The future is now

In the first quarter of each year, there are two major trade shows that I've always used as a barometer of what technology companies think should be our focus for the new year. Those shows are the National Retail Federation's convention in New York and the Food Marketing Institute's Marketechnics show, which this year is in Washington, D.C. Marketechnics, which balances workshops with exhibits, is important because of its focus on the supermarket industry. The NRF show is a combination of top executive presentations and a huge trade floor with most of the exhibitors marketing technology-related products or services. The attendees are primarily from the NRF membership, department stores, mass merchandisers, fashion, and all other nonfood areas of retailing. This gives food retailers a great opportunity to see "the other side of the moon" and to compare priorities. Following are some of the important trends or technologies that were in evidence at the NRF show and will be present at Marketechnics.

the supermarket industry. The NRF show is a combination of top executive presentations and a huge trade floor with most of the exhibitors marketing technology-related products or services. The attendees are primarily from the NRF membership: department stores, mass merchandisers, fashion, and all other nonfood areas of retailing. This gives food retailers a great opportunity to see "the other side of the moon" and compare priorities. Following are some of the important trends or technologies that were in evidence at the NRF show and will be present at Marketechnics.

Clearly those in fashion retailing place a high importance on the use of their scanning data, to manage their inventory and guide their reordering of specific styles and colors to meet demand. Computer-developed retail pricing is also a high-priority application, because, as we all know, markdowns and sales are critical parts of the other side of retailing. The applications offered at the NRF show centered on sophisticated forecasting and demand simulation tools that would project the sales impact of various price points (retail prices).

Retail members of NRF usually have a high percentage of their purchases paid for by credit card. This means that those retailers have the opportunity to identify their customers and exploit information about them using customer relationship marketing (CRM) tools. Many CRM software companies were at the NRF show, offering full-service facilities including identification of important customers, analysis of their purchases, and ultimately the mailing of material to them using either e-mail or snail mail. Some of the more creative retailers are making this historical customer purchase information available to cashiers to guide them in suggesting things that the customer might like, and identify specific products to show to shoppers.

Useful tools

NRF retailers tend to reset their stores much more frequently than food retailers do, to add excitement to the shopping experience and accommodate changes in fashion merchandise to fit the season. I was impressed this year by the use of virtual reality software to present the store and allow retailers to make changes and see how they would look. I suspect that this form of tool will become useful for those in the store construction and design areas of food retailing, to work on new formats or remodels. There were also some offerings that tracked customers as they shop in the store. These services are expensive to install but make a lot of sense when a retailer plans to copy a single store format for hundreds of stores. I've seen limited use of this technology in food stores in the United States, but the conclusions reached have been insightful in the selection of categories of products to place in each aisle in an attempt to encourage customers to shop the entire store.

As one would expect, a large number of NRF exhibitors showed various aspects of RFID. This should come as no surprise when you realize that Wal-Mart is an NRF member, as is Target, which has also announced a major push into RFID. There were companies that market RFID tags and readers, and others that develop the support infrastructure for RFID. I expect that all of these vendors will also be at Marketechnics. Since the release of the final technical specs for the tags, many of the exhibitors hope that the market will move from its bleeding-edge phase to a point where the followers will commit to the use of the technology. I suspect that the food industry is at least a year away from that point.

Although it didn't exhibit at the NRF show, OrganicID is a potentially exciting new company in the RFID field. This company is a technology startup that has partnered with several major organizations, including International Paper and the University of Texas, to develop a printable RFID tag from plastic materials. Using a process called organic electronic printing technology, OrganicID is hopeful of delivering an RFID tag for the price of about one cent. If that's possible, it blows the goal of a five-cent tag into obsolescence before it can even be delivered. The company's aim is to deliver prototype tags in 2005 and be able to include them in product packaging by 2007. OrganicID is not alone in this field, with Motorola and Poly IC (a joint venture of Siemens and Kurz, a German printing company) also working to develop a printable tag.

Wireless technology is reaching a mature stage, although NRF exhibitors showed evolving uses of the technology and faster transmission rates. Many NRF exhibitors focused on the security issues of wireless transmissions. This is understandable when you realize that the POS systems in many retail stores are also wireless. The reason for this is that the frequent changes in store layout make it difficult to be always able to cable-connect the POS terminals. This means that tender transactions can be entered by the cashier or customer to a wireless reader, resulting in the need for the security focus.

I have always felt that this use of RFID offers great opportunities for identification of customers as part of frequent shopper programs and to establish the identity requirements for credit and debit. There were also wireless companies showing both telephones and headsets for communications within a store. This gives the employee a high-tech look and the ability to communicate quickly with those working the back-room inventory. I think we'll see this use of wireless communications in food stores during 2005.

Many of the vendors at the NRF show will also be at Marketechnics. Among those vendors are those that specialize in managing the printing for in-store promotional materials such as signs and shelf labels. Several years ago these companies all moved to an Internet platform. This year the emphasis seems to be on faster printing and more access to impressive graphics to support the development of more colorful signage. I was also interested in the companies offering electronic signs. Many fashion retailers want to have walls of TV monitors so as to project a youthful image, and these are clearly too expensive for most food stores. There were some vendors showing surprisingly large displays designed to handle text and limited graphics, managed by computer. These signs are a dynamic way to communicate with customers.

Things to come

For decades all of retailing has been using software to support labor scheduling. Each year it gets more sophisticated and the solutions become more complete. At the NRF show I was intrigued by several solutions that offered everything from scheduling to interactive Web-based training in the use of their systems. While many of the NRF vendors have focused on the requirements of nonfood retailers, their offerings should serve as a preview of what we may see in new food applications.

A new feature, at least for me, was the ability of some systems to perform real-time validation of store activity, to assure that breaks are taken and that labor laws are complied with. The systems also monitor when an employee checked in ahead of schedule, to make sure the added time was approved by a manager before it affected the budget. This capability was tied by several vendors to the use of a manager's wireless terminal to handle alerts and support overrides of rules or schedules. One vendor emphasized the importance of real-time monitoring to make sure the store conformed to state work rules associated with breaks and work time, thereby avoiding fines.

One of the reasons I think that the NRF show is such a predictor of the future of food retailing is that the members of this trade organization have an incredible commitment to technology leadership. Their senior executives take a serious role in all major industry initiatives, with the strong support of their IT executives, in the committee processes that are so important in defining how and in what form new technologies should be used to improve retailing.

While there are still some food retailers, notably Wegmans, Ahold, Kroger, and Pathmark, that are willing to make the commitments of time and resources to support these kinds of projects, I find it incredibly discouraging that as an industry we have retreated from the worldwide leadership that gave us the UPC.

Today there are pioneering efforts, such as the EPC and RSS, that have gained limited U.S. food retailer involvement in the committee process. These committees and their subcommittees are dying for more retailers to get involved to help them establish standards that will reflect the needs and deliver the benefits that retailers need before they'll invest in such technologies, yet committee positions go begging. Many food retailers use the fact that they're in a highly competitive industry as an excuse for not supporting these efforts, but competition is comparable in all areas of retailing. I believe that if we're ever to sustain a competitive parity with other forms of retailing, notably Wal-Mart, we must be willing to commit corporate resources to those industry opportunities to use new technology.