry. PwC reported that the impact was nearly 20 times greater than originally forecast, and that without it food prices would have risen almost twice as fast over the prior 25 years.

The original idea for scanning was to speed up the checkout process and make it more accurate. What the food industry didn't fully realize on that late June day was that scanning would not only achieve that goal, especially as the number of products proliferated, but would transform the way supermarkets and eventually all retailers operated.

The scan data collected as products passed through the checkout process would prove to be a treasure trove of information about consumer demand that retailers would leverage in ways that are still being developed today.

Perhaps most significantly, it shifted some power to retailers, forever altering their relationships with trading partners. "Retailers were able to say, 'These are the products I will buy and won't buy,"' said Ken Fobes, a principal of Business Strategy Group, Ponte Vedra Beach, Fla. "They took control and the technology enabled it."

Even in the beginning, supermarket operators recognized that with scanners "they knew exactly what was selling for the first time," said Daniel Hopping, consulting marketing manager, IBM, Raleigh, N.C.

Scanners not only recorded each purchase with both price and product name -- which traditional cash registers never did -- but also ensured that, for the most part, the right price was being recorded, not always the case in the manual days. Now that they knew what sold, they readily knew what to reorder, Hopping noted, and didn't have to figure it out via shelf audits.

As a scanning pioneer, Marsh had some competition in those early days. According to Hopping, two other stores conducted scanning tests the same week that Marsh did its initial run-through -- a New Jersey Pathmark store and a store run by an independent grocer, Stekepes, Grand Rapids, Mich. The Pathmark and Stekepes stores used IBM scanning equipment. Still, independent authorities like the Uniform Code Council credit Marsh with the first scanned product at a checkout.

A good five years passed before most products came into the stores with bar codes. In the early days, retailers had to apply many of the bar codes themselves. "It took a lot of vision on the part of the food industry to make scanning happen," said Joy Nicholas, vice president, research and emerging technologies, Food Marketing Institute, Washington. "Manufacturers put bar codes on products not knowing how often they'd be scanned. Retailers overhauled their front end not knowing if there would be enough products to scan."

By 1980, scanners were smaller and less expensive (an early scanner cost $10,000), and retailers "could see the ROI," said Matt D. Schler, vice president, retail automation group, PSC, Eugene, Ore., which purchased Spectra-Physics in 1996.

Kroger and Safeway were aggressive early adopters of scanning, but it wasn't until about 1986 before as many as 70% of U.S. supermarkets were scanning, said Dan Bogan, NCR's industry marketing vice president. Around that time, Wal-Mart and Kmart began to mandate that their suppliers provide bar-coded products; that drove adoption significantly, said Abell.

By the late 1980s, scanners began to incorporate scales and became much less costly and easier to maintain. By the early 1990s, the capacity of scanners increased as bioptic models, which read multiple sides of a product, were unveiled.

In 1989, the concept of self-service came to the checkout as a company called CheckRobot (now Productivity Solutions Inc.), Jacksonville, Fla., demonstrated a self-scanning checkout system at the Food Marketing Institute's show, according to Norman Tsang, vice president of marketing, Productivity Solutions (PSI).

Later, Optimal Robotics and NCR entered the self-checkout field. But the technology didn't catch on in a significant way until the last few years as costs came down by about two-thirds, features improved and labor costs grew, said Tsang.

Cash registers long preceded scanners, having been around since the 1880s.

By the late 1950s, registers began to include change dispensers and began to handle change and tax computations, said Bill West, Montgomery County Historical Society, Dayton, Ohio.

In the early 1970s, electromechanical registers were replaced by the first electronic terminals with digital displays and "silent" keyboards from IBM, NCR and National Semiconductor's Datachecker division.

The advent of the PC in the early 1980s had a big impact on checkout. By the mid-1980s, anyone could write retail applications, including ones for their POS.

Another big change came to the front end in the late 1980s and early 1990s when stores began installing terminals that accepted credit and debit cards. Supermarkets were pioneers in the development of electronic benefit transfer (EBT) systems that accepted food-stamp cards at the front end.