DALLAS -- Efficient Consumer Response is working, but success does not come cheap.
The grocery industry expects to invest $4.5 billion in ECR activities during 1995, an increase of 50% over the $3 billion it spent in 1994, according to a new industry survey by Kurt Salmon Associates, New York.
That spending increase is anticipated despite a mixed assessment of ECR results by responding companies. Half the manufacturers and brokers, as well as 44% of the wholesalers and retailers, said results of their ECR efforts so far had fallen short of their expectations.
Whether those responses reflect unrealistically high initial expectations, unexpected challenges, or both, the survey results portray a burgeoning of ECR activity. Seven companies in 10 are already implementing it in various ways, and real financial benefits are accruing to the industry.
These results were included in a preview of the ECR Implementation Assessment survey, which was conducted in the fourth quarter of 1994 by KSA. It was presented for the first time at the "ECR A to Z" conference here by KSA's Peter Harding, vice president, and James Horton, national director of retail services. "Commitment to ECR is universal and strong and continuing to grow. Companies are now seeing tangible results in terms of reduced costs," said Harding.
He added, "ECR is fact, not fad. The benefits are real -- sales are up 4.5% to 7.0%, profits are up 4.8% to 9.0%."
Those growth ranges reflect manufacturers' expectations over the course of ECR implementation. The survey question asked manufacturers to estimate what their benefits will be, based on what they know so far, said Harding.
Responding to a similar question, wholesalers and retailers projected average benefits as follows: sales, up 5.4%; gross margin, up 3.4%; warehousing costs, down 5.9%; warehouse inventory, down 13.1%; store labor, down 1.7%; sales per square foot, up 5.7%, and stockkeeping unit counts, down 7.5%.
The KSA survey was conducted by mail in October 1994. A total of 392 manufacturers, brokers, wholesalers, self-distributing chains and independent retailers returned questionnaires. The survey was designed to establish a "baseline" of ECR activity two years into the initiative. KSA has committed to conduct two annual followups in 1995 and 1996.
Publication of the complete survey report is expected in March. It will be available through the 13 trade associations sponsoring the ECR initiative.
"ECR is moving from concept to reality," said Harding, who estimated that between 8% and 9% of grocery products sold in the U.S. during 1994 were accounted for by ECR alliances between manufacturers and retailers. KSA projects that by 1996 fully one-third of all grocery volume will be handled "within ECR partnerships," he added.