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The top 5 areas of investment
Research Director Retail Technology
Senior Retail Technology Analyst
Senior Retail Technology Analyst
Planet Retail is the leading provider of global retailing information, from news and analysis to market research and digital media. Covering more than 9,000 retail and foodservice operations across 211 markets around the world, many of the world’s leading companies turn to Planet Retail as a definitive source of business intelligence. For more information please visit www.planetretail.net
All images © Planet Retail Ltd unless otherwise stated.
Cover images: 10 - © Cincysavers; Q - © Gerry Weber
Executive Summary 1. Self-Service Checkouts:
New technologies change the game
2. Customer Facing Technologies:
Enabler for a new generation of pinpoint marketing
3. Price optimisation:
Higher margins without increased turnover
4. RFID (Radio-Frequency Identification):
Back from the brink
5. Warehouse Automation:
Machinery picks and packs more precisely
www.planetretail.net - Planet Retail 2011
PlanetRetail Planet Retail 2011 .www.net .planetretail.
Research Director Retail Technology T oday. www. cut their IT spending in the economic downturn. While their competitors celebrate significantly reduced out-of-stocks which lead to higher sales and higher customer satisfaction and at the same time lower inventory with less fixed capital.net . and last not least. But this does not mean that they will stand for the major part of retailers’ IT budgets. There is no doubt that optimisation and automation needs accurate master and inventory data.Planet Retail 2011 1 . data warehousing. By far largest part of the technology spending will go unaltered into the traditional areas such as POS systems. This means it highlights key technologies for which Planet Retail’s Retail Technology research team predicts major investments by retailers over the next five years. less waste and less logistics costs.planetretail. They are also founded on Planet Retail’s continuous monitoring of the technology deployment and strategies of all major retail groups. data warehousing and warehouse management as well as supply chain management solutions. The findings are based on in-depth interviews with decision makers from the world’s major retail companies and their technology vendors. a 100% scanning rate at the checkout and visibility of the good’s flow along the supply chain.just to mention the most important ones.PlanetRetail Executive Summary Björn Weber. the major retail companies of the world are aware of the impact new technologies can have on their profit lines. This report provides with detailed insights on these trends. those retailers which haven’t yet done their homework in terms of merchandise management and data accuracy have been left behind. Incomparable to any other resource. This report is a trend report. the winners of these budget shifts are technologies that enable optimisation through sophisticated data analyses. But most of the international players shifted their budgets. The five technologies described in this report will be areas of additional investments. those that enable self-service and automation. This report highlights key technologies for which Planet Retail’s Retail Technology research team predicts major investments by retailers over the next five years. replenishment automation. Some retailers are learning this the hard way at the moment because they missed the immense benefits that came to their competitors who implemented replenishment automation based on sales forecasts. at least not those who are financially in good shape. In short. This is why hardly any retailer. those which bring together online and offline marketing. merchandise management systems. optimisation and data analyses. warehouse automation and all forms of instore solutions . they have to do their homework. Before retailers can benefit from the innovative technologies. As one module of its database offer. Planet Retail offers the world’s most detailed repository on the technology deployment of the major retail groups . this knowledge base enables users to identify investment trends and retailers’ success but also issues with their core systems in the area of merchandise management.globally.
But one of the largest revolutions is happening behind the scenes. Now that the likes of Kroger. This report gives practical advice on how to set up a digital instore marketing successfully.the smartphone. Sobeys and Mercadona have proven that the complete automation of distribution centres is possible even in the grocery business. Following the immense success of replenishment automation. but also range optimisation solutions will play a significant part in the competition over the next years. almost all major retailers of the world will follow and will invest significantly in warehouse automation – not only full-range retailers. Planet Retail has identified five major technology investment trends in the retail industry: 1. it will be rolled out at high speed. but also discounters and other retail formats. a new generation of price. technology providers and consultancies learned from the major mistakes made in the early RFID days and will deploy the technology now in a very different way. Self-service at the point of sale will take the next step and conquer the checkout. Further customer facing technologies will also start off. retailers can go one step further. 2. Complete new forms of marketing are changing the game in retailing.planetretail. In this report. But not everything makes sense. Self-checkout technology is not new. the master data management. 4. Planet Retail provides a very clear answer to the question in which ways RFID makes sense and which not. Wasn’t this technology dead for deployment in the retail industry? Planet Retail learned that RFID will see a major renaissance because retailer. Retail companies which not yet started to think about deploying one of the innovative price optimisation tools on the market should start a project very soon.www. with a new generation of user-friendly technology.PlanetRetail But given that the merchandise management system. but now. because their competitors will do it. Those reported dead live longer . POS systems and the data warehouse work without major problems. 3.net .it could take some of this report’s readers by surprise that RFID is identified as a major trend. driven especially through the revolution in the pocket of the shopper . 5. 2 Planet Retail 2011 .
Delhaize is also experimenting with its Red Market banner in Belgium in which all customers have to use self-scanning handheld devices. self-checkouts are globally still seen as a supplement to manned tills. for instance. the press wrote. But those correct observations were based on an older generation of self-checkouts which is. They exist with Tesco’s US banner Fresh & Easy and at one Tesco convenience store in Northampton. But Metro Group in Germany.Planet Retail 2011 3 . The latest generation of technology available is likely to change the game and bring self-checkouts from the corner of the store into its spotlight. The machines. France. England. which tried to run its Real hypermarket in MülheimKärlich with self-service payment at machines only. Nowadays.planetretail. show the new colour guidance system through the different forms of self-service checkouts. Self-checkoutonly stores are rare. Today. … and self-scanning with Re-vision and Motorola. 18 years after the first selfcheckout got a patent and was installed at a Price Chopper store in Clifton Park. The photos from the concept store Carrefour planet in Vénissieux. for example. were not user-friendly enough to make the deployment mandatory for the shopper. The British press. This first self-service revolution established stores in which shoppers picked the items themselves was in reality a slow process which took several decades: starting slowly in the 1930s in North America before becoming accepted in Europe from the 1950s. Tesco and Marks & Spencer. Carrefour equipped all hypermarkets in France and Belgium with both stationary self-checkouts from Wincor Nixdorf … www. still widespread in the stores of Sainsbury’s. Self-Service Checkouts: New technologies change the game T he next generation of self-service is conquering retail – slowly but surely. soon re-established manned tills because of customer complaints.net . it is hard to imagine any retail store without selfservice picking of goods. The speed of transformation in which the checkout process changes from manned tills to selfservice checkouts is reminiscent of the first self-service revolution which formed the basis of modern retailing as we know it today.PlanetRetail 1. New York. in the UK. was full of doubts after Tesco opened its first selfcheckout-only stores there.
There are two reasons for this. all major technology providers have worked hard and improved their self-service checkout products significantly. the technology available on the market improved significantly. user-friendliness. it also makes solutions possible that allow shoppers to pack directly into their own bags or boxes. this technology will replace many more manned tills over the coming years. global market leader NCR and its European challenger Wincor Nixdorf were some of the first to launch new products that were a considerable improvement in terms of design. Since then. And. Planet Retail had spotted five weaknesses of the technology available at this time. this modularity made the deployment of stationary self-checkouts possible in non-food retail stores too. the retail industry will see a significant rise in new selfservice checkout projects around the globe in the coming years. cash handling. modularity in casings and ability of integration into the existing software architecture and checkout processes. with which for instance Wincor Nixdorf won Carrefour as a customer. Germany and CEE countries.www. Firstly and most importantly. not only allows retailers to more easily adapt self-checkouts to their own shop design and corporate identity. In early 2008. such as the US and UK.planetretail. which have so far not seen many self-checkouts will see them very soon – based on a new generation of technology. retailers are already in the process of rolling out different forms of self-service checkouts at high speed. 4 Planet Retail 2011 . a smaller footprint and an optional cash recycling are the main characteristics of IBM’s Self Checkout System 6. which was unveiled in January 2011. Modularity. • Incapable of handling cash in large amounts. • Complexity of integration into existing software architecture. In the area of stationary self-checkouts. In some other countries such as France. The new modularity. They were: • A lack of user-friendliness. and • Design of the machines and devices. The technology available has improved significantly Although self-service will not completely replace manned tills in the next five years.net © IBM . • An inability to cope with larger purchases and the bags/boxes shopper want to pack their purchases into. And markets such as Spain.PlanetRetail In countries with a high deployment rate.
some retailers will install one or two more groups of self-checkouts in selected stores . Big Blue decreased the footprint of the machine.net . or 12 if there are eight today. North America sees organic growth In North America.” said Carlegren. significantly.eight if there are four now. but also DIY and electronics retailers. IBM prepared its self-checkout technology especially for the deployment in smaller retail formats. where self-checkouts as a supplement to manned tills have been widespread for more than seven years. The results were ceremonially unveiled at the 100th NRF Convention and Expo in New York City in January 2011. remove or replace a payment module later.PlanetRetail In 2008. The series. different bagging modules as well as different payment modules can be optional attachments. even if installed with all modules. www. the major players in the US and Canada are not really looking to innovate the self-checkout. here with IBM devices. While the user-interface sits at the scanning module of the system. NCR. If they are already have self-checkouts from us. © IBM and are a quantum leap in terms of modularity. for example. most retailers will handle this technology evolutionary over the course of 2011. self-checkouts are conquering new formats. IBM was also working hard on a new generation of self-checkouts in a project internally called Columbia.added to the exiting manned tills. So far. as early as 2008. With the modularity. “Retailers can add. most of the major grocers. replaced the one Big Blue acquired with Productivity Solutions (PSI) in November 2003 cash handling and user-friendliness. the retailer decided to allow card payment only.” explained Fredrik Carlegren who oversees the global marketing of IBM’s selfservice solutions. jointly developed with Gisecke & Devrient and called Pecuron. now called IBM Self Checkout System 6. This makes their deployment in cash intensive markets such as Germany. After so much innovation from its competitors.planetretail. for instance.” said IBM’s Fredrik Carlegren. they can reuse their existing bagger or conveyor assemblies. such as those from CVS pharmacy. In 2011. the European IBM operations had already brought a stand-alone self-payment terminal to the market. we protect retailers’ investments. “With the new modularity. the system can be deployed even in convenience stores if. The Self Checkout System 6 always needs the scanning module. The payment module is available either with conventional cash management with cash recycler or with pure card payment functionality. However. Wincor Nixdorf and Fujistu presented their solutions for the first time with inbuilt cash recyclers.Planet Retail 2011 5 . follow the standard scenario of four or eight stationary scan & bag or scan & belt machines . Spain or Poland much more likely. IBM didn’t develop this cash module in a way that it can be used as standalone self-payment terminal. With its System 6 series. But. different from some of its competitors. In the US. “Different from European retailers.
However. The belt moves much faster than at traditional tills. Kentucky. Kroger. is with its visions and tests going further than any other retailer in the world. All tests and projects Kroger is running are highly confidential.www. in 2010. became the world’s first retailer testing fullyautomated tunnel scanners at the checkouts of a real life store. in North America there will no revolutionary strategy change or major investment drive in the sector in 2011. The fact that many Kroger employees. The US retailers will expand the overall footprint of the installations without changing the concept dramatically. makes radical innovations around the checkout. 6 Planet Retail 2011 . but in a similar way to that already employed by the big box players. Kroger. the USA’s second largest grocery retailer. are unionised. After the scanning. is indeed looking to innovate the checkout in a radical way. Customers have to place their products on a conveyor belt – one at a time with a clear distance between the items. The retailer. unlike the majority of Walmart staff. the retailer was received Planet Retail’s Innovation Award in November 2010. The tunnel scanners make manual item scanning by staff as well as by shoppers redundant. With one remarkable exception. it was Kroger that. which are likely to make parts of the staff redundant .planetretail. And with NCR’s new Version Five Selfserve Checkout. This is because the overwhelming market power of Walmart makes it difficult for Kroger to bring innovations with a competitive advantage faster to the market than the Behemoth from Bentonville.600 stores across all its banners.PlanetRetail Smaller stores and pharmacies such as CVS will also install self-checkouts. Products are scanned automatically while they are moved at high speed through the tunnel. They move on to one of four self-service payment terminals from IBM where they scan the barcode of the receipt and pay. Kroger started the world’s first test of a fully automated tunnel scanner in a real store. different from Europe.an even more sensitive topic for Kroger as employer. is looking for something above and beyond today’s self-checkout technology. which runs more than 3. Kentucky. The world’s first tunnel scanner in a real life store Nevertheless. The Kroger Marketplace store in Hebron. The scanners in the tunnel are able to read barcodes from all sides of the product. shoppers receive a receipt with another barcode from a printer. is the world’s first store which is equipped with such a tunnel scanner that Kroger calls ‘Advantage Checkout’. new installations will often be equipped with cash recycling technology at NCR’s major customers such as Walmart and Home Depot. Some very old self-checkout machines will be replaced with the latest versions. In Hebron. which was an early adaptor of self-checkouts with machines from Canadian Optimal Robotics (which was acquired by the US subsidiary of Fujitsu in April 2004) and still has the largest installation base of this specific solution. For this.net © Cincysavers .
The reason for this additional piece of self-service is again to save seconds in the checkout process.” But. the machine. that “uses a patented technology designed by the grocer’s research and development team”.PlanetRetail The tunnel scanner is not unmanned. It has also installed selfservice scales in the Hebron produce section that lets customers weigh and label items with printed barcodes while they shop. The Advantage Checkout is based on IBM’s POS software and was custom built for Kroger with components from different technology providers.planetretail.Planet Retail 2011 7 7 .” he explained in September 2010. Meanwhile. Kroger’s Chief Financial Officer. while the purchases of the first are packed by an employee. According to Schlotman. The advantage of the machine compared with traditional tills is its speed: the scanning is completed much faster. Michael (‘Mike’) Schlotman. It has yet to determine the optimal configuration which would remove all bottlenecks during the checkout process. Wincor Nixdorf is developing this fully automated tunnel scanner jointly with major European retailers. “We have to figure out ways to take seconds out of a process that is done thousands of times. Three months after Planet Retail unveiled the details of Kroger’s tests with tunnel scanners to the retail industry. An employee watches the scanning process from the backside of the tunnel and directs the items with a twin flow device into different packaging areas so that the machine can be used by the next shopper. During bagging. could only read about 90% Kroger’s assortment in the tunnel. the reading rate was not yet perfect. answered the questions of investors and analysts. Kroger had installed a fine-tuned system in a second store and continues testing and seeking feedback from customers.net . “You can really leverage two seconds of savings that way. customers visit one of four separate pay stations where they can scan coupons and pay for their goods. © Wincor Nixdorf www. It is not live yet in any store.
is looking for speed and consequently also in a reduction of labour costs. At each tunnel. Dutch start-up company Scangineers built a fully-automated scanner in its laboratory in Amersfoort. as mentioned above. Meanwhile. The sophisticated combination of picture recognition technology and laser scanning seems to be the way to make this a success. In 2005.” he said. Germany-based Wincor Nixdorf has been working hard on the development of a fully-automated scanner. The question took most of the participants by surprise. Won’t such a technology. A decision maker from a major Spanish retailer told Planet Retail that he would never ever start to renew the checkout process if the result wasn’t more convenient for the shopper. allow him to fit more goods into the store. Maybe this is the reason why major European retailers have started again to experiment with self-scanning with mobile devices on a large scale. pioneer in terms of fully-automated scanning.www. he said. Germany and Spain. the items are packed into a bag by a member of staff as is common in the US. NCR actually experimented with prototypes on this in its laboratory as early as the 1990s – actually before the world’s first self-checkout went live in a store. A slim frame holds the technology that is able to scan the items moving forward on a conveyor. the fully automated checkout is so far a product study and installed only in laboratories and not in any real store. Staff. the fully automated tunnel scanner has so far not been installed in a real store. however. “Over the last 12 months. Gordon Klein. would still be needed to supervise the checkout process and help customers. The Product Manager of the Paderborn-based specialists. Kroger. 8 Planet Retail 2011 . is so far not reducing staff – at least not in the test phase. Over the last three years. representing a range of different grocery retail formats. are still handled at least three times: the shopper picks them from the shelves. For the US retail giant. puts them on a conveyor belt and someone bags them at the end. or if it makes the checkout process more convenient for the shopper in terms of item handling. make cashiers redundant and save retailers the largest part of their labour costs? The questioner countered with his view that a business case would. Kroger. Wincor Nixdorf is very confident that this will change. in his opinion. the business case is given that it saves some seconds at the checkout with the very fast moving conveyor belt. and at the end. a friendly assistant is supporting and supervising the process. told Planet Retail in late 2010 that “it will take not more than two years” until Wincor Nixdorf can offer the automated checkout as a product. The small company was acquired by Swedish shopfitting company Itab in 2008. However. we made significant progress in terms of the reading rate. and today forms their self-checkout business under the name Scanflow. However. it doesn’t even need a tunnel anymore.PlanetRetail The idea to automate the barcode scanning at the checkout with a tunnel full of laser scanners through which the items move on a conveyor belt is not new. Reduced labour costs are not always seen as the business case “But where is the business case for this?” the IT decision maker of a major European retailer recently asked during a a Planet Retail seminar. combined with self-service payment machines. Although Wincor Nixdorf is working on this development closely with major retailers from the UK. only exist if the future checkouts were either smaller.planetretail. At least someone has to monitor the age of the shopper if they buy alcohol or cigarettes.net . The items.
Metro Group’s Real re-introduced cashiers at the first self-service payment only store in Mülheim-Kärlich.planetretail. will initially just be tested in real stores before the retailer decides about a roll-out. The terminals will be provided by kiosk system specialist Acrelec with coin recycling technology from Swedish Scan Coin. At the trade show Equipmag in Paris.net . These have not always been successful. After the items have been scanned. Although the new checkout process.Planet Retail 2011 9 . it is unclear if the new checkout process will replace or supplement the existing installations of selfscanning with mobile devices from Motorola and self-checkouts from Fujitsu in Auchan’s French hypermarkets. Rewe stopped a self-service payment experiment at its discount store Penny in Bonn-Duisdorf. The idea to offer self-serve payment while scanning continues to be conducted by staff is not new. 2011 will see a significant rise in innovative self-service checkout and self-service payment installations across Europe and will also see roll-outs of not just traditional. Instead of just adding four. Rewe’s Penny and Billa as well as Schwarz Group’s Kaufland tested stand-alone self-service payment terminals. Planet Retail spotted the future self-service payment machines of Auchan – supplied by Acrelec. major European retailers have started to experiment with a lot of very different forms of self-service checkouts. which can so far only be seen in the retailer’s laboratory. Auchan plans to install one payment terminal for each of the four cashiers who will continue to scan the items but will no longer conduct the payment process. eight or 12 stationary self-checkouts to the manned tills. also in Germany. new checkout technology at a large scale. www. This includes: • The separation of scanning from payment In 2011. German Metro Group has installed self-service payment machines from Skeye and Gunnebo in its cash & carry markets were the scanning was always separated from the payment which was and still can be conducted at manned ‘cash offices’. The terminal will also offer contactless payment with Near Field Communication (NFC). European retailers are looking to innovate the checkout completely. Acrelec is famous in the foodservice industry for providing major quick service restaurant operators such as McDonald’s with order kiosk terminals that also enable payments – at least by card. So far. Grocery retailer Auchan plans to install self-service payment terminals with automated cash handling behind the checkouts of its stores. customers will pay at the new self-service terminals either with cash or credit card. but also innovative. it is very likely that the new approach will sooner or later be installed at all checkouts. However. it is very likely that those isolated tests of self-service payment failed because they were not accompanied by a communication strategy explaining the very new process sufficiently to both employees and shoppers. Germany. And. Also Metro Group’s hypermarket operation Real. a new revolution will begin in France.PlanetRetail European retailers experiment greatly Different from their North American counterparts.
www. Northampton. According to predictions of Planet Retail. Edeka shop owner Hövener in Wuppertal installed Scan Coin’s technology. the automation of cash handling at manned tills is coming to further countries: In Germany.PlanetRetail • The integration of cash recycling Cash still plays a significant role at retailers’ checkouts in countries such as Italy. with the brand new inhouse developed Cineo series and Toshiba Tec. Spain.planetretail. Germany and Poland. It is the Tesco Express in King’s Langley. Ideally. which has five self-scan tills overseen by a single member of staff but no manned checkouts. as opposed to the currency in the USA. Retailers will soon follow the example of Auchan and install the technology in self-service payment machines that free the manned checkouts from the payment process completely. Additionally. the European company with the highest number of stationary self-checkouts currently installed. And. self-checkouts or stand-alone self-service payment terminals. It is likely that more major French retailers such as Carrefour. not all new projects will see the installation of cash handling machines directly at the manned checkout.net © Scan Coin . Most of its Fresh & Easy stores do not have any manned tills. In Germany Metro Group’s Real and Edeka shop owner Simmel stopped the tests as the shopper acceptance was too low. Scan Coin and Cash Guard. 10 Planet Retail 2011 . While this concept is new in its homeland. has been testing one self-checkout only store since October 2009.integrated into manned tills. NCR is selling the payment module of its latest self-checkout also as a stand-alone payment terminal. Therefore retailers and filling station operators across Europe are experimenting with automated cash handling . • Self-checkout only stores Some European retailers tried to find out what happens if a store offers self-checkouts only. and IBM offers jointly with Gisecke & Devrient their payment machine Pecuron. As already mentioned. Casino and Système U as well as German retailers such as Rewe Group and parts of Edeka as well as Schwarz Group will start or roll-out projects with cash recycling at the point of sale in 2011. This technology is already established all over Sweden where cash recyclers at manned tills make retailer stores safer against robberies. Tesco. which replaced Wincor Nixdorf as reseller of the cash handling machines from Japanese Glory. Established across the retail landscape of Sweden. Joining them will be Wincor Nixdorf. The major technology partners delivering the solutions will be the three Swedish specialists Gunnebo. the machines are able to recycle coins and notes which means they dispense change from the piles of coins and notes they previously collected. Tesco has gained a lot of experience with self-checkout-only stores in the US. not only notes but also coins are very important in the payment processes in Europe. the number of tills in Europe equipped with cash recycling technology will double over the course of 2011.
ITM Intermarché’s CIO Christian Legendre rebuilt a hypermarket in Rennes. France. © IBM inbuilt theft control. In June 2008.PlanetRetail • Trolley-to-trolley self-checkouts At a manned checkout. a fixed support at hand height is installed on the floor scale to accept customer baskets with up to 10-20 products. others continue to look for solutions that reduce the item handling but provide at the same time an Retailers are looking for new ways to make item handling more convenient for the shopper without an increased theft risk: Intermarché is testing a trolley-to-trolley self-scanning with IBM in Rennes. As a control mechanism. ITM Intermarché in France is testing a selfcheckout with two scales both weighing a complete trolley. Shoppers take each item from the first trolley. Two scales in the floor weigh complete shopping trolleys: one with the customer’s purchases before the scanning process and another one on which the items are placed after they are scanned by the customer. While some retailers see the self-scanning with mobile devices as the answer. The store manager can also change the self-checkout systems from ‘trolley mode’ to ‘basket mode’ based on traffic and specific customers’ needs. The intervention of a checkout operator is then needed. shoppers are used to unpacking almost all items they picked from the shelves onto the conveyor and packing them again at the end. This is different from most retail stores in North America where packers help at the end of the checkout process. The system ensures that all products are scanned without forcing the customer to use one-way plastic bags. that included machines developed by IBM and Stime.net . Many European retailers are now looking for solutions that make the process more convenient and are not willing to implement self-service solutions that more or less require the same effort in terms of item handling by the shopper. scan them and place them directly into the second trolley. For basket shoppers. which are so far unique in the industry.planetretail. each item that is not scanned automatically generates a wrong weight that blocks the system.Planet Retail 2011 11 . www. France.
Although there is still an additional risk of theft and the danger of annoying shoppers who are ready to leave the store but are selected to be controlled by a staff member.without any control scales and without any cash acceptance. told Planet Retail. instore location-based discount offers via instant messaging and mark-downs in real time on the mobile selfscanning devices. However. wants to “bring all these services in the future also on shoppers’ mobile phones”. The picture shows one in the La Gavia Shopping Center in Madrid. self-scanning with mobile devices is having a real renaissance in the global retail industry.www. 12 Planet Retail 2011 .PlanetRetail • Value-added self-scanning Retailers deploying self-scanning with mobile devices. navigation through the store. and now available with a touchscreen display. Spain. helped to changed the game in a stagnating market of scan-as-you-pick solutions. SPAR Austria is now implementing ‘complete’ self-checkouts with weighing scales. IKEA is currently replacing half of its tills in all European stores by self-checkouts . Also.net . for example. that made a quantum leap in terms of usability. • Simple self-checkouts Reducing self-checkout installations to the minimum equipment required.planetretail. are keen to offer shoppers a lot of additional features such as a shopping list compiled at home. already launched in 2007. currently realising these services on Datalogic's Joya device. Motorola’s MC17. scans of complete trolleys. This is an approach which is seen as highly risky with regard to the shrinkage rate coursed by dishonest visitors of the stores. Not insignificant are the technical improvements that came to the selfscanning installations with specialist software providers such as Dutch Re-vision. couponing. But Casino. New players such as Höft & Wessel Skeye with their Dart device are now also bringing added dynamism to the market. Theft control in the form of partial re-scans of scored and not only randomly selected customers made this form of self-service much more feasible than the annoying re- IKEA is rolling out self-checkouts without any inbuilt theft control across its European store network. Alain Berne. • Renaissance of self-scanning with mobile devices It was not only stationary self-checkouts. Similar ‘simple self-checkouts’ were also being tested by SPAR Austria which intended to deploy the systems alternating in manned or self-service modus. but also the mobile devices for self-scanning and the software deployed on them. such as Casino in France and Coop in Switzerland. Casino’s Head of Store Processes. Datalogic contributed to this with its highly successful Joya device.
Casino and Delhaize Group are rolling out self-scanning with mobile devices across large parts of their store network. Nor can they use them to look up from home in which store a favourite product is on stock or can they look up their bonus points. often in addition to stationary self-checkouts in the same stores. But all those additional functions already exist or are in development in the form of smartphone applications.PlanetRetail Global players such as Ahold. Also the world’s second largest and most international grocery retailer. Therefore. most of them from Motorola or Datalogic. • Self-scanning with shoppers’ mobile phone Major retailers such as Carrefour. © Metro Group www. The devices. nor receive coupons or other promotional offers at home. Auchan. Ahold. Carrefour has rolled out self-scanning. Carrefour is convinced that stationary scan & bag solutions are the best for smaller baskets and self-scanning with mobile devices are ideal for larger purchases. Germany.manned checkouts are competing with self-scanners. are exclusively for use in the store. shoppers confronted with the new opportunities to check out at Carrefour stores reported that they were very confused by the variety of technology and checkout processes . Casino and Delhaize Group now base their selfservice checkout strategy predominately on self-scanning with mobile devices. self-service payment terminals and scan & bag solutions in the same stores. shoppers can’t use them for scanning empty packages at home to create a shopping list. In the project in Real’s Future Store in Tönisvorst. Nevertheless.net . They can neither use them to locate the next store of their favourite retailer if they are on the road.Planet Retail 2011 13 . Metro Group in Germany was the world’s first retailer testing self-scanning with mobile phones. Metro Group will soon test self-scanning with iPhones.planetretail.
As Planet Retail learned, Metro Group as well as Tesco are in the process of developing iPhone apps that can be used for self-scanning. Both retail giants are likely to start testing those applications in 2011. Metro has already decided to use the technology from RedLaser, which was recently acquired by eBay. RedLaser is one of the software providers which enable the camera of the iPhone to read barcodes without a laser scanner. Metro Group will first test the application in its Real Future Store in Tönisvorst. Here, the German retail giant already gained - as the first retailer in the world - experience with self-scanning via shoppers’ mobile phones. Currently, the retailer hands specific Nokia phones that have a focusable camera and an NFC interface for payment to shoppers who choose to test the new technology. The software running on the Nokia phones, called MEA (Mobiler Einkaufsassistent, or Mobile Shopping Assistant in English) had been developed jointly by Metro’s in-house IT subsidiary and Deutsche Telekom. It allows registered customers to use the phone’s camera for self-scanning and to receive product and promotional information. When the customer has finished shopping, a barcode is shown on the cell phone display which is then read by a payment machine. In October 2010, Tesco also decided to develop and test a self-scanning app for not just the iPhone but also for iPad. The retailer, which is the largest deployer of stationary self-checkouts in Europe, is already testing self-scanning in some of its stores with Motorola handheld devices and software from Re-vision. According to Nick Lansley, Head of Research and Development at Tesco, his department is planning to bring the same technology to the iPhone without any real change to the checkout system.
Predictions of the market development
Based on its regular interviews with major retailers and IT vendors, Planet Retail predicts that major investments in different forms of self-service checkout technology will very soon be happening in Europe. Some of them have already started, with IKEA implementing self-checkouts across Europe and Carrefour’s equipping its hypermarkets with hybrid selfcheckout processes in France, Belgium and Spain. Others will follow soon. All over the world, self-checkouts will increasingly be deployed by specialist retailers, especially in the home sectors (furniture and DIY) as well as electronics, entertainment and office. Self-checkouts are no longer a tool for large grocery stores and hypermarkets only. There will be new tests in Asian countries but these are still at an early stage with no significant roll-out plans so far. In the high developed Asian markets, projects on the further deployment of shoppers’ mobile phone as a means of payment and as a marketing tool have a higher position on the prioritisation list of the retailers than self-service checkouts. North America will see a significant number of new self-checkouts installations in Canada. Also, in the USA, we will see new installations, but predominately in the stores of smaller retail companies. As most of the major grocery retailers are already deploying self-checkouts, larger projects are expected at the major pharmacy and drugstore operators. In Europe, the number of stores with any kind of self-service checkout technology is likely to triple by the end of 2012. In the same timeframe, the number of installed stationary self-checkouts in Europe will quadruple. The number of stores with self-scanning technology will triple.
Planet Retail 2011 - www.planetretail.net
France, the Netherlands and Belgium are currently seeing the largest roll-outs of different forms of self-service checkouts in Europe. Following the example of Carrefour’s hypermarket operations and Ahold’s Albert Heijn in these countries, almost all major full-range grocery retailers are in the process of implementing a significant number of selfcheckouts or self-scanning installations in their stores. Some of the projects will not be completed before 2012. The UK - until two years ago the only market in Europe with an extensive deployment of self-checkouts - is currently seeing a significant rise in the numbers of installed self-checkouts. Sainsbury’s and Morrisons are following Tesco and Walmart’s Asda and are installing the machines in almost all stores. With Kingfisher’s B&Q and book retailer and newsagent WH Smith also starting to deploy self-service tills, UK non-food retailers have also started to invest seriously. Germany, Switzerland and Austria, as well as Poland - which are more or less virgins in terms of self-service checkouts - will also see a significant number of initial pilots in 2011, likely to be followed by roll-outs in 2012. In the largest market of Europe, Germany, selfcheckouts are today still a rarity. Only IKEA, surprisingly, converted half of all manned tills in Germany to self-checkouts at high speed.
In the grocery sector, until recently, only Metro Group and some independent shop owners of Edeka were experimenting with some self-checkouts. But this is very likely to change. According to research at Planet Retail, the major players Schwarz Group as well as drugstore operator dm and the DIY retailers Obi (Tengelmann Group), Hornbach and Bauhaus are all planning their first ever self-checkout pilot tests in 2011. Some of them have already made a decision with which IT vendor to go, while others are still evaluating the adequate partner. In September 2010, Rewe Group started a series of test installations of self-checkout in its German retail stores. Planet Retail learned that Rewe Group’s IT subsidiary RIS installed NCR’s SelfServe systems with integrated cash recycling functionality at a store in Siegen, Germany, which is owned by Friedhelm Dornseifer. Another trial is planned in one of the group’s Toom hypermarkets. Self-scanning projects with handheld devices were almost completely missing in Germany, with only one exception, the regional retailer Feneberg from Allgaeu. Retailers in Austria which are predominately owned by German retail groups, will follow the German example. Their Central and Eastern operations, which are often controlled by the Austrian subsidiary of German retail groups, will follow suit.
www.planetretail.net - Planet Retail 2011
2. Customer Facing Technologies: Enabler for a new generation of pinpoint marketing
onsumers are more versatile than ever, better informed and often acting less Using pictures and moving images at the point of sale can influence customers in a positive way and increase sales and margins. According to the global retail marketing association Popai, 70% of customers’ buying decisions are made at the point of sale, while retailers and consumer goods suppliers are still spending most of their advertising budgets on print or TV campaigns. Since the impact of traditional advertising media is reportedly decreasing, it is very likely that both retailers and suppliers will shift significant portions of their marketing spending not only towards the internet, but also to instore marketing. So far, only the most advanced and innovative retailers have fully implemented digital merchandising strategies. Most others are still experimenting, trialling different options of implementation and business cases. The most common business model is based on selling advertising space and time to suppliers of consumer goods brands or other third parties, which allows the system to practically pay for itself. loyal. They want to buy at the best prices while at the same time expecting excellent service from retailers. Traditional mass marketing is losing impact in a world in which customers are confronted with thousands of advertising messages daily. The newly empowered customers have nearly unlimited access to information on products and prices through the internet. And they use this information, even if they continue to shop in bricks and mortar stores. In 2011, retailers will increasingly invest in technologies that allow them to reach their customers more individually and efficiently across all channels. These Customer Facing Technologies comprise online and mobile applications as well as instore solutions such as kiosk systems, electronic shelf labels or digital merchandising equipment. Some of these, for example kiosks or electronic shelf labels, have been around for quite a while and are gaining renewed interest since new applications can be deployed. Others, such as mobile commerce applications, are relatively new. Often, it is not yet clear to which degree they substitute other forms of communication and transaction and to which degree they create additional value.
Tesco learned the hard way
Tesco, one of the pioneers of instore TV, had been using screens in its stores since 2004. In March 2009, Tesco announced it was to shut down the network, five years after the service was launched. At this time, the network consisted of 5,000 LCD and plasma screens across 100 Tesco superstores and Extra hypermarkets. The grocer said the decision had been taken as the equipment was “outdated and energy inefficient”. But instead of another green initiative this decision was in its core more likely a general problem of the instore advertisement market in Europe and the UK. In truth, Tesco TV wasn’t living up to its expectations and always had a lack of advertisers. Even Tesco’s famous in-house consultancy and data analyser dunnhumby, which tried a turnaround with taking over responsibility for Tesco TV in August 2007, failed with a new concept.
Retailers will invest in digital merchandising
Usage of digital media for advertising and information purposes has become extremely popular in public spaces and customer areas, such as malls, restaurants, banks, petrol stations and retail stores. In some cases, digital media was installed to simply create a specific ambience in a store or a mall. The use of this technology is showing significant growth rates inside as well as outside of the retail space. In the world of retail, digital merchandising solutions so far mostly support promotions or new product introductions, provide more detailed product information or help to create an atmosphere that engages customers and enhances the shopping experience.
Planet Retail 2011 - www.planetretail.net
Planet Retail 2011 17 . In April 2009. Tesco pioneered instore TV in Europe. When Tesco TV was started. Tesco in Poland aimed to achieve incremental revenues from the sales of advertisement time. www. meanwhile. Insights regarding customer acceptance and the right implementation practices had not yet been gained.net .PlanetRetail The end of Tesco’s network changed the way the retail industry discussed digital instore media.But the relative immaturity of the digital instore advertisement market in Europe is only one of the reasons why Tesco’s concept failed. a different type of digital signage network is still up and running in Poland. are used to generate significantly more revenue from selling time and space to top brands. In the UK. other major European retailers were also complaining that there has not been enough investment by brand manufacturers into digital instore advertisement. hanging from the ceiling. Tesco expanded its digital signage network in Poland. Atvertin started its expansion by deploying content management solutions from DDS Poland. Polish advertising company Atvertin was selected to develop a programme tailored to Polish customers and the local market. experience in deploying the new technology to retail stores was close to zero. Tesco had a top player as its selling partner. which is based on software from digital signage solutions provider Scala. based on lessons learned from the failed first installation in the UK and then the more successful deployment in Poland. With JCDecaux. where shoppers have a very short attention span. The network features an average of 30 42inch Philips plasma screens per store. the sales of advertisement didn’t even cover the expenses of the network. but it failed to generate additional revenues for the leading British retailer.planetretail. It is very likely that Tesco will start again in the UK with a newly developed approach. pays a rental charge and shares revenues from advertising partners back with the retailer. large flat screens running promotions and infotainment can still be found in the consumer electronics department as well as in some recreational areas. Tesco did not stop the usage of advertising screens in their stores totally. As Planet Retail learned. particularly when it was using audio. Increasing sales of instore-advertised products were nice to have. Content shown was not properly adapted to the grocery retail environment. Their counterparts in the US. Right from the start. As insiders report. Customers commented they found Tesco TV too intrusive. Tesco launched a digital signage network across all its stores in Poland. In September 2008. Atvertin owns and runs the Tescobranded network. but not the retailer’s success criterion for the network. However. And.
Finally. while content is adapted according to the different phases of the shopping process. One pillar of the Smart concept is the so-called Triple Play.net . Walmart ‘Triple Play’: Welcome signage. category screen and display at gondola end.700 stores across the country. open enterprise platform powered by Internet Protocol Television (IPTV) technology that allows the retailer to monitor and control more than 27.www.000 screens in more than 2. These displays are now part of the product presentation and create interactive virtual assistance to provide product information to shoppers and refine choices in key categories. and message optimisation technologies are provided by DS-IQ. Walmart completed the chain-wide deployment in early 2010. mounted only a few steps away from the products are showing content related to the category. Response measurement. With its revised concept. It is called Walmart Smart Network (Smart) and mainly provided by PRN (at this time Thomson’s Premier Retail Networks). Smart is the result of two years and USD10 million in research and development used to identify the optimal locations. by screen. The network deploys response measurement and message optimisation technologies to enable delivery of the most relevant content to shoppers . In this way. © Walmart 18 Planet Retail 2011 . Custom programming on the network is provided by Studio2. applications and programming for reaching the millions of consumers who visit the retailer’s stores each week. taking only five seconds of attention to introduce customers to the network. which was developed with the support of the consultancy DS-IQ moves some of the screens much closer to eye level. All of the content on the Walmart Smart Network is customised and designed to deliver product information to consumers at the point of decision when and where they need it in the store.planetretail. Walmart is the first retailer in the US who has rolled out a next generation of instore media that is supported by a flexible. learning. In a first step shoppers entering the store are greeted by a welcome screen. US retail behemoth Walmart presented a revised instore media concept to agencies and marketers. The new concept. Department screens. customers are very subtly accompanied during their shopping trip.by store.PlanetRetail Walmart set benchmarks with its Smart Network In September 2008. by day and by time-of-day. a newly formed company led by key advertising executives who are instore communications experts and had been involved in the development and testing of the new network. smaller end cap screens at each aisle provide customers with the final piece of information needed to take a buying decision.
in the previous 18 months. Figures released by Walmart report an increase of sales not only for products promoted but also for the category. At the Digital Signage Expo in Las Vegas. to increase sales for many of the products that it advertised. is calculated between USD2 and USD4.Planet Retail 2011 19 . Walmart stated that its Smart digital signage network were a huge success compared to its predecessor ‘WalMart TV’. while price leadership products grew by 6%. A Nielsen survey came to the result that 40% of Walmart shoppers noticed the network. Walmart is running instore TV and digital signage solutions also in its Brazilian and Mexican operations. which is well below print and TV advertising costs. 32% recalled an ad on it and 64% reported a positive experience.000 viewers.net . In addition to its Smart network in the USA. Source: Walmart 2010 Walmart Instore TV in Mexico Increased Sales Through Walmart Smart Network Sales Lift by Department Electronics Over the counter TC Food Health/Beauty % 7 23 13 28 Sales Lift by Department Mature item boost Item launch Seasonal push Price leadership % 7 9 18 6 www. Walmart markets advertising time on the network relatively low priced.PlanetRetail In February 2010. Cost per Mille (CPM). the costs to show the advertisement to 1. the retail giant’s creative director Andy Johnson said the Smart Network had proven. ranging from 7% sales increase for electronics to 28% for health & beauty products. those connected to pushing seasonal products achieved an 18% uplift. The Smart network is creating 140 million impressions per week. mature items were boosted by 7%. which is equal to a US nationwide TV campaign running on up to 15 channels.planetretail. This makes the Smart network attractive to advertisers. The retailer also noticed a sales lift in certain product types: promotions for item launches produced a lift of 9%.
retailers are deploying a mixture of promotions. product information. Future solutions will be more interactive and individually targeted Rewe Group commissioned T-Systems to deploy a digital merchandising network to 480 German supermarkets in 2010. Production and compilation of content is expensive and in most cases outsourced to specialised service providers. Digital merchandising screens enhance the shopping atmosphere at an Edeka store in Aachen. These offerings are enabling small and independent retailers to participate in the trend. They are looking to differentiate themselves from competitors using screens to enhance their own brand image and their customers’ shopping experience. Germany. Nevertheless. image or ambience creating content. In many cases. A large number of trials and different types of implementations can be observed in the European market. This may change when powerful retailers begin initiatives and start negotiating this topic in their annual range reviews with suppliers. European retailers have been less successful in deploying a similar business model. 20 Planet Retail 2011 .www. Some of these agencies have been developing specialised content related to local markets or specific segments such as health & beauty. most retailers prefer a business model in which the digital signage platform is paid from advertising revenues. For obvious reasons. supplemented with news and weather forecasts or local information and advertising. In the same way. petrol stations. software can track eye movements. some smaller independent retailers have been investing into this technology without securing income from third parties. FMCG manufacturers in Europe have not yet recognised digital instore media as a relevant marketing platform. Face recognition software detects the gender of the shopper or its age group and triggers the system to display content according to the target group. More importantly.planetretail.net . bakeries or butchers.PlanetRetail Europe follows suit So far. Technology developments promise to make digital instore marketing more interactive and individually targeted in the future. which detect when a customer gets attracted by something and allows it to provide more detailed content. Some retailers may not be big enough to attract enough advertisements from the manufacturers.
Planet Retail 2011 21 . Promoting sales with product pictures on scale display at Edeka. Lessons learned from failed projects have shown that overkill in the form of too much acoustical or visual noise may be seen as intrusive by customers. for example enlarge or rotate objects or open up windows displaying additional information. Aachen in Germany. A new generation of screens based on Organic Light Emitting Diodes (OLED) provides brighter and more brilliant pictures while using less power. the display technology itself is developing fast. But despite all the fascination that fancy new technology may create.PlanetRetail Multi-touch surfaces will enable customers to directly interact with the content.net .planetretail. Lessons learned: Balance strategy Content is king • Fresh & interesting • Consumer orientated • Controlled by the retailer Instore marketing is NOT TV Content Placement makes a difference • Guide the customer • Near the products • At eye level • • • • • Short attention span Formats designed for retail Be careful with audio Balance information & entertainment Avoid visual overkill Instore Digital Media Technology A learning system • Response measurement • Message optimisation Marketing Integrated concept • Tied into POS data • Integrated marketing concept Sustainable implementation • • • • • Energy efficient User friendly Centrally manageable Locally adaptable Future-proof Sound business case www. Also. If deployed rightly. retailers should be careful not to deploy it for its own sake. the technology may guide and support shopper without distracting from the actual shopping process.
For this reason. Nevertheless. these changes are time consuming and expensive.net © ZBD . Even price changes during the day. The photo shows one at an ITM Intermarché store. the stickers also have to be changed manually. barcodes and graphics cannot be displayed. happy hour pricing or end-ofthe-day mark-downs for fresh products are enabled through this technology. which cost significant less. price optimisation with new software solutions and a new strategy is a hot topic for retailers. retailers see increasingly a business case in electronic shelf labels which display price information electronically and are updating prices immediately and automatically. Innovative retailers such as Tesco or Coop Norway are already testing the next generation of Electronic Shelf Labels (ESL). The results of those projects require in some cases more frequent price changes. Dot-matrix displays show text and graphics.planetretail. For this reason.www. most installations in larger supermarkets or hypermarkets are still based on segmented LCD labels. They allow prices to be changed whenever appropriate according to the marketing strategies of the retailer. Additionally. while consuming low power 22 Planet Retail 2011 .PlanetRetail Electronic Shelf Labels (ESL) get a second chance As we shall see later in this report. Each time the shelf layout or the product description is changed. These displays based on dot-matrix e-paper technology significantly improve the readability of prices. the system secures that shelf prices and prices of the POS system are always in sync. Improvements have been made both regarding display technology and technical infrastructure. controlled from a central server. The downside to this is that text information. They have to be printed on stickers which are then attached to the electronic label. they are still expensive and only affordable in relatively small sizes. They are highly energy efficient as they are consuming power only when the content is changing. The technology available has made significant progress over the past few years. French retailers are deploying electronic shelf labels comprehensively. text and graphical information. Manually executed.
PlanetRetail For most deployments. Speed and required infrastructure vary according to bandwidth and frequency used. Although Electronic Shelf Labels have been offered to the retail market for more than 25 years. Despite the fact that existing solutions on the market are typically offering a return on investment within 18 months.planetretail. only a few retailers have gone beyond testing electronic labels in some of their stores . each with its pros and cons. These do not need to be mounted in visible line with the labels. being used by the different ESL suppliers. since the signal is being carried via diffused light.Planet Retail 2011 23 . only wireless communication is acceptable. ESLs enable dynamic prcing at Système U’s U Express neighbourhood store in Vincennes. Larger stores require the installation of a significant number of transmitters. Some of them can be subject to interference. There is a great variety of different wireless technologies. The downside of infrared communication is that the installation costs are high as the set-up of the infrastructure typically takes three to five nights per store.000 labels per hour. A performant system is able to change between 7. each serving approximately 120 square metres of retail space. France. © ZBD www. highly vulnerable in the tough environment of a store and less flexible. which may affect its performance.net .with the remarkable exception of France. The speed of transmission is highly important and determines the number of labels that can be initialised or changed over time. To support the replenishment process. since a cabled infrastructure is more expensive. distortion or shielding effects. store staff can access additional layers of information by using a handheld device. where legal requirements have fuelled the nationwide roll-out of this technology. Alternatively. different types of radio frequency technologies are being used. Wireless infrared technology allows high speed transmission and provides two-waycommunication to enable central control and monitoring of the labels. either providing one or two-way communication.000 and 15. many retailers seem to be waiting for the one ideal solution that fits to all their requirements: high quality graphical displays with low purchase and operating costs that can be easily integrated into shelves and information systems and allow quick and reliable updates.
at work. analyses expected deliveries and current stock levels to avoid overstock or out-of stock situations. the National Retail Federation (NRF) in the US expects. With the advent of user-friendly and fast working smartphones – Apple’s iPhone as a benchmark .consumers are now enjoying the freedom to access the internet and its services anytime anywhere: at home. In the world of non-food. goods worth USD120 billion will be bought via mobile phones representing 8% of the e-commerce market.www. the Dutch grocer is testing the scenario in an Albert Heijn store in Amersfoort.planetretail.PlanetRetail Albert Heijn reduces food waste with Electronic Shelf Labels (ESL) Nevertheless. on the move or even inside a store. Prices are marked down accordingly to the calculations of a price optimisation engine and are communicated via Wi-Fi to 92 full colour 15-inch displays. All price changes applied are automatically transferred to the merchandise management system. the consultancy Capgemini and messaging specialist Impulselogic. Price comparison platforms help to set new price expectations. test reports and product ratings from consumer associations or customers who already bought the product. the retailer continuously compares predicted and actual sales of fruit and vegetables. Shoppers using mobile self-scanning devices receive updated price information directly onto their handhelds and also get cross-selling offers. In the Amersfoort store. exceeding one billion users worldwide. They browse for detailed product information. However. consumers are already used to prepare their shopping trips online. © Capgemini Ahold Albert Heijn reduces food waste with price optimisation and ESLs at a pilot store in Amersfoort. which reflect the company’s standard design for pricing or promotions. employees in the stores are also able to override price changes with a custommade mobile solution within a predetermined time frame in case they do not agree with the suggested price changes. shoppers have nearly unlimited access to product and price information through the internet. Netherlands.net . According to a recent study from Parks Associates the number of smartphone users is vastly increasing and will have quadrupled by 2014. The mobile shopping revolution Today. With Toshiba Tec Europe. The project was one of the winners of the EHI Retail Institute’s Retail Technology Awards in 2010 and has received a lot of positive reactions. Albert Heijn is considering expanding the trial to other product categories and further store locations but has not yet made a roll-out decision. some innovative retailers are trying to get more use out of the deployment of Electronic Price Labels. By 2015. 24 Planet Retail 2011 . Albert Heijn started a food waste reduction programme using mark-down optimisation to shrink losses from spoilage of fruit and vegetables. In March 2010.
© Ocado UK .particularly in the USA and significant share of these being transactional.Planet Retail 2011 25 .planetretail.000 customers downloaded the software free of charge from Apple’s app store. Shopping app for different types of smartphones from Ocado. And they can specify their needs when shopping for deli produce. Retailers have realised this and started inviting more mobile shoppers by increasing the user-friendliness of this channel. numerous retailers . The application is fully synchronised with Ocado. this proportion had increased to 6%. As smartphone usage increases and consumers become more willing to shop through their devices. allowing shoppers to execute online purchases via their mobile phones. even though these had not yet been optimised for mobile access.com so customers can start an order on one platform and complete it on the other. mostly for fresh products. for example if they want their cold meat thinly or thickly sliced. Using the application.have released smart phone apps with a www. 2% of Ocado’s sales were being generated through the app. Migros-owned Swiss online grocer LeShop has been providing iPhone users with a mobile interface to its online shop. Others have been implementing dedicated landing pages optimised for mobile access. According to the retailer’s founder and CEO. 4% of LeShop’s online sales come from the mobile channel. the rapid upward trend is unmistakeable. Wanner said. Within six months 150. Since the beginning of 2010. The app synchronises automatically with the website. customers are not always substituting weekly purchases from their home computers but placing additional orders. keeping prices and personal shopping lists always up-to-date.net . Consumers are able to shop from the kitchen and check their cupboards and fridge as they shop. Ocado on the Go should soon be generating over 10% of Ocado’s sales. By February 2010.000 items with images offline as everything is downloaded to the phone. They can also quickly add items to existing baskets at a later point in time. The preferred way to achieve this is by providing so called apps designed for the most popular smart phone platforms. Although still a relatively small proportion of the grocer’s entire business. Currently. the transactional service enables customers to browse over 21. Christian Wanner. the mobile channel is of strategic importance for LeShop. the shoppers can access and order from LeShop’s whole range of products including promotions. the retailer expects the share to reach the 10% mark soon. Just three months later. The share of customers using the service has increased rapidly. A typical example of a transactional app is ‘Ocado on the Go’. In 2010.PlanetRetail The year of the app More and more customers have been using smartphones to enter retailers’ web pages. When shopping with their smartphones. in May 2010. Created partly by John Lewis-owned online grocer Ocado in the UK.
Slow loading speeds are likely to make users turn away from the app.www.engaging with customers wherever they go Selling goods via the mobile channel represents only a fraction of mobile enabled services retailers will invest in. Symbian. retailers may provide web access optimised for mobile phones without providing an app. including mobile coupons. Entering the mobile world of commerce is still challenging for retailers. via a retailer’s app or by scanning a so-called Quick Response (QR) code from product packaging.planetretail. vouchers. personalised promotions and product offers. it is reasonable to assume that the mobile nature of the new channel will motivate shoppers to order additional products on top. Mobile marketing .the widely spread Nokia platform first and rolled it out to other devices such as the Apple iPhone a few weeks later. Using this QR code will lead to additional insights on the web. retailers may apply a multitude of mobile marketing programmes.” Tesco. Please give it a try. newspapers.com’s head of R&D. It can help to make image-heavy product catalogues downloadable to the phone. Nick Lansley. posters or displays. Monitoring customer feedback and requests is important in order to understand how the app could be improved. All of this underlines the fact that getting mobile is not an easy task for retailers and requires appropriate strategies as well as significant and well placed investments. cannibalising existing online business? It is sure that the same item will not be ordered twice just because of a new order channel. To interact with customers. magazines. Users have high expectations and the mobile market is moving quickly. retailers and their developers have to keep an eye on the new system Bada. Retailers can either send them actively to their known customer base by text message or alternatively enthuse consumers to download them to their phones. Tesco launched the application for Ovi . 26 Planet Retail 2011 . Tesco. They can also update their shopping lists.net . Android. And it is clear that online retailers not willing to serve the mobile customer may lose significant market shares. Performance is crucial. Windows Mobile and Windows Phone as well as Blackberry all play a significant role in the market. Additionally. Despite the buzz about transactional mobile applications one question remains unanswered: Will mobile commerce become a new channel which creates additional revenue streams or solely a new way to order. but also on Linux deployments on mobiles. Nevertheless. stated: “Our core customers are busy mums who don’t have iPhones and we want to focus on them first. Additionally or alternatively. This could be done by accessing a retailer’s website. They have to constantly review and update their mobile services.PlanetRetail Tesco in the UK launched its first transactional mobile app in August 2010.com has also formed a development team to bolster its mobile services and extend its strategy beyond the smartphone market before the end of the year 2010. Multiple platforms have to be supported: iPhone’s OS. The application lets shoppers browse the complete online offer of the retailer.
QR codes are based on a new generation of barcodes using a two-dimensional square pattern that can store more than 4. or on just about any object about which users might need information.089 characters. buses. information can be constantly updated and even multi-media content. After a while. QR codes may appear in magazines. Auchan or Intermarché.PlanetRetail QR Codes A QR code is a two-dimensional barcode (datamatrix) designed to have its contents decoded at a high speed by dedicated readers and camera phones. QR codes can be used to display text. QR codes have become extremely popular in Japan. Recently. open a website or compose an e-mail or text message. but over 50 free Apps are available with reader and metadata browser URI redirection capability. In the Apple iOS. The most commercial use for QR codes is in the telecommunications industry where the mobile phone seems to be the biggest driver of their popularity. Mobile phones can read and interpret these codes to display the information stored and link to a specific landing page on the Internet.net . In this way. QR codes on product packaging links to extended content via mobile phone. Created in Japan by Toyota subsidiary Denso-Wave in 1994. movie clips or sound can be presented via the shopper’s phone. QR codes could be printed on products. Nokia’s Symbian operating system is also provided with a barcode scanner. which is able to read QR codes. Users with a camera phone equipped with the correct reader can scan the image of the QR code to display the information contained within it. add a contact to the user’s device. such as Carrefour. shoppers’ phones are becoming mobile kiosk systems.Planet Retail 2011 27 . The code consists of black modules arranged in a square pattern on a white background. This makes the use and diversity of QR codes much more appealing than its older counterpart. on signs. the QR code is one of the most popular types of 2D barcodes.000 alphanumeric characters. QR codes have become more popular than typical barcodes as the typical barcode can only hold a maximum of 20 digits. the trend has travelled across to the USA and Europe. Casino. while the QR code can hold up to 7. Google’s mobile Android operating system supports the use of QR codes by natively including the barcode scanner (ZXing) on some models. have started to use them to provide shoppers with additional product information. With this feature. as its contents can be decoded at high speed. QR codes first became popular when used for tracking parts by vehicle manufacturers. www. companies saw the potential for the QR codes to be used elsewhere. QR is the abbreviation for Quick Response. such as pictures.planetretail. Initially. while mbarcode is a QR code reader for the Maemo operating system. posters and shelf labels or displayed on screens such as those of weighing scales. French retailers especially. a QR code reader is not natively included. This technology could also be used inside the store in various ways. business cards.
Younger consumers have come to expect internet and mobile-based savings. According to the spokesman more than half of the participating consumers redeemed more than one coupon in the testing phase last summer. Cellfire reported that over half of shoppers who joined the programme redeemed more than one coupon while the average conversion rate was between 10-20%. A browser opens on the mobile device and a website provides customers with detailed product information. Kimberly-Clark and others on their Blackberries. Clorox. Extended product information using QR codes at Sears in the USA Sears was one of the first US retailers using 2D barcode technology for instore advertisement. all accessible through a single barcode. 28 Planet Retail 2011 . The response message includes a link to a barcode which can be scanned at the cash register or by providing a numeric code to the clerk. Target’s point of sale scanning technology makes mobile coupons possible. © Target Paperless coupons at Kroger in the USA Since 2009. In January 2009. Del Monte. Offers are single use and expire on the date listed. he said.planetretail. Target started to offer digital coupons that are redeemed by scanning a barcode from the display of the shopper’s mobile phone at the checkout.” said a Kroger spokesman. check product availability and store locations. The message also includes an invitation to receive future text messages with 7-Eleven news and offers. Customers are linked to promotional websites simply by scanning the QR code with their mobile phone’s digital camera. Time-crunched shoppers can download coupons from Proctor & Gamble.PlanetRetail Insights from Planet Retail’s database How retailers step into the world of mobile marketing Mobile marketing via text message at Seven & I in the USA In late 2009. Coupon service. Additionally. browse the weekly ad and receive text and e-mail notifications of deals – all via their mobile phones. In addition Target shoppers can access their Target Mobile gift cards. After opting-in. Kroger is also working with another mobile couponing service called Cellfire. Kroger has been participating in AOL’s electronic coupon service Shortcuts. manage their Target gift registry and lists.net . With the test 7-Eleven allowed customers to send a text message to receive a free non-alcoholic beverage. view online assortments. iPhones or other mobile devices.www. “Retailers have a wider generation of shoppers than they ever had before. 7-Eleven Inc in the US (part of Japan’s Seven & I) was testing a mobile marketing campaign in approximately 200 San Diego area stores. Shoppers can opt-in to the programme via the internet with their PC or mobile phone or via text message. Consumers can redeem paperless coupons at the checkouts of all Kroger banners. shoppers receive a text message with a link to a mobile web page that contains multiple offers. Target mobile coupons can be scanned directly from the phone’s display at the POS. Several hundred of products in the USA are already equipped with 2D barcodes. General Mills. mobile gift cards and gift registry at Target in the USA In March 2010. the US retail giant completed the roll-out of the Cellfire-based mobile coupon programme to all its stores.
The system. Comparing prices even within a store and then purchasing the cheapest item online with the retailer’s 1-click purchasing system has proved popular with shoppers and may become a nightmare for retailers that base their business on bricks & mortar stores only. Amazon Remembers – take a picture of any product and receive the best price offer Amazon’s mobile app is featuring a thus far unique service called Amazon Remembers. by an employee. The free app allows customers to receive personalised offers from Sainsbury’s and other retailers using the Nectar loyalty card. Users can take a picture of any given item with the phone’s camera. find promotions or pick and choose recipe ideas along the way. shoppers can search for the nearest Billa store. Blackberrys or other smartphones. For the eValues programme. The product is identified by image recognition or. which is then stored in the app and uploaded to the Amazon website. Sam’s Club is deploying the Retail Action Manager solution from analytics and decision management technology provider Fico. The app has been lauded not only for being innovative and useful but also for the fact that it really works.Planet Retail 2011 29 © Amazon . Customers send a photo and Amazon remembers the product. and optimisation technology and takes into account a member’s preferences.com. Additionally.se and any kind of mobile phone. The programme. allows shoppers to look-up information about additives and E numbers via the internet or SMS text message. customers of Rewe’s Billa in Austria can download a free application that deciphers the European number code for food additives. ICA in Sweden launched an information service on food content which shoppers can access via its website ica. The predictive technology solution uses a combination of analytics. Walmart-owned cash & carry operator Sam’s Club completed the roll-out of paperless couponing to all its stores throughout the US. health & beauty products and office supplies as well as other goods and services. on product packages and notifies on nutritional value of grocery products. provides personalised savings on hundreds of items including fresh foods. the so called E numbers.planetretail.PlanetRetail Savings through paperless coupons at Walmart’s Sam’s Club In August 2009. purchase history. Extended consumer information at Rewe Group Billa. The user then receives an e-mail comprising product details.net . if this fails. rules. Nectar rewards at Sainsbury’s In August 2010. and in-club product availability to maximise offer relevancy and profitability. The app also contains a store locator and the ability to check Nectar points balances instantaneously. called ’Koll på maten’ (Know your food). Members can also access their eValues accounts via Samsclub. Sam’s Club members can look up eValues offers at interactive kiosk systems in the stores and send an eValues shopping list from it to their iPhones. www. Sainsbury’s launched two new iPhone apps in conjunction with the loyalty programme Nectar. and matched with the Amazon product catalogue including the offers of the retailer’s Marketplace partners. Austria Since the end of June 2010. Information on food items via mobile phone at Ahold’s ICA in Sweden In September 2009. called eValues. price comparison and requisite links to the product.
Walmart-owned Asda. another route retailers may take is by improving the shopping experience and providing more customer service. Avoid Mobile Mobbing with Location Based Services Strong marketing opportunities derive from the fact that new smart and mobile phones can locate their position using the mobile phone as well as Wi-Fi networks and the Global Positioning System (GPS). nutrition facts and background information on producers and suppliers. They can also share their shopping experience via social networks and see how other customers rated the product. mySupermarket. Prices are updated daily. or mobile consumer platform Barcoo from German startup company Checkitmobile. shoppers scan product barcodes and gain instant access to competitive prices.planetretail. Power is shifting more and more towards the consumer and only those retailers who develop hands-on strategies may sustain their success in the future. an iPhone barcode scanner application recently acquired by eBay.PlanetRetail Even more power will shift to consumers Shoppers enabled to access every bit of information on products and their suppliers available on the internet with their mobile phones will most likely be shopping more consciously and confidently. which was launched in March 2009 and allows customers to check the retailer’s prices wherever they are. The examples show how much price transparency consumers will gain in the future across markets and retail verticals. Mobile scanning app RedLaser has been acquired by eBay. Customers can compare prices for single products as well as for complete shopping baskets and move orders to a cheaper store with just one click. providing them with personalised offers or additional services. The site provides prices for Intermarché and Ecomarché stores. This may be taken even further. Many retailers are already offering a store locator function that guides customers to their nearest outlet. 30 Planet Retail 2011 . Retailers have to answer with appropriate strategies. applying a pro-active price policy is one way to respond.uk. this service only compares web store prices. supplemented with price data collected from four Morrisons supermarkets. Walmart’s Asda tries it with an attack: The retailer is providing its customers a limited price guarantee based on the services of mySupermarket.co. which for grocery products are usually higher than in bricks & mortar stores. Currently.net © RedLaser . initially listing the best prices for the most commonly consumed produce.co.uk allows its users to compare and shop from four grocery online shops in one central place: Tesco. ingredients. French grocer Intermarché runs a mobile website called Discount Utile. They could also send messages to customers related to the position in a store or in the vicinity.www. The new communication tools in the hands of consumers have become a threat and an opportunity for retailers at the same time. With applications such as RedLaser. Sainsbury’s and Ocado. In the UK.
The app comes from start-up company Shopkick and uses transmitters in the store. Consumers give their mobile phone number to a cashier. allowing any applicable personalised discounts to immediately appear on a customer’s receipt. but only when the phones have launched the Best Buy mobile app before. which is inaudible to humans.planetretail. allergies or other health related requirements. including gift cards and Napster (owned by Best Buy) song downloads. called ‘kickbucks’ for simply entering a store. is detected by mobile phones in or near the store. However. Best Buy is paying Shopkick for every customer who uses the app in its stores. This would enable nearly infinite possibilities to exploit marketing opportunities. there are so far no efforts taken to integrate a customer’s purchase history with the application. But even if permitted. The new app will initially be available on the iPhone with applications for other smart phones to follow suit.Planet Retail 2011 31 . Best Buy integrated Shopkick into its point of sale system in its San Francisco store to streamline the redemption of special offers.net . receiving a large number of messages from retailers could be perceived as spam. Such details could be individual preferences. Best Buy demonstrated in San Francisco its new mobile application that can detect shoppers who are in or near stores. This sound. Best Buy rewards customers who open up their phones In August 2010. even if they do not buy anything. Shopkick’s “kickbucks” can be earned just by entering a store. But services such as these do need the permission of the customer to avoid the recipient of the messages being annoyed. special diets.PlanetRetail Customers identifying themselves by using their mobile phones may enable the retailer to customise their messages using information from previous store visits. online purchases and personal details disclosed by the customer. According to Shopkick’s CEO Cyriac Roeding. These points are redeemable for a variety of things. In a first step. © Shopkick www. Consumers then receive various discount coupons redeemable at the particular store. which broadcast a constant signal announcing the store’s identification number. Initially Best Buy offers around 10% off of an entire product category for everyone in the store. the retailer plans to use customers’ volunteered demographic details to fine-tune recommendations soon. Shoppers can also earn points. Shoppers may feel intimidated in respect of their privacy if they did not actively opt into this offer.
with the ability to instantly locate sale items. Finally. four Meijer supercenters have been enabled with the service. The application also provides updated information on weekly specials and price promotions available in the store.planetretail.PlanetRetail Meijer’s app helps shoppers find products inside the stores In August 2010. specific departments or services such as a fitting room or restroom. Meijer’s Find-It application helps customers to locate products inside the store. It allows shoppers to quickly find products. location and contact information for all Meijer stores is available. eliminating the need to ask store employees where particular items are. allowing the customer to navigate to the correct exit when their shopping is completed. But there is no doubt that those efforts will be taken by the most innovative and potent market participants. © Meijer Spot’. Shoppers can see the location of more than 100. They will have to make significant investments to develop winning strategies and best practices.000 items in a Meijer outlet using their smart phones. Meijer launched a product locator app called ‘Find-it’. During this pilot phase of the programme. In some developed markets. we are already experiencing promising forerunners of what may become the next shopping revolution. Retailers cannot afford to ignore this trend. which shows the location of a shopper’s car Summary Retailers and their customers are only just beginning to fully realise the possibilities of mobile marketing and mobile commerce. The free app shows items as pins placed on an interior map of the store. The app also features a tool called ‘Remember My Parking in the Meijer parking lot.net .www. built upon a mobile destination content platform from solution provider Point Inside’s. They have to keep in mind that there are possible pitfalls. 32 Planet Retail 2011 .
but will also highly be welcomed by their FMCG suppliers. In the US. services. 14 rounds of price cuts impacted the German grocery market. these sophisticated tools will be crucial for retailers if they want to survive the counterproductive price competition. retailers see themselves not only exposed to ruinous Retailers have to position themselves in an environment characterised by market saturation and frequent price cuts. Major retailers around the world have already discovered that price optimisation technology can be a very helpful and profitable tool for this purpose. www. Walmart. retailers will significantly invest in price optimisation software and price wars but also to growing price sensitivity among shoppers as well. where Aldi has traditionally dictated the prices. at least in a few product categories. Coop and Migros. As a consequence. Due to this changing competition. In the future. its longstanding price leadership has resulted in a retail environment in which virtually all competitors are constantly monitoring the “Behemoth from Bentonville” and position themselves and their prices accordingly. Price optimisation: Higher margins without increased turnover I n 2011 and onwards. Aldi’s move into Switzerland has led to a gradual lowering of prices and the extension of economy ranges by the market leaders. However.PlanetRetail 3. Aldi’s store openings in Australia caused Woolworths and Coles to lower their prices every time a new Aldi opened in their neighbourhoods. In Germany. other players are constantly challenging its price hegemony. will not only benefit retailers. partly due to a rising volatility in commodity prices. A new generation of price optimisation software will help them to optimise retail prices based on simulations of customer behaviour. Last year alone. is using price optimisation technology. Slowing down the rate of decline for shelf prices. Furthermore. Price wars dominate retailing in saturated markets Even though retail landscapes in the Western hemisphere vary from country to country.Planet Retail 2011 33 . the one thing they have in common is increasing market saturation. Even the world’s largest retailer. they have lowered the price level in general. even Walmart cannot fully rely on its low-price leadership position anymore as discounters such as Aldi and Dollar General are starting to challenge it on prices. Consequently. which the trade industry experiences in major countries. Aldi’s market entry a few years ago reshaped the retail structure of these countries. In Australia and Switzerland. Even though these cuts were led by discounters. fluctuations in purchase prices have become more frequent during the last few years.planetretail. it has become a necessity for retailers to adapt their selling prices more often. Confronted with price wars and saturated markets in many parts of the Western hemisphere. Walmart has started to rely on price optimisation technology. they will deploy new ways to improve their margins.net .
net . Walmart has been using price optimisation tools for more than three years. Older tools were limited to specific questions of item-level pricing and could not support a complete pricing process. It is also doubtful whether product proliferation will lead to an increase of the number of products sold.www. Shopper behaviour analysis enables them to see how their margin and sales will change if they go ahead with a certain price change recommended by their optimisation tool. pricing is for many retailers still a comparably manual process. retailers can find an answer to the increasing competition and might even earn more money without selling more items. if retailers want to survive the present counterproductive price competition. These tools enable retailers to forecast units that will be sold of a certain item at a certain price on a weekly.planetretail. However. but it also reduced waste and decreased fixed capital and stock-keeping costs significantly. saved in the form of historical POS and loyalty card data. automated ordering has certainly been the technology which brought the largest benefits to retailers. On the contrary. Looking at demographic projections for European countries. Price optimisation predicts consumer behaviour While the retail environment has become increasingly competitive during the last few years and will continue to do so. With price optimisation tools. these © Walmart optimisation can be called self-learning. It is likely that price optimisation will be the next massive success story of retail technology after retailers’ converted their order process to automated replenishment based on sales forecasts.PlanetRetail Simply copying Aldi’s prices for their price entry range will not be a future-proof strategy for fullrange retailers anymore. the next generation solutions have heralded a new era of price optimisation. Within the last ten years. Despite its everyday low prices promise. daily or hourly basis and break down demand by region or store level. as they do not have the discount-specific low cost structure that Aldi is famous for. Being able to not only generate prices. enabling retailers to predict shopper behaviour. investing in new price optimisation tools will be crucial for them. but also monitor the effectiveness of price changes and feeding this information back into the system. new price optimisation software not only takes into account traditional rules which segment products (price elasticity vs. They also use actual consumer behaviour. traffic building vs. Compared to earlier software versions. profit building) and enable retailers to set their own rules such as ‘always match competitors’ prices on item X’. 34 Planet Retail 2011 . there is another important aspect which will drive the investment in price optimisation technology. It helped them to not only increase their sales and boost shopper satisfaction through lowering out-of-stock rates. Intelligent price optimisation software can help retailers to find a way out of the downward spiral of declining prices. While market saturation and price wars are already a matter of fact in many Western countries. non-price elasticity. the US and other Western economies it is obvious that future growth for retailers can hardly be achieved with the help of a growing customer base.
Although shoppers only rarely recall the price of a certain product correctly after they bought it and thus react sensitively to a price change. retailers can convey a good overall impression of their prices. The price elasticity of yoghurt is very high (here at Ahold Stop & Shop in the US). By predicting consumer sensitivity to future price changes and seeing which SKUs are the most sensitive. New price optimisation tools therefore offer integration with assortment and shelf space optimisation tools and also feed into retailer replenishment orders accordingly. Conversely. it is also important to be aware of cross effects which are positive or negative consequences that the price change of one item can have on the sales of other items. they can price goods which are not KVIs and/or do not have a high price awareness with greater freedom. they nevertheless have a feeling for a price benchmark of specific products that they buy frequently. How price optimisation works An important factor in predicting consumer behaviour in this context is the price elasticity. for example. customers will buy another flavour. they will have no other choice than to pay the higher price. All of these are not only interdependent on each other.planetretail. shelf. and the prices of promotions and mark-downs. Contrary to this. If customers do not decide to stop smoking or buy an electric car. for example. strawberry yoghurt becomes too expensive. A halo effect is given when the price of a given item positively influences the sale of other items. If the yoghurt becomes too expensive. price and order optimisation. Looking ahead.Planet Retail 2011 35 . which describes the relationship between the price change of a good and its unit sales. the price elasticity of tobacco products and petrol is very low. Price awareness is also an important factor. However. the optimisation of prices also has an impact on a retailer’s replenishment orders. a cannibalisation occurs when a significant price reduction for branded crisps reduces the sales of the retailer’s private label crisps. If. retailers are able to adjust prices according to margin and profit goals and improve their price image against their competitors. when optimising prices. New software specialists such as US-based Predictix and German Dacos promise to develop tools that use the same simulation engine for assortment. but also affect the retailer’s assortment and planning of shelf space. it is likely that there will also be integrated optimisation tools available in the future. These so-called signpost items or Known Value Items (KVIs) need a specific consideration in the price optimisation as they are able to build the price image of a retailer. even more importantly. By pricing products with high price awareness competitively. prices of the basic range. customers will go for another flavour. such as a litre of milk or a pound of coffee. However. Contrary to this.PlanetRetail There are four different kinds of prices which can be optimised: initial prices of new product. An aggressive price promotion for charcoal could drive up sales for meat and barbeque sauce. www. The price elasticity of a banana yoghurt. is very high.net .
dunnhumby and KSS Retail created a strategic alliance that allowed dunnhumby to utilise the KSS Pricestrat solution for price modelling and optimisation.net .www. 36 Planet Retail 2011 . Maybe. dunnhumby and KSS Retail helped Kroger improve its price image against Walmart. While a heat wave has dramatically driven up sales of ice cream in July 2010. When taking these effects into account. Due to this. in which it used the retailer’s loyalty card and POS data to help Kroger segment its stores to meet the needs of different customer groups and evaluate its marketing efforts. they do not do themselves any favours. Tesco and its consultancy and data mining specialist dunnhumby have set the standard. Depending on the competitive environment of a retailer. current trends/fashions. they might have to be flattened out when completing price optimisation on an ongoing basis. Retailers wishing to benefit from price optimisation will also have to ensure that they receive reliable data input from manifold sources in order to constitute the basis for effective pricing decisions. alternative shopping locations or promotions/couponing. there are also external effects which can influence the results of a price optimisation processes. sales will go down dramatically. dunnhumby had formed a joint venture with Kroger in 2003. How rewarding the combination of reliable data input and price optimisation expertise can be was illustrated by the fact that UK-based dunnhumby (84% owned by Tesco) acquired price optimisation software provider KSS Retail in January 2010. Prior to this deal. Other important influence factors are seasonality. When it comes to analysing customer data from loyalty cards and translating this data into actionable marketing and retailing insights. What makes all these effects so tricky is that they have influenced the retailer’s sales in the past and are stored within historical POS data. Having combined their expertise. the two companies worked together to help Kroger in the US in its battle to improve its price image against Walmart. Sources of valuable data could be the retailer’s own POS and loyalty card data as well as market research data from external providers.planetretail. Reliable data input is necessary Even the best price optimisation tool is useless if it is not fed with meaningful data. July 2011 will be an unseasonably cold month. it can also be important to incorporate data about competitors’ prices and their strategies into a price optimisation tool. if retailers price a certain SKU so competitively that customer cannot resist and start stockpiling that item.PlanetRetail In addition to the pricing cross effects. For example. Earlier. it is necessary to see that they can also vary over the course of time. As soon as the price goes up again or the promotion ends. in June 2009. this does not necessarily mean that ice cream sales will go up to the same extent next year.
Walmart itself. Price optimisation is changing the strategy of Walmart Early users of price optimisation tools were the likes of Kroger and SuperValu-owned Albertsons which are under continuous pressure from Walmart’s prices and price image. Kroger. for instance by using the payment card data. including Asia.PlanetRetail While having loyalty card data might seem to be essential to link up customers with shopping trips. Walmart uses Demandtec’s price optimisation for all its banners. Walmart installed the former Profitlogic solution to optimise markdowns for seasonal apparel. However. once famous for developing all business critical software in-house. retailers still have to worry about how their customers perceive this approach if it enters the public domain. depending on the country the retailer operates in. When it comes to mark-down optimisation. Contrary to this. the second largest retailer in the US. In just 14 weeks. The Oracle Profitlogic price optimisation project was the first step of the Bentonville giant into the world of standard software. But obviously. But now. Walmart started to optimise its prices with a software tool from Oracle. In the second quarter of 2007. installed the price optimisation tool from dunnhumby KSS Retail on its own servers. which is be used by its competitors. For fast movers. where retailers want to reduce inventory or get rid of end of shelf life products. for mark-down optimisation. also Safeway in the US is also using Demandtec’s solution.net .planetretail. This specific model of delivery leads to a situation in which both Target and Walmart calculate the prices for parts of their product range on Demandtec’s server. Even in countries where laws permit the use of payment data to track shopping trips. accurate inventory data is essential. Retailers wanting to use this kind of price optimisation successfully will have to make sure that their inventory data is reliable. legal restrictions have to be considered. this seems to have changed due to the complexity of a new generation of simulation and optimisation tools. www. Walmart now also deploys the price optimisation tool from Demandtec. In July 2010. For example Target also uses Demandtec’s price optimisation tool which is offered as a software-as-a-service tool. the solution was already live in seven of the retailer’s markets. is deploying standard optimisation tools for its pricing. including Sam’s Club. even retailers who do not deploy loyalty cards can find a way to track transactions by shopper to a certain extent. they often struggle with the accuracy of inventory data in their merchandise management system. Planet Retail’s List of 10 Price Optimisation Solutions to Watch • Demandtech • dunnhumby KSS Retail • Revionics • Oracle Profitlogic • SAP Khimetrics • Predictix • Dacos • SAS (‘Regular Price Optimization’) • Retalix TCI • Accenture (‘Pricing and Profit Optimization Services’) Source: Planet Retail While Walmart’s Information Systems Division (ISD) was famous for its strategy of developing each business critical application itself.Planet Retail 2011 37 . In the US. In fact.
Another benefit of SaaS-based price optimisation solutions is that their deployment is completely independent from the in-house IT architecture as they can be accessed from any internet-connected device. Delhaize Group (Hannaford). hosted and operated by the software provider. Save-aLot. Overall.planetretail. Target. seasonal ranges Mark-down optimisation Software installed at retailer Part of Oracle's Retail Suite Regular pricing for whole categories Software installed at retailer Moving into assortment optimisation soon Price image optimisation Software installed at retailer Part of SAP's Retail Suite Way of delivery Product diversification Major retail customers Best Buy. Off-premise software is usually always offered in its latest release while installed software need to be upgrades on a regular basis. ShopKo Stores Walmart. Family Dollar SuperValu. SaaS solutions need between 60-90 days. general merchandise. retailers have to decide whether they want to implement the software or simply want to use them as a ‘software-as-a-service’ (SaaS) solution. Walmart (fuel). textiles Oracle Profitlogic Textiles. moving into textiles EDLP and promotion optimisation Software-as-aservice Promotion optimisation and planning Collaborative promotional planning between retailer and suppliers Inventory optimisation and store replenishment Kroger. The latter require five to 10 times more upfront investment than the typical off-premises deployment. Modelo (Sonae) SuperValu. Walmart. To get the software fully launched. Casino. Dollar General. SaaS solutions are ready to be used much faster than installed solutions.net . Big Y. but only pay for the applications and functions they need within a ‘pay-as-you-go’ model. whereas the process of implementing a new optimisation tool into existing. Both have their advantages and drawbacks.www. Tesco SAP Khimetrics Grocery. Secondly. Office Depot. Ahold. the total cost of ownership are lower with off-premises solutions because retailers do not have to pay for the entire software and service suite up-front. Ahold (US) Source: Planet Retail 38 Planet Retail 2011 . Lowe's. resulting in a quicker return on investment. complex IT architectures could take between six and eight months. A Closer Look at selected Price Optimisation Provider Demandtec Product categories in focus Pricing focus Grocery.PlanetRetail Sensible price data calculated by service providers When starting to deploy price optimisation technology. moving into apparel Basic rage optimisation Software-as-aservice Assortment optimisation Promotion optimisation and execution Shopper insights Collaborative promotional planning dunnhumby KSS Retail Grocery Revionics Grocery. Rite Aid. Probably the biggest advantage of SaaS-based price optimisation solutions are the lower initial investment and set-up costs for the retailer compared to traditional on-premises models.
From family-owned. They are communicated via Wi-Fi to 92 15-inch full colour instore displays. Retailers might be worried about the fact that their prices are optimised on the same server as their competitors’ prices. The headquarters can monitor exactly which item has been sold at what time and at which price.Walmart and Target have initially both been concerned about calculating the prices for parts of their product range on the same server. At an Albert Heijn outlet in Amersfoort. Instore displays always show the latest price for fruit and vegetables in an Albert Heijn store in Amersfoort. On the contrary. While SaaS provides all the above mentioned advantages. the consultancy Capgemini and Impulselogic.net . But it can also be useful for product categories which are perishable and cause high write-offs for the retailer. Simultaneously.planetretail. Additionally. a provider of consumer messaging solutions. www. However.Planet Retail 2011 39 © Capgemini . According to experts from Demandtec . the new solution also enables the retailer to reduce labour and printing costs and to avoid price discrepancies between product location and POS systems. there is one big drawback that accompanies every off-premise installation: concerns on data security.which offers its price optimisation as SaaS . which reflect the company’s standard layout for pricing or promotions. the retailer compares predicted and actual sales and analyses expected deliveries and current stock levels to work out which measures are necessary to avoid overstock or out-of stock situations. The employees in the stores are also able to override price with a custommade mobile solution within a predefined time frame if they do not agree with the suggested price changes. Dutch supermarket operator Albert Heijn piloted a food waste reduction programme using mark-down optimisations to decrease losses from spoilage of fruit and vegetables. For this purpose. Prices are marked down accordingly. This food waste reduction programme is not only a good way to reduce losses from spoilage but also a protection against fraud as the retailer is able to control individual stores from a central system. single-store operations to multi-banner conglomerates with hundreds of pricing zones globally. Albert Heijn tests mark-down optimisation for perishables Mark-down optimisation is widespread in nonfood retailing. In early 2010. Shoppers using mobile selfscanning receive the updated prices directly onto their mobile devices. the Netherlands. Kroger did not want to use Demandtec because Walmart and Target already were already customers and decided to work with KSS Retail/dunnhumby which offers a solution to be installed behind the retailer’s firewall. They support retail operations of any size and can scale the system to any number of stores. the retailer teamed up with Toshiba Tec Europe. the store merchandise system is updated with the new price information. any doubts about data projection have been cleared out and both retailers are now customers of Demandtec.PlanetRetail Another benefit of SaaS solutions is their higher scalability.
started to equip its forecourt stores with Electronic Shelf Labels (ESLs) from Pricer. it is doubtful they will accept this in a supermarket. retailers have to be aware of the fact that price optimisation does not necessarily mean more frequent price changes.net . the checkouts automatically apply a 35% discount to the normal price of the products on the day of its expiry. While customers might accept these different prices over the day in a forecourt store due to convenience-driven reasons. are very successful with their strict strategy of ‘national pricing. when retailers decide to enable customers to create a shopping list online with prices or operate an online shop. In general.planetretail. for example. thus enabling dynamic pricing. Looking ahead. However. Albert Heijn uses the GS1 Databar which does not only carry the Global Trade Item Number (GTIN) but can also store information such as serial numbers. with markdown prices also promoted on the day of expiry. Shell De Lucht in the Netherlands together with Toshiba Tec and filling station technology specialist Extendas. In July 2010. this time for game and poultry products. Operating an online shop is more or less similar to pursuing a strategy of national pricing as customers will expect the same prices countrywide no matter where they log into the site. Aldi. they have to rethink their strategy of regional pricing. but without the usage of advanced price optimisation software. the Netherlands. In one store in Zaandam. for example. the Shell Shop outlet near Amsterdam’s Schiphol Airport. Albert Heijn started to work on another markdown optimisation pilot. when using this technology. Instore. followed suit and installed ESLs from e-paper specialist ZBD.’ In particular. Price optimisation does not mean frequent price changes Price optimisation technology offers manifold possibilities for retailers to price their products competitively and to earn more money even without selling more items. the Metro Group-owned consumer electronics retailer will pursue regional online pricing strategies to resolve these conflicts. products from the game and poultry range are promoted with their normal prices. Walmart’s Asda and IKEA.www. has been hampered for years due to conflicts with managers of bricks & mortar stores. retailers have to be very careful about what price image they would like to convey to their customers. Going one step further than other retailers were several Shell forecourt store operators in the Netherlands which started changing prices according to the time of the day. In March 2009. who own minority stakes in the outlets they manage and who run their own pricing strategies. lot numbers and expiration dates.PlanetRetail In autumn 2010. the Netherland’s busiest forecourt store. To do this. Electronic Shelf Labels (ESL) can be an effective tool when retailers want to change their prices frequently. The store operators change the prices for groceries four times over the course of the day and the week. 40 Planet Retail 2011 . The launch of Media-Saturn’s online shop.
Planet Retail 2011 41 . www.net . Price transparency can be a useful strategy to improve the price image. Nevertheless. price optimisation technology can help retailers optimise retail prices based on simulations of customer behaviour. Even though price optimisation software can be an effective tool to improve bottom lines. it will take some time until one-stop solutions that support decisions on assortment. price.PlanetRetail Looking ahead In order to tackle increasing market saturation and price wars. In contrast. it will be crucial for retailers to invest in price optimisation technology. However. promotion and order quantity out of the same simulation engine will be deployable. undermining a retailer’s price image and impairing customer loyalty. they have to be clear about which price image they would like to convey to their customers and what long-term goals they would like to pursue. price differences could also backfire. retailers should not confuse optimisation with frequent price changes. if they have done their homework and have reliable data in a modern merchandise management system and data warehouse. space. Neither should they overdo a strategy of regional differentiation. In times of price wars and saturated markets. before investing in price optimisation tools.planetretail. Price optimisation can be the next success story of retail technology after the automated replenishment based on forecasting tools. Retailers can start to deploy price optimisation tools right now. a reliable merchandise management systems and consistent master data can now take the next step and move into more sophisticated optimisation. Those who have done their homework and have already invested into a data warehouse strategy.
to the waste management of the packaging. revolutionise retailing and logistics. the retail industry has learned from its mistakes. RFID (Radio-Frequency Identification): Back from the brink I t is not long ago that RFID technology has been expected to do nothing less than RFID deployment described at this time that would not vanish even when the technology improved.and even further. Consequently. which can also be read automatically if placed according to industry standards at the transport unit. the transport units themselves are monitored. have learned from the mistakes they made earlier. service providers such as pallet pool operators can be brought onboard as well. This results in significant lower costs and more benefits for the retailers and its business partners. They have realised that tagging transport units for food with one-way RFID tags is associated with high costs for the suppliers but actually brings only minimal benefits to the retailer. And. Retailers. the retail and FMCG industry enthusiastically moved into the deployment of RFID technology. retailers are now moving into the deployment of reusable RFID tags on pallets.www. too. Driven by highly motivated technology providers and consultants. In the frenzy of this enthusiasm and being convinced that something would work if the largest retailer of the world wants it to work. the retail industry failed to heed the doubts of experts. boxes and crates.planetretail. from the field to the fork . ideally helping to pay the costs for the technology. in those early days. The enthusiasm of the early days of deployment could not obscure for a long time the fact that the involved parties have bet on the wrong scenarios when implementing RFID. top managers from major retailers such as Walmart and Metro Group and dominant brand manufacturers such as Kraft Foods and Procter & Gamble praised the age of RFID that would revolutionise the complete supply chain. with this approach. They warned that there were some core issues with the scenarios of 42 Planet Retail 2011 . Additionally. this is now history. However. In general. Five years ago. there is no reason to opt for RFID tags if the relatively same effect can be achieved with barcodes. including the dominant player Walmart. In terms of tagging transport units.net . the projects often failed to deliver a clear business case behind the replacement of the good old barcodes with the more expensive RFID labels.PlanetRetail 4. It has now re-opened the chapter on RFID – with new deployment scenarios that do have a business case and are very likely to lead to major investments in this technology. However.
Even though this scenario means high costs for suppliers. Retailers have now realised that non-food. Only recently. RFID will see significant investments by retailers. this time with significantly enhanced chances of success. they now have promising business cases and are likely to spread rapidly. Walmart’s new approach towards RFID technology In July 2010. © Bartirah/Flickr The recent example of Walmart’s latest RFID implementation illustrates this shift in strategy. Walmart is now taking a completely new approach and decided to tag non-food goods at item level. It is also the way the technology is deployed at item level.PlanetRetail But it is not only the shift to reusable radio tags on reusable transport units that changes the building blocks of RFID deployment. it results in high savings for the retailers. Even though they are associated with high costs due to reverse logistics for the tags to the point of manufacturing.Planet Retail 2011 43 . later at case level and finally also at item level is no longer articulated. it marks the beginning of a new era of RFID deployment after the enormous investments in tagging pallets and cases of fast movers could be seen as failed to a large extent. Earlier in 2010. Early fantasies which predicted this technology making the checkout redundant and imagined shoppers just walking through a gate with all purchased items identified fully automated are now considered highly unlikely to turn into reality. The main goal of this is to improve inventory accuracy and onshelf availability. not only one-way but also reusable tags at item level for non-food are a promising approach. RFID has become a top trend again. Having largely failed with its previous initiatives to deploy the radio tags at pallets and cases of fast moving consumer goods. www. This is because RFID tags cannot be read properly through liquids and metals in bulk which makes the deployment of this technology at item level very unlikely in the food sector. Additionally. The expectation that the deployment of RFID tags in the food industry would firstly happen at pallet level. they also lead to high benefits for the retailers and can ideally be used as Electronic Article Surveillance (EAS) solution that protects items against shoplifting. In fact. the second generation of RFID projects has started.net .planetretail. in 2011 and onwards. This project is not just another trial to deploy this technology in retail. Very different from their predecessors. Walmart was quietly testing the usage of RFID tags at item level in two Arkansas stores for several months. The projects are founded on a shift in strategy and a new approach towards the usage of radio communicating labels. is the area in which RFID at item level is promising. which does not contain liquids and rarely has metal packaging. The retailer’s suppliers in Asia tag the clothes at the point of manufacturing with EPCglobal’s second-generation ultra high frequency (UHF) standard tags. The world’s largest retailer is now selling menswear tagged with RFID labels in its US stores. Walmart started a new approach to implement RFID technology. RFID technology at item level helps Walmart to speed up stocktaking and increases inventory accuracy. Due to this.
Consequently. the customer has to make a decision based on brand. even suppliers that only deliver a small amount of jeans or socks to Walmart will get a better price for the tags.net . a challenge to manage from an inventory perspective. However. There are other areas of the store where we sell items with similar attributes. thus making it easy for customers to remove the labels before they wear their new clothes for the first time. said: “Walmart is focused on items that require a more complex purchasing decision by the customer. We do not want to accelerate unnecessarily and put undue pressure on them. for instance. Walmart’s Director of Store Innovation. style. Some electronics items.planetretail.www.” According to the RFID Journal. Looking ahead. Walmart is reading the radio tags not only when the clothing items arrive at the stores’ receiving docks. 44 Planet Retail 2011 . therefore. Consequently. With denim. if they are on the wrong shelf or if they are missing at all. it can share the experience gained and the needs for business process changes in the supply chain with its suppliers of branded goods.” However. caused to make significant investments in a first round of RFID enthusiasm. even though Walmart predicts good results in denim and basics. The retailer is deploying new RFID hardware and software systems which are able to tell which items need to be replenished soon. Burke explained that Walmart is “sensitive to the impact this will have on suppliers. Due to this. The retailer did not ask its suppliers to sew the tags into the clothing. Walmart is now taking a more co-operative approach towards its suppliers which it has. as they would normally do with other non-RFID labels and hangtags. it has been estimated that up to 250 million items annually could be tagged once the initiative becomes fully operational at all Walmart stores in the US. workers in the store know immediately which sizes are missing and are able to tell customers what is available in the store’s stock room. Speaking with the RFID Journal. Apparel for example often requires a lot of manual labour to keep track of a wide variety of sizes. Walmart will not give money to its suppliers to compensate them for buying the tags. size and cut.PlanetRetail Walmart’s new programme concentrates on those types of products that have multiple SKUs and are. but also when they move from the back of the store to the sales floor and for stock taking reasons on the shelves and racks. according to Burke. which are only available in stores for a few weeks will not be tagged. We will give them time to engage. Walmart said that it expects its customers to cut off and discard the tags prior to wearing the items. the new initiative will not require every apparel supplier to tag its items with RFID tags. Unremoved tags provokes privacy concerns in the US The fact that Walmart will not remove or deactivate the RFID tags of sold items at the checkout has provoked privacy concerns in the US press. Myron Burke. review their processes and ultimately change their processes. after all. Contrary to its previous deployments of this technology. Tyres are one. such as TVs are another. Walmart also uses RFID tags for its own private label apparel items. there are no immediate plans to begin tagging these other types of items yet. but is willing to share the costs in a model that includes EPC (Electric Product Code) labels as a component of the total cost of goods. Seasonal clothing items. in addition to price of course. Sam’s Club is so far not participating in the scheme. colours and styles. Walmart is helping its current suppliers for jeans and basic clothing items to get the best price on EPC tags by forecasting the total volume of tags the retailer will buy for both its private label apparel and the tags that its jeans and basics suppliers will need to purchase.
Planet Retail 2011 45 .000 Chinese suppliers from January 2009. Unilever. Walmart for the first time includes its international business in the RFID roll-out. 1. the reason for Walmart to opt for one-way tags is very simple. First of all. Walmart implements RFID at 12 of its 137 distribution centres and at the receiving docks of 1. Secondly. analytical insights that were expected to take the retailer forward. Kimberly-Clark as well as Nestlé Purina Pet-Care and Hewlett-Packard.000 of its around 4. With its DC in Mississauga. Walmart for the first time puts pressure on suppliers to fulfil its demand to tag pallets with RFID labels. Marks & Spencer in the UK. Sam’s Club expects all suppliers to tag all deliveries at pallets level for all 17 distribution centres (DCs) as well as for direct store deliveries with RFID by 31 October 2009. Also.000 club-sized bulk packs.net . Walmart could save customers the time they need to remove the tags at home. Other retailers have also noticed that the usage of RFID tags on clothing items is a promising strategy. but not yet the forklifts. but not conventional store items. Canada. Around 600 suppliers which account for 200. At that time.600 US locations are equipped with RFID technology.PlanetRetail However. the new RFID project at Walmart has the largest impact on the global retail industry. Gillette. Suppliers will be fined USD2 per pallet if they do not meet the retailer’s requirements. Without doubt. The Reusable Pallet & Container Coalition (RPCC) ships produce in thousands of reusable containers with affixed RFID tags being used throughout the supply chain. for example has been tagging apparel with radio tags for quite a long time. As of 30 January 2009.000 Walmart and Sam's Club stores in the US. This concerns around 5. Walmart starts to work with lift truck manufacturers to integrate RFID into its lift trucks. one very interesting question is why Walmart does not remove or deactivate the tags at the checkout. A strategic shift from food to non-food Unlike in previous efforts. Nov-08 Oct-08 Aug-08 Aug-08 Aug-08 Apr-08 Dec-07 Jul-07 Sep-06 Feb-04 2006 Source: Walmart www. Johnson & Johnson. Sam’s Club requires RFID tags on all single-item pallets irrespective of which DC or store is supplied. Walmart is now taking a different approach towards RFID. the use of RFID tags in the food business did not really bring a significant advantage to the retailer. having realised that the approach at pallet and case level did not deliver the kind of data and Walmart RFID timeline Jul-10 Feb-09 Walmart turns to a completely new approach towards RFID and starts tagging on item level (menswear and jeans) Procter & Gamble ends its highly touted practice of using RFID to track promotional displays at Walmart stores. its suppliers and its reusable container pool providers start the largest field trial of RFID in the supply chain of perishables in America so far.planetretail. Contrary to this. also in terms of privacy and environmentally concerns it would be better to use reusable RFID tags and remove them at the checkout. Kraft Foods. Suppliers failing to meet these requirements will be charged USD2. tagging at item level will provide the retailer with more meaningful insights and will enable Walmart to measure the actual benefits of the implementation of RFID tags. Walmart announces plans to adopt RFID for products delivered by its more than 1. But it is not the first of its kind. The costs for reverse logistics shipping the tags back to the point of manufacturing are too high. Walmart. compared to simple and cheap barcodes.000 items (SKUs) are participating. Walmart receives the first pallets tagged with RFID labels in a DC shipped from Procter & Gamble. However.50 per pallet. Sam’s Club requires several suppliers to also tag single items with the radio labels by 31 October 2009. Walmart converts all of its systems to only read Gen 2 tags. Walmart’s CIO states that moving forward the retailer’s installations would only read tags that follow the second generation of the EPC standard 'Gen 2'.300 of the retailer’s 3. Displays were tagged to automatically record when they were moved between the back room and the retail floor and alerted merchandise managers if the system didn't detect promotional displays being positioned according to schedule. instead proving itself a waste of suppliers’ resources.
the retailer started to equip all clothing items with a retail price of more than EUR30 (USD37) with RFID tags. all items which have come into the stores have been equipped with RFID. the EAS function on all tags has to be deactivated at the checkout.planetretail. In this case.www. All of Gerry Weber’s own stores in Germany and abroad have been equipped with RFID antennas at the ceiling. Gerry Weber developed together with partners a new. one of which was the high © Gerry Weber price. In August 2010. It will also be impossible to steal an item in one store and return it in another outlet. replacing traditional electronic article surveillance technology. Due to this. According to the retailer. With this move. when customers try to leave the store without paying. RFID-facilitated weekly stocktaking enables Gerry Weber to detect shrinkage due to theft or flaws in the supply chain earlier. The tags will be sewn directly into the items at the point of manufacturing. From January 2011 onwards. Similar. amounting to 25 million items annually which is around 50% of Gerry Weber’s total production. For more expensive items more than one RFID tag could be used.net © Gerry Weber . reduce theft through customers and unfaithful employees. clothing manufacturer and retailer Gerry Weber is spearheading the RFID movement by deploying radio tags at item level. Electronic Article Surveilllance (EAS) and Electronic Product Code (EPC) in one tag. 46 Planet Retail 2011 . the currently available reusable RFID labels were not suitable for implementation in the clothing industry for several reasons. single use solution which combines the washing label. Gerry Weber hopes to boost supply chain efficiency and transparency and. Gerry Weber combines RFID and Electronic Article Surveillance (EAS) in one tag. The retailer is the first in the country to roll out a combination of RFID and Electronic Article Surveillance (EAS) integrated in the same tags. RFID-facilitated weekly stocktaking will enable Gerry Weber to detect shrinkage due to theft or flaws in the supply chain earlier. pretending that it does not fit and the receipt is lost.PlanetRetail Gerry Weber spearheads RFID in Germany In Germany. the system will give an alert because the EAS function on the tag has not been deactivated. The first RFID-equipped clothing was delivered to the stores in October 2010. The retailer’s merchandising system will immediately realise when an item has never been paid for and will alert the cashier. This roll-out of the hardware in the stores was finished in June 2010. RFID gates were installed at distribution centres of logistics service company DHL in Asia at the same time. at the same time. Gerry Weber opted for one-way tags.
Every time a customer picks a package. This number refers to a central database enables back-office store managers to know the exact stock level and ensure that no item has gone past its sell-by date. Within the next five years. The programme is part of Metro Group’s Advanced Logistics Asia (ALA). The meat is packaged in transparent plastic packages with sufficient empty space around the steak that enables the radio waves to pass the liquid containing food. This will give an alert in case it is being cut through in the fitting rooms. expecting a return on investment within two years. Checkpoint continues to supply pre-printed RFID labels and services to suppliers in the region. a new generation of RFID tags at Gerry Weber will be also be able to read a so-called security thread. Regarding privacy concerns.7 million (USD3. Gerry Weber stated that it does not relate customer data to the RFIDsourced information in the database. Metro Group is testing a so-called Smart Cooler system together with Bizerba and further specialists. which does not work due to liquids and metal problem.PlanetRetail Additionally. www. The project is based on the guidelines of the standardisation bodies GS1 and EPCglobal. for example.net . As a third-party solutions provider. Checkpoint Systems.Planet Retail 2011 © Metro Group database in which the sell-by date is stored. the retailer will invest EUR2. ‘Tag It Easy!’ participants apply RFID labels on shipments bound for Metro Group’s facilities in Germany. Metro Group is also using RFID technology for many other purposes. Looking ahead. the retailer expects the RFID tags to be physically deconstructed after three laundries.planetretail. In its Future Store in Tönisvorst. The third phase of the programme involves more than 75 Chinese and Indian suppliers. one of Metro Group’s logistics service providers in China. the Smart Cooler Shelf reads the RFID tag and informs the central database of the store that the stock level has decreased. In another project.3 million) into the project for hardware only. Different from Gerry Weber. all other stores which sell Gerry Weber fashion . this deployment of RFID technology for food products makes sense. Contrary to comprehensive usage of RFID tags on food products. This technology uses ‘intelligent’ shelving located in the fresh meat refrigerator. where Gerry Weber plans to install additional RFID receivers. which goes through the entire washing label. The 47 . Metro Group combines RFID and EAS too Similar to Gerry Weber. For this. in addition to the 100 manufacturers delivering from Hong Kong which are already in the programme. Metro Group decided to extend its ‘Tag It Easy!’ programme with its Asian suppliers in July 2009. Outgoing goods at Fat Kee Stevedores. Moreover. the retailer uses RFID technology from Checkpoint to track merchandise throughout the supply chain.such as department stores receive the RFID tags and the EPC data free of charge. All items on the Smart Cooler shelf are tagged with RFID labels that carry a unique number for each item. Kaufhof works for the combination of identification and theft protection with the technology of a dedicated EAS specialist. Metro Group-owned department store chain Kaufhof started a new project aiming to combine RFID identification at item level with Electronic Article Surveillance (EAS) in its textile business in November 2009.
it became known that M&S is planning to trial a second generation of RFID tags in the first quarter of 2011. But.” RFID tags are embedded into the paper barcode label. However. As suppliers produce and pack exclusively for M&S. M&S decided right from the beginning of the project to only use reusable RFID tags in its food business on returnable plastic trays. However. M&S is also considering RFID technologies such as printed electronics. the retailer has so far no plans to extend the RFID deployment to the checkout tills. In July 2010. according to a company’ spokesperson. the project was still at an early stage. Due to this.000 items can be scanned in an hour and a half using handheld devices. as it allows us to manage our stock levels better and ensure we have the right product mix on display. The new version of the RFID tags have a smaller data chip than the first generation which allows the size of labels and tickets to be reduced. the retailer achieved a quicker and more reliable food delivery between its suppliers.10 (USD0. Furthermore. Marks & Spencer (M&S) is. staff use handheld devices which transmit each tag’s unique number to an ‘Intelligent Mobile Store Reader’ base station over a Bluetooth connection.net . The retailer moved the technology from trial to implementation in April 2007. However. The RFIDtagged plastic trays pass by the RFID antennas directly and are read from the outside. M&S reduces costs for itself. with the RFID deployment. M&S also avoids the reading problems associated with metals and liquids. A spokesperson for the retailer explained: “We’ve found that RFID is most beneficial in our high value departments where there are complex sizing requirements. But.www. such as suits and tailoring. The company had no plans to tag single food items.planetretail. The next step sees the base stations send the information to a managed database. which is handled by a third party logistic provider. Avoiding one-way transponders. M&S hopes to expand the use of RFID especially in its international business and for men’s shoes. Looking ahead. warehouses and food divisions.PlanetRetail Long time pioneer Marks & Spencer With around 100 million tags every year for both apparel and reusable boxes in which food is transported to the stores. According to the retailer. its suppliers and last. The retailer’s depots read the information on two million trays per week just by passing them by a mobile reader. To scan garments in a weekly stock check. contrary to the RFID deployment in its food business. M&S uses radio tags at item level for its apparel range. M&S said that with GBP0. More than 7. Around 90% of M&S’ food assortment is transported in returnable trays. 48 Planet Retail 2011 . it is 100 times quicker to run a stock check using RFID than with manual methods. in relation to its size. this almost ideal situation for the deployment of RFID is only possible because almost all of Marks & Spencer’s product range consists of private label products. M&S will go on scanning barcodes at the checkout for the time being. Carried out by M&S’ general merchandise packaging team. As costs for antennas in its roughly 30. there are no additional process costs involved in using the tray pool of the retailer. the project covers all the retailer’s non-food products.000 tills would be too high. for the environment. the heaviest user of RFID tags globally. which can be interrogated by M&S’ head office applications.15) cost of each tag the technology was not yet cost-effective for basic products such as socks. However. which is marked ‘Intelligent Label’. but not least. in contrast to Walmart and Metro.
Rewe Group’s new approach to RFID Rewe Group in Germany recently decided to limit the use of RFID to the identification and tracking of its own roll-cages and other reusable transport containers. In June 2009. At this time. some of Otto Group’s fashion suppliers had equipped their products with RFID tags already in the country of manufacturing. in addition to its roll-cages.600 pallets per week with RFID chips for the three Rewe distribution centres in Norderstedt.Planet Retail 2011 49 © Rewe Group . In all other stages of the supply chain. Passive RFID tags at the transport units are read by ceiling mounted receivers without passing the units through gates with antennas. but ultimately didn’t see a business case for this in the long run. Head of Logistics System Development. no further suppliers were added to the programme. The RFID reader technology comes from USbased Mojix with whom Rewe had already successfully completed a trial at its DC in Buttenheim in September 2009. However.04 (USD0. Even though testing with current suppliers was not stopped. Previously. the retailer can identify all pallets. equip all of its 40. Ceiling-mounted receivers read passive RFID tags at the transport units. Germanybased mail order and e-commerce specialist Otto Group has. The retailer tried to optimise its goods receiving area with single-use RFID tags at item level.planetretail. after extensive testing. roll-cages and crates that are located in a certain area of a warehouse.net . which are owned by the retailer and cost around EUR700 (USD855) each. According to Dr Jürgen Schieleit. will be labelled with both fix-mounted RFID tags which bear the Global Returnable Asset Item (GRAI) number as well as with barcodes. The boxes. For the time being. As a reason for this shift in strategy.PlanetRetail Otto Group phases out tagging at item level While Gerry Weber and M&S invest heavily in RFID technology at item level. In October 2010. Otto Group has for the time being no plans for further RFID activities. thus limiting the financial investment into RFID reader technology for the retailer. Wiesloch and Rosbach. www. Rewe said that it considered RFID for the internal usage and traceability of reusable transport units as a more promising strategy for the time being. decided not to use RFID tags at item level anymore. around 50 suppliers labelled around 2. the retailer stopped all projects with suppliers labelling pallets and cases with one-way RFID tags. but only if all items were equipped with RFID tags.000 reusable transport units for frozen goods with RFID tags to also improve the tracking of these units along its supply chain. Rewe plans to only read the RFID tags at the ramps of its around 30 DCs when the reusable transport units return.05) per item. Original plans foresaw the roll-out of the RFID technology to further Rewe DCs. boxes. the group is constantly observing RFID technology developments and is well prepared in case it will be interesting to follow new RFID approaches. Otto Group’s calculations have shown that it would save less than EUR0. With Mojix’s technology. it became known that Rewe will. the transport units will be identified with the help of their barcodes.
For this deployment. according to the technology provider. The system can help to address past problems in shipping errors. The technology enables the tracking of assets in large spaces. the first pallets will be put into circulation between selected locations of Rewe Group and Mars. the Mojix Star system is integrated with Rewe’s warehouse management system to provide RFID data to further business areas. Testing regarding reading accuracy will start in the first quarter of 2011. effective tracking of goods through the shipping process. Used throughout the entire supply chain. Research project Smarti has a pan-industry approach. loading and unloading of trucks should be made easier. The project foresees a scenario in which Mars loads its products on RFID-equipped Chep pallets which then can be monitored through the entire supply chain until they arrive at the Rewe stores. In addition to ‘smart pallets’. high-sensitivity receiver reads the resulting tag signals from across the system’s potentially vast coverage area which can be up to 23. temperature controls and control of external service providers should be facilitated. and mixed pallets. Rewe is covering a complete 40.000 square metres. With this concept. while the centralised. Rewe’s subsidiary ‘Rewe Information Systems (RIS)’ is currently also developing a software which will be able to depict the entire circulation of the reusable transport units using their RFID tags and barcodes. pallet and container pooling services provider Chep and the Fraunhofer Institute for Material Flow and Logistics (IML) already teamed up for research project Smarti to create intelligent load carriers and trucks. the IML is creating software interfaces that enable communication across all involved software systems.PlanetRetail Mojix E-Nodes systems provide energy to all passive RFID tags within their specified interrogation spaces. staging. In the second quarter of 2011. new RFID tags will be developed which combine UHF (ultra high frequency) and HF (high frequency). with 99. Additionally.net . For this purpose. In July 2010. Rewe Group. ‘smart letterboxes’ for Deutsche Post and smart air cargo pallets for Lufthansa Cargo will also be developed. Within the scope of Smarti (Smart Reusable Transport Item) the partners aim to develop a new concept for semi-automated control of goods and materials flow on the basis of RFID. Rewe is able to establish a closed loop system for the tracking and management of transport items which delivers multiple cost and efficiency benefits including significant reduction of losses from wrong shipments to retail outlets.planetretail. a possible next step for Rewe Group could be to ask the pallet pool providers it operates with to equip all pallets with reusable RFID tags. With several receivers. 50 Planet Retail 2011 . This would enable the retailer to even search for one specific unit. Looking ahead.9% accuracy. brand manufacturer Mars.000 square metre warehouse. They will be integrated into the pallets. Additionally. the involved parties could also write additional information on the tags during different steps.www. tracking of goods throughout the supply chain. and more efficient cost-allocation for reusable transport items to the outlets. With this level of reliability.
It has long been known that RFID tags on single food items do not make much sense as they are too expensive to put on every yoghurt pot.Planet Retail 2011 51 . for example. as the reusable transport unit itself can also be monitored along the supply chain. Contrary to this. one-way tags on transport units for food do bring not enough advantage compared to barcodes. The significant investment by suppliers in this is not justifiable because it brings only minimal savings to the retailer. which often requires a lot of manual labour to keep track of because of variations in size. www. with regards to non-food items.PlanetRetail Market Potential of Different RFID Scenarios Reusable RFID tag at item level / non-food One-way RFID tag at case or item level / food One-way RFID tag at item level / non-food Costs One-way RFID tag at transport units / non-food Resusable RFID tag at transport units / food Source: Planet Retail Retailers’ Savings RFID on load carrier level RFID tags in the supply chain only make sense under certain circumstances. there are product categories for which the deployment of RFID makes more sense than others. Liquids and metal packaging such as aluminium foil can also hamper the accuracy of the technology.planetretail. Product categories such as apparel.net . are certainly attractive from a ROI perspective and a good starting point for RFID technology at item level. but also bring high benefits for the retailer. RFID tagging at item level only makes sense under certain circumstances. Radio tags at item level for non-food are associated with high costs. colour and style. Costs are lower and savings are higher. Deploying the smart labels at reusable load carriers seems to be a promising strategy for the time being. However. RFID at item level Similar to RFID tagging of pallets and cases. Pool operators could help to pay for equipping their transport units with RFID tags.
Due to the lower wages in those countries. a reduction in counterfeiting and automating shipping and receiving.net . While the above mentioned reason speaks in favour of reusable tags. Again. RFID has the potential to transform how business is conducted for both retailers and their suppliers. RFID transponders contain copper or lithium. in certain cases the deployment of RFID technology will also lead to changes in the organisation of the supply chain. the data sharing should follow the rules of the GS1 standards to avoid enormous costs through duplication of effort. The reward for well done collaboration will be a decrease in out-ofstocks. improve and fasten up inventory control.PlanetRetail The more the merrier . Consequently. From a commercial point of view. this work would have to be carried out in the country where the retailer’s stores are located.www. Reusable tags on load carriers will do less harm to the environment as they are used for a longer period. simplify business processes. most likely a country with higher labour costs. However. a slashed inventory throughout the supply chain. reduced out-of-stocks will lead to increased sales for the supplier. And. Nowadays. Nevertheless.collaboration will be the key to success The great variety of different strategic focuses and priorities of the many different RFID projects in the world do not justify any solo run of a company if it comes to specifications for the technology and the data. this would mean that the labels have to be brought back to the point of manufacturing. in order to deploy the full benefits from RFID technology. Problems and concerns . Retailers will be able to reduce out-of-stocks. Even small amounts of copper could discolour recycled glass. RFID tags are attached to items directly at the point of manufacturing. Looking ahead. reduce shrinkage and increase sales. glass and granulated plastics.RFID and the environment With more and more retailers and suppliers using RFID tags. 52 Planet Retail 2011 . retailers and their suppliers need to share their data and develop standardised business processes. there is no way of getting around the question of what happens with all this tags if they are disposed of once they have been used. If a retailer decides to implement reusable tags. the mere figure of 250 million single-use tags annually for Walmart’s menswear gives reason to worry about the impact on the environment. which could cause impurities in the recycling of raw material such as paper. save labour costs. suppliers will also benefit from RFID technology as their supply chain can be made more efficient. only those projects that rely fully on the industry standards of the GS1 organisations including the EPC toolset will be sensible.planetretail. Otherwise. Strategy is important Companies considering the usage of RFID technology have to be clear about their strategy first. whereas lithium can make glass more fragile. RFID can only be sensible if it works as an enabler for this strategy. Additionally. there is one strong argument against them. the majority of products such as clothing and electronics are produced in China or other Asian countries.
it is certainly an issue with manufacturers of products such as perfumes. which every very few minutes measures the current temperature and transfers the data to a handheld device. equipped the floor of its DC with 2. RFID tags are not only useful if they are attached to products. could be a promising strategy to save money. Tracking batches with RFID labels in the floor In a distribution centre.000 pallets by batch throughout the DC to assure traceability. Arriving at the store. Retailers could not only build RFID tags in the floor of their DCs. RFID – a means against counterfeit goods While counterfeiting might not be a problem for every supplier. But. as German clothing manufacturer and retailer Gerry Weber is doing. Putting a unique serial number on a product at the point of manufacturing could be an effective means to tackle counterfeiting. Individual company-owned solutions are likely to be too expensive.net . the driver hands over the handheld device to a member of staff. One sensor is located in every lorry. A special temperature sensor. was created in order to measure the temperature of the goods. German beverage manufacturer Gerolsteiner. The Swiss grocery retailer constantly monitors the temperature within its lorries and then uses the RFID technology to fully automated transfer a temperature protocol to a reader every time the vehicle enters or leaves the courtyard of a distribution centre. which is attached to an RFID tag. This could provide them with meaningful insights into shoppers’ behaviour. One example is Austrian grocery retailer SPAR which monitors the temperature of RFID-tagged frozen goods during their transport in order to improve quality and safety control. Control of the cold chain Retailers are increasingly looking into deploying active RFID Transponders that are able to monitor the temperature. luxury accessories or cigarettes. The technology is provided by Daily Service Tiefkühllogistik and has been exclusively developed in cooperation with SPAR.planetretail. manufactures could create an electronic pedigree. If RFID tags replace the conventional EAS tags. pallets or cases. but also in the floor of their outlets aiming to track shopping trolleys throughout the stores. www. In eastern Switzerland. for example.Planet Retail 2011 53 . a ROI could easily be achieved in a short period of time.500 RFID tags in order to track its daily turnover of 9. With the help of RFID tags. thus helping to locate forklifts and thus track batches.PlanetRetail Looking ahead Combination of RFID and EAS The combining of RFID technology with electronic article surveillance (EAS). This idea is likely to be taken up by further manufacturers. this will only happen if the retail industry manages to set common standards. They can also be highly efficient if they are built in a DC’s floor. RFID readers are mounted underneath every forklift and transmit the current position of the vehicle every time it moves over an RFID tag in the floor. Migros is deploying a similar solution. drugs. Transport from the central warehouse for frozen goods in Asten/ Linz to SPAR’s outlets all over the country are permanently monitored. who can see if goods have been exposed to dangerous and higher than acceptable temperatures during transportation.
A further reason for investment in this technology is the fact that transport units can be packed on average 10% more condensed with automation technology that plans the packing with sophisticated software. even discounters which usually avoid investing in high tech and achieve low costs through lean and simple processes. Due to this.” explains Helmut Prieschenk. lifting and carrying.planetretail.net . the weight workers lift day by day has significantly increased. Mercadona. the opportunity to shrink the volume of transported goods is of very high interest. while Dansk Supermarked’s Netto in Denmark is looking for semiautomated solutions. Another driver of this technology is the demographic change which could soon make it hard to find workers for manual goods picking. Denmark aims to limit the weight a worker lifts per day to six tonnes. further retail formats such as discounters are now following suit. Sobeys and Edeka move to automate some of their full-range grocery distribution centres. are looking for specific automation solutions that fit their concept.www. At a time when retailers are desperately looking for additional ways to reduce road mileage and consequently C02 emissions. are now looking for warehouse automation. 54 Planet Retail 2011 . Interestingly enough. A significant number of retailers will also invest in semi-automated solutions that support the worker in the picking process.PlanetRetail 5. Warehouse Automation: Machinery picks and packs more precisely of warehouse automation technology. it is likely that very soon regulations will limit the weight one worker is allowed to lift each day. While the last few years have seen only full-range retailers such as Kroger. Imminent government 2011 will see significant financial investments in different forms regulations and demands from unions limiting the accumulated weight a worker is allowed to lift per day can be seen as one of the major reasons for retailers to invest in this technology. the reduction of labour costs is not the only driver for this. Schwarz Group’s Lidl in Germany is the first discounter aiming to fully automate the picking and packing of ambient goods in one distribution centre. also discounters. Logistics experts expect similar regulations EU-wide. CEO of warehouse automation specialist Witron. With the implementation of voice-picking and optimised processes. Now. with their business model relying on a fast-moving and small assortment. “Employees move 15 tonnes and more per shift. performing this by bending. Not all are aiming to install fully-automated picking and packing solutions which make the traditional warehouse worker completely redundant. At the same time.
a Lidl manager explained in talks with Planet Retail. In July 2011. Mercadona and Edeka. the packing software can determine that. The product recognition process within the automated picking system relies on this information as it is based upon a combination of physical product characteristics and visionbased optical recognition. the new automated DC is planned to go live and is scheduled to be fully operational in January 2012. the teach-in process will also help Lidl to control whether the product master data it received from its supplier is correct and will help to continuously improve the quality of this data. The DC will be the world’s first installation of the new automation technology which works differently from Witron’s solutions that have automated warehouses belonging to Kroger. The DC in Kirchheim Teck is currently being extended from 27. Lidl will be able to pick 60.000 square feet) to 36. normal packaging can be distinguished from a seasonal one to ensure that the seasonal one is shipped at the right time.000 square feet) to accommodate the fully-automated case picking system from SSI Schäfer.net .000 square metres (387. With the help of visual product recognition.Planet Retail 2011 55 . the so-called “teach-in” process is carried out in the goods receiving area. Even a washing detergent might have a seasonal characteristic on its packaging such as a Santa Claus picture for a Christmas edition. www.planetretail. The packing software uses all data collected in the teach-in process to optimise pallet stacking patterns and to determine how the products (at case level) can be handled in the DC. Taking pictures of cases is also important for products which vary by season. but not the other way round. Even though Lidl also stores dairy. Finally. Sobeys. This distinguishes the SSI Schäfer solution from the solutions of other warehouse automation specialists such as Witron which work with barcodes. The automated picking process step-by-step Teach-in In a first step. The IT implementation at the site will begin in January 2011. the company revealed in talks with Planet Retail. If successful.000 cases of ambient food per day automatically. for example.000 previously. compared to just 30. Within this process. the deployment of automated picking will be limited to ambient goods.000 square metres (290. frozen and fresh products in this DC. one case of every product arriving at the DC is scanned in terms of size and weight and is photographed from the top and from the side. Being fed with all characteristics such as size. Once the distribution centre is operative. the DC in Kirchheim Teck will supply 140 discount stores. a case of crisps can be put on top of a case of tinned vegetables.PlanetRetail Schwarz Group’s Lidl pioneers new way of warehouse automation Schwarz Group-owned Lidl wants to be the world’s first discounter to fully automate large parts of its distribution centre. the technology will be rolled out to additional distribution centres. With the new automation technology. compared to a previous 90 outlets. The automated picking system in the retailer’s distribution centre (DC) in Kirchheim Teck expected to start operations in July 2011. The implementation of this automated picking is seen as a test. weight and stability against tipping over.
This is carried out with the help of 14 so-called case wheelers. © SSI Schäfer Layers are separated into single cases. the trays are identified through their barcodes. These horizontally moving conveyer belts forward the right number of cases to one big conveyer belt. From there. Tray buffering The trays are stored in a special high bay warehouse until they are needed for the automated picking. Complete layers are pushed onto one tray each. The data belonging to the trays and the cases on them are ‘married’ in the warehouse management system. At this stage. the pallets are retrieved and are automatically depalletised into individual layers of cases. they are retrieved from the tray buffering with the help of so called tray shuttles . A palletising robot puts individual cases on a pallet according to a pattern determined by the packing software. The software now ensures that the trays are retrieved from the tray buffering in the right order.planetretail. 56 Planet Retail 2011 . the packing algorithm of the software has already developed an optimal design and has built a ‘virtual pallet’.www. a machine de-palletises around 300 layers per hour. for every order. Single-case selection from layer trays and store specific sequencing The vertically moving tray shuttles transport the trays to an area where single cases are separated from each other. At the time trays are demanded for an order.vertical lifts which are located between the aisles of the high bay warehouse.PlanetRetail Pallet storage and layer tray creation Contrary to previous goods received in the DC. pallets arriving at Kirchheim Teck will have to be labelled with a Serial Shipping Container Code (SSCC) as they are stored in an automated high bay warehouse with five aisles and space for 15.net © SSI Schäfer . With the help of vacuum cups and clamps. The fact that complete layers are stored on the trays distinguishes SSI Schäfer’s solution from other warehouse automation technologies which store individual cases.000 pallets. While cases are identified with visual product recognition.
Sophisticated packing software not only ensures that the trays are retrieved from the high bay warehouse in the right order. Witron’s technology avoids robotics and simply pushes the cases onto the right place. Automated Palletising The last step is the automated packing of transport units with the help of palletising robots.Planet Retail 2011 57 . With gantry robots. The palletising robot automatically lifts the cases from the conveyer belt onto the transport unit that will be shipped to the store. Mercadona and Edeka. according to the previously determined stacking pattern. SSI Schäfer now aims to handle about 96% of all ambient supermarket goods .more than the sites that are already automated with Witron technology can handle.net . Sobeys. the control software knows how the cases are situated on the conveyors and how they have to be grabbed.planetretail. The deployment of robotics is another aspect which distinguishes the SSI Schäfer solution from Witron’s warehouse automation technologies that is already deployed at Kroger. www. Due to the picture recognition technology deployed. one after the other.PlanetRetail In a last step. but also takes care that the case wheelers sequence the cases according to store orders and that cases arrive at the big conveyer belt in the right order. © SSI Schäfer The trays with surplus cases are shuttled back into the warehouse. the pallet is shrink-wrapped and equipped with a shipping label before it leaves the DC.
PlanetRetail Lidl sees competitive advantage to opt for warehouse automation technology Asked by Planet Retail why Lidl decided to pilot the brand new technology from SSI Schäfer rather than deploying other warehouse automation that already has a footprint in the market. However. Another reason for Lidl to work with SSI Schäfer was that its system stores several cases on one tray rather than individual ones. compared to the Witron OPM (0rder Picking Machinery).000 different ambient SKUs with SSI Schäfer’s technology in Kirchheim Teck. with the new automated picking system. opt for a very simple low-tech solution to reduce the weight its employees have to lift. If a worker lifts a case. Edeka currently handles 11.net © Gebhardt . 58 Planet Retail 2011 .www. the project manager named ergonmics.planetretail. As a third reason for automating the DC. The aim of this technology is not to automate picking or packing. Lidl was able to get the automated warehouse tailored to its needs to a certain extent. This methodology fits into the mode of discount operators. However.000 ambient food cases per day from the Kirchheim Teck site with SSI Schäfer. Edeka picks and packs about 200. discount rival Aldi (Süd). Aldi installed cranes on pallet trucks in its distribution centres. Cranes support the workers lifting heavy cases from pallet to pallet: cables from the crane are mounted on cuffs that sit on both of the workers’ wrists. less material handling technology and less space. The SSI Schäfer solution also needs.000 different SKUs automated with the Witron’s technology in Hamm while Lidl aims to pick and pack less than 1. bigger DC nor managed to find enough additional workers in the area of Kircheim Teck. Low-tech at Aldi Süd: To deal with ergonomics problems in the case picking process. While Lidl plans to automate the shipment of about 60. Lidl will also be able to save labour costs and to reduce freight costs due to the fact that the pallets will need less space in a truck than pallets which have been packed manually. but certainly in 15 years”. Due to this. “maybe not within the next two years. the investment will pay off. The responsible Lidl manager is sure that in terms of ROI.000 per day cases with Witron at its Hamm distribution centre. the crane is holding his hand and takes a significant proportion of the load. a member of the Lidl project team explained that the discounter had been able to exert influence on the configuration of the system during the development of the machinery. The only reason for installing the solution that Aldi developed together with technology provider Gebhardt is ergonomics. the wrists of the worker are connected to a crane that helps to lift the goods. Aldi opts for low cost solution While Lidl decided to address the topic of ergonomics with piloting a completely automated warehouse. Other reasons behind the decision to automate the DC in Kirchheim Teck was that Lidl was neither able to find a suitable plot of land for a new. Aldi Süd tested the solution successfully at one of its Bavarian distribution centres in Regenstauf and is currently rolling it out across its warehouse network. which ship high volumes to their store and have a limited range.
full-range retailers are already a step ahead. © Witron Edeka pioneers warehouse automation in Germany In Germany.net . www. warehouse automation specialist Witron unveiled a complete new picking technology in its laboratory in Parkstein aimed exactly at discounters. which needs to sequence single cases. However. Kroger was the pioneer of the world’s grocery retailers to fully automate distribution centres and Spanish Mercadona was the first one in Europe to follow.000 ambient SKUs with the help of 24 Witron Order Picking Machines (OPMs). The case picking with the new machinery. Fresh. is still done by a worker. Also. Edeka was the first retailer to deploy warehouse automation technology. This makes the technology significantly cheaper than the fully automated warehouses.000 SKUs. The shelves the worker picks from are replenished in a fully automated fashion. And. The picking shuttle brings the worker into an optimal position to pick the cases and put them onto the pallet. shifting 11. chilled and frozen food are handled manually handled with the help of voice-picking technology. it is possible to pick up to 500 trade units per employee per hour with the ETP. But it supports the movement of the goods bringing the worker and the transport unit with a Pick Shuttle into the optimal position. does not need to store single case units in an automated storage and retrieval high bay warehouse like the fully automated OPM. While the discounters have only started to look into warehouse automation. which can handle up to 4. but not on single case units. such as those of the discounters. between these extremes are further. semi-automated warehouse automation solutions on the market that fit to the discounters’ needs. According to Witron. The regional co-operative invested EUR120 million (USD150 million in 2006) in the complete site. the semi-automated solution bases the packing of the pallets on the same truckload-optimising software algorithms as Witron’s solution for complete automation. with operations and maintenance Edeka completely outsourced to the vendor of the technology. which has been installed at Kroger and Mercadona sites. Witron. The Ergonomic Tray Picking (ETP) is not a fully automated solution such as Witron implemented for the likes of Kroger and Sobeys. The replenishment of the picking shelves at the semi-automated ETP is based on a tray full of cases. Since September 2006. Witron’s new ETP system for smaller distribution centres. the technology needs less space than the huge fully automated sites. In spring 2010. Edeka has only automated the handling of ambient products.000 trading units per day. The site automatically distributes up to 210. the Order Picking Machinery (OPM).planetretail.PlanetRetail Semi-automation could be a solution for discounters While Lidl is going the whole hog with its fully automated warehouse and Aldi has opted for a very basic low-cost approach. the Edeka co-operative Rhein-Ruhr (Rhine Ruhr) is running one of the distribution centres with the highest level of picking automation in Europe. The automated picking systems alone cost them EUR50 million (USD63 million in 2006).Planet Retail 2011 59 .
Using trays instead of totes or boxes is key for the technology which enables the later separation of the goods from the trays without the need for sucking or gripping the cases.PlanetRetail Pallets with ambient products arriving at the DC are firstly stored in an 80 metres long and 30 metres high. a Layer Picker machine from Danish automation specialist Univeyor is used which (similar to a huge vacuum cleaner) sucks each layer from the pallet. Once cases are needed for a certain order. conveyors running at different speeds individualise the cases. the rest of the automation process can do without RFID tags and just uses barcodes on the trays.net © Witron . thus leading to a substantial saving of transportation volume. In addition.planetretail. The COM pushes the items onto the load carriers. fully automated high bay warehouse. they are automatically depalletised as far as possible. After the cases have been separated from the trays. For this purpose. the serial shipping container bar code (SSCC) is read automatically with fixed laser scanners. The trays with the cases are stocked in a fully automated high storage area provided by Austrian specialist TGW Logistics. The algorithms pack transport units much more condensed than employees pack them. In a next step. the COM pushes them onto the transport units that will go to the store. Sophisticated software calculates the exact position of each product on the pallets or roll-cages to avoid damage from heavy cases. they leave the high storage area on their blue trays and are forwarded to the loading machine. Once the pallets are removed from the high bay warehouse. This sequencing follows the way the employees unpack the pallets or roll-cages in a specific outlet and thus increases the efficiency significantly. for example. The heart of the distribution centre is the Case Order Machine (COM) from Witron. contrary to the SSI Schäfer solution that uses a robot to grab the cases and put them onto the pallet. It is also noteworthy that this warehouse automation from Witron does not use RFID technology at all. In the receiving area. Another relevant benefit from the software managed packing is the optimisation © Witron of the supply chain.www. 60 Planet Retail 2011 . which are then loaded onto trays. The heart of the distribution centre in Hamm is the innovative Case Order Machine (COM) from Witron. The items are brought into an order which reflects the individual store layout.
Looking ahead. This closes a gap for Edeka Rhein-Ruhr. The first is located in Ciempozuelos (near Madrid) and works with the Witron Order Picking Machinery (OPM). Mercadona aims to also automate tote distribution While Edeka so far limits the deployment of automation to the handling of ambient products. plus 2 degrees and plus 12 degrees Celsius). The haulier deposits the suppliers’ pallets directly on the roller conveyors which run along the width part of the warehouse facility. stacks and consolidates half and quarter pallets.800 quarter pallets per day. Module Picking System (MPS) and Dynamic Picking Solution (DPS). The cases will be supplied to the COM machines via a 26-aisle tray warehouse divided into three temperature zones (minus 23 degrees. This is important for Edeka as some of the retailer’s stores are fairly small and entire pallets would not always fit through narrow aisles. which are the heart of the OPMs. meat and fresh products will automatically be stacked onto order pallets in a store friendly manner.100 fresh.Planet Retail 2011 61 . Mercadona in Spain also deploys Witron’s Case Order Machine (COM) for perishables as well as for frozen food. Edeka further automated its distribution centre in Hamm with Witron’s DPP (Display Pallet Picking) solution for fully automated handling of half and quarter pallets. It will be the first installation of Witron’s ATS worldwide and will enable Mercadona to pick more than 100. Witron has already realised two distribution centres for Mercadona’s dry goods assortment and temperature-controlled products.5 truckloads per article) for those 67 products with the highest turnover (one conveyor for each type of product). Additionally. frozen and perishable products using 13 Case Order Machines (COM). Once the site in León goes live.planetretail.000 trade units a day will be picked from a range of approximately 1. The second site is located in Ribarroja (near Valencia) and uses the Order Picking Machinery (OPM) system for frozen goods. Mercadona decided to use Witron’s Automated Tote System (ATS) for fully automated whole tote picking at its León site. the DPP system in Hamm will handle up to 500 half and up to 1. At the new site in León. Mercadona’s third. Additionally. which directly delivers around 70 different products on half pallets and 120 items on quarter pallets such as promotional displays to its stores.net . 108. Mercadona will also deploy Witron’s Order Picking Machinery (OPM) which is planned to be up and running in March 2011. at the end of the conveyors the goods arrive at the dispatch bays where the orders are prepared.000 totes a day automatically from a range of approximately 330 fresh articles.800 storage locations. Additionally. Replenishment will be carried out from a pallet high bay warehouse with 8. Mercadona will operate four highly automated distribution centres in Spain. the site uses a DPP (Display Pallet Picking) solution for fully automated handling of half and quarter pallets for ambient. in September 2009. highly automated distribution centre is the non-perishable product warehouse in Huevar (Seville). fresh and frozen goods. Without entering the warehouse. www. Various fruit and vegetables. The new DPP system automatically stores. This distribution facility is equipped with a rolldocking system and deploys 67 roller conveyors with dynamic buffer storage (at least 1. the DPP machinery can also place transport units onto rolling reusable load carriers.PlanetRetail Edeka further automated its warehouse in autumn 2010 In autumn 2010.
Since 2008.net . In 2009. Witron is the general contractor of this project and will install 28 Case Order Machines at Suhr – more than ever in one single warehouse. In 2003. Texas. The technology will be able to pick and pack 315. Kroger also automated its distribution centre in Aurora. Kroger opened its first fully automated distribution centre for perishables and frozen food in Compton. Migros has already installed the Schäfer Carousel System (SCS). In June 2009. Migros’ national distribution centre for ambient goods in Suhr will be the world’s largest fully-automated distribution centre in grocery retailing. The implementation of the roll-docking system was conducted by material handling and storage solutions provider TGW Logistics Group from Wels in Austria. the employees had to handle cases with a weight of up to 20kg. Later. The algorithms of the COM machinery pack “transport units much more condensed than employees pack them”. The retailer decided to implement the solution due to ergonomic reasons as. the same solution that Lidl in Germany has selected. It is likely that from April 2011. the world’s first ambient site with this technology went into operation in Tolleson. Arizona. Kroger on the forefront of warehouse automation Kroger was the first grocery retailer in the world deploying the Case Order Machine (COM) from German specialist Witron. Kroger is constructing an automated dry food distribution centre in Paramount. the cooperative Ostschweiz (Eastern Switzerland) has deployed a fully automated picking machinery from Swisslog for fruit and vegetables in its distribution centres in Gossau. Migros also works with further warehouse automation providers. with the technology from the German specialist. pick between 20.planetretail.www. a small parts storage systems from SSI Schäfer. In Neuendorf. 62 Planet Retail 2011 . A total of four machines. Close to the future Compton site. Swiss Migros on the way to operate the world’s largest fully automated warehouse Swiss grocery retailer Migros is also a customer of Witron. previously. enabling retailers to pick and pack food cases fully automated. Kroger decided to construct two more almost fully automated distribution centres in California. California. Migros supplies all its stores in Switzerland with ambient goods. the retailer ordered the technology for a fully automated distribution centre. the Swiss retailer will deploy the fully-automatic case picking system from SSI Schäfer. From Suhr. The machinery from Swisslog depalletises. confirm the removal with radio scanners and place the picked products together at the assigned outgoing goods gate. Migros is thinking about deploying the machinery also for charcuterie products.000 cases per day. Kroger sees the work with Witron as a real success. explains Witron’s Founder and Owner Walter Winkler.000 and 50. called Stack Runners. At the end of 2010. “Kroger saves through this about 8% of the transportation volume which is shipped from its automated distribution centres to the stores”.PlanetRetail Mercadona employees pick the goods onto pallets with fork-lifts. stores and packs the boxes. in its DC in Neuendorf. Additionally.000 cases per day.
this has not been proven in real life yet. Warehouse automation will come on the agenda of every retailer Looking ahead. And toilet paper. Kroger is able to save about 8% of its transportation volume shipped from its automated distribution centres to the stores due to the intelligent packing done by the machinery. Warehouse automation technology could reduce retailers’ road mileage more efficiently than many other supply chain optimisation projects conducted in recent years. warehouse automation is another good reason for tight cooperation between retailers and FMCG manufacturers. The aim will be to develop product packaging which is stable enough to be handled by the automation machinery.PlanetRetail Warehouse automation cannot be used for all products While warehouse automation solutions such as Witron’s OPM and SSI Schäfer’s Case Picking automate the picking and packing of pallets as far as possible and are able to reduce manual labour to an absolute minimum. but also regulations and demands that limit the maximum weight a worker lifts per shift will force all kind of retailers to invest in automation technology. which is too light. SSI Schäfer now aims to handle about 96% of all supermarket items. Crisps packed in unstable cardboard cases cannot be picked automatically. at least in the developed and high labour costs countries. not only the urge to save labour and freight costs. But. there is still one drawback: warehouse automation cannot be used for all products.planetretail. as soon as they are available. The example of Kroger in the US illustrates another reason why warehouse automation will be increasingly popular with retailers. With the deployment of robotics on its Case Picking solution. www. there are still items which require manual or semi-automated picking solutions due to their packaging. soft and unstable. For example. In general. Glossy cardboard packaging is difficult to handle as well and crisps which are packed in unstable cardboard cases. can neither be picked automatically.net . large packages of washing powder have very often an unfavourable tipping point and can easily fall off the trays. The challenge is now to collaboratively work on packaging that is both at the same time: stable in the automated warehouse and easy to open in the store. The business partners in the food business will listen very closely to new ideas from the packaging industry.Planet Retail 2011 63 . given stability of large variety of packaging used in a supermarket range. In recent years. the collaborative projects on Shelf Ready Packaging led to easy to open but at the same time less stable packaging.
net .www.PlanetRetail 64 Planet Retail 2011 .planetretail.
Planet Retail 2011 65 .net .PlanetRetail www.planetretail.
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