FMI Releases Technology Benchmarking Report
Where would food retailers be without technology? Based on the Food Marketing Institute’s (FMI) Food Retailing Technology Benchmarks 2008 report, they’d probably be in another line of work.
“Retailers are leveraging technology to streamline operations and cut costs, enhance service and meet market demands with increasing precision,” said Pat Walsh, FMI vice president of industry and trade development, in a press release. “It’s become an integral part of the supplier-retailer relationship.”
Frequent shopper programs ranked high on retailers’ list of sales-driving technologies. According to the study, nearly half of retailers said they had a frequent shopper program and that 90 percent of their customers participated in the program.
Frequent shopper programs, respondents claimed, did lead to more frequent and profitable shopping. Nearly 85 percent of those with frequent shopper programs claimed that participants shopped in stores more often than non-card holders. More than three in four of those with programs claimed that they rang up higher gross margins on purchases made by card members.
Retailers are also beginning to make better use of the data obtained through frequent shopper programs to customize product assortments to meet the needs of consumers on a store-by-store basis.
The relationship between retailers and suppliers is also said to be benefiting from the deployment of technology. Today, the vast majority of retailers report using electronic data interchange (EDI) technology to communicate more effectively with suppliers and, in the process, reduce errors. The number of consumers using EDI has jumped from 67 percent in 2005 to 85.7 percent today.
Food stores are also making much greater use of scan-based trading. Today, half of those responding to the FMI study use scan-based trading up from 26 percent just three years ago.
Also seeing growth among retailers is use of the internet for purposes ranging from employee scheduling and training to improving the shopping experience of consumers.
Fewer than 49 percent of retailers are now using a company intranet as a resource for training store-level workers. Seventy percent use their intranet to communication human resource policies and to recruit workers for open jobs.
Discussion Questions: Which technology application(s) do you think are most critical for success in grocery retailing today? Why?
It’s EDI. Can you imagine going back to the bad old days when shipments were accompanied by a physical bill of lading that had to be keyed into one system and then keyed into another? (We used to call that swivelware…typing at one keyboard, swiveling around in the chair and typing at another.)
With luck, the answer to question will be significantly different in a few years, when newer technologies will have taken hold in the razor-thin-margin grocery industry….
Very few grocers use email or their web sites to improve their advertising efficiency. Most supermarkets still throw away their money on flyers and newspaper inserts with all the technology of 1982. Ask any supermarket executive how his/her ad spending differs from 25 years ago. In almost all cases, the media budget is proportionately the same: mainly newspaper, flyers, some TV and some radio. The web site is an afterthought and so’s the email.
Retail technology has moved ahead furthest in supply chain areas and the checkout. We might add price optimization modeling to the list as well. But technologies and techniques to support the stores themselves have lagged.
There’s an implementation gap that needs closing–to support effective merchandising from plan to action, and to accurately monitor and measure shelf conditions 24/7. To be fair, this may be technology-enabled, but it ultimately will depend on new best practice.
Focusing on the supply part of the value chain is easier when trying to cut costs, demonstrate improvement, and increase efficiency. However, there is a limit as to how much improvement can be made without focusing on the demand part of the supply chain. That part is more challenging–to understand consumers in all their diversity, their contradictions, and their decision making processes. However, the companies that do focus on this area and generate insights that can be applied to the supply aspect of their business will make great competitive strides leaving their competition behind.
Potentially, the answer to this question ought to be consumer-facing technologies like loyalty programs, etc. In reality it’s all those supply chain, logistic technologies.
The industry still under utilizes consumer-oriented technologies. At the end of the day, this is still a logistics business not–with the clear exception of a couple of dozen operators–a merchandising business.
No wonder the supply chain stuff is better integrated. You always solve the problem as you define it.