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Market basket offers a new set of metrics.

CAMP HILL, Pa. -- There's data. And then there's meaningful data. Tom Xhilone, vice president of category management systems at Rite Aid, specializes in the latter.

Take for example, the drug chain's analysis of market basket transactions. Every single item in every single market basket that is brought up to a Rite Aid checkout counter by a customer is recorded in the company's database.

As a result, Xhilone says, Rite Aid can find out not only what customers buy, but also their purchase "affinities"--or what items they tend to buy at the same time.

These "cross-category correlations," Xhilone explains, are proving immensely useful in helping the retailer plan merchandising, promotional and advertising strategies. "Now that we know what items drive market basket purchases we have a new set of metrics for success."

For example, notes Xhilone, analysis of the market basket data allows Hire Ala to see how sale items featured on page one of weekly advertising circulars drive market basket purchases throughout the store. That information then helps determine what products will appear in subsequent circulars.

Shopping patterns of customers can be better defined by analyzing market basket data. The transaction information shows customers limit shopping to certain sections of the store. Customers shopping beauty tend to limit purchases to those categories and O-T-C customers tend to remain in the health aisles. One category, oral care, can commonly be found in both O-T-C and beauty purchases. Understanding how this category has common appeal to both types of shoppers allows us to develop merchandising programs that can encourage migration from one part of the store to another."

Category managers are also benefiting from other increasingly sophisticated data analysis tools and applications, according to Xhilone. They now have access to an internal web site, for instance, that integrates the retailer's new tools and work system.

Working with Microsoft Corp., Rite Aid has developed a high-powered information tool that, similar to Windows, provides a very user-friendly, single site for all category management information, reports and applications.

"The reason we worked with Microsoft to design this tool was," notes Xhilone, "we wanted a highly intuitive tool that category managers would only have to learn once. While the system is constantly changing and being enhanced, the category managers will always work with the tool the same way. While the technological enhancements are major, they are transparent to how you use the tool."

The development of Information Cubes, or ICubes, represents a signification step forward, according to Xhilone. "Through this new technology, smaller, more portable data warehouses can be developed to deliver very rapid, detailed level reporting," he says. "The most important advantage of ICube technology is dynamic reporting and business analysis. With this type of reporting tool, you can drill right to answer. With other reporting tools, you had to pull back multiple reports to find the answer to a business question. With ICubes, reports are dynamic and all your analysis can be done in real time."

Advances in web-enabled applications are also allowing Rite Aid to fully collaborate with its suppliers.

"Through its Supplier Advisory Board," says Xhilone, "Rite Aid is working closely with suppliers to develop technology solutions that will result in collaborative business plans. Through these efforts Rite Aid and its suppliers are developing dashboards and scorecards that will assist the partnership to plan, integrate and monitor all the various components of the marketing and demand chain that can effect the attainment of plan.

"It takes a lot of orchestration to attain our mutual business objectives. These tools will effectively keep all the stakeholders informed and on the same page."

Overall, he notes, Rite Aid's applications are designed to gather and distill information to develop a category planning system that allows stores to order and plan more efficiently. "We have to constantly ask ourselves, what is the most important information to help us drive the business?," Xhilone remarks. "We used to be information intensive; now we have to figure out how to make the information actionable."

Looking ahead, he notes that Rite Aid will continue to focus on market basket data, and it is also working on price optimization software with a British company. The objective, he says, is not only to strategically pick optimal prices, but also to forecast effects of promotional prices on store inventory.

"It all comes down to understanding what stores need," comments Xhilone.
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Title Annotation:Rite Aid
Comment:Market basket offers a new set of metrics.(Rite Aid)
Publication:Chain Drug Review
Geographic Code:1USA
Date:Oct 27, 2003
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