Magazine Article | February 1, 2003

Grocery: The Great Retail Testing Ground

Source: Innovative Retail Technologies

No matter what your next IT project is going to be, chances are it's been tested by grocery. To see what you'll be doing in a few years, check out what grocery is doing now.

Integrated Solutions For Retailers, February 2003
Matt Pillar

In retail IT circles, grocery often gets an unfair rap. Maybe it's the margins. They are small. Maybe it's the products. They are, for the most part, necessary staples. Maybe there's nothing too exciting about that. You don't often see the cornerstone of an IT software vendor's marketing campaign built around a successful grocery install. The leather and lace of specialty retail, for instance, has far more sex appeal. But come on, think about it. Grocery has a legacy of pioneering new retail technology. After all, remember when grocery gave us UPCs (universal product codes) and POS scanners? Retail in general is letting grocery feel the pain of ECC (electronic check conversion) as a payment alternative before clamoring for it. The same is true of nearly any technology associated with cards, from customer loyalty to debit. Now, grocery is about to navigate the bleeding edge again with EPCs (electronic product codes) and RF (radio frequency) readers.

Grocers Are Buying Into ECC. Are You?
ECC has many people confused, most notably shoppers. They don't understand why clerks are handing their checks right back to them after running them through a scanner. But hey, let's let grocery deal with the confused consumers. In a couple of years, shoppers will come to expect to have their check handed back to them after a purchase. Then you can adopt ECC in your retail enterprise, too. In the meantime, you'll just miss out on the monstrous savings grocers are realizing, even as you read this. How much does it cost your company to process a check? The benchmark, they say, is 50 cents. ECC is supposed to better than cut that in half. I recently heard that Albertson's processed 234 million checks in 2001. They did it with ECC. You do the math.

If not the first, grocers were at least among the first to offer self-service PIN-based debit and credit payment terminals. At first, these confused shoppers and clerks alike. Now they're everywhere. Grocers invested first and reaped the rewards first.

EPC Is Next
As for the EPC, the FMI (Food Marketing Institute) IT Committee has for some time now been working with MIT's Auto-ID lab, the U.S. Technical Advisory Group, and, subsequently, the International Organization for Standardization to develop them. You're probably aware of the concept. RF-enabled microchips are placed within product containers and read by RF readers at various points in the supply chain. Product movement is tracked and reported in real time. Products don't need to be handled as much this way, and inventory will be dramatically reduced. That's all pretty cool, and once they figure out how to make EPC tags inexpensively, grocery will probably be the first segment of retail to implement them on a wide scale. It might hurt for a while, but grocery will also be the first to benefit. Then, after it becomes reality in the grocery supply chain, grocery shoppers will cruise through scannerless checkout lanes thanks to EPC. Or will they do that at your store first?

This month's MARKETECHNICS show (Dallas Convention Center, February 23-26), put on by the FMI, promises to be a showcase of more technology that will inevitably make its way into general retail - a few years after grocery has ironed out the wrinkles, that is. I hope to see you at the show.