COUPON SCANNING DELAY EXPECTED AT SMALL CHAINS

CHICAGO -- It could be a long time before most independent and small-chain retailers have the technological ability to scan coupons fully and participate in a more efficient coupon processing system.That was the sobering message delivered by Brian Moore, manager of management information systems application services at Spartan Stores, Grand Rapids, Mich. He spoke at a seminar on coupon management

CHICAGO -- It could be a long time before most independent and small-chain retailers have the technological ability to scan coupons fully and participate in a more efficient coupon processing system.

That was the sobering message delivered by Brian Moore, manager of management information systems application services at Spartan Stores, Grand Rapids, Mich. He spoke at a seminar on coupon management here sponsored by the Grocery Manufacturers of America, Washington.

"Unlike a large chain, we can't dictate that retailers put in [up-to-date scanning systems] throughout their stores. In fact, only about half of the stores we now serve scan at the front end, and they are using 17 different varieties of scanning systems," Moore said.

"Many of these older scanning systems, although they can be upgraded, have no ability to scan coupons anyway," he said.

In all, about 100 of the 500 or so stores Spartan serves today scan coupons, but even they are not collecting family-code data, Moore stressed. "They are only doing it at the manufacturer level. They have no family code files or information whatsoever."

While focusing on Spartan Stores and its retailers specifically, Moore made it clear that the task of moving to a scan-driven coupon processing system will be difficult for the entire independent sector.

"We are talking about wholesalers [and retailers] that represent over half of total retail grocery sales across the country," he said.

In contrast to the highly efficient coupon processing system envisioned for the future, Spartan and its retailers today continue to rely on traditional but laborious handling procedures when it comes to couponing.

For instance, coupons redeemed

at store level now are gathered together and bagged and sent to Spartan to be weighed. Based on that weight, Spartan then estimates the dollar value of the coupons and pays each retailer 75% of that estimated value upfront, Moore said.

The paper coupons then are shipped to a clearinghouse to be physically sorted and counted. Only when that process is completed are individual manufacturers billed. Eventually, Spartan is paid by the manufacturers, and the wholesaler settles up with its retailers and charges them for handling costs.

"So basically when we talk about coupon scanning as a means to get money back faster, [changing] this whole process stands in front of us. We have a long way to go," he said.

That isn't to deny that some progress is being made. For one thing, Spartan is taking steps to instill some "scanning discipline" among its retailers and to promote greater standardization of hardware and software used by retailers.

"It is hard to use the words 'discipline' and 'retail' in the same sentence, but I will here. Spartan is in the process of producing a rather thick document to try to get some [scanning] discipline into the independent retailing environment," Moore said.

One key example of that involves product look-up codes. Many independent and small-chain retailers use different PLU codes for the same items. For an efficient scanning system to take hold, though, PLU codes must be standardized, he said.

Educating retailers not to use the multiple key for different stockkeeping units is another concern. But retailers don't always "understand issues like 'I can't scan one jar of baby food and use the multiple key instead of scanning all the jars,' " Moore said.

"We have a great variety of issues with independent retailers that we are trying to get our hands around. Scanning discipline has to come before coupon scanning or it won't make any difference," he said.

Spartan also is taking substantial steps to promote greater standardization in the types of scanning systems retailers use, Moore said.

"We have taken a number of steps to try to get to the same systems environment that the big chains are in. Instead of 17 scanning vendors, which we were automatically serving and supporting, Spartan has now picked three vendors that we believe are leaders in the field," Moore said.

Despite the wholesaler's commitment to do its part in helping to improve the coupon processing system, Moore did warn that implementing a better system is just one -- and not the most important -- initiative under way today at Spartan.

"With the industry Efficient Consumer Response initiative, Spartan, as a wholesaler, has to take a long hard look at the way we do business. We have to drive costs out of the system between us and the independent retailers we serve, or we are going to see Wal-Mart and Kmart, and now Target, supercenters eating our lunches as far as the grocery business is concerned," Moore said.

"Basically, the issue for us is a matter of priorities. Right now, the emphasis is on re-engineering the supermarket, and that is going to move coupon scanning down on the list of priorities," he said.