IGA INDEPENDENT COMPETES ON TECHNOLOGY

Michael Garry

BETHEL, Conn. -- Like many IGA independents, Caraluzzi's Bethel Food Market here has to compete with a major chain in its marketplace. For Caraluzzi's, that chain is Ahold USA division Stop & Shop, Quincy, Mass., which operates three stores near this community in far-western Connecticut near the New York border.

And while Caraluzzi's -- which opened a second store in nearby Georgetown two months ago, and also operates a liquor store here -- certainly competes with Stop & Shop on price, the independent likes to compete on technology as well. Matching Stop & Shop, two weeks ago Caraluzzi's introduced a gift card program at the Bethel store that will be available at its other stores as well.

"We've got to keep up with the technology," said Matt Caraluzzi, who handles the front end and technology for the Bethel store, and is one of four third-generation Caraluzzi cousins running the 53-year-old business started by his grandfather. "Stop & Shop beat us out by six months with gift cards, but we beat them with our frequent-shopper program."

Caraluzzi gets assistance with technology from Bozzuto's, Cheshire, Conn., his wholesaler. "We use their advice," he said, "but we're fortunate now to have the capital to purchase hardware on our own."

But he does purchase technical services like in-store music, vendor billing and electronic transaction processing through Bozzuto's, all at discounted prices. And he's employed Bozzuto's engineering services for redesigning his fish department into an open ice display. "I'm an aggressive independent, but I can save some money with their help," he said.

In 1993, Caraluzzi was able to acquire his frequent-shopper system at a discount through Bozzuto's from DCI Marketing, now part of Catalina Marketing, St. Petersburg, Fla. Caraluzzi has been considering Catalina's front-end coupon program with the assistance of Bozzuto's.

Linc Retail Solutions, Glastonbury, Conn., his technology reseller, installed the gift card system, which was developed by his point-of-sale software vendor, Dallas-based Retalix, the first time it has done so for an independent, said Caraluzzi.

Working through Bozzuto's electronic transaction processing vendor, Concord EFS, Memphis, Tenn., he purchased new payment terminals, from VeriFone, Alpharetta, Ga., to support the gift cards. The new terminals are also compliant with DUKPT (Derived Unique Key Per Transaction) standards that will be required for debit card PIN security next year, he noted.

Caraluzzi said that, thanks to the Retalix software, his store is ready for the Sunrise Date, Jan. 1, 2005, when stores are expected to be able to read 13- and 14-digit bar codes (used outside North America), along with traditional 12-digit UPC bar codes. "We already see some European bar codes in here," he said.

Caraluzzi's next big project is to leverage his frequent-shopper program's target-marketing capabilities. To date, the system has been used as a discount vehicle at the checkout. "That's only part of the potential," he said. "I have software in the lanes I can turn on to start tracking purchases as far as who, what, when, where and how much. I can get information on spending in the store, and try to get someone to spend in other departments or shop more often." He plans to send targeted coupons by mail or e-mail, using addresses supplied by shoppers. "We don't sell the information," he noted.

Caraluzzi is also considering selling ads to CPG companies that would appear in a section of the large customer display screen at the checkout. He uses POS hardware from NCR.

Taking advantage of the item-pricing exemption Connecticut gives stores that use electronic shelf labels, Caraluzzi installed ESLs, from NCR, Duluth, Ga., in the Bethel store three years ago. Those ESLs were NCR's previous generation, called DecisionNet; about that time, NCR introduced its current generation of ESLs, called RealPrice, and retired the earlier model.

Caraluzzi said he is holding off on installing RealPrice labels in his new store because he doesn't want to have two different ESL formats in his stores. He said in considering the new format last year, he believed that pricing, which is the same for both stores, couldn't be easily communicated between the two sets of labels. So he expects to install RealPrice labels in both stores when he is ready to upgrade the Bethel store's labels in a few years.

Gary Dalton, NCR's director of product management for RealPrice, told SN that RealPrice labels would require a different integration from what was used in the Bethel store, but once that was done, the two stores could be operated with the same pricing platform. "One store would have version A and one would have version B, but it would just be a file management challenge," he said.

Caraluzzi said the Bethel stores' ESLs have saved labor on price marking, though there is some labor needed for maintenance of the tags. What he especially likes about the labels is the pricing consistency they enable between the shelf and the front-end scanner. In the past, he said, "the grocery crew may price one product and go on to the next case and forget to change the pricing gun," which would lead to pricing errors at the register, though the store was found to be 98% accurate in state surveys. He said there's a "huge" value in getting prices right and not upsetting customers.

While Caraluzzi takes advantage of the discounted rates Bozzuto's secures from Concord EFS for processing debit and credit cards, he does not use Bozzuto's frame-relay network, preferring to employ satellite communication with a dish on the roof of his stores provided by Concord EFS and installed by Hughes Network Systems, Germantown, Md. The satellite system, which processes transactions in three to five seconds, is a little less expensive and more secure than frame relay, he said.