PERILS AND PAYOFFS SEEN IN TECHNOLOGY'S FUTURE

DENISE POWER

CHICAGO -- The technology horizon for retailers is riddled with a host of hidden land mines and undiscovered treasures that promise new competitive opportunities.

It's a mixed bag of hope and fear as retailers contemplate the technical implications of year 2000, as well as the accompanying consumer stockpiling that's likely to occur in the fourth quarter.

On the optimistic side, the potential business benefits of exploiting the Internet and customer relationship marketing can't be overestimated.

This unchartered territory was explored by Michael Heschel, executive vice president for information systems and services at Kroger Co., Cincinnati, and Michael Sansolo, senior vice president of the Food Marketing Institute, Washington, during last week's Speaks '99 presentation at the FMI's annual convention here.

"There's never been a period of mankind where 5-year-olds possessed more knowledge of cutting-edge technology than 40-year-olds," said Sansolo, setting up the dramatic changes that have taken place over the years. In 1980, about 9% of supermarkets were equipped with scanning technology; today more than 35% are experimenting with intranets and 19% of supermarkets are developing extranets to communicate with their business partners.

"Technology is reshaping us today; technology promises to reshape us significantly tomorrow," he said.

Heschel agreed that the Internet promises unprecedented opportunities for retailers to communicate effectively with trading partners and with consumers.

"It is very, very exciting," he said. "We haven't seen anything like this. Think about it: you can get any information to anybody, any place at any time. It's fantastic. The Internet is going to have a dramatic impact on the economy of the United States."

Heschel pointed to the Uniform Code Council's developing UCCnet project, which leverages the Internet for business-to-business electronic commerce.

"With ECR, we were unable to really get what I would call a good concentration of electronic data interchange. The reason is because we didn't have the network mechanism to do it. Now we have. We have something called UCCnet, which is part of the Internet, and we'll be able to use that capability for the whole ordering cycle."

Heschel also cited great opportunities for retailers to strengthen their relationships with consumers through information gathered via frequent-shopper programs. In the same breath, he cautioned supermarkets to be judicious in the use of that customer data, so as not to stir up privacy concerns.

"Pay attention to the government," he added. "I think you are going to see some legislation coming that's going to further define what you can and can't do with information."

Heschel, who testified before the Senate in March about the industry's year-2000 readiness, appealed for calm and an end to what he called "media hype" of impending disaster.

"It is a problem," he acknowledged. "It is a definite problem, no question about it, but all the companies I have talked to have addressed it or are addressing it now." FMI research indicates 12.5% of supermarkets have ignored the issue entirely.

Open communication about year-2000 preparedness is a powerful tool to counter the fatalistic scenarios painted by the media.

"We are good at advertising; we are good at promotion; we're good at convincing people. And that's what we have to do with the year 2000 -- convince them that there is not going to be an issue," Heschel said.

"There is an undeniable expectation about 1999," Sansolo noted, "which is no matter how great a message we send to the consumer about our readiness, there will be a little bit of 'preparation' shopping, a little bit of stocking up in the fourth quarter.'

Heschel said that consideration should be factored into contingency planning and the industry is well-accustomed to handling unexpected surges in demand prompted by promotions and natural events.