THE FIRST STEP: TALK

Russell Shaw

For independent retailers looking to proceed down the road to Efficient Consumer Response, the best first step may have nothing to do with investing in new systems or technology.

Instead, retailers must undertake a careful self-assessment and detailed evaluation of current business practices and take steps to open communications as fully as possible with their wholesalers.

When it comes to ECR, technology is just the tool to energize and vitalize the process. But the retailer with the most computer power is not necessarily the one who will reap the greatest benefits, said one industry observer.

"There are a lot of parts to ECR that are not necessarily high-ticket technology. Independent retailers are going to need partners and are going to have to work with their wholesalers to achieve the goal," said Michael Sansolo, group vice president of industry relations and education for the Food Marketing Institute, Washington.

In particular, before investing in new technology and applications, retailers must decide which areas and programs specifically they most want to attack and make substantial progress in.

"Retailers have to determine what areas hold the most benefits for them, what their strengths and what their needs are," Sansolo said. "They must understand their place in their consumers' minds, and what makes their stores stand out.

"Their store environments have to be exciting. All of the efficiencies [of ECR] cannot substitute for a good level of customer service. The store environment has to be exciting. ECR cannot replace that," he said.

While resisting the temptation to pursue too many ECR programs at once, retailers must also guard against being lulled into a false sense of security.

That is often especially true for independents operating in communities offering little or no competition from chains.

Sansolo, though, has two arguments against ignoring the changes now sweeping the industry: First, ECR is as much a strategy for getting one's act together internally as it is a game plan to outperform the competition, and second, the competition will eventually come to the retailer's market area.

"Some retailers may be sitting in a small town with no competition and saying, 'Why do I need to change?' But that retailer needs to understand that hostile forces have blown into other markets and quickly created the need for change," Sansolo said. "Kmart and Wal-Mart are operating deep in rural America, and it would be foolhardy to ignore them," he said.

For retailers who want to make progress with ECR, Sansolo's suggestion is that they sit down with their wholesalers and decide which programs and technologies to test first.

"Scanning is obviously critical, but for a one-store operator, the investment may not be justified," Sansolo said. "Retailers have to ask themselves a lot of serious questions about the future of their business."

Also of critical importance in the process is not simply what technologies to acquire first, but making sure the wholesale partner agrees.

"There's an important case for independents sitting down with wholesalers in an effort to make sure the technology is lining up properly," Sansolo said. "If retailers are not scanning, they need to ask how to get around that. "The first and easiest thing to get involved with is electronic data interchange. It is the simplest and one of the least expensive [ECR-related technologies]. It will help retailers get in the habit of ordering right."

Sansolo also stressed the need for retailers to begin implementing category management. "One of the things I recommend first is category management. Parts of category management involve technology, but a lot of it comes down to determining what the retail strategy is all about, how each product fits into the mix, what the price-image connection should be, and how to build the profits," Sansolo said. "That requires retailers to understand their stores, to know which items are profitable and which aren't turning."