ABINGDON, Va. — K-VA-T Food Stores here is completing a major overhaul of its data warehouse system and is about to apply that system to several new initiatives, including fresh-item management and loyalty marketing.
The data warehouse, from Teradata, Dayton, Ohio, will provide much more “granular” transaction data that offer “more insight into what's happening in our stores” during specific parts of the day, said Paul Widener, director of information services, K-VA-T. The retailer runs 92 stores under the Food City banner in Kentucky, Virginia and Tennessee, and three under Super Dollar Discount Foods in Virginia.
Previously, the data available from the data warehouse were at a much more “aggregate” level, representing total department sales by day or by week. K-VA-T has operated the data warehouse since the mid-1990s, but began to upgrade it two years ago, a process that was completed this month. Concurrently, Teradata, the provider of the technology, completed a spin-off from NCR on Oct. 1.
One example of how K-VA-T plans to use the upgraded data warehouse is in perishables production. The more granular transaction data could point out that meat sales don't begin in earnest until 8 a.m., impacting when meat cutters should begin their day. “There are hundreds of permutations like this for every perishables item,” said Widener. “It will help us to maximize our labor resources as well as the freshness of products and our presentation to the customer.”
K-VA-T is among a growing group of retailers using more detailed data to drive their businesses — what Thomas Murphy, president, Peak Tech Consulting, Colorado Springs, calls “Molecular Management.” In a conference call hosted by Citigroup, New York, this month, Murphy said that the food retailing industry “is trending toward Molecular Management driven by the detailed, near real-time data they now have available.”
Using this much more granular level of data, Murphy said, retailers “can frequently make near real-time decisions that actually impact current operations and the financial aspects of the period.” Other retailers employing this approach include Kroger, Safeway, Tesco, Food Lion and Hannaford Bros.
K-VA-T is preparing a training initiative with its corporate departments “to get more people using the data” from the data warehouse, said Widener. Users will include directors, category managers and line-item buyers. “We'd eventually like to see store-level access too,” he added.
FLURRY OF IDEAS
Widener noted that the data warehouse will be used in a number of “large-scale initiatives” involving deli, bakery and fresh meat, including fresh-item management, production management and labor scheduling. “We're generating ideas like crazy,” he said. “Now we're going through how we want to prioritize them for the business.”
While Widener's IT department is suggesting ways that the technology can be used, he expects business users to advise the department on future uses “as they become educated on what data is available,” he said. Fresh-item management is an application that K-VA-T's perishable managers had been requesting for some time, Widener noted, “but we didn't have what we needed data-wise until now.”
K-VA-T has previously applied the data warehouse to such applications as category management, vendor scorecarding and loyalty marketing. The upgraded data warehousing will also be used to enhance loyalty marketing and customer relationship management, Widener said.
In fact, he regards loyalty and CRM as the areas with the greatest potential to benefit from the new technology. “We will get a tremendous amount of good information regarding customer behavior through transaction-level data. This will help us improve their shopping experience.”
In particular, over the next 12-24 months K-VA-T will offer more targeted discounts to shoppers and change the way it delivers offers and how shoppers interact with the store.
While not providing specific figures on K-VA-T's investment in upgrading its data warehouse, Widener acknowledged that the company spent “well over $1 million” over the past two years. “But we are going to use it to make so many decisions on how we operate our stores that it will drive millions and millions of dollars of value,” he said. The payback, he added, may be difficult to pinpoint because the technology extends into many separate operational projects.
Another key technology used in concert with the data warehouse is business intelligence software from MicroStrategy, McLean, Va., “which allows us to use the data in a more focused way,” said Widener.
Part of the challenge in rebuilding the data warehouse was establishing common definitions of terms such as gross profit across many business functions, Widener said. A challenge going forward is changing business users' “pre-conceived notions” about operations based on years of experience, relying instead on what the data suggest.
He observed that advances in data warehouse technology are benefiting retailers in general. “Just having a data warehouse is not an advantage,” he said. “It's how well you run the analytics and which fight you elect to fight.”