SURVEY FINDS ECR SPENDING GROWTH

JAMES TENSER

DALLAS -- Efficient Consumer Response is working, but success does not come cheap.

The grocery industry expects to invest $4.5 billion in ECR during 1995, an increase of 50% over the $3 billion it spent in 1994, according to an industry survey by Kurt Salmon Associates, New York.

That spending increase is expected despite responding companies' mixed assessment of ECR results. Half the manufacturers and brokers, and 44% of the wholesalers and retailers, said ECR results so far had fallen short of their expectations.

Whether those responses reflect unrealistically high expectations, unexpected challenges or both, the survey results point to burgeoning ECR activity. Seven companies in 10 are already implementing ECR in some aspects, and the industry is seeing real financial benefits.

These results were included in a preview of the ECR Implementation Assessment survey, which KSA conducted in the fourth quarter of 1994. The survey was presented for the first time at the "ECR A to Z" conference here by Peter Harding, vice president of KSA, and James Horton, national director of retail services.

"Commitment to ECR is universal and strong and continuing to grow. Companies are now seeing tangible results in terms of reduced costs," said Harding.

He added, "ECR is fact, not fad. The benefits are real -- sales up 4.5% to 7%, profits up 4.8% to 9.%"

Those growth ranges reflect manufacturer expectations over the course of ECR implementation -- based on a survey question that asked them to estimate their what their benefits would be, based on what they know so far, said Harding.

Responding to a similar question, wholesalers and retailers projected average benefits as follows: sales, up 5.4%; gross margin, up 3.4%; warehousing costs, down 5.9%; warehouse inventory, down 13.1%; store labor, down 1.7%; sales per square foot, up 5.7%, and stockkeeping unit count, down 7.5%.

The KSA survey was conducted by mail in last October. A total of 392 manufacturers, brokers, wholesalers, self-distributing chains and independent retailers returned questionnaires. The survey was designed to establish a "baseline" of ECR activity two years into the initiative, and KSA has committed to conduct annual follow-ups in 1995 and 1996.

The complete survey report is expected to be published in March. It will be available through the 13 trade associations that sponsor the ECR initiative.

Horton said investment in ECR reported by manufacturers and brokers reflects their deepening commitment. In 1994 manufacturers spent 0.45% of sales on ECR activities, a figure they project will grow to 0.60% in 1995, with an expected 2.9-year payback. Brokers spent 0.69% of sales in 1994, and expect to spend 0.73% of sales in 1995, with payback in 3.2 years.

Wholesalers said their rate of investment will grow from 0.52% of sales in 1994 to 0.67% in 1995, with a 2.6-year payback. Self-distributing chains will increase from 0.21% to 0.36% with a 2.4-year payback. Independents will increase from 0.36% of sales to 0.50%, with a 2.8-year payback, he added.

"ECR is moving from concept to reality," said Harding, who estimated that 8% to 9% of grocery products sold in the United States during 1994 were accounted for by ECR alliances between manufacturers and retailers. KSA projects that by 1996 one-third of all grocery volume will be handled "within ECR partnerships."