In Touch With Retailing

IT’S TIME: Grocers Need to Revolutionize with Technology

By Scott Langdoc, chief technology officer, Fujitsu Transaction Solutions Inc.

To say that the competitive marketplace for grocery retailers is challenging would be a bit of an understatement. Pressure from global mega-marts and high-end boutique chains is squeezing grocer market share from both sides. The ability to compete solely on low price has all but been taken away. While grocers continue to have a competitive edge when it comes to brand value, locations and consumer loyalty, these alone will not be enough to fight off the ever-increasing competitive threats.

Merchants in other retail segments have seen well-placed bets on advanced store technology investments that can have a material effect on competitive differentiation and the overall shopping experience. On the other hand, it’s no secret that grocers have been much slower than other retail segments at investing in new systems. For example, many grocery point-of-sale systems are more than 15 years old and limit the kinds of merchandise and consumer marketing programs that help drive bigger shopping baskets and improved profitability.

While many grocers have broadly deployed advanced technologies – self-checkout, for example – the majority lack the depth and breadth of an investment and deployment strategy that will focus on delivering a differentiated consumer experience. The last three years have seen a powerful wave of new grocery-centric store technologies that can help drive these kinds of aggressive strategies. They include:

GROCERY POS THAT BLENDS EFFICIENCY AND INTERACTION

During the original wave of scanner-based POS systems, grocers usually had one objective in mind – speed of checkout. This need is almost always on the top of consumer priorities when selecting the grocery store where they shop. However, the traditional focus on “scan and bag” has now been augmented with the need to better engage the customer at checkout to help drive up not only their satisfaction, but the size of their market basket.

Advanced POS systems blend a flexible and intuitive cashier interface with a customer “interaction display” that allows the cashier to speed through the checkout process while giving the customer the chance to respond to promotions, tender needs or advertising suggestions. These new POS software platforms can drive 10-15 seconds out of each transaction (saving more than $1.5 million in labor costs for every $1 billion in sales), while increasing branding and loyalty marketing with each and every customer through the check-stand.

DEMAND-DRIVEN LABOR MANAGEMENT

The increased availability of store/SKU-level sales data has enabled much more detailed forecasting and demand planning. This demand insight can now be integrated with labor and task management systems to help match store associate staffing to the forecasted customer traffic.

Managing staffing levels to the variability produced by different promotions at different times of the year can help improve customer service levels and sales. Properly implemented, this can create the perfect scenario of improved customer satisfaction due to staff availability, along with overall lower labor costs because retailers can be more accurate in their staffing requirements.

STRATEGIC SELF-SERVICE

Grocers who have not invested in self-checkout (SCO) technology are quickly realizing that this is no longer a “nice to have,” but a growing customer expectation as a checkout option. New form factors allow for more efficient installations, while easier user interfaces improve customer adoption and employee training. And the leverage of mobile handheld technology is giving more flexibility to staff acting as SCO attendants.

Many of the same benefits from SCO systems at the front-end can be seen with more distributed self-service kiosk technology throughout the store. Applications for deli ordering, wine selecting, and pharmacy information are helping improve store operations and giving customers a choice of how they wish to interact with and/or access information.

IN-AISLE INFLUENCE

While it’s a bit premature to declare the impending death of the Wednesday newspaper grocery advertisement, the real opportunity to drive consumer behavior will happen when the customer is at or near the products in the store. Today, purpose-fit display technology can direct targeted advertising and marketing messages to merchandise categories or even unique SKUs as customers pass by. There is also growing consumer acceptance of cart-based and handheld “shopping assistant” technologies that can give retailers much more targeted opportunities to drive specific promotions or specific customer actions.

CONTACTLESS PAYMENT

With dramatic changes in payment technologies and the ever-increasing cost to retailers to accept electronic payments, merchants have the opportunity to leverage technologies that help drive down the cost of each transaction while enabling a greater interactive relationship with each consumer. New contactless programs from card issuers are simply ways to “pay your merchant fees faster,” but don’t materially improve the consumer relationship. Retailers should look for payment solutions that they can brand and that combine less expensive forms of payment (like ACH) with other customer identification technologies such as stored value and loyalty programs. This capability ensures that the relationship with the customer is driven by the retailer, not the card issuers.

ELECTRONIC PAPER

While most grocers have actively considered electronic shelf labels (ESLs) for improved price accuracy and lower shelf-tagging labor costs, the quick per-store cost calculations that combine tags and infrastructure have driven most away from broad deployments – even when faced with regulatory penalties. The next 12-18 months will see the early availability of electronic paper (or “epaper” for short), that in many situations will be the best solution yet for the eventual replacement of traditional shelf tags and promotional signs. Displayed in monochrome or color, e-paper can be powered by passive transmission; images can be stored for extended periods without any power. The advent of e-paper technology along with improving price and promotion optimization systems will allow grocers much more flexibility and accuracy in their to-the-shelf execution.

RFID

RFID will be slower to take hold than most people thought a few years ago. While RFID will continue to see targeted uses and benefits in supply chain deployments that include inventory management between the back room and the sales floor, the concept of total item-level, embedded tags on every product in grocery is a decade away. Grocers should proceed cautiously and evaluate specific benefits when considering the investment value of any item-level RFID project. While each of these technology investments is beneficial in its own right, it is critical that grocers do not evaluate deploying such systems in a vacuum. Equal time and attention should be paid to the underlying integration and architecture requirements that will allow otherwise disparate systems to act as a single, cohesive grocery selling platform.

When grocers work to implement improved technology that supports and enables more proactive merchandising and marketing strategies, they help create the kind of differentiated shopping experience many customers want. This is not just a strategy of survival – but a powerful plan to gain profitable customers, increase loyalty, and drive better sales and improved margins worthy of the brand value that has taken a long time to establish.