Retail: General Merchandising: Retail Industry Holds On Tight

Guardedly optimistic companies use technology to retain customers, cut costs
The moment a transaction is posted, it's available as a digital receipt and can be provided via E-mail to institutional customers. In addition, customers such as school districts can log on to a Smart & Final Web site, pull up current transactions, and submit payments, rather than waiting for a bill to come in the mail. Suppliers, meanwhile, can log on to the system and view sales of their products within the past few minutes and up to the previous seven days.

The system has been particularly effective with produce and other perishables, because current sales information helps buyers know how much to order. "Any time you can get the supplier to be a partner in the supply-chain process, especially with perishables, you end up with a fresher product and everyone wins," Graham says.

Smart & Final's .Net platform is built on standards developed by the National Retail Federal/Association for Retail Technology, such as IX-Retail.

"The concept is to develop standards so that businesses transact either with each other or with customers' systems, and it becomes easier to plug in various applications," Graham says. "You're taking a lot of cost out of processes." NFR/ART and other data standards can make it easier for technologies such as electronic shelf labels and price optimization, he adds.

Smart & Final was scheduled to start an electronic shelf-label pilot in late August, which in its most basic form will eliminate manual shelf-price tagging. But electronic shelf labels will also make it easier to utilize more sophisticated technologies, like price-optimization software that analyzes data such as store sales and published competitive data to determine the best price on products to achieve the highest margins, Graham says.

For traditional grocers, one of the biggest IT efforts this year is involvement in UCCnet, a nonprofit division of the Uniform Code Council, which provides a global online registry of product information. The cooperation stems from UCCnet's potential to help solve one of the retail industry's most expensive problems: inaccurate and inconsistent product descriptions, which drive up supply-chain costs, complicate buying and selling transactions, and impede product launches.

Although some smaller suppliers and retailers are suspicious that UCCnet will benefit only the industry's big guns, hundreds more have signed up for the registry within just the past year. At Pathmark Stores Inc., the UCCnet application is in the final stages of review by the company's legal department.

"We're ready to move forward and sign a contract with UCCnet," says senior VP and CIO Robert Schoening. Pathmark replaced several antiquated IT systems in the past few years, and that put it in the position to benefit from UCCnet, which requires clean data and a fairly modern IT infrastructure. "A lot in my peer group are holding back as much as I did, until they're ready to start utilizing UCCnet," Schoening says.

Pathmark is also looking to IT to help improve the bottom line, testing price-optimization software from DemandTec Inc. The pressure to deliver bottom-line results has been particularly sharp during the slow sales of the past two years. "After 9/11, most everyone has had very soft quarters here in the New York area," Schoening says. "When you get into an economy in which people are concerned, they go back to the basics."

Pathmark also is among a handful of grocery chains forging ahead with self-checkout lanes, which it has installed in about half of its 143 stores. The lanes are particularly well-suited to urban areas where people shop for a small number of items on a frequent basis and want to get in and out of the store quickly. "It's very much a customer-service thing," Schoening says.

Self-checkout also reduces the number of cashiers needed--positions that can be hard to fill, despite high unemployment. "Finding people who want to work Saturdays, Sundays, and evenings is difficult," Schoening says.

Another Northeastern chain, Gristede's Foods Inc., which is owned by Red Apple Group, woos customers with a new online order system. The failure a few years ago of dot-com grocery delivery company Webvan doesn't concern Don Winant, the chain's CIO.

"Our focus and emphasis is to provide groceries in whatever way is convenient to customers," he says. Gristede's also has introduced a customer-loyalty program that includes E-mailing coupons that customers can print out and bring to any of its 52 stores.

In nearly every instance of retail business-technology strategy, customer satisfaction plays a role. With the turbulent economy, there's no telling when healthy sales will return. But for now, technology helps retailers hold their customers--and, it's hoped, profits--while they prepare for growth.

Rank Company Revenue in millions Income (loss)
in millions
56 Supervalu Inc. $19,160 $257 740
185 Saks Inc. $5,911 $24 470
188 Smart & Final Corp. $2,016 $7 80
189 Giant Eagle Inc. $4,415 -- 250
246 Boscov's Department Stores LLC $1,100 -- 115
273 QVC Inc. $4,381 -- 530
283 Wal-Mart Stores Inc. $244,524 $8,039 2,204
303 Sears, Roebuck and Co. $41,366 $1,376 1,335
336 Kmart Corp. $30,762 ($3,219) 710
355 Red Apple Group $2,100 -- 25
382 Pathmark Stores Inc. $3,938 $13 92
389 Big Lots Stores Inc. $3,869 $76 125
392 Burlington Coat Factory Warehouse Corp. $2,697 $65 250
420 Kroger Co. $51,760 $1,205 1,850
473 Raley's Inc. -- -- --
485 Winn-Dixie Stores Inc. $12,168 $239 440
Financial data is from public sources and company supplied.
Revenue is for latest fiscal year.
Employee data is from InformationWeek 500 qualifying survey.

Average portion of revenue spent on IT 1%
Average percentage of industry applications and business
processes that have Web-based front ends
Companies with real-time business processes in place 69%
Hardware purchases 21%
Services or outsourcing 13%
Research and development 2%
Salaries and benefits 31%
Applications 15%
Everything else 18%
Average year-over-year revenue change 15%
Average year-over-year net income change 32%
See year-over-year shifts in business-technology practices for this industry. Compare and contrast this year's data with last year's.

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