NEW YORK — “Smart shelves” that automatically alert the stockroom when razor blades are running out or remove the cream cheese because the expiration date is up. Instantaneous checkouts by just waving a scanner over the...
NEW YORK — “Smart shelves” that automatically alert the stockroom when razor blades are running out or remove the cream cheese because the expiration date is up. Instantaneous checkouts by just waving a scanner over the shopping cart. Tiny chips concealed in apparel to track the item and foil shoplifters. Software that automates the markdowns.
These are among the latest and most creative technologies that such retailers as Wal-Mart, Metro in Germany and Bloomingdale’s have selectively begun adopting and that could be widespread before the decade is out. Retailers are counting on new technologies to make them more efficient, more profitable and easier to shop.
They’re also looking for technology to come down in price.
“Chief information officers are being pressed to cut costs and be more efficient,” said David Hogan, senior vice president and chief information officer for the National Retail Federation, during an interview on new retail technology and the trends to be highlighted at NRF’s IT Leadership Summit at the Hilton San Diego Resort Aug. 10-12.
For new technology, “retailers are going to India, Pakistan, Ireland, the Philippines and Asia, where the cost of labor is significantly less than in the U.S. and the caliber of programming, project management and software architects is on par. Five or seven years ago, you didn’t hear about this,” Hogan said, noting offshore software development is among the sessions on the conference agenda.
In the area of radio frequency identification [RFID] and electronic product codes, which is what experimental “smart” tags, shelves and shopping carts utilize to track merchandise, Wal-Mart and Metro in Germany are considered pioneers, and interest in the industry is mounting. “But people just need to temper their enthusiasm,” Hogan cautioned. “We will see it in the supply chain first, with pallets and cases, and at the end of the decade, we might see it at the item level. This is just going to revolutionize supply-chain efficiency and take it to the next level. Wal-Mart is doing some great work in that area.” It wants to upgrade its merchandise tracking systems through RFID, requiring its 100 top vendors to apply the technology to pallets and cases by 2005.RFID is considered the next generation of the bar code and a more powerful and easier way to capture information. RFID chips, also known as smart tags, store all kinds of information, which is transmitted via radio frequency. Affixed to products, they store stockkeeping unit information, including style, size and color. They also facilitate faster checkouts. A sales clerk would just wave a wand over all the products, rather than scanning each product individually. RFID also fights shoplifting. An RFID chip or tag embedded inside the article has a kill switch, so the item [after it is purchased] can’t be tracked any further, Hogan explained. “An embedded chip will be hard for the shoplifter to find.”
A Metro grocery store in Rheinberg, Germany, like a test lab, is rigged with much of this wireless technology, including the “smart” shelves and tags on products, as well as shopping carts and handheld scanners that quickly scan products for a running total. This supermarket of the future will be discussed by Zygmunt Mierdorf, chief information officer and executive vice president of human resources of Metro Group, at the conference.
However, for RFID to get cost effective, retailers must get on board en masse. “The chips are 30 to 40 cents a piece. That’s expensive,” Hogan said. “We need to drive the price of those chips down to below five cents, through mass adoption. This is as important as the bar code was in the mid-Seventies.”
Another new technology on the conference agenda is merchandise optimization, which involves automating markdowns and regionalizing pricing. “These are tools that make the recommendations. It’s still up to the merchant to decide when to pull the trigger [on markdowns],” Hogan said.
In addition, “many retailers have POS that is seven to nine years old,” Hogan said. He expects to see a wave of retailers over the next 12 to 24 months seeking store systems for new POS, with clienteling capabilities, dedicated connections to headquarters and Web-based training for educating the workforce.
“Now is the time to invest in technology,” Hogan said. “I view this as a buyer’s market and it’s been that way in the last six months. Whether it’s warehouse software or POS software, suppliers are hungry to make deals right now.”Retailers must be careful to choose the technology that is right for their individual needs, particularly because there are so many suppliers. “We [the NRF] are actually coming up with standardized RFPs [request for proposals] that retailers will be able to use to submit to different hardware and software vendors, when they are shopping for new POS, new warehouse or new merchandise planning systems. We will offer that to our membership. Hopefully, it will be ready in the first quarter of next year, and our members will be able to download these RFPs from the NRF Web site.”
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