CATCHING ON

Once source tagging establishes a foothold in the supermarket industry, the hidden tags, capable of holding sigificant amounts of data, will be used as a theft deterrent, a merchandising tool and, in the future, for inventory-tracking purposes. However, unless supermarket retailers band together to get this technology into manufacturer assembly lines, source tagging's potential will remain unrealized."If

Once source tagging establishes a foothold in the supermarket industry, the hidden tags, capable of holding sigificant amounts of data, will be used as a theft deterrent, a merchandising tool and, in the future, for inventory-tracking purposes. However, unless supermarket retailers band together to get this technology into manufacturer assembly lines, source tagging's potential will remain unrealized.

"If the [supermarket] industry joins together and puts some pressure on manufacturers to see the benefits, we can make source tagging happen," said Marene Allison, vice president of loss prevention, safety and year 2000 for A&P, Montvale, N.J.

Among the obstacles stalling the progress of source-tagging initiatives is that retailers who have installed electronic article surveillance systems have not done so chainwide. Also, the need to maintain two separate inventory files -- for items that are tagged, and those that are not -- adds complexity to the maintenance task.

While many retailers believe source tagging will eventually become widespread, others remain skeptical, wondering if source tagging may cause more trouble with consumer relationships than they are worth. Some feel false alarms caused by active tags could jeopardize visits from regular customers.

Source tagging, which involves embedding EAS labels into products or product packaging at the point of manufacture, is beginning to take hold in some larger drug and mass merchandise chains, including Kmart Corp., Troy, Mich.; CVS, Woonsocket, R.I.; and Fred Meyer Inc., Portland, Ore.

In the supermarket industry, however, source tagging may not make its mark for another two years, according to loss-prevention executives.

"The supermarket industry is not far along in this area at all," said Allison. "If we got the A&Ps, Krogers, Winn-Dixies, Acmes, American Foods and other retailers together, we would see source tagging happen.

"Part of the issue is that the supermarket industry is not on the same page in choosing a common technology vendor," she added.

A loss-prevention executive at a large, Southwestern retailer echoed Allison's comments. "If we could all agree on what technology we wanted, then we would have the ability to leverage action from our suppliers," said the source, who requested anonymity. "Until that is resolved we will have, for example, Acme and A&P on one side of the fence, and Winn-Dixie on the other," because the different companies are deploying different vendors' systems.

"A commitment from all the 'big guys' to use source tagging would make a difference in encouraging the widespread use of source tags, but the first step is getting all the retailers to also make a commitment to using EAS," said a source from a large Southeastern retailer.

Hannaford Bros., Scarborough, Maine, agrees that not many retailers have hit critical mass in their store installations of EAS, and this could be a barrier to widespread adoption of source tagging.

"We are somewhat of a newcomer to EAS, and only have it installed in about 22 stores," said Mike Harris, vice president of internal audit and loss prevention for Hannaford. "EAS is one tool that could be more effective if it could not be detected by potential shoplifters. The key is to get the manufacturers to see the advantages."

If source tagging becomes more prevalent, companies that are using EAS tags in only some of their stores must consider installing the correct equipment to deactivate live tags, according to the source at the large Southeastern retailer.

"If vendors were to ship us product that is source tagged, and we do not have the right equipment to deactivate it, we will have live tags in our stores and no way to deactivate them," said the source. This could be troublesome for retailers equipped for a different type of EAS technology.

Retailers are particularly concerned about products containing live tags entering their stores and triggering false alarms.

"We cannot afford to have live labels moving in and out of the store without the right equipment in place," he added. "We need to make sure if source tagging takes hold, all our stores can kill those active tags."

The next obstacle facing retailers is keeping more than one inventory file. This challenge will also spill over into the acceptance of source tagging.

"Without a chainwide rollout of EAS, a retailer has to maintain essentially two separate item files -- one for protected, or tagged items, and one for untagged items," said one retailer. "We already have a gigantic item file, and to increase that is a huge undertaking."

Associated Wholesale Grocers, Kansas City, Kan., is concerned that source tagging can harm customer relations.

"For example, let's say there are two stores in an area -- store A has source-tagged product and deactivation equipment, but store B does not have EAS at all," explained Larry Bussow, executive director of member services for Associated Wholesale Grocers. "If customers shop store A and keep hearing beeps as they pass through the exit, and see associates searching packages, customers may opt to shop at store B instead to eliminate the hassle," he explained. Hypothetically, "store B may not have put in the security system so as not to upset the customers. This could give retailer B a competitive advantage."

Moving beyond customer perception, many retailers still look to source tagging for opportunities to better merchandise higher ticket items.

"The beauty of source tagging is that we do not have to lock up our more expensive items," said Hannaford's Harris. "If items are on display more openly, customers will be more willing to buy them. Customers also will no longer need to seek out an associate to help them at the counter. This leads to the possibility of generating additional sales."

Source tagging can provide additional sales as higher theft items move through the front end, rather than out the front door undetected. "For example, we noticed we kept reordering stick deodorant for one store -- it was moving like crazy, but we had no scan data," said the Southeastern retail source.

"Through EAS, we were able to make an apprehension, and the next month we noticed we ordered one-fourth the amount of product," he added. "This may not have increased sales, but eliminating the additional purchases from our distribution center was a savings."

One developing application for source tagging is radio frequency identification, or the storage of item statistics, embedded directly onto RFID technology resembling bar codes. This technology will allow retailers to track inventory through the supply chain, and eliminate the physical counting of products.

"This is a natural extension of some EAS tags, and it will help some technology vendors position themselves for RFID," said A&P's Allison. "EAS is dumb RFID technology at this stage, but RFID is smart technology. It will have the potential to tell retailers item prices, and redefine category management, item movement and item tracking through the supply chain."