Savvy retailers are no longer relying on gut instinct to decide if a particular product is delivering the right benefits or a category is performing as well as possible.
Through the use of more powerful databases and decision-support tools, executives are cutting research time and pinpointing new areas of opportunity. The benefits of decision support are especially useful in refining and improving category management initiatives and promotional efforts, retailers told SN.
"We need the data to establish and analyze relationships between customers, associates, products, pricing, promotions, item movement, and store performance," said Paul Nicholson, vice president of finance and management information systems for Pay Less Supermarkets, Anderson, Ind. "Understanding these relationships, and how they relate to your business, is what really drives the decision-making process."
Bozzuto's, Stamford, Conn., believes that the foundation of decision support is based on the relationship of data, but the user needs to know how to use that data.
"The database-management system and database design are critical to effective use in answering different business questions," said John Keeley, director of information systems for Bozzuto's. "Just as important is the internal user of the system. Their knowledge of both the business and technology will make or break the success of a project."
According to the fourth annual State of the Industry Report on Supermarket Technology, almost 33% of supermarket companies are launching executive information systems, or decision-support connections for top-level managers this year, an increase from 28% in 1997.
Executives use a personal computer to query a database filled with item movement data acquired through front-end scanning, frequent-shopper purchase history, and warehouse and direct-store-delivery shipments. The data is analyzed and put to use to aid in decisions that will better direct business operations.
One area that consistently tops the list of priorities among retailers using decision-support tools is category management.
"Retailers can examine department sales data to get information on the percentage of sales in each department, and look at the store mix of products when it comes to monitoring category management," said Mike Brown, manager of retail systems for United Grocers, Portland, Ore.
A major Midwestern retailer is using decision support to track the performance of new items within a category. "We use historical data when we introduce new items in our stores," said a source who requested anonymity. "We need to track the item closely to see if its performance is meeting expectations.
"Often, execution at store level is problematic, so we use decision support to identify the areas where execution of the item on the shelf is not consistent with the objective of where the item should be or how it is priced," he said. "The answers we derive from our stored data let us take action to improve the power of the item, or take it off the shelves."
Decision-support tools are also now playing a stronger role in promotions.
"Determining which products to promote, when to run the special and how to effectively discount an item is fueled by what is learned through past instances," said Pay Less' Nicholson.
For example, if an item was originally sold at 99 cents, and in the last few promotions was reduced to 89 cents, decision-support analysis is allowing retailers to examine the activity during those promotions.
"We also combine other factors into the mix of our analysis, like did we advertise the product, did we do tie-in displays, or did our competitors advertise the item," he added. "Having that history at our fingertips gives us a great insight to what will happen in the way of movement and sales, and what we want to achieve. But to achieve that end, we need to know and understand the factors that could affect the outcome."
Paw Paw Shopping Center, Paw Paw, Mich., is now more aware of the factors that affect its promotions via internal analysis, especially in areas the retailer may have overlooked in the past.
"We are doing a better job on planning our promotions, and using the best elements to plan them," said Marvin Imus, vice president and owner of Paw Paw. "Several promotions in the past we thought had failed through poor planning, when in fact a lower-than-expected response was not related to the promotion itself."
For example, Imus reported that a closed road near the store was hindering the sales of a specific week's items. "This is something that we had no control over, but when analyzing the factors, we can stay alert and not hamper the decision-making ability to manage our promotions and the store."
While a majority of supermarket executives are drilling down to data that resides on mainframe and client-server architecture, they anxiously await the next generation of decision support in the form of Web browsers.
United Grocers, which is exploring how to make its leap into decision support, plans to leapfrog over a structured system, and instead use the flexibility of Web-based technology.
"We are in the process of developing a better database model and are looking to use Web-based applets, or small applications that run downloads from the server, and display results graphically," said United's Brown. "For us to use a system through a client server would eventually become obsolete. Also, it would not be as graphically enhanced, as Web-based applications show analysis results in graphics rather than relying on text."
The benefits of using browser technology to run decision-support tools or programs is that the data warehouse is available centrally to all users. "Any store manager with a browser and a password can use a PC to analyze how the store is performing, by department, item or as a unit," said the anonymous source. "A Web browser brings a data warehouse in-house, and makes it centrally located."
While sources told SN this technology is still evolving, some report that Web browser-based intelligence could be a reality within six to 12 months.
"This will allow executives who are on the road to go through the Internet or their intranet connection to monitor sales and additional information as it pertains to their daily business obligations," said United's Brown. "This will give the industry a lot more functionality to bring their business decisions to the market, and execute them fairly quickly."
One area of concern for some retailers is the possible trouble that follows the year 2000.
"What is scaring me is that this industry is so integrated with companies and businesses around the world globally, that we can have all of our ducks in a row and have all of our internal systems compliant, but we can still be taken down by one partner that did not pay as much attention," said Paw Paw's Imus.
"By having a noncompliant partner, our internal data could be erroneous, making our decision-making processes inaccurate," he added. "We have huge databases that we have built with disciplines, and this is critical for our business as a whole. If we start making reactions to inaccurate or incomplete data we can cause serious damage to ourselves."
