FMI 1998 ANNUAL CONVENTION 1998-05-11 (6)

GREG GATTUSO

CHICAGO -- Although the millennium is still 19 months away, major retailers have only about seven months to become "year-2000 compliant," said one supermarket technology expert.

Appearing here last week at the Food Marketing Institute Speaks presentation, Ed Gropp, senior vice president for Ahold Informational Services, told attendees that preparing business computers to recognize the year 2000 is not a complicated procedure, "but it's a humongous amount of work that must be done."

Currently, most computers recognize only the last two digits in dates. When the year changes from "99" to "00" at the turn of the century, computers that have not been properly upgraded will confuse the year 2000 with the year 1900 -- causing system crashes and other problems, according to technologists.

Gropp said Ahold conducted an experiment in which it reset the date in the computers in one of its stores to the year 2000.

"The computers shut down the store in five minutes," he said. "Everything was shut down. The security systems, the temperature controls, the safes, the front end. Everything."

Gropp said retailers must also make sure their suppliers are year-2000 compliant as well, if they want to continue to have a working supply chain.

"We can control our own destiny," Gropp said. "But if our vendors do not have their computers ready, there will be a ripple effect that will be significant."

Gropp said 20% or 30% of Ahold's suppliers have not even responded to a questionnaire asking whether they will be year-2000 compliant at the turn of the century.

Finding technicians to fix the so-called millennium bug will get increasingly harder as the months go by. Those who are available are likely to seek a premium for their services, he noted.

Gropp said the Small Business Administration has posted information about the year-2000 issue on its Web site (www.sba.gov/y2k).

In addition to the year-2000 problem, retailers are also slow to recognize the full benefits of frequent-shopper programs.

Food shoppers use customer-loyalty cards more than any other supermarket program or specialty department -- but only 44% of shoppers said their primary store offers such a program, according to the Washington-based FMI.

"To be honest, we don't know yet how well these programs will work in the long run," said Michael Sansolo, the FMI's senior vice president. "And a very good argument could be made that these programs are not right for every retailer. But has every retailer even debated using them?

Can you afford to stand back and wait when shoppers are clearly showing such interest in them?"

Sansolo said many stores that do offer a frequent-shopper program have yet to realize the full benefits of such programs.

He said that FMI retailer members are most likely to use scan technology to verify an item's price, to track daily item movement and for category management.

"Those are valid uses, obviously," Sansolo said. But he said scan data could also be used to conduct target marketing campaigns, monitor shoppers' buying habits and for computer-assisted ordering.

"We have this potentially powerful technological weapon that can help us build an intimate relationship with consumers, and more than half of our shoppers can't find it."

Retailers should not ignore the Internet either, Sansolo said. Internet usage in the United States has grown to about 56 million, and the fastest-growing user segment is women over the age of 50.

"We don't know yet exactly how the Internet is going to affect the supermarket business -- whether it's finally going to spur home delivery, or meals cooked to order, or ingredients in ice cream that are chosen by the consumer, not the manufacturer," Sansolo said. "But we do know that it has the potential to drastically change our business.

"We do know that more than half of Internet users are in the coveted 18 to 39 age group and we do know that we'd better find the answers before out competitors do."