NORTHLAKE, Ill. -- Converting to standardized codes can increase profits for both meat and produce departments, according to Robert DiPiazza, vice president of produce operations at Dominick's Finer Foods here.
DiPiazza provided a graphic example from his own chain to prove that standardized product look-up codes, applied by suppliers, can lead to big financial rewards. He spoke at the recent Joint Industry Conference on Efficient Consumer Response held in Dallas.
Dominick's conducted a one-week experiment that focused on how red delicious apples were selling in nine stores. In all units large apples sold at 20 cents more than medium apples.
The study split the stores into three groups: group A used no labels to distinguish size difference but instead relied on cashier judgment, group B labeled the large apples at store level and group C stores carried all supplier-labeled PLUs from an automatic labeling machine.
The chain's management attempted to study how accurate the checkouts were compared to data detailing what apples were shipped to the stores. The findings were revealing:
For group A, the nonlabeled products, cashiers were only accurate 42% of the time. For group B, store-labeled products, the accuracy rating rose to 60%. DiPiazza said the lack of a higher percentage here could probably be attributed to the pitfalls of using store labeling guns and the limitations of store employees who conduct the labeling. But group C, which was supplier-labeled products, led to a 92% accuracy rating.
The financial rewards were even more impressive. The savings involved with using source-labeled products vs. apples without labels was $112 per week in each store. The savings reaped from using source-labeled vs. store-labeled products was almost $100: $74 from improved checkout accuracy and $25 from eliminating the need for in-store labeling.
"These savings are for one item in one store for one week," DiPiazza stressed. "Now I'll let you extend that out for your business. I'll tell you we have many categories that are difficult to distinguish: 26 varieties of peppers, 18 varieties of tomatoes, distinguishing seedless from Florida tangerines. Standardized labels can help us deal with that identification challenge."