NEW YORK -- The National Association of Chain Drug Stores will continue to push for a universal source tagging system on all retail products, despite findings in a study indicating such a system is not likely to exist in the near future.
Conducted for NACDS by Arthur D. Little Co., Cambridge, Mass., the study on electronic article surveillance technology systems was released at a press conference here last month.
The report concluded that a universal solution does not now exist, nor is technology likely to be developed in the near future, that is capable of universal source tagging of retail products that NACDS is urging manufacturers to develop.
NACDS, however, continues to favor a universal source tagging system that can be implanted at the manufacturer level across all product lines, said Ronald Ziegler, president and chief executive officer of NACDS.
He said NACDS will continue discussions already started with the Food Marketing Institute, the Grocery Manufacturers of America and the National Retail Federation to find a solution.
"We want universal source tagging applied at the manufacturing level, across all products, that retailers can activate and deactivate at the point of sale," said Ziegler.
Ziegler repeatedly referred to shrinkage as a "serious problem" facing the chain drug store industry. He estimated that 2% to 3% of chain drug store sales is lost to shrinkage.
He spoke of a "growing frustration" on the part of the chain drug store industry due to what he described as "the lack of momentum on the part of manufacturers of electronic article surveillance to work out a solution for universal source tagging. We wish we could today announce movement to an industry standard," he said. "Unfortunately, none of the technologies now on the market are able to be universally applied."
Ziegler said the subject was one of "intense discussion and concern" at NACDS's recent board meeting. The vote was unanimous, he said, to "form an interindustry task force to lead the efforts to achieve universal source tagging and prod EAS [electronic article surveillance] manufacturers forward."
EAS manufacturers must "focus on our need," and commit the necessary research funding, said Ziegler, to create a system that can be imbedded into a package across all products. "There's a massive market for this, close to $1 billion."
Currently, "we affix tags in the store," said Jack Futterman, chairman of NACDS and chairman and CEO at Pathmark Stores, Woodbridge, N.J. "We want to be able to affix tags at the manufacturer level and hide the tags. Now the smart ones know which merchandise is tagged."
Manufacturers have a stake, too, said Futterman, because products that are high-theft items are then taken off open selection. If manufacturers help to achieve a universal source tagging system, "We can then reduce prices to consumers," he said.
"What is out there now is not meeting our needs," said Ziegler. While some companies can imbed a chip at the source level and some packaging manufacturers are developing machinery to imbed a chip, he said, this is not the universal source tagging that the industry seeks. Until a universal tagging system is available, retailers should demand of suppliers inventory source tagging on an item-by-item basis, said Ziegler, on those items with the highest shrink rate to start.
Ziegler described NACDS's position as "a wake-up call to EAS manufacturers to establish standards and procedures to meet the industry's needs. If not, there is a consensus in the industry to seek other alternatives," he said.
Retailers currently committed to one system are unlikely to switch systems "with no clear road to go down," said Ziegler.