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Life in the fast checkout lane.

Life with a stand-alone. What's it like? . . . compared to a scanning system with a separate processor?

Don Schoen, part-owner and co-manager of the Fairground Super Valu, along with his brother-in-law, Phil Paget, says, "Basically, living with a standalone scanning system with built-in processors is no different than having an in-store processor. But for us our system has some decided advantages. It was relatively inexpensive to buy, it offers great flexibility and it enables us to customize information for our own needs."

Schoen explains what he means by inexpensive. "We moved into this 23,000-square-foot-store in June 1982, when our wholesaler, Super Valu, bought out nine Safeway units. That left Des Moines with three major factors, Dahl's and Hy-Vee, who between them do about 75% of the volume here and eight Super Valu independents, who have about 18%. You can see we're up against two very tough competitors. So our having a scanning system that cost us about $54,000, including seven registers, scanners, displays and scales, plus two memories, was very important to us."

In going to a Data Terminal System model 540, Schoen says he's getting low price and flexibility. "What other system enables you to pick up one of your two master registers, place it in a cart and then take it right to the shelves for price checks? all you need to spend is $1,300 for a hand-held Norand scanner, and a 12-volt Die Hard battery and a battery charger. We made a little wooden frame ourselves to keep the register on the cart."

The DTS 540 system, installed six months after the takeover, allows Fairground to have 13,500 items in memory and as many as 5,000 negative file slots for check cashers. The check cashing feature, he says, is "worth its weight in bad checks." Previous losses of approximately $5,000 a year, out of an annual volume of more than $6 million, have been reduced to less than $2,500.

If a customer's check cashing number is entered at the register and triggers a code that shows there is history of past trouble on that number, the check in question is taken to the courtesy booth and in 20 to 30 seconds verified by phone. This on-line service, called Valicheck, costs Fairground about $2,100 a year and, according to Schoen, is well worth it. "The best place to stop a bad check is before it gets through the register. The combination of the negative file and the phone verification not only reduced losses by one-half but also automatically reduced the follow up expense and effort of chasing bad checks."

Schoen's DTS 540 system is capable of generating scores of reports of all kinds but the ones he cites as particularly useful are cashier balancing, weekly ad sales by dollars and units, weekly unit and dollar sales by 10 major departments and 200 sub-departments, daily consolidation of sub-department totals to one register and hourly front-end productivity reports.

"We've used these reports to perform labor scheduling, control ad markdowns and reallocate space for product," says Schoen, adding, "We estimate that our overall gross profit has increased an average of 2.5 percentage points as a result. Stockouts have declined to almost zero in reallocated departments." Reducing Generic Items

A report of individual item unit and dollar sales generated for generic products recently enabled Schoen to identify and remove 30 slow movers among 180 generic items and solve a situation where the shelves were plagued by stockouts. Another improvement was made in dairy where a stocker was tied up during peak periods replenishing stock as often as every hour. By adding faces of gallon milk at the expense of slow movers, Fairground now is capable of going from 4:30 to 7p.m. without restocking. (While he was realigning, Schoen also transferred eggs to the opposite end of dairy, away from milk. The reasons: "Having two power items like that next to each other creates traffic problems for customers. And you also lose impulse sales if they just shop one end of the case.")

Computer analysis of the beer department revealed that Fairground's blue collar customers, who dominate its customer base, are particularly fond of 12-packs. "It surprised us. So Phil realigned the shelves to give more space to the 12-packs and transferred 6-packs to a cooler which they now share with soft drinks." Now, instead of having to refill 12-packs at 4,6, and 9 p.m., the beer vendors fill the shelves in the afternoon and the store needs to stock only once an evening. What's the Best Mix?

Unlike some of tis competitors, Fairground carries a very complete line of generics and masses them in one aisle for maximum impact. "Our customers are not high income," explains Schoen, "and we don't believe in dissipating generics' effect by stocking them among regular categories."

Generics do serve as an occasional merchandising laboratory, however. Schoen recently used his system to track sales of an end display of a brand name bathroom tissue and learned that it moved 12 cases in a week, but at no profit since it was a breakeven price feature. A month later he ran the same bath tissue at the same price of 89 cents per four-pack but split the end display between it and its generic counterpart priced at 59 cents. "I wanted to see if I could switch customers away from the brand name and to the generic. The results were that the brand name sales dropped to about seven cases and the generic, which had for weeks sold about one case in a week on the shelf, sold four cases on the end display. Even though the margin on the generic was only 5%, at least it was bringing in money. Meanwhile, our customers had a choice between two bargains. It never hurts for us to give our customers a choice."

Another tracking, in this case, soft drinks, proved to Schoen's satisfaction that he was on the right track in pricing this "pop" category. Says Schoen, "Des Moines is very pop conscious and so pop is very price sensitive. We have been very aggressive with good prices, lots of end displays and lots of movement, all of which earn us no good allowances from vendors. We are projected to earn 18% but with our promotional activity we're coming up with 24%." Scan data shows Fairground's soft drink sales of individual vendors are up 30% to 60% a week for the latest six months compared to the previous year. Concludes Schoen, "Recently Pepsi had two deals in a period, one at near cost. I kept prices consistent, however. I prefer to sell at everyday low price rather than occasional deep cuts."

On the other hand, he is not convinced that on-again, off-again pricing is wrong in other departments, like meats. "Sometimes those everyday low prices take on a life of their own and become the norm that everyone expects. It then becomes very difficult to create any sense of bargain. Iths an interestiong challenge for any retailer. Someday soon, when I install a personal computer at the store which can interface with my scanners, I'll use scanning labelers for meats and be able to test which price approach is best for us."

Meanwhile, Fairground's scanners are providing good feedback and control of existing merchandising and pricing techniques. An on-going program of free merchandise--margarine, eggs, celery, or whatever--with a $10 minimum order is easily tracked for movement figures but also is easily controlled. The free merchandise scans at regular price, but when the price lookup (PLU) code for the offer is entered, the amount is automatically subtracted--provided the total of the transaction is $10 or more.

Individual packages of cigarettes and eggs are also on PLU codes, as is all fresh bulk produce. "We tried putting the PLU numbers right on the produce, but it confused customers. Sometimes it just made them plain mad. They mistook the code numbers for the price," explains Schoen. "We use small price books at each register for produce and other price lookup."

Another category not scanned is in-and out merchandise. So as not to have to constantly enter and delete codes in the memory, Schoen has cashiers ring up the actual UPC code digits on these few products.

This practice slows cashiers very little and is easily accounted for in the labor productivity reports generated by the front end. These reports show yardsticks such as number of customers checked, number of items, value of the order, time on active ring up and other measurements.

Schoen thinks a retailer can overdo the publicizing of individual checker's skill, saying, "Computer reports should be used with discretion. We used to rank the checkers and post the results but I found that you could increase productivity if you didn't pit the other checkers against the fastest. Also, the ones on top tried too hard to stay here and got sloppy."

Accordingly checkers' reports are reviewed privately to determine why a checker may not be up to standards. Says Schoen, "Sometimes a checker is a bit slow because she's schmoozing the customer." (Editor's note: In Iowa schmoozing is somewhat equivalent to charming the customer. Good schmoozers build good relations, according to Schoen.)

Accordingly, the chance for cashiers to win the Golden Banana award--including a cash prize--is determined on a balance of factors, including willingness to help others, not solely rings per hour or other strictly numerical measurements.

Interestingly, Schoen says his method of balancing out registers by lane takes about the same time as the old pre-scan method. But it is judged far superior because of all the accurate detail on cash, checks, vendor coupons, double coupons, food stamps, WIC (Women, Infant and Children) supplements, bottle refunds, rebates, voids, credits and similar balancing requirements.

For their part, Schoen and Paget both find the hourly customer traffic and transaction report exceedingly helpful in scheduling the front-end personnel and others among the 25 full- and 35 part-time workers. "Say we're projecting $122,000 of business for the week. We know we do 35% of that on Saturdays and Sundays, so we can tell quite well what kind of hours we're going to need on the registers. And not just by day, either. Say I take a reading of customer counts at 4:30 Saturday afternoon and see that we had 1,100 customer transactions at an average of $12.50. I could figure on another 900 customers that day; so maybe we want to send someone home early or maybe ask someone to stay later.

"I also know that meat sales are 16% of total--so I can expect about $21,000 in meats. I can alert the meat department if their sales are not running true to form. It's not perfect but compared to the old way it's a giant step forward. What's more, it helps in ordering products as well as scheduling people." Leaning on Super Valu

Fairground uses electronic MSI ordering devices to scan order tags provided by Super Valu headquarters, for as Schoen and Paget are quick to point out, "We wouldn't even be in the ballgame if it weren't for Super Valu's many programs and services." Among the major services used are Super Valu's shelf price tags which are scannable for "automatic" ordering; a pricing program that automatically adjusts Fairground's suggested retail prices to reflect changing costs; automatic pass-through of manufacturer allowances; a cooperative advertising program; and accounting support. Super Valu also develops and updates Fairground's direct store delivery file when supplied with product codes.

Some things Schoen and Paget prefer to do themselves. Explains Schoen, "We run as many as 130 specials in a separate circular we run independently of the regular Super Valu ad and I find it productive to spend as much as an hour and a half securing figures from the processor. Item sales are accumulated weekly so it's easy to get a beginning count, an ending count, subtract the two and then chart what the dollar sales and profits were compared to what they would have been at regular price."

Tracking produce specials is particularly desirable because, says Schoen, "No other department gets hit as hard on margins on specials." Bakery products, from the bake-off installed at the time the store was taken over, are handled in a special way. Super Valu preprints a scannable bar code that identifies the item but not the price; the price is rung up separately after scanning.

It is these aids to improving effectiveness of advertising and merchandising that most excite--and frustrate--Schoen. "Take Super Valu's SAPA program--space and profit analysis. For a given store, it ranks items' contributions over a period of time and it does it well. But it is limited to warehoused products. It reflects changing costs but not all of the changing retails at the store. And it is not based on across-the-checkstand sales. And for a small retailer it is relatively cumbersome and expensive. That is, relative to a retailer's ability to generate his own store's numbers in his own way on a personal computer that interfaces with the front end.

"I can see all sorts of improvements with a personal computer--in testing pricing and merchandising appeals, controlling direct store delivery, measuring ad markdowns, improving meat cutting tests, allocating space within categories--the potential is unlimited, it seems to me. We'll be able to see our store's various components at work in detail--almost like opening the pages of a book." No Price Marking, Thanks

Meanwhile, in order to keep the "hard savings" benefits of scanning intact, Fairground maintains a constant program of price verification. "We're fortunate in Des Moines in that every scanning supermarket in town is able to dispense with price marking every item. For us that meant immediate 'hardware savings'. We were able to reduce stockers to three instead of six. What's more, we can now put up a 1,300 case delivery in one night's shift, about 40 cases an hour."

The tradeoff comes in the need for a scanning coordinator and an assistant. Traveling throughout the store with one of the master registers with built-in memory (see photo) they verify every price in less than three weeks, encountering about five errors in pricing in each aisle. The goal is to verify the store every two weeks and reduce errors to no more than two items per aisle.

Schoen's eyes fairly sparkle when he looks ahead to what may be some day. "Imagine having LED signs at the shelf or on displays--you know, those light emitting diode numbers you see on digital clocks. You could assemble all your price changes in the computer and at the press of a button activate the new prices at the shelf. How? Via frequency modulation radio--just the way the Bass FM price verification is being done now, by radioing the price at the shelf via a hand-held scanner to the store's price file for comparison. The LED idea not far fetched at all."

As an enthusiast of computer use, ("I just fell into it," says Schoen) he believes passionately that scanners and supplementary in-store personal computers are not luxuries but necessities. "Retailers not thinking of going into scanning--because they think it costs too much--will be the ones left behind their competitors both in sales and return on investment."
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Title Annotation:Computer Usage for Profits, part 1; supermarket scanning system
Author:O'Neill, Robert E.
Publication:Progressive Grocer
Date:Feb 1, 1984
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