Nearly half of the supermarket industry's retailers and wholesalers, 45.5%, will be involved in test programs on the Internet in 1996, up from just 12.7% last year, a new survey reveals.
The vast majority of companies said their management information systems budgets will increase in 1996, with 24.5% citing budget jumps of 11% to 25%, and 7.1% even larger hikes of 25% or more.
Category management will remain the top program priority among distributors in 1996, as it was in 1995. Communications networks, distribution and warehousing, and frequent shopper programs all will command substantially heightened attention in the year ahead.
Almost one-third of companies, 29.9%, said efficient promotion -- not efficient replenishment -- will top their Efficient Consumer Response agenda in 1996. In contrast, only 18.4% chose efficient promotion as their No. 1 ECR priority for 1995.
More than half of retailers and wholesalers, 53.5%, will test or launch an executive information system in 1996, compared with 21.8% in 1995.
Those are just some of the key findings and highlights of SN's second-annual State of the Industry Report on Supermarket Technology.
The comprehensive report is based on a nationwide survey of senior executives at 103 supermarket chains, independent operators and wholesalers. The companies combined accounted for more than $149 billion in annual sales in 1995 and included 36 companies with sales of $1 billion or more and nine with sales of $5 billion or more.
The survey was developed by SN Productivity section editors and conducted by the Market Research Department at Fairchild Publications, New York, which publishes SN.
The report paints a sharp picture of the critical issues and sweeping changes now transforming food industry practices, including advances in computer systems architecture, progress in implementing ECR, and predictions about the future roles of networks and on-line services.
One clear sign of technology's perceived importance to the supermarket industry's success is the overwhelming majority of survey respondents who reported IS department budget increases for 1996.
Almost one-quarter of survey respondents, 24.5%, said their 1996 IS department budgets will increase by 11% to 25%, while another 7.1% reported steep budget increases of more than 25%. In addition, 49% of survey respondents said their IS budgets will increase by 1% to 10%. Large numbers of both retailers and wholesalers reported IS budget increases for the year ahead.
Budgets for IS departments at 13.3% of companies, on the other hand, will remain the same 1996, while declining at 6.1%.
Top Priorities
The survey revealed some sweeping changes in priorities for 1996.
While category management remained at the top of the list overall for the second year in a row, selected by 27.2% of respondents as their No. 1 priority, they also pointed to a number of other areas for increased emphasis in 1996.
Communications networks jumped to the No. 2 spot for 1996, cited as a top priority by 23.8% of survey respondents. In 1995, in comparison, only 11.1% of respondents listed communications networks as a top priority.
Distribution and warehousing also jumped much higher on the list, especially among retail chains. Overall, 19.8% of survey respondents cited distribution and warehousing as a top priority for 1996, up from just 10.1% in 1995. Much of that increase came from retail chains, 17.9% of which listed it as a top priority for the current year, compared with just 5.3% for 1995.
Frequent shopper programs also will command substantially more attention in 1996. The innovative programs were cited as a top priority for 1996 by 17.8% of survey respondents, compared with only 11.1% of respondents in 1995.
Another area that showed a strikingly strong jump in interest was executive information systems, listed by 12.9% of companies, including 14.1% of chains and 8.7% of wholesalers and independents, as a priority in 1996. Just 3% of total respondents -- and no wholesalers or independents -- listed EIS as a priority for 1995.
Other important areas that will receive top priority billing in 1996 include point-of-sale systems, cited by 16.8% of survey respondents; other ECR initiatives, listed by 13.9% of respondents; systems integration and electronic payment options, each by 8.9%, and client-server architecture and data warehousing, each by 7.9%. Survey participants were allowed to select more than one answer.
Internet Action
One of the most sweeping changes in supermarket industry focus, as in virtually all business segments, involved the surge in on-line interest and activities.
While only 12.7% of supermarket companies said they were involved in any test program on the Internet in 1995, 45.5% will tap into the international computer network at least to some degree this year, with interest and intent divided almost equally between retailers and wholesalers.
In addition, when asked how important the Internet or commercial on-line services will become in the food industry by the turn of the century, the vast majority of survey respondents, 91%, said either "extremely" or "very important." Again, retail chains and wholesalers and independents cited similar high expectations about the future importance of on-line vehicles.
When asked whether they planned to use on-line systems primarily for either business communications or consumer-oriented programs, nearly two-thirds of retailers and wholesalers, 61.6%, said both, while about quarter, 22.2%, said business communications and 16.2% listed consumer programs.
With regard to computerized home shopping services, a large group of respondents, 89.2%, said they expect such programs to play either an "extremely" or a "very important" role in the food industry by the year 2000.
ECR Progress
ECR remains a hot topic among food industry executives, but the areas of emphasis within the broad initiative are starting to change and expand.
Efficient replenishment still reigns as the No. 1 ECR program priority for 1996, cited by 54% of all respondents, including 78.9% of wholesalers and independents. But retailers and wholesalers are now paying increased attention to another core ECR initiative, efficient promotion.
For 1995, for example, 62.1% of survey respondents, including 90.5% of wholesalers and independents, placed efficient replenishment at the top of their ECR priority lists. Only 18.4% cited efficient promotion.
In 1996, almost one-third of
respondents, 29.9%, including 32.8% of retail chains and 20% of wholesalers and independents, placed efficient promotion at the top of their ECR program priority list.
The percentage of all distributors citing efficient store assortment remained the same for both years at 13.8%, while the percentage listing efficient product introduction dropped from 5.7% for 1995 to 2.3% for 1996.
When asked about efficient replenishment programs specifically, more than one-third, 35.3%, of respondents, including 58.3% of wholesalers and 28.2% of retailers, said they are now testing a program, while an additional 15.7%, including 17.9% of chains and 8.3% of wholesalers, are involved in substantial rollouts. Almost half, 49%, are not involved at all.
Of those involved in an efficient replenishment program, nearly two-thirds, 63.8%, rated it as moderately effective, including 78.6% of wholesalers and 57.6% of retail chains. More than one-quarter, 27.7%, characterized it as highly successful.
In the key area of category management, 60.2% of respondents said they were beginning to implement a program, while another 27.2% said they were well along the road to rolling it out. Only 12.6% of companies said they were not involved with category management at all.
Of those firms that are involved, the vast majority, 78.1%, rate their category management programs as moderately successful, while nearly one-fifth, 18.7%, termed it highly successful. Only 3.1% said it was unsuccessful.
Systems Surge
In the fast evolving area of computer architecture, the trend toward upgrading front-end point-of-sale systems, migrating to client-server environments and embracing open-systems technology will continue and, in most cases, intensify in 1996.
When asked whether they will substantially upgrade front-end POS systems, a striking 75% of respondents indicated they would do so in at least some of their stores in 1996, a jump from just over 67% for 1995.
In addition, the percentage of distributors who said they will revamp their front-end POS systems in most or all of their stores climbed to 17.7%, up from 15.3% for 1995.
Migration to client-server computing environments is also gaining much more momentum. A steep 87.6% of survey respondents said they will migrate to client-server platforms to some degree in 1996, a major increase from about 63% in 1995.
Even more striking, the percentage of distributors who said they will implement client-server computing platforms to a large degree in 1996 at their companies soared to nearly 26%, a large hike from just 10.2% for 1995. Only 12.4% of survey respondents said they had no plans to move toward a client-server environment in 1996, compared with 36.7% for 1995.
The pursuit of open systems also is expected to pick up even more steam in 1996. Nearly 17% of retailers and wholesalers said more than 75% of their computer applications will run on open-systems hardware in 1996, compared with about 10% of survey respondents for 1995.
At the other end of the spectrum, only 12.6% of respondents said they had no plans to run applications on open systems at their companies in 1996, a marked decrease from the 33.7% of distributors who reported having no open-systems involvement during 1995.
In one of the major new surges of computer involvement in the supermarket industry, nearly 54% of retailers and wholesalers said they plan to test or use an executive information system at their companies in 1996. In contrast, less than 22% of survey respondents said they tested or used an EIS during 1995.
Hot Issues
Retailers and wholesalers were also asked to rate the importance of several issues facing the supermarket industry.
Distributors were asked, for instance, how important the issue of scan data integrity
is today. An overwhelming 99% of survey respondents said it was extremely or highly important issue.
When asked to rate the issue of pricing verification, 93.1% said it was extremely or highly important. Another 5.9% said pricing verification was moderately important today, and 1% said it was only marginally important.
With regard to store security, 25% of survey respondents said it was an extremely important issue for the industry today and 40% characterized it as highly important. An additional 30% rated store security as a moderately important issue, while 5% said it was marginally important.
In the emerging area of data warehousing, 17% of respondents, including 19.7% of retail chains and 8.3% of wholesalers and independents, said it was an extremely important issue.
Another 29%, including 23.7% of chains and 45.9% of wholesalers and independents, rated it highly important. An additional 37% characterized it as moderately important; 13% said it was marginally important and 4% termed it not important at all.
TOP PRIORITIES IN 1995
In 1995, category management reigned supreme among MIS/IS priorities, followed by point-of-sale systems, systems integration and electronic payment options.
Which areas commanded the highest priorities at your company in 1995?
Category Management
TOTAL 32%
CHAINS 38%
WHOLESALERS/INDEPENDENTS 13%
Point-of-Sale Systems
TOTAL 22%
CHAINS 25%
WHOLESALERS/INDEPENDENTS 13%
Systems Integration
TOTAL 17%
CHAINS 17%
WHOLESALERS/INDEPENDENTS 17%
Electronic Payment Options
TOTAL 12%
CHAINS 16%
Client-Server Architecture
TOTAL 11%
CHAINS 9%
WHOLESALERS/INDEPENDENTS 17%
Communications Networks
TOTAL 11%
CHAINS 15%
Frequent Shopper Programs
TOTAL 11%
CHAINS 12%
WHOLESALERS/INDEPENDENTS 9%
Distribution/Warehousing
TOTAL 10%
CHAINS 5%
WHOLESALERS/INDEPENDENTS 26%
Other ECR Initiatives
TOTAL 10%
CHAINS 9%
WHOLESALERS/INDEPENDENTS 13%
Executive Information Systems
TOTAL 3%
CHAINS 4
Data Warehousing
TOTAL 2%
CHAINS 3%
Loss-Prevention Systems
TOTAL 2%
CHAINS 3%
NEW PRIORITIES FOR 1996
For 1996, category management is still at the top of the priority list, but communications networks, distribution/warehousing and frequent shopper programs all shot up markedly in importance. Executive information systems also emerged as a hot new area of focus.
Which areas will command the highest priorities at your company in 1996?
Category Management
TOTAL 28%
CHAINS 30%
WHOLESALERS/INDEPENDENTS 22%
Point-of-Sale Systems
TOTAL 17%
CHAINS 18%
WHOLESALERS/INDEPENDENTS 13%
Systems Integration
TOTAL 9%
CHAINS 10%
WHOLESALERS/INDEPENDENTS 4%
Electronic Payment Options
TOTAL 9%
CHAINS 5%
WHOLESALERS/INDEPENDENTS 22%
Client-Server Architecture
TOTAL 8%
CHAINS 10%
Communications Networks
TOTAL 24%
CHAINS 25%
WHOLESALERS/INDEPENDENTS 17%
Frequent Shopper Programs
TOTAL 18%
CHAINS 21%
WHOLESALERS/INDEPENDENTS 9%
Distribution/Warehousing
TOTAL 20%
CHAINS 18%
WHOLESALERS/INDEPENDENTS 26%
Other ECR Initiatives
TOTAL 14%
CHAINS 15%
WHOLESALERS/INDEPENDENTS 9%
Executive Information Systems
TOTAL 13%
CHAINS 14%
WHOLESALERS/INDEPENDENTS 9%
Data Warehousing
TOTAL 8%
CHAINS 9%
WHOLESALERS/INDEPENDENTS 4%
Loss-Prevention Systems
TOTAL 2%
CHAINS 3%
FRONT-END PROGRESS
A strong 75% of respondents said they will upgrade their front-end point-of-sale systems in some or all stores in 1996, up from 67% in 1995.
Did you substantially upgrade your front-end point-of-sale system in 1995?
TOTAL
In Most or All Stores 15%
In Some Stores 52%
In No Stores 33%
CHAINS
In Most or All Stores 19%
In Some Stores 46%
In No Stores 35%
WHOLESALERS/INDEPENDENTS
In Most or All Stores 4%
In Some Stores 70%
In No Stores 26%
Will you upgrade your front-end point-of-sale system in 1996?
TOTAL
In Most or All Stores 18%
In Some Stores 57%
In No Stores 25%
CHAINS
In Most or All Stores 21%
In Some Stores 52%
In No Stores 27%
WHOLESALERS/INDEPENDENTS
In Most or All Stores 9%
In Some Stores 74%
In No Stores 17%
MIS BUDGET: ON THE RISE
More than 80% of respondents said their information systems budgets will increase in 1996, with 7.1% citing jumps of more than 25%.
How will your MIS/IS Budget Change in 1996?
TOTAL
Increase 1% to 10% 49%
Increase 11% to 25% 25%
Increase More Than 25% 7%
Remain the Same 13%
Decrease 6%
CHAINS
Increase 1% to 10% 47%
Increase 11% to 25% 24%
Increase More Than 25% 7%
Remain the Same 15%
Decrease 7%
WHOLESALERS/INDEPENDENTS
Increase 1% to 10% 57%
Increase 11% to 25% 26%
Increase More Than 25% 4%
Remain the Same 9%
Decrease 4%
CLIENT-SERVER MIGRATION
Client-server computing continues to gain in importance. Nearly 88% of respondents said they will migrate to client-server platforms to a large or limited degree in 1996, a sharp increase from about 63% in 1995.
To what degree did your company switch to a client-server architecture in 1995?
1995
TOTAL
To a Large Degree 10%
To a Limited Degree 53%
Not at All 37%
CHAINS
To a Large Degree 9%
To a Limited Degree 58%
Not at All 33%
WHOLESALERS/INDEPENDENTS
To a Large Degree 13%
To a Limited Degree 39%
Not at All 48%
To what extent will you in 1996?
1996
TOTAL
To a Large Degree 26%
To a Limited Degree 62%
Not at All 12%
CHAINS
To a Large Degree 26%
To a Limited Degree 63%
Not at All 11%
WHOLESALERS/INDEPENDENTS
To a Large Degree 24%
To a Limited Degree 57%
Not at All 19%
PURSUIT OF OPEN SYSTEMS
About 45% of companies said they will run at least 25% of their applications on open systems in 1996.
To what extent did your company switch from "legacy" to open systems-driven applications in 1995?
1995
TOTAL
More Than 75% 10%
From 50% to 75% 6%
From 25% to 49% 7%
From 1% to 24% 43%
No Programs 34%
CHAINS
More Than 75% 12%
From 50% to 75% 7%
From 25% to 49% 7%
From 1% to 24% 44%
No Programs 30%
WHOLESALERS/INDEPENDENTS
More Than 75% 4%
From 50% to 75% 4%
From 25% to 49% 9%
From 1% to 24% 39%
No Programs 44%
To what extent will you in 1996?
1996
TOTAL
More Than 75% 17%
From 50% to 75% 10%
From 25% to 49% 17%
From 1% to 24% 43%
No Programs 13%
CHAINS
More Than 75% 19%
From 50% to 75% 10%
From 25% to 49% 18%
From 1% to 24% 42%
No Programs 11%
WHOLESALERS/INDEPENDENTS
More Than 75% 9%
From 50% to 75% 14%
From 25% to 49% 14%
From 1% to 24% 45%
No Programs 18%
EIS INTEREST
Less than one-quarter of companies tested or used an executive information system in 1995, but that percentage will soar to more than 53% in 1996.
Did your company test or use an executive information system in 1995?
TOTAL
yes 22%
no 78%
CHAINS
yes 22%
no 78%
WHOLESALERS/INDEPENDENTS
yes 21%
no 79%
Will you in 1996?
TOTAL
yes 53%
no 47%
CHAINS
yes 53%
no 47%
WHOLESALERS/INDEPENDENTS
yes 56%
no 44%
THE EMPHASIS IN ECR
Efficient replenishment still commands the most attention among major Efficient Consumer Response programs. But a striking 29.9% of respondents said efficient promotion will be a top ECR priority in 1996.
In the area of ECR, which of the following initiatives had the highest priority in 1995? Efficient Response
TOTAL 62%
CHAINS 53%
WHOLESALERS/INDEPENDENTS 90%
Efficient Promotion
TOTAL 18%
CHAINS 21%
WHOLESALERS/INDEPENDENTS 10%
Efficient Store Assortment
TOTAL 14%
CHAINS 18%
Efficient Product Introduction
TOTAL 6%
CHAINS 8%
Which will in 1996?
Efficient Response
TOTAL 54%
CHAINS 48%
WHOLESALERS/INDEPENDENTS 75%
Efficient Promotion
TOTAL 30%
CHAINS 33%
WHOLESALERS/INDEPENDENTS 20%
Efficient Store Assortment
TOTAL 14%
CHAINS 16%
WHOLESALERS/INDEPENDENTS 5%
Efficient Product Introduction
TOTAL 2%
CHAINS 3%
EMBRACING CATEGORY MANAGEMENT
Nearly 90% of companies said they were beginning or well along the road toward implementing category management practices.
To what extent is your company involved in category management?
TOTAL
Beginning to Implement It 60%
Well on the Way to Implementation 27%
Not Involved at All 13%
CHAINS
Beginning to Implement It 63%
Well on the Way to Implementation 29%
Not Involved at All 8%
WHOLESALERS/INDEPENDENTS
Beginning to Implement It 50%
Well on the Way to Implementation 21%
Not Involved at All 29%
GAUGING ITS SUCCESS
The vast majority of companies involved in category management characterized their efforts as highly or moderately successful.
How would you rate the effectiveness of your category management program?
TOTAL
Highly Successful 19%
Moderately Successful 78%
Unsuccessful 3%
CHAINS
Highly Successful 19%
Moderately Successful 79%
Unsuccessful 2%
WHOLESALERS/INDEPENDENTS
Highly Successful 20%
Moderately Successful 70%
Unsuccessful 10%
INTERNET INTENT
In 1995, only 12.7% of companies were involved in any test programs on the Internet. This year 45.5% will tap into the vast computer network.
Was your company involved in any test programs on the Internet in 1995?
TOTAL
yes 13%
no 87%
CHAINS
yes 14%
no 86%
WHOLESALERS/INDEPENDENTS
yes 8%
no 92%
Will you be in 1996?
TOTAL
yes 46%
no 54%
CHAINS
yes 45%
no 55%
WHOLESALERS/INDEPENDENTS
yes 46%
no 54%
PREDICTING THE FUTURE
More than 91% of companies expect on-line services to be extremely or highly important by the year 2000.
How important will the Internet or commercial on-line services become in the food industry by the year 2000?
TOTAL
Extremely Important 22%
Very Important 69%
Not Important 9%
CHAINS
Extremely Important 21%
Very Important 69%
Not Important 10%
WHOLESALERS/INDEPENDENTS
Extremely Important 26%
Very Important 70%
Not Important 4%
A FUTURE FOR COMPUTERIZED SHOPPING
Nearly one-quarter of respondents said home shopping services will be extremely important by the year 2000, and about two-thirds said it will be very important.
How important will alternative home shopping services, such as computerized ordering, become by the year 2000?
TOTAL
Extremely Important 24%
Very Important 65%
Not Important 11%
CHAINS
Extremely Important 22%
Very Important 68%
Not Important 10%
WHOLESALERS/INDEPENDENTS
Extremely Important 33%
Very Important 54%
Not Important 13%
ON-LINE TARGETS
Most respondents, 61.6%, said on-line services would be used for both business communications and consumer programs.
What will these on-line services be used for primarily?
TOTAL
Business Communications 22%
Consumer Programs or Services 16%
Both 62%
CHAINS
Business Communications 25%
Consumer Programs or Services 19%
Both 56%
WHOLESALERS/INDEPENDENTS
Business Communications 13%
Consumer Programs or Services 8%
Both 79%
EMBRACING CONTINUOUS REPLENISHMENT
Just over half of all companies surveyed are testing or rolling out continuous replenishment programs.
To what extent are you involved in continuous replenishment?
TOTAL
Testing 35%
Substantial Rollout 16%
Not Involved at All 49%
CHAINS
Testing 28%
Substantial Rollout 18%
Not Involved at All 54%
WHOLESALERS/INDEPENDENTS
Testing 33%
Substantial Rollout 8%
Not Involved at All 59%
GAUGING ITS SUCCESS
More than 27% of companies involved in continuous replenishment characterized their programs as highly successful, and nearly 64% rated them as moderately successful.
How would you rate the effectiveness of your continuous replenishment program?
TOTAL
Highly Successful 28%
Moderately Successful 64%
Unsuccessful 8%
CHAINS
Highly Successful 30%
Moderately Successful 58%
Unsuccessful 12%
WHOLESALERS/INDEPENDENTS
Highly Successful 21%
Moderately Successful 79%
HOT ISSUES
SCAN DATA ACCURACY
An overwhelming 99% of respondents said scan data integrity was an extremely or highly important issue.
How important is the issue of scan data integrity on a scale of 1 to 5, with 5 representing the greatest importance?
TOTAL
5 80%
4 19%
3 1%
2
1
CHAINS
5 83%
4 16%
3 1%
2
1
WHOLESALERS/INDEPENDENTS
5 71%
4 29%
3
2
1
PRICING ACCURACY
When asked to rate the issue of pricing verification, 93% said it was extremely or highly important.
How important is the issue of pricing verification on a scale of 1 to 5, with 5 representing the greatest importance?
TOTAL
5 78%
4 15%
3 6%
2 1%
1
CHAINS
5 80%
4 14%
3 5%
2 1%
1
WHOLESALERS/INDEPENDENTS
5 75%
4 17%
3 8%
2
1
STORE SECURITY
One-quarter of respondents said store security was an extremely important issue, with 40% characterizing it as highly important and 30% as moderately important.
How important is the issue of store security on a scale of 1 to 5, with 5 representing the greatest importance?TOTAL
5 25%
4 40%
3 30%
2 5%
1
CHAINS
5 30%
4 42%
3 25%
2 3%
1
WHOLESALERS/INDEPENDENTS
5 8%
4 33%
3 46%
2 13%
1
THE BIGGEST CHALLENGES
Respondents said receiving clear priorities from top management is the most significant challenge facing MIS departments, with availability of skilled personnel and technological solutions following behind.
What are the biggest challenges facing MIS/IS in 1996?
Receiving Clear Priorities from Top Management
TOTAL 41%
CHAINS 41%
WHOLESALERS/INDEPENDENTS 42%
Availability of Skilled Personnel
TOTAL 30%
CHAINS 29%
WHOLESALERS/INDEPENDENTS 33%
Availability of Technological Solutions
TOTAL 21%
CHAINS 22%
WHOLESALERS/INDEPENDENTS 17%
Budget
TOTAL 16%
CHAINS 12%
WHOLESALERS/INDEPENDENTS 29%
Other
TOTAL 4%
CHAINS 5%
GAINS IN DATA WAREHOUSING
Data warehousing is emerging as a major issue, with 46% of respondents characterizing it as extremely or highly important.
How important is the issue of data warehousing on a scale of 1 to 5, with 5 representing the greatest importance?
