SN Year in Review 2007: Molecular Management

In 2007, more retailers became in their management practices. Molecular Management is a term coined by Thomas D. Murphy, president of Peak Tech Consulting, a retail technology consultancy based in Colorado Springs. It was the centerpiece of a conference call on retail technology he led in October. Murphy, who was vice president of IT for Kroger from November 1993 to January 2000, used the term to

In 2007, more retailers became “molecular” in their management practices.

Molecular Management is a term coined by Thomas D. Murphy, president of Peak Tech Consulting, a retail technology consultancy based in Colorado Springs. It was the centerpiece of a conference call on retail technology he led in October.

Murphy, who was vice president of IT for Kroger from November 1993 to January 2000, used the term to describe a style of management — practiced by such industry leaders as Safeway, Kroger and Tesco — that relies on “real-time or near-real-time data” to support marketing, inventory, pricing and other decisions. The data generally encompasses POS transactions, often tied to individual customers who partake in a retailer's loyalty program, but it could include other kinds of product and customer information.

U.K.-based Tesco, which shook the food retailing landscape by opening its first U.S. stores in the Southwest in November, has gained fame and fortune in the U.K. for its adroit use of loyalty-card customer data. Working with its partly owned marketing partner Dunnhumby, Tesco figured out how to mine the data to deliver finely tailored offers to its customers. It has not started its U.S. operation with a loyalty card program, but industry observers predict it will add loyalty marketing as it gains a foothold in this marketplace.

One data-based system that Tesco has started using in the U.S. is a homegrown continuous-replenishment application that allows it to generate detailed orders for each of its stores. That system supports Tesco's supply chain practices, such as frequent store deliveries.

Meanwhile, Kroger is pursuing its own customer-data-driven programs in collaboration with Dunnhumby's U.S. division. And Safeway is collecting and leveraging a wide range of customer data to deliver more targeted assortments, prices and promotions to its lifestyle stores, which recently reached the 1,000-store threshold. According to several observers, Safeway launched a program this year called “Optura” that aims to share customer data with suppliers for the sake of making assortments and promotions more attractive to shoppers.

Data-driven, molecular-management programs are not confined to the behemoths of the food retailing industry. K-VA-T Food Stores, a 92-store operator based in Abingdon, Va., is completing a major overhaul of its Teradata data warehouse system to leverage more “granular” transaction data that offers “more insight into what's happening in our stores,” Paul Widener, director of information services for K-VA-T, said in October.

Much of the data driving retailers' decisions comes from scanning bar codes on products and coupons at the POS. In 2007, the industry made strides in developing a new bar code, the GS1 DataBar, based on a 14-digit number scheme. The DataBar is being groomed for use on coupons as well as perishable items.

Earlier this month, the Joint Industry Coupon Committee (JICC) — representing the Grocery Manufacturers Association and the Food Marketing Institute — announced the release of specifications for the use of the DataBar on coupons.