WHOLESALE CHANGES 1994
When it comes to Efficient Consumer Response, the majority of wholesalers and retailers agree on one thing: It's time for the independent sector to get on board and move forward.Thus far, the larger chains have dominated the industry's ambitious drive to test and implement an impressive array of ECR initiatives designed to hike efficiency substantially and cut costs.For independent retailers, though,
September 12, 1994
RUSSELL SHAW
When it comes to Efficient Consumer Response, the majority of wholesalers and retailers agree on one thing: It's time for the independent sector to get on board and move forward.
Thus far, the larger chains have dominated the industry's ambitious drive to test and implement an impressive array of ECR initiatives designed to hike efficiency substantially and cut costs.
For independent retailers, though, a host of critical issues, including the financial ability to invest in new technology and participate in comprehensive test programs, have hindered their progress with ECR.
But independents, with considerable help from their wholesale partners, must now begin to make the move into ECR -- or risk falling even further behind in the race for efficiency, wholesalers and retailers interviewed by SN said.
"All of those [ECR initiatives] need to come to fruition," said William Brodbeck, president and chief executive officer of Brodbeck Enterprises, Platteville, Wis.
"It is as terrifically important for independents to avail themselves of the benefits that can accrue from ECR as for the larger chains. I don't think of ECR as something that we have an option on." Brodbeck operates six supermarkets under the Dick's Supermarket banner.
Charles Butson, president of Butson's Supermarkets, a six-store operation in Woodsville, N.H., also stressed the importance of independents making more progress in the area of ECR.
Independent retailers especially need to work more closely with wholesalers to set and achieve common goals in implementing ECR programs, he said.
"My view is that we as an industry have to work with our wholesalers to get involved in ECR," Butson said. "Basically, people can make the argument that it's too expensive, but I have a hard time buying that.
"You have to make the assumption that independent retailers already are scanning, as a baseline capability, and have some of their product-movement data readily available to them. On that basis, you can usually work with the wholesaler to do category management, which is one of the basics of ECR," he said.
Wholesalers also stressed the importance of independents and suppliers working more closely together in this area. The first step, though, often is for retailers to understand what really is at stake.
"Those independents who fully implement ECR will be part of the aggressive, next-generation retailing community in our industry," said Bob Stauth, chairman, president and chief executive officer of Fleming Cos., Oklahoma City. "They should want to know what they have to do to participate in ECR, what the costs are, who is going to pay for it and what the payback will be over what period of time."
Wholesalers also must be proactive in this area, Stauth said. "The wholesaler has to be in the position of determining how we can make [ECR] happen and help the retailer get up to speed."
Donald Bennett, president and CEO of Richfood, Mechanicsville, Va., said educating retailers about the potential benefits of ECR is one of the wholesaler's top priorities today.
"We're trying to educate the independents on what ECR is all about by showing them different things they can do," Bennett said. "We're trying to show them areas they can get involved in that will produce savings for them as well as for us."
One of Richfood's most important tasks is educating retailers about the "different things we can do to eliminate or drive costs out of the system," he said. "One of the biggest areas is convincing retailers that instead of placing three orders a week, they might do better with two. Bigger orders are more efficient for both of us."
Richfood also is striving to help retailers, who typically operate on razor-thin margins, in securing financing they need to develop and roll out ECR programs, Bennett said.
"We've done a lot of work financing front-end systems for our retailers. Now, with 87% of our total sales volume being scanned, we feel we've helped our retailers make a lot of technological headway," he said.
Richfood is now also trying to help interested retailers implement more efficient direct-store-delivery systems and install credit-card authorization terminals at the front end. As one measure of the program's success, more than 50 stores supplied by Richfood now accept credit cards at the checkout.
"We're helping our retailers compete with the big retailers," Bennett said.
The expense of implementing comprehensive ECR programs, though, is not an issue that is going to go away easily. The cost of a comprehensive ECR program can easily exceed $200,000, said John Dixon, chairman and CEO of Roundy's, Pewaukee, Wis.
That is one of the key reasons many independent retailers have moved slowly in this area and are now looking for more help from their wholesalers.
"Our supplier is working on it with us, but it is a bit of a slow process," said Russ Kates, controller of Steele's Markets, a four-store operation based in Fort Collins, Colo. "On our end, we're now about six months away from putting in an enhanced point-of-sale system at our front end. It will be a Super POS system that will provide us with all the information about what's happening at our register and will have a frequent-shopper program attached to it," Kates said.
As for implementing a wider range of ECR programs, however, Kates cited cost as a major impediment. "You are talking about big bucks and a lot of time," Kates said. "Plus, many retailers are not even willing to look at some of these programs unless they can be absolutely sure they work."
Indeed, while many retailers and wholesalers believe that moving ahead with ECR programs is desirable and even necessary, getting to the next level with ECR will not be easy.
Just as with the large chain, numerous issues, including retailer-vendor trust and corporate priorities among suppliers, are hindering progress in many cases. Retailers may be enthusiastic about the ECR concept, but they view much of the information required for implementing ECR as highly proprietary, Butson of Butson's Supermarkets said. Independents, in many cases, simply don't want to share that information with anyone outside their company, including wholesalers.
To move forward, that attitude will have to change as both sides enter into a more comprehensive and open dialogue.
"The decision needs to be made about how much information we, as retailers, are willing to share with our wholesaler," Butson said. "Traditionally, the independent operator has been reluctant to share much information. The buzzword now seems to be 'partnering' -- how you partner with your wholesaler."
The best partnerships in this regard come from establishing a common-goal mindset. "Doing partnering means that we both need to be more open with each other," he said. "We need to get in true talks with our wholesaler to understand where they derive their income.
"The fees we pay to them today only pay part of their cost of doing business," Butson said. "We have to understand if we are going to reduce true costs, the cost of goods, we have to look at what we can do to improve the efficiency of our wholesaler. We view ECR as opening the door to conversations we should have been having a long time ago."
Butson's is implementing several ECR-related projects in partnership with its wholesaler, Supervalu, Minneapolis. "We are talking with them about a variety of issues," Butson said. "For example, there are some small projects aimed at cutting SKU variety. We are asking our wholesaler to carry fewer items so we can become more efficient in the long run and move more product."
Brodbeck of Brodbeck Enterprises cited some progress his operation is making in ECR. Brodbeck's stores were supplied by Scrivner Inc., which was just acquired by Fleming Cos., Oklahoma City.
"We're working with our wholesaler now and are on the edge to moving toward some of these things now," said Brodbeck of his new partnership with Fleming. "Continuous replenishment will be one of the first priorities for us. We hope to move toward that by the end of next year."
Phil Quillin, president of Quillin's, a six-store operation in La Crosse, Wis., said that for independents to fully enter the age of ECR, wholesalers still have to focus more of their attention on the smaller retailers they serve.
"There hasn't been enough education yet on what ECR is or can be for the independent," Quillin said. "The Food Marketing Institute is starting a project to get more independents involved with ECR, but I'm not sure some wholesalers have taken the initiative."
The top priority on the docket may be going on line with Fleming's electronic ordering systems, which could happen within the next couple of months, Quillin said. "I think it is time for all independent retailers to take a long, hard look about how to get involved with ECR," he said. "Maybe you can't jump in 100%, but you can do little bits and pieces of it."
But other independents are much more skeptical about the benefits of plunging too deeply into the ECR waters just yet, despite the initiative's much-touted potential for enhancing long-term operating efficiency.
"It's more of a hazy notion than a concrete goal right now for us," said Kenneth Stroud, chairman, president and CEO of Dahl's Food Markets, Des Moines, Iowa. "We are trying to run our business on a day-to-day basis by taking care of our customers as we see fit right now."
Dahl's has 100% scanning ability in its 14 stores and is involved in a continuous replenishment programs with its wholesaler. But Stroud is hesitant to be lured into doing too much too soon by peer pressure.
"ECR implementation is a slow process. People set goals that they expect you to do next month, but that's not a real-world scenario," he said.
Wayne Rindt, president of Rindt Enterprises, Sheboygan, Wis., is even less enthusiastic about the role of ECR for independents. "From what I've read, the larger players have the resources to devote to it. But the smaller independents don't have the resources to chase it down."
The message wholesalers have for independents, though, is quite succinct: Get with the program.
"I think the ones who are skeptical had better get on the bandwagon and be part of the process of what is going on," said Charles Ramsbacher, vice president of marketing at Nash Finch, Minneapolis, and chairman of the wholesaler's internal committee on ECR.
"There's so much data available that anyone who says they have never heard of ECR or isn't putting it in needs to concentrate on what is going on," added Patrick Quinn, president and CEO of Spartan Stores, Grand Rapids, Mich.