LOOKING AHEAD

If there has been any redeeming feature to the colossal headache known as the year-2000 problem, it has been to spotlight just how important information technology is to all aspects of the supermarket industry.IT has proven its importance not only in traditionally technology-rich areas like the point-of-sale and electronic marketing, but also in the distribution center, where warehouse-management

If there has been any redeeming feature to the colossal headache known as the year-2000 problem, it has been to spotlight just how important information technology is to all aspects of the supermarket industry.

IT has proven its importance not only in traditionally technology-rich areas like the point-of-sale and electronic marketing, but also in the distribution center, where warehouse-management systems make accurate, high-speed picking logistics possible. IT's transportation role is also on the rise, with distribution executives increasingly turning to onboard computers that allow them to pinpoint the location of any truck in their fleet, as well as share important information with the driver.

In addition, IT departments are increasingly being called on not only to gather data but to provide the analysis that makes it meaningful. Programs including in-store merchandising, electronic commerce and category management are relying on a more sophisticated reading of frequent-shopper, item-movement and customer-preference databases, among others.

Leading IT executives shared some of their key technology solution priorities for 1999 with SN.

Bill Homa

chief information officer

Hannaford Bros.

Scarborough, Maine

We're concentrating on a lot of in-store technology. This year we will really be focusing on information collected at point-of-sale to analyze our market basket through data mining.

There's a lot of analysis that needs to be done. At this point, I'm not sure what we are going to glean out of this project. However, it certainly will help us develop strategies in the area of in-store merchandising and execute more marketing strategies at the store level.

We're optimistic about home shopping via the Internet. We've set up a home-shopping program that services the Cambridge, Mass., area. We're still trying to achieve critical mass of orders placed through the home-shopping service. However, we can process four orders or 10,000 orders on the same system.

By combining the service with a dedicated facility for picking, we feel we've got a very scalable model. Once we have proven this business model, we feel secure that we can replicate the Internet home-shopping site anywhere in the world.

We're also continuing to roll out the new asynchronous transfer mode technology to all our stores. ATM is a way to use traditional land-based communications networks [via copper telephone wires] to transmit voice, data and video through one stream. It allows our retail stores to communicate with the home office on an immediate basis.

We hope to have it deployed to all our stores by summer. So far, it's been a very successful implementation. We have already achieved 100 times [our previous] communication capacity, at less cost, at the locations already fitted with ATM.

With this technology, we can share knowledge throughout our stores in a fashion that wouldn't have been possible using regular communications. Employees can check their benefits information from a kiosk, and credit- and debit-card transactions are sped up through ATM. Once we get it out to all our stores, it will be like having all our stores in one building.

As far as Y2K compliance is concerned, our mainframe is already compliant, so we expect to get this finished in the first few months [of 1999].

Becca Anderson

director, public relations

Bashas' Markets

Chandler, Ariz.

Quite frankly, for 1999 we'll really be focusing on learning and getting more comfortable with the technology we rolled out in 1998. One thing we did is we converted to a frequent-shopper card after 18 years on a stamp program -- our bargain-booster program, where our customers would shop and get a stamp for every $5 they spent.

Customers would get six stamps on a card and then they would get discounts, but there was no data-retention ability with the stamp program. Last October we switched to Bashas' Thank You Card, which has proved very popular in our market. We're the fourth chain in the market to have such a card.

During phase one of the program, we got well over 450,000 people signed up for the card in very short order. In 1999, we'll be moving toward phase two of the program, which is making sure our data is reliable and then beginning customer-based marketing using the technology.

In January 1999, we will reintroduce our home-delivery program, where people can order by phone, fax or Internet. We had a program like that for three years, but last May, Shoppers Express went out of business and left us high and dry -- with 48 hours notice. It's taken this long to pull together everything in-house. So it's not so much new technology for 1999, but taking technology that has worked well for us and bringing it in-house.

Cor Karaffa

VP, distribution

Certified Grocers of

California

Los Angeles

We have two major things besides Y2K remediation that we're looking at for 1999. One involves equipment satellite tracking. Currently, we're testing about 100 tractors with onboard computers. We expanded the test from 30 tractors about a month ago. The onboard computer allows the dispatcher to communicate with the tractor electronically. The test has been going on for about four months and will continue until the spring, and then we'll decide whether to roll the technology out to the entire fleet of 270 [tractors]. We're also looking at warehouse-management systems and how to improve order selection. As a wholesaler, it's important for us to have accurate shipments to our customers. We're going to have radio frequency picking technology at one of our divisions by March.

Jay Robinson

director, electronic marketing

Wild Oats Markets

Boulder, Colo.

We are in the process of setting up our point-of-sale system so that each machine communicates in real time with our home office. This way we can get real-time access to our loyalty database, and offer real-time point redemption to customers enrolled in our frequent-shopper program.

We also have made a commitment to a paperless marketing system. We've been getting the e-mail addresses for our frequent-shopper cardholders. The next step is to assign individual cardholders individual promotions.

We are also trying to develop a marketing strategy that will let us use e-mail to alert customers to current products highlighted in the media. For example, we can send an e-mail saying, "A recent New England Journal of Medicine article found a certain food to be beneficial to your health." Then, using e-mail, we can target interested customers, and offer them discounts on these certain items.

We are also in the process of integrating our database of customer information with [our Internet site]. Customers will be able to look at their own buying record, and access the information we're gathering on them. Privacy is a big issue when it comes to loyalty programs. If the customer wants to change, or make additions to their customer profile, they can do that on-line.

Stuart Denrich

VP, information systems

Valu Food

Baltimore

The No. 1 priority starting in 1999 is to fully upgrade our point-of-sale hardware. This will allow us to achieve year-2000 compliance, as well as to pursue electronic marketing initiatives.

In regard to electronic marketing, we expect to achieve two things. The first goal is to implement customer-specific marketing, which can help us in the area of a frequent-shopper program. Second, it will help us come up with better ways to deal with category management.

Through customer-specific marketing we will be able to increase the basket size of what our customers are buying, by doing things like cross merchandising electronically.

For category management, we can use customer data to easily and accurately determine what products the customer wants. We can also more easily understand what the shopping trends are.

As far as progress with our Web page is concerned, this year we are going to use it to market our in-store services. We are going to enable customers to order customized cakes and certain deli items, including fresh meals, on-line.

For example, if customers are planning a party, they can select from an electronic listing of available party platters, place the order on-line, and we will have it ready for them when they come to the store. Eventually, we would like to expand into more e-commerce. That plan looks further into the future than 1999, but it will start there.

Jim Swoboda

director, strategic

business development

and planning

Spartan Stores

Grand Rapids, Mich.

We'll be working on Efficient Consumer Response activities in early 1999. We'll continue using electronic data interchange [to communicate] with manufacturers and look forward to Web-based EDI -- anything to move faster and reduce paper.

In addition, we'll be working on category management, using syndicated data provided by a third-party company, to get sales information for our trading areas. [This type of data] is one step beyond warehouse level [data], but it's not quite store-level data. It's a middle step.

Collaborative planning, forecasting and replenishment is definitely on the radar screen -- we'll have some pilot programs. Hopefully, all of us will have some freed-up information technology resources.

John Sweigart

director, automated retail systems

Redner's Markets Baldon, Pa.

I think that for the next year we'll be making sure everything is as Y2K-compliant as it can be. We're upgrading our point-of-sale system, our time clocks, our human-resources software and our warehouse system. However, a lot of upgrades are still unavailable, but should be by the first quarter of 1999.

We also want to get more into category management.

We are currently doing category management with perishables and will probably move into grocery next. Through category management we'll immediately be able to identify slow-moving items -- dead weight we'll want to get rid of.

We're also replacing all register systems at our QuickShoppe convenience stores and looking at getting our Web site [up and running].

Bob Rippley

president, CEO

Affiliated Food Stores

Tulsa, Okla.

We're initiating a new fully integrated software system that we have worked on for the last year and a half. The system will tie in everything from financial information to the distribution system.

Al Lees Sr.

chairman, CEO

Lees Supermarket

Westport, Mass.

We are off to a good start for 1999. We're year-2000 compliant throughout the store, and we have a solid frequent-shopper program.

In 1999, we're not really going to go ahead with any new programs, but instead we're going to look at what we already have in place. Our goal is to utilize all the data we're managing. That is the next step.

For example, in the last half of 1998, we let our frequent-customer program sort of plateau. Instead, we began to focus on other parts of our business such as in-store events.

In 1999, we'll be running more events instead of promotions. For example, this month we will highlight the Super Bowl and sponsor events like a football-throwing contest for kids. We prefer to do this rather than just market a certain Super Bowl platter for $9.99. It takes a lot more planning and a lot more work, but it's worth it.

During promotions you can end up getting carried away with numbers. However, you are not dealing with numbers, you're dealing with people. If you're not focused, you can lose sight of that.

With regard to deploying new systems, we need to first ask ourselves if the effort and new information systems are really necessary. Are we [installing new technology] to enhance our business? Or are we doing it because it's capable of being done?

A lot of what we're doing in 1999 is not too exciting because we made the decision not to invest too much in new technology, but to go with what we have and to focus on people.

Jack C. Smith

chairman, CEO

K-VA-T Food Stores

Abingdon, Va.

We're working on Y2K diligently and expect to have it completed by June 30, 1999. Our payroll system has already been tested and our accounting system has been written and corrected.

Next year we are going to intensify our category management efforts. It's in its embryonic stage and we have a couple of category managers already. The rest are converted buyers, and they are learning.

We've also completed the installation of a data warehouse, which will be used extensively for category management and with our frequent-shopper program. Daily data will be transmitted to the data warehouse via satellite. We also want to make better use of the data warehouse to reward our frequent shoppers.

We are also looking at an imaging project -- the electronic storage of data. Paper does nothing but incur cost. With electronic data storage we should be able to cut a week off the processing of store credits, and eliminate two people who would have to deal with the paper. And it saves trees.

James Reach

director, information systems

Food Giant

Bessemer, Ala.

My major concern is for upgrades in my point-of-sale system. For the customer, this is the final step to make an impression. We need a fast system that functions with as few keystrokes as possible at the front end, and is accurate.

We'll try upgrading our POS in accordance with year 2000. We're also headed in the direction of a Windows-based front end, where cashiers will utilize touch screens. This version of a POS simplifies the procedure of offering discounts while speeding up credit- and debit-card transactions. A second here, a second there, it adds up.

In order to comply with year 2000 we're planning to have this updated POS system installed by the third quarter of 1999. We're testing everything we use, including conversion files. So far, everything looks good. I don't foresee any big problems but there could always be something that will hit you from the blind side that you never thought of before.