Retail Technology Trends-2011

Retail Technology Trends, 2011The top 5 areas of investment

Björn WeberResearch Director Retail Technology

Joachim PinhammerSenior Retail Technology Analyst

Sarah HerrleinSenior Retail Technology Analyst

PlanetRetail

All images © Planet Retail Ltd unless otherwise stated.

Cover images: 10 - © Cincysavers; Q - © Gerry Weber

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www.planetretail.net - Planet Retail 2011

Contents

Executive Summary 1

1. Self-Service Checkouts: 3

New technologies change the game

2. Customer Facing Technologies: 16

Enabler for a new generation of pinpoint marketing

3. Price optimisation: 33

Higher margins without increased turnover

4. RFID (Radio-Frequency Identification): 42

Back from the brink

5. Warehouse Automation: 54

Machinery picks and packs more precisely

Planet Retail 2011 - www.planetretail.net

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1www.planetretail.net - Planet Retail 2011

PlanetRetail

oday, the major retail companies of the world are aware of the impact new technologies can

have on their profit lines. This is why hardly any retailer, at least not those who are financially in

good shape, cut their IT spending in the economic downturn. But most of the international players

shifted their budgets. In short, the winners of these budget shifts are technologies that enable

optimisation through sophisticated data analyses; those that enable self-service and automation;

and last not least, those which bring together online and offline marketing.

This report provides with detailed insights on these trends. The findings are based on in-depth

interviews with decision makers from the world’s major retail companies and their technology

vendors. They are also founded on Planet Retail’s continuous monitoring of the technology

deployment and strategies of all major retail groups. 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 - globally. Incomparable to any other resource, 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, replenishment automation, data warehousing, optimisation and

data analyses, warehouse automation and all forms of instore solutions - just to mention the most

important ones.

This report is a trend report. 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.

The five technologies described in this report will be areas of additional investments. But this does

not mean that they will stand for the major part of retailers’ IT budgets. By far largest part of the

technology spending will go unaltered into the traditional areas such as POS systems, merchandise

management systems, data warehousing and warehouse management as well as supply chain

management solutions.

Before retailers can benefit from the innovative technologies, they have to do their homework.

There is no doubt that optimisation and automation needs accurate master and inventory data,

a 100% scanning rate at the checkout and visibility of the good’s flow along the supply chain.

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. 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,

less waste and less logistics costs, those retailers which haven’t yet done their homework in terms

of merchandise management and data accuracy have been left behind.

This report highlights key technologies for which Planet Retail’s Retail Technology research team predicts major investments by retailers over the next five years.

TBjörn Weber, Research Director Retail Technology

Executive Summary

2 Planet Retail 2011 - www.planetretail.net

PlanetRetail

But given that the merchandise management system, the master data management, POS systems

and the data warehouse work without major problems, retailers can go one step further. Planet

Retail has identified five major technology investment trends in the retail industry:

1. Self-service at the point of sale will take the next step and conquer the checkout. Self-checkout

technology is not new, but now, with a new generation of user-friendly technology, it will be

rolled out at high speed.

2. Further customer facing technologies will also start off, driven especially through the revolution

in the pocket of the shopper - the smartphone. Complete new forms of marketing are changing

the game in retailing. But not everything makes sense. This report gives practical advice on how

to set up a digital instore marketing successfully.

3. Following the immense success of replenishment automation, a new generation of price, but also

range optimisation solutions will play a significant part in the competition over the next years. 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, because their competitors will do it.

4. Those reported dead live longer - it could take some of this report’s readers by surprise

that RFID is identified as a major trend. Wasn’t this technology dead for deployment in the

retail industry? Planet Retail learned that RFID will see a major renaissance because retailer,

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. In this report, Planet Retail

provides a very clear answer to the question in which ways RFID makes sense and which not.

5. But one of the largest revolutions is happening behind the scenes. Now that the likes of Kroger,

Sobeys and Mercadona have proven that the complete automation of distribution centres is

possible even in the grocery business, almost all major retailers of the world will follow and will

invest significantly in warehouse automation – not only full-range retailers, but also discounters

and other retail formats.


PlanetRetail

he next generation of self-service is

conquering retail – slowly but surely. The

speed of transformation in which the checkout

process changes from manned tills to self-

service checkouts is reminiscent of the first

self-service revolution which formed the basis of

modern retailing as we know it today.

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. Today, it is

hard to imagine any retail store without self-

service picking of goods.

Nowadays, 18 years after the first self-

checkout got a patent and was installed at

a Price Chopper store in Clifton Park, New

York, self-checkouts are globally still seen as

a supplement to manned tills. Self-checkout-

only stores are rare. They exist with Tesco’s

US banner Fresh & Easy and at one Tesco

convenience store in Northampton, England.

Delhaize is also experimenting with its Red

Market banner in Belgium in which all customers

have to use self-scanning handheld devices. But

Metro Group in Germany, for instance, which

tried to run its Real hypermarket in Mülheim-

Kärlich with self-service payment at machines

only, soon re-established manned tills because

of customer complaints.

The British press, for example, was full

of doubts after Tesco opened its first self-

checkout-only stores there. The machines, the

press wrote, were not user-friendly enough

to make the deployment mandatory for the

shopper. But those correct observations were

based on an older generation of self-checkouts

which is, in the UK, still widespread in the

stores of Sainsbury’s, Tesco and Marks &

Spencer. 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.

T

Carrefour equipped all hypermarkets in France and Belgium with both stationary self-checkouts from Wincor Nixdorf …

1. Self-Service Checkouts: New technologies change the game

… and self-scanning with Re-vision and Motorola. The photos from the concept store Carrefour planet in Vénissieux, France, show the new colour guidance system through the different forms of self-service checkouts.


PlanetRetail

In countries with a high deployment rate, such

as the US and UK, this technology will replace

many more manned tills over the coming

years. In some other countries such as France,

retailers are already in the process of rolling out

different forms of self-service checkouts at high

speed. And markets such as Spain, Germany

and CEE countries, which have so far not seen

many self-checkouts will see them very soon –

based on a new generation of technology.

The technology available has improved significantly

Although self-service will not completely replace

manned tills in the next five years, the retail

industry will see a significant rise in new self-

service checkout projects around the globe in the

coming years. There are two reasons for this.

Firstly and most importantly, the technology

available on the market improved significantly.

In early 2008, Planet Retail had spotted five

weaknesses of the technology available at this

time. They were:

A lack of user-friendliness;•

An inability to cope with larger purchases • and the bags/boxes shopper want to pack their purchases into;

Incapable of handling cash in large amounts;•

Complexity of integration into existing • software architecture; and

Design of the machines and devices.•

Since then, all major technology providers have

worked hard and improved their self-service

checkout products significantly. In the area of

stationary self-checkouts, 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, user-friendliness, cash handling,

modularity in casings and ability of integration

into the existing software architecture and

checkout processes. The new modularity,

with which for instance Wincor Nixdorf won

Carrefour as a customer, not only allows

retailers to more easily adapt self-checkouts

to their own shop design and corporate

identity, it also makes solutions possible that

allow shoppers to pack directly into their own

bags or boxes. And, this modularity made

the deployment of stationary self-checkouts

possible in non-food retail stores too.

Modularity, 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.

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In 2008, NCR, Wincor Nixdorf and Fujistu

presented their solutions for the first time

with inbuilt cash recyclers. This makes their

deployment in cash intensive markets such as

Germany, Spain or Poland much more likely.

After so much innovation from its competitors,

IBM was also working hard on a new generation

of self-checkouts in a project internally called

Columbia. The results were ceremonially

unveiled at the 100th NRF Convention and

Expo in New York City in January 2011. The

series, now called IBM Self Checkout System

6, replaced the one Big Blue acquired with

Productivity Solutions (PSI) in November 2003

and are a quantum leap in terms of modularity,

cash handling and user-friendliness.

“With the new modularity, we protect retailers’

investments,” explained Fredrik Carlegren who

oversees the global marketing of IBM’s self-

service solutions. While the user-interface sits

at the scanning module of the system, different

bagging modules as well as different payment

modules can be optional attachments. “Retailers

can add, remove or replace a payment module

later. If they are already have self-checkouts

from us, they can reuse their existing bagger or

conveyor assemblies,” said Carlegren.

The payment module is available either with

conventional cash management with cash

recycler or with pure card payment functionality.

However, different from some of its competitors,

IBM didn’t develop this cash module in a way

that it can be used as standalone self-payment

terminal. The Self Checkout System 6 always

needs the scanning module. But, as early as

2008, the European IBM operations had already

brought a stand-alone self-payment terminal

to the market, jointly developed with Gisecke &

Devrient and called Pecuron.

With its System 6 series, IBM prepared its

self-checkout technology especially for the

deployment in smaller retail formats. Big Blue

decreased the footprint of the machine, even

if installed with all modules, significantly. With

the modularity, the system can be deployed

even in convenience stores if, for example, the

retailer decided to allow card payment only.

North America sees organic growth

In North America, where self-checkouts as

a supplement to manned tills have been

widespread for more than seven years,

most retailers will handle this technology

evolutionary over the course of 2011. So

far, most of the major grocers, but also DIY

and electronics retailers, follow the standard

scenario of four or eight stationary scan & bag

or scan & belt machines - added to the exiting

manned tills. In 2011, some retailers will install

one or two more groups of self-checkouts in

selected stores - eight if there are four now,

or 12 if there are eight today, for instance.

“Different from European retailers, the major

players in the US and Canada are not really

looking to innovate the self-checkout,” said

IBM’s Fredrik Carlegren.

In the US, self-checkouts are conquering new formats, such as those from CVS pharmacy, here with IBM devices.

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Smaller stores and pharmacies such as CVS

will also install self-checkouts, but in a similar

way to that already employed by the big box

players. Some very old self-checkout machines

will be replaced with the latest versions. And

with NCR’s new Version Five Selfserve Checkout,

new installations will often be equipped with

cash recycling technology at NCR’s major

customers such as Walmart and Home Depot.

However, different from Europe, in North

America there will no revolutionary strategy

change or major investment drive in the sector

in 2011. The US retailers will expand the

overall footprint of the installations without

changing the concept dramatically. With one

remarkable exception. Kroger, the USA’s second

largest grocery retailer, is indeed looking to

innovate the checkout in a radical way. The

retailer, which runs more than 3,600 stores

across all its banners, is with its visions and

tests going further than any other retailer in

the world. Kroger, 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, is looking for something above and

beyond today’s self-checkout technology.

All tests and projects Kroger is running

are highly confidential. 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.

The fact that many Kroger employees, unlike

the majority of Walmart staff, are unionised,

makes radical innovations around the

checkout, which are likely to make parts of the

staff redundant - an even more sensitive topic

for Kroger as employer.

The world’s first tunnel scanner in a real life store

Nevertheless, it was Kroger that, in 2010,

became the world’s first retailer testing fully-

automated tunnel scanners at the checkouts

of a real life store. For this, 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. The Kroger Marketplace

store in Hebron, Kentucky, is the world’s first

store which is equipped with such a tunnel

scanner that Kroger calls ‘Advantage Checkout’.

Customers have to place their products on

a conveyor belt – one at a time with a clear

distance between the items. The belt moves

much faster than at traditional tills. Products

are scanned automatically while they are

moved at high speed through the tunnel.

The scanners in the tunnel are able to read

barcodes from all sides of the product. After

the scanning, shoppers receive a receipt with

another barcode from a printer. They move on

to one of four self-service payment terminals

from IBM where they scan the barcode of the

receipt and pay.

In Hebron, Kentucky, Kroger started the world’s first test of a fully automated tunnel scanner in a real store.

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7

The tunnel scanner is not unmanned. 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, while the purchases of the first

are packed by an employee. The advantage

of the machine compared with traditional tills

is its speed: the scanning is completed much

faster. During bagging, customers visit one of

four separate pay stations where they can scan

coupons and pay for their goods. The Advantage

Checkout is based on IBM’s POS software and

was custom built for Kroger with components

from different technology providers.

Three months after Planet Retail unveiled the

details of Kroger’s tests with tunnel scanners to

the retail industry, Michael (‘Mike’) Schlotman,

Kroger’s Chief Financial Officer, answered the

questions of investors and analysts. “We have

to figure out ways to take seconds out of a

process that is done thousands of times,” he

explained in September 2010.

“You can really leverage two seconds of savings

that way.” But, the reading rate was not yet

perfect. According to Schlotman, the machine,

that “uses a patented technology designed by

the grocer’s research and development team”,

could only read about 90% Kroger’s assortment

in the tunnel.

Meanwhile, Kroger had installed a fine-tuned

system in a second store and continues testing

and seeking feedback from customers. It has

yet to determine the optimal configuration

which would remove all bottlenecks during the

checkout process. It has also installed self-

service scales in the Hebron produce section

that lets customers weigh and label items with

printed barcodes while they shop. The reason

for this additional piece of self-service is again

to save seconds in the checkout process.

Wincor Nixdorf is developing this fully automated tunnel scanner jointly with major European retailers. It is not live yet in any store. © Wincor Nixdorf


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. 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. In 2005,

Dutch start-up company Scangineers built a

fully-automated scanner in its laboratory in

Amersfoort. The small company was acquired

by Swedish shopfitting company Itab in 2008,

and today forms their self-checkout business

under the name Scanflow. However, the fully

automated tunnel scanner has so far not been

installed in a real store.

Over the last three years, Germany-based

Wincor Nixdorf has been working hard on the

development of a fully-automated scanner.

Meanwhile, it doesn’t even need a tunnel

anymore. A slim frame holds the technology

that is able to scan the items moving forward on

a conveyor. Although Wincor Nixdorf is working

on this development closely with major retailers

from the UK, Germany and Spain, representing

a range of different grocery retail formats, the

fully automated checkout is so far a product

study and installed only in laboratories and not

in any real store. However, Wincor Nixdorf is

very confident that this will change.

The Product Manager of the Paderborn-based

specialists, Gordon Klein, 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. “Over the

last 12 months, we made significant progress

in terms of the reading rate,” he said. The

sophisticated combination of picture recognition

technology and laser scanning seems to be the

way to make this a success.

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. The question took most of

the participants by surprise. Won’t such a

technology, combined with self-service payment

machines, make cashiers redundant and save

retailers the largest part of their labour costs?

The questioner countered with his view that a

business case would, in his opinion, only exist if

the future checkouts were either smaller, allow

him to fit more goods into the store, or if it

makes the checkout process more convenient

for the shopper in terms of item handling. Staff,

he said, would still be needed to supervise the

checkout process and help customers. At least

someone has to monitor the age of the shopper

if they buy alcohol or cigarettes.

Kroger, pioneer in terms of fully-automated

scanning, is so far not reducing staff – at least

not in the test phase. At each tunnel, a friendly

assistant is supporting and supervising the

process, and at the end, the items are packed

into a bag by a member of staff as is common

in the US. Kroger, as mentioned above, is

looking for speed and consequently also in

a reduction of labour costs. For the US retail

giant, the business case is given that it saves

some seconds at the checkout with the very

fast moving conveyor belt.

The items, however, are still handled at least

three times: the shopper picks them from the

shelves, puts them on a conveyor belt and

someone bags them at the end. 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. Maybe this is the

reason why major European retailers have

started again to experiment with self-scanning

with mobile devices on a large scale.

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European retailers experiment greatly

Different from their North American

counterparts, major European retailers have

started to experiment with a lot of very different

forms of self-service checkouts. 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, but also innovative, new

checkout technology at a large scale.

Instead of just adding four, eight or 12

stationary self-checkouts to the manned tills,

European retailers are looking to innovate the

checkout completely.

This includes:

The separation of scanning from payment•

In 2011, a new revolution will begin in

France. Grocery retailer Auchan plans

to install self-service payment terminals

with automated cash handling behind the

checkouts of its stores. Although the new

checkout process, which can so far only be

seen in the retailer’s laboratory, will initially

just be tested in real stores before the

retailer decides about a roll-out, it is very

likely that the new approach will sooner or

later be installed at all checkouts.

The terminals will be provided by kiosk

system specialist Acrelec with coin recycling

technology from Swedish Scan Coin. 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.

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. After the

items have been scanned, customers will pay

at the new self-service terminals either with

cash or credit card. The terminal will also

offer contactless payment with Near Field

Communication (NFC). So far, it is unclear

if the new checkout process will replace or

supplement the existing installations of self-

scanning with mobile devices from Motorola

and self-checkouts from Fujitsu in Auchan’s

French hypermarkets.

The idea to offer self-serve payment while scanning continues to be conducted by staff is not new. 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’. Also Metro Group’s hypermarket operation Real, Rewe’s Penny and Billa as well as Schwarz Group’s Kaufland tested stand-alone self-service payment terminals. These have not always been successful. Metro Group’s Real re-introduced cashiers at the first self-service payment only store in Mülheim-Kärlich, Germany. And, also in Germany, Rewe stopped a self-service payment experiment at its discount store Penny in Bonn-Duisdorf. 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.

At the trade show Equipmag in Paris, Planet Retail spotted the future self-service payment machines of Auchan – supplied by Acrelec.

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The integration of cash recycling•

Cash still plays a significant role at retailers’

checkouts in countries such as Italy, Spain,

Germany and Poland. And, as opposed to

the currency in the USA, not only notes

but also coins are very important in the

payment processes in Europe. Therefore

retailers and filling station operators across

Europe are experimenting with automated

cash handling - integrated into manned tills,

self-checkouts or stand-alone self-service

payment terminals. Ideally, the machines are

able to recycle coins and notes which means

they dispense change from the piles of coins

and notes they previously collected. This

technology is already established all over

Sweden where cash recyclers at manned tills

make retailer stores safer against robberies.

According to predictions of Planet Retail,

the number of tills in Europe equipped with

cash recycling technology will double over

the course of 2011. As already mentioned,

not all new projects will see the installation

of cash handling machines directly at the

manned checkout. 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.

It is likely that more major French retailers

such as Carrefour, 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.

The major technology partners delivering the

solutions will be the three Swedish specialists

Gunnebo, Scan Coin and Cash Guard. Joining

them will be Wincor Nixdorf, with the brand

new inhouse developed Cineo series and

Toshiba Tec, which replaced Wincor Nixdorf

as reseller of the cash handling machines

from Japanese Glory. Additionally, NCR is

selling the payment module of its latest

self-checkout also as a stand-alone payment

terminal, and IBM offers jointly with Gisecke

& Devrient their payment machine Pecuron.

Self-checkout only stores•

Some European retailers tried to find out

what happens if a store offers self-checkouts

only. In Germany Metro Group’s Real and

Edeka shop owner Simmel stopped the

tests as the shopper acceptance was too

low. Tesco, the European company with the

highest number of stationary self-checkouts

currently installed, has been testing one

self-checkout only store since October 2009.

It is the Tesco Express in King’s Langley,

Northampton, which has five self-scan tills

overseen by a single member of staff but

no manned checkouts. While this concept is

new in its homeland, Tesco has gained a lot

of experience with self-checkout-only stores

in the US. Most of its Fresh & Easy stores do

not have any manned tills.

Established across the retail landscape of Sweden, the automation of cash handling at manned tills is coming to further countries: In Germany, Edeka shop owner Hövener in Wuppertal installed Scan Coin’s technology.

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Trolley-to-trolley self-checkouts•

At a manned checkout, 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. 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. While some

retailers see the self-scanning with mobile

devices as the answer, others continue

to look for solutions that reduce the item

handling but provide at the same time an

inbuilt theft control.

ITM Intermarché in France is testing a self-

checkout with two scales both weighing a

complete trolley. Shoppers take each item

from the first trolley, scan them and place

them directly into the second trolley.

In June 2008, ITM Intermarché’s CIO

Christian Legendre rebuilt a hypermarket

in Rennes, France, that included machines

developed by IBM and Stime, which are so

far unique in the industry. 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. The system ensures that

all products are scanned without forcing the

customer to use one-way plastic bags.

As a control mechanism, each item that

is not scanned automatically generates a

wrong weight that blocks the system. The

intervention of a checkout operator is then

needed. For basket shoppers, a fixed support

at hand height is installed on the floor

scale to accept customer baskets with up

to 10-20 products. The store manager can

also change the self-checkout systems from

‘trolley mode’ to ‘basket mode’ based on

traffic and specific customers’ needs.

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, France.

© I

BM


PlanetRetail

Value-added self-scanning•

Retailers deploying self-scanning with mobile

devices, such as Casino in France and Coop

in Switzerland, are keen to offer shoppers a

lot of additional features such as a shopping

list compiled at home, couponing, navigation

through the store, instore location-based

discount offers via instant messaging and

mark-downs in real time on the mobile self-

scanning devices. But Casino, for example,

currently realising these services on

Datalogic's Joya device, wants to “bring all

these services in the future also on shoppers’

mobile phones”, Alain Berne, Casino’s Head

of Store Processes, told Planet Retail.

Simple self-checkouts•

Reducing self-checkout installations to

the minimum equipment required, IKEA

is currently replacing half of its tills in all

European stores by self-checkouts - without

any control scales and without any cash

acceptance. This is an approach which is

seen as highly risky with regard to the

shrinkage rate coursed by dishonest visitors

of the stores. Similar ‘simple self-checkouts’

were also being tested by SPAR Austria which

intended to deploy the systems alternating

in manned or self-service modus. However,

SPAR Austria is now implementing ‘complete’

self-checkouts with weighing scales.

Renaissance of self-scanning with • mobile devices

It was not only stationary self-checkouts,

but also the mobile devices for self-scanning

and the software deployed on them, that

made a quantum leap in terms of usability.

Motorola’s MC17, already launched in 2007,

and now available with a touchscreen

display, helped to changed the game in

a stagnating market of scan-as-you-pick

solutions. Also, Datalogic contributed to

this with its highly successful Joya device.

New players such as Höft & Wessel Skeye

with their Dart device are now also bringing

added dynamism to the market.

Not insignificant are the technical

improvements that came to the self-

scanning installations with specialist software

providers such as Dutch Re-vision. 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-

scans of complete trolleys. 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, self-scanning with mobile

devices is having a real renaissance in the

global retail industry.

IKEA is rolling out self-checkouts without any inbuilt theft control across its European store network. The picture shows one in the La Gavia Shopping Center in Madrid, Spain.


PlanetRetail

13

Global players such as Ahold, Casino

and Delhaize Group now base their self-

service checkout strategy predominately

on self-scanning with mobile devices.

Also the world’s second largest and most

international grocery retailer, Carrefour has

rolled out self-scanning, often in addition to

stationary self-checkouts in the same stores.

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.

Nevertheless, 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 - manned checkouts are

competing with self-scanners, self-service

payment terminals and scan & bag solutions

in the same stores.

Self-scanning with shoppers’ • mobile phone

Major retailers such as Carrefour, Ahold,

Auchan, Casino and Delhaize Group are

rolling out self-scanning with mobile devices

across large parts of their store network.

The devices, most of them from Motorola

or Datalogic, are exclusively for use in the

store. Therefore, shoppers can’t use them

for scanning empty packages at home to

create a shopping list. They can neither

use them to locate the next store of their

favourite retailer if they are on the road, nor

receive coupons or other promotional offers

at home. 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. But all those additional functions

already exist or are in development in the

form of smartphone applications.

Metro Group in Germany was the world’s first retailer testing self-scanning with mobile phones. In the project in Real’s Future Store in Tönisvorst, Germany, Metro Group will soon test self-scanning with iPhones. © Metro Group


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 self-

checkout 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.

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PlanetRetail

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 self-

checkouts 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, self-

checkouts 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.

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PlanetRetail

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.

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.

onsumers are more versatile than ever, better informed and often acting less

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.

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.

C

2. Customer Facing Technologies: Enabler for a new generation of pinpoint marketing


PlanetRetail

The end of Tesco’s network changed the way

the retail industry discussed digital instore

media. As Planet Retail learned, other major

European retailers were also complaining

that there has not been enough investment

by brand manufacturers into digital instore

advertisement. Their counterparts in the US,

meanwhile, are used to generate significantly

more revenue from selling time and space to

top brands. With JCDecaux, Tesco had a top

player as its selling partner, but it failed to

generate additional revenues for the leading

British retailer. As insiders report, the sales of

advertisement didn’t even cover the expenses

of the network.But the relative immaturity of

the digital instore advertisement market in

Europe is only one of the reasons why Tesco’s

concept failed.

When Tesco TV was started, experience in

deploying the new technology to retail stores

was close to zero. Insights regarding customer

acceptance and the right implementation

practices had not yet been gained. Customers

commented they found Tesco TV too intrusive,

particularly when it was using audio. Content

shown was not properly adapted to the grocery

retail environment, where shoppers have a

very short attention span. However, Tesco

did not stop the usage of advertising screens

in their stores totally. In the UK, large flat

screens running promotions and infotainment

can still be found in the consumer electronics

department as well as in some recreational

areas. And, a different type of digital signage

network is still up and running in Poland.

In September 2008, Tesco launched a digital

signage network across all its stores in Poland.

The network features an average of 30 42-

inch Philips plasma screens per store, hanging

from the ceiling. Polish advertising company

Atvertin was selected to develop a programme

tailored to Polish customers and the local

market. Atvertin owns and runs the Tesco-

branded network, pays a rental charge and

shares revenues from advertising partners

back with the retailer. Right from the start,

Tesco in Poland aimed to achieve incremental

revenues from the sales of advertisement time.

Increasing sales of instore-advertised products

were nice to have, but not the retailer’s

success criterion for the network.

In April 2009, Tesco expanded its digital

signage network in Poland. Atvertin started its

expansion by deploying content management

solutions from DDS Poland, which is based

on software from digital signage solutions

provider Scala. It is very likely that Tesco will

start again in the UK with a newly developed

approach, based on lessons learned from the

failed first installation in the UK and then the

more successful deployment in Poland.

Tesco pioneered instore TV in Europe.


PlanetRetail

18

Walmart set benchmarks with its Smart Network

In September 2008, US retail behemoth

Walmart presented a revised instore media

concept to agencies and marketers. 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, applications and programming for

reaching the millions of consumers who visit the

retailer’s stores each week. Walmart completed

the chain-wide deployment in early 2010.

The new concept, which was developed with

the support of the consultancy DS-IQ moves

some of the screens much closer to eye level.

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.

Custom programming on the network is

provided by Studio2, 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. Response measurement, learning,

and message optimisation technologies are

provided by DS-IQ. With its revised concept,

Walmart is the first retailer in the US who has

rolled out a next generation of instore media

that is supported by a flexible, open enterprise

platform powered by Internet Protocol Television

(IPTV) technology that allows the retailer to

monitor and control more than 27,000 screens

in more than 2,700 stores across the country.

One pillar of the Smart concept is the so-called

Triple Play. In a first step shoppers entering the

store are greeted by a welcome screen, taking

only five seconds of attention to introduce

customers to the network. Department screens,

mounted only a few steps away from the

products are showing content related to the

category. Finally, smaller end cap screens at

each aisle provide customers with the final

piece of information needed to take a buying

decision. In this way, customers are very

subtly accompanied during their shopping

trip, while content is adapted according to

the different phases of the shopping process.

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. The network deploys response

measurement and message optimisation

technologies to enable delivery of the most

relevant content to shoppers - by store, by

screen, by day and by time-of-day.

Walmart ‘Triple Play’: Welcome signage, category screen and display at gondola end. © Walmart


PlanetRetail

In February 2010, Walmart stated that its

Smart digital signage network were a huge

success compared to its predecessor ‘Wal-

Mart TV’. At the Digital Signage Expo in Las

Vegas, the retail giant’s creative director Andy

Johnson said the Smart Network had proven,

in the previous 18 months, to increase sales

for many of the products that it advertised. A

Nielsen survey came to the result that 40%

of Walmart shoppers noticed the network,

32% recalled an ad on it and 64% reported a

positive experience.

Figures released by Walmart report an

increase of sales not only for products

promoted but also for the category, ranging

from 7% sales increase for electronics to 28%

for health & beauty products. The retailer also

noticed a sales lift in certain product types:

promotions for item launches produced a lift

of 9%, those connected to pushing seasonal

products achieved an 18% uplift, mature items

were boosted by 7%, while price leadership

products grew by 6%.

The Smart network is creating 140 million

impressions per week, which is equal to a US

nationwide TV campaign running on up to 15

channels. Walmart markets advertising time on

the network relatively low priced. Cost per Mille

(CPM), the costs to show the advertisement

to 1,000 viewers, is calculated between USD2

and USD4, which is well below print and

TV advertising costs. This makes the Smart

network attractive to advertisers.

In addition to its Smart network in the USA,

Walmart is running instore TV and digital

signage solutions also in its Brazilian and

Mexican operations.

Walmart Instore TV in Mexico

Increased Sales Through Walmart Smart Network

Sales Lift by Department %

Electronics 7

Over the counter TC 23

Food 13

Health/Beauty 28

Sales Lift by Department %

Mature item boost 7

Item launch 9

Seasonal push 18

Price leadership 6

Source: Walmart 2010


PlanetRetail

Europe follows suit

So far, European retailers have been less successful in deploying a similar business model. Some retailers may not be big enough to attract enough advertisements from the manufacturers. More importantly, FMCG manufacturers in Europe have not yet recognised digital instore media as a relevant marketing platform. This may change when powerful retailers begin initiatives and start negotiating this topic in their annual range reviews with suppliers.

For obvious reasons, most retailers prefer a

business model in which the digital signage

platform is paid from advertising revenues.

Nevertheless, some smaller independent

retailers have been investing into this

technology without securing income from

third parties. They are looking to differentiate

themselves from competitors using screens

to enhance their own brand image and their

customers’ shopping experience.

A large number of trials and different types

of implementations can be observed in the

European market. In many cases, retailers are

deploying a mixture of promotions, product

information, image or ambience creating

content, supplemented with news and weather

forecasts or local information and advertising.

Production and compilation of content is

expensive and in most cases outsourced to

specialised service providers. Some of these

agencies have been developing specialised

content related to local markets or specific

segments such as health & beauty, petrol

stations, bakeries or butchers. These offerings

are enabling small and independent retailers to

participate in the trend.

Future solutions will be more interactive and individually targeted

Technology developments promise to make

digital instore marketing more interactive

and individually targeted in the future. 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. In the same way, software can

track eye movements, which detect when a

customer gets attracted by something and

allows it to provide more detailed content.

Rewe Group commissioned T-Systems to deploy a digital merchandising network to 480 German supermarkets in 2010.

Digital merchandising screens enhance the shopping atmosphere at an Edeka store in Aachen, Germany.


PlanetRetail

Multi-touch surfaces will enable customers to

directly interact with the content, for example

enlarge or rotate objects or open up windows

displaying additional information. Also, the

display technology itself is developing fast. A

new generation of screens based on Organic

Light Emitting Diodes (OLED) provides

brighter and more brilliant pictures while

using less power.

But despite all the fascination that fancy

new technology may create, retailers should

be careful not to deploy it for its own sake.

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. If deployed rightly,

the technology may guide and support

shopper without distracting from the actual

shopping process.

InstoreDigital Media

Content

Marketing Technology

Content is kingFresh & interesting• Consumer orientated• Controlled by the retailer•

Placement makes a differenceGuide the customer• Near the products• At eye level•

Integrated conceptTied into POS data• Integrated marketing concept•

Sound business case

A learning systemResponse measurement• Message optimisation•

Sustainable implementationEnergy efficient• User friendly• Centrally manageable• Locally adaptable• Future-proof•

Instore marketing is NOT TVShort attention span• Formats designed for retail• Be careful with audio• Balance information & entertainment• Avoid visual overkill•

Lessons learned: Balance strategy

Promoting sales with product pictures on scale display at Edeka, Aachen in Germany.


PlanetRetail

Electronic Shelf Labels (ESL) get a second chance

As we shall see later in this report, price

optimisation with new software solutions and

a new strategy is a hot topic for retailers.

The results of those projects require in some

cases more frequent price changes. Manually

executed, these changes are time consuming

and expensive. For this reason, retailers see

increasingly a business case in electronic

shelf labels which display price information

electronically and are updating prices

immediately and automatically, controlled from

a central server.

French retailers are deploying electronic shelf labels comprehensively. The photo shows one at an ITM Intermarché store.

Dot-matrix displays show text and graphics, while consuming low power

© Z

BD

They allow prices to be changed whenever

appropriate according to the marketing

strategies of the retailer. Even price changes

during the day, happy hour pricing or end-of-

the-day mark-downs for fresh products are

enabled through this technology. Additionally,

the system secures that shelf prices and prices

of the POS system are always in sync.

The technology available has made

significant progress over the past few years.

Improvements have been made both regarding

display technology and technical infrastructure.

Innovative retailers such as Tesco or Coop

Norway are already testing the next generation

of Electronic Shelf Labels (ESL). These displays

based on dot-matrix e-paper technology

significantly improve the readability of prices,

text and graphical information. They are highly

energy efficient as they are consuming power

only when the content is changing.

Nevertheless, they are still expensive and

only affordable in relatively small sizes.

For this reason, most installations in larger

supermarkets or hypermarkets are still based

on segmented LCD labels, which cost significant

less. The downside to this is that text

information, barcodes and graphics cannot be

displayed. They have to be printed on stickers

which are then attached to the electronic

label. Each time the shelf layout or the product

description is changed, the stickers also have to

be changed manually.


PlanetRetail

For most deployments, only wireless

communication is acceptable, since a cabled

infrastructure is more expensive, highly

vulnerable in the tough environment of a store

and less flexible. There is a great variety of

different wireless technologies, each with its

pros and cons, being used by the different ESL

suppliers. Wireless infrared technology allows

high speed transmission and provides two-way-

communication to enable central control and

monitoring of the labels.

Larger stores require the installation of a

significant number of transmitters, each

serving approximately 120 square metres

of retail space. These do not need to be

mounted in visible line with the labels, since

the signal is being carried via diffused light.

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.

Alternatively, different types of radio frequency

technologies are being used, either providing

one or two-way communication. Speed and

required infrastructure vary according to

bandwidth and frequency used. Some of them

can be subject to interference, distortion

or shielding effects, which may affect its

performance. The speed of transmission is

highly important and determines the number

of labels that can be initialised or changed over

time. A performant system is able to change

between 7,000 and 15,000 labels per hour.

Although Electronic Shelf Labels have been

offered to the retail market for more than 25

years, only a few retailers have gone beyond

testing electronic labels in some of their stores

- with the remarkable exception of France,

where legal requirements have fuelled the

nationwide roll-out of this technology. Despite

the fact that existing solutions on the market

are typically offering a return on investment

within 18 months, 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.

To support the replenishment process, store staff can access additional layers of information by using a handheld device. © ZBD

ESLs enable dynamic prcing at Système U’s U Express neighbourhood store in Vincennes, France.


PlanetRetail

Albert Heijn reduces food waste with Electronic Shelf Labels (ESL)

Nevertheless, some innovative retailers are

trying to get more use out of the deployment

of Electronic Price Labels. In March 2010,

Albert Heijn started a food waste reduction

programme using mark-down optimisation

to shrink losses from spoilage of fruit and

vegetables. With Toshiba Tec Europe, the

consultancy Capgemini and messaging

specialist Impulselogic, the Dutch grocer is

testing the scenario in an Albert Heijn store in

Amersfoort.

In the Amersfoort store, the retailer

continuously compares predicted and actual

sales of fruit and vegetables, analyses

expected deliveries and current stock levels

to avoid overstock or out-of stock situations.

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, which reflect the company’s

standard design for pricing or promotions.

However, employees in the stores are also

able to override price changes with a custom-

made mobile solution within a predetermined

time frame in case they do not agree with the

suggested price changes. All price changes

applied are automatically transferred to the

merchandise management system. Shoppers

using mobile self-scanning devices receive

updated price information directly onto their

handhelds and also get cross-selling offers.

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.

The mobile shopping revolution

Today, shoppers have nearly unlimited access

to product and price information through the

internet. In the world of non-food, consumers

are already used to prepare their shopping

trips online. They browse for detailed product

information, test reports and product ratings

from consumer associations or customers who

already bought the product. Price comparison

platforms help to set new price expectations.

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, at work, on the

move or even inside a store. According to a

recent study from Parks Associates the number

of smartphone users is vastly increasing and

will have quadrupled by 2014, exceeding

one billion users worldwide. By 2015, goods

worth USD120 billion will be bought via mobile

phones representing 8% of the e-commerce

market, the National Retail Federation (NRF) in

the US expects.

Ahold Albert Heijn reduces food waste with price optimisation and ESLs at a pilot store in Amersfoort, Netherlands.

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PlanetRetail

The year of the app

More and more customers have been using

smartphones to enter retailers’ web pages,

even though these had not yet been optimised

for mobile access. Retailers have realised this

and started inviting more mobile shoppers

by increasing the user-friendliness of this

channel. The preferred way to achieve this is

by providing so called apps designed for the

most popular smart phone platforms. Others

have been implementing dedicated landing

pages optimised for mobile access. In 2010,

numerous retailers - particularly in the USA and

UK - have released smart phone apps with a

significant share of these being transactional,

allowing shoppers to execute online purchases

via their mobile phones.

A typical example of a transactional app is

‘Ocado on the Go’. Created partly by John

Lewis-owned online grocer Ocado in the UK,

the transactional service enables customers

to browse over 21,000 items with images

offline as everything is downloaded to the

phone. The application is fully synchronised

with Ocado.com so customers can start an

order on one platform and complete it on the

other. Consumers are able to shop from the

kitchen and check their cupboards and fridge

as they shop. They can also quickly add items

to existing baskets at a later point in time. And

they can specify their needs when shopping for

deli produce, for example if they want their cold

meat thinly or thickly sliced.

The share of customers using the service has

increased rapidly. By February 2010, 2% of

Ocado’s sales were being generated through

the app. Just three months later, in May 2010,

this proportion had increased to 6%. Although

still a relatively small proportion of the grocer’s

entire business, the rapid upward trend is

unmistakeable. As smartphone usage increases

and consumers become more willing to shop

through their devices, Ocado on the Go should

soon be generating over 10% of Ocado’s sales.

Since the beginning of 2010, Migros-owned

Swiss online grocer LeShop has been providing

iPhone users with a mobile interface to its online

shop. Within six months 150,000 customers

downloaded the software free of charge from

Apple’s app store. Using the application, the

shoppers can access and order from LeShop’s

whole range of products including promotions.

The app synchronises automatically with

the website, keeping prices and personal

shopping lists always up-to-date. According

to the retailer’s founder and CEO, Christian

Wanner, the mobile channel is of strategic

importance for LeShop. When shopping with

their smartphones, customers are not always

substituting weekly purchases from their home

computers but placing additional orders, mostly

for fresh products, Wanner said. Currently, 4%

of LeShop’s online sales come from the mobile

channel; the retailer expects the share to reach

the 10% mark soon.

Shopping app for different types of smartphones from Ocado.

© O

cado


PlanetRetail

Tesco in the UK launched its first transactional

mobile app in August 2010. The application

lets shoppers browse the complete online

offer of the retailer. They can also update their

shopping lists. Tesco launched the application

for Ovi - the widely spread Nokia platform -

first and rolled it out to other devices such as

the Apple iPhone a few weeks later.

Tesco.com’s head of R&D, Nick Lansley,

stated: “Our core customers are busy mums

who don’t have iPhones and we want to focus

on them first.” Tesco.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.

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, cannibalising existing

online business? It is sure that the same item

will not be ordered twice just because of a new

order channel. Nevertheless, it is reasonable

to assume that the mobile nature of the

new channel will motivate shoppers to order

additional products on top. And it is clear that

online retailers not willing to serve the mobile

customer may lose significant market shares.

Entering the mobile world of commerce is

still challenging for retailers. They have to

constantly review and update their mobile

services. Users have high expectations and the

mobile market is moving quickly. Performance

is crucial. It can help to make image-heavy

product catalogues downloadable to the phone.

Slow loading speeds are likely to make users

turn away from the app. Monitoring customer

feedback and requests is important in order to

understand how the app could be improved.

Multiple platforms have to be supported:

iPhone’s OS, Android, Symbian, Windows Mobile

and Windows Phone as well as Blackberry all

play a significant role in the market.

Additionally, retailers and their developers have

to keep an eye on the new system Bada, but also

on Linux deployments on mobiles. Additionally or

alternatively, retailers may provide web access

optimised for mobile phones without providing

an app. 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.

Mobile marketing - engaging with customers wherever they go

Selling goods via the mobile channel represents

only a fraction of mobile enabled services

retailers will invest in. To interact with

customers, retailers may apply a multitude

of mobile marketing programmes, including

mobile coupons, vouchers, personalised

promotions and product offers. Retailers can

either send them actively to their known

customer base by text message or alternatively

enthuse consumers to download them to their

phones. This could be done by accessing a

retailer’s website, via a retailer’s app or by

scanning a so-called Quick Response (QR)

code from product packaging, newspapers,

magazines, posters or displays.

Using this QR code will lead to additional insights on the web. Please give it a try.


PlanetRetail

QR codes are based on a new generation of

barcodes using a two-dimensional square

pattern that can store more than 4,000

alphanumeric characters. Mobile phones can

read and interpret these codes to display

the information stored and link to a specific

landing page on the Internet. With this feature,

information can be constantly updated and

even multi-media content, such as pictures,

movie clips or sound can be presented via the

shopper’s phone.

This technology could also be used inside

the store in various ways. QR codes could be

printed on products, posters and shelf labels or

displayed on screens such as those of weighing

scales. In this way, shoppers’ phones are

becoming mobile kiosk systems.

QR codes have become extremely popular

in Japan. Recently, the trend has travelled

across to the USA and Europe. French retailers

especially, such as Carrefour, Casino, Auchan or

Intermarché, have started to use them to provide

shoppers with additional product information.

QR codes on product packaging links to extended content via mobile phone.

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. The code consists of black modules arranged in a square pattern on a white background.

Created in Japan by Toyota subsidiary Denso-Wave in 1994, the QR code is one of the most popular types of 2D barcodes. QR is the abbreviation for Quick Response, as its contents can be decoded at high speed.

QR codes have become more popular than typical barcodes as the typical barcode can only hold a maximum of 20 digits, while the QR code can hold up to 7,089 characters. This makes the use and diversity of QR codes much more appealing than its older counterpart.

Initially, QR codes first became popular when used for tracking parts by vehicle manufacturers. After a while, companies saw the potential for the QR codes to be used elsewhere. 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.

QR codes can be used to display text, add a contact to the user’s device, open a website or compose an e-mail or text message. QR codes may appear in magazines, on signs, buses, business cards, or on just about any object about which users might need information.

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. Google’s mobile Android operating system supports the use of QR codes by natively including the barcode scanner (ZXing) on some models.

Nokia’s Symbian operating system is also provided with a barcode scanner, which is able to read QR codes, while mbarcode is a QR code reader for the Maemo operating system. In the Apple iOS, a QR code reader is not natively included, but over 50 free Apps are available with reader and metadata browser URI redirection capability.


PlanetRetail

Mobile marketing via text message at Seven & I in the USA

In late 2009, 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. With the test 7-Eleven allowed

customers to send a text message to receive

a free non-alcoholic beverage. 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. The message also

includes an invitation to receive future text

messages with 7-Eleven news and offers.

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.

Customers are linked to promotional websites

simply by scanning the QR code with their

mobile phone’s digital camera. A browser opens

on the mobile device and a website provides

customers with detailed product information.

Several hundred of products in the USA are

already equipped with 2D barcodes.

Paperless coupons at Kroger in the USA

Since 2009, Kroger has been participating in

AOL’s electronic coupon service Shortcuts.

Insights from Planet Retail’s databaseHow retailers step into the world of mobile marketing

Target mobile coupons can be scanned directly from the phone’s display at the POS.

© T

arget

Consumers can redeem paperless coupons

at the checkouts of all Kroger banners.

Additionally, Kroger is also working with another

mobile couponing service called Cellfire. In

January 2009, the US retail giant completed

the roll-out of the Cellfire-based mobile coupon

programme to all its stores. Time-crunched

shoppers can download coupons from Proctor

& Gamble, Clorox, Del Monte, General Mills,

Kimberly-Clark and others on their Blackberries,

iPhones or other mobile devices.

“Retailers have a wider generation of shoppers

than they ever had before,” said a Kroger

spokesman. Younger consumers have come to

expect internet and mobile-based savings, he

said. 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%.

Coupon service, mobile gift cards and gift registry at Target in the USA

In March 2010, 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. Shoppers can opt-in to the programme via the internet with their PC or mobile phone or via text message. After opting-in, shoppers receive a text message with a link to a mobile web page that contains multiple offers, all accessible through a single barcode. Offers are single use and expire on the date listed.

Target’s point of sale scanning technology makes mobile coupons possible. In addition Target shoppers can access their Target Mobile gift cards, view online assortments, check product availability and store locations, manage their Target gift registry and lists, browse the weekly ad and receive text and e-mail notifications of

deals – all via their mobile phones.


PlanetRetail

Savings through paperless coupons at Walmart’s Sam’s Club

In August 2009, Walmart-owned cash & carry operator Sam’s Club completed the roll-out of paperless couponing to all its stores throughout the US. The programme, called eValues, provides personalised savings on hundreds of items including fresh foods, health & beauty products and office supplies as well as other goods and services. 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, Blackberrys or other smartphones. Members can also access their eValues accounts via Samsclub.com. For the eValues programme, Sam’s Club is deploying the Retail Action Manager solution from analytics and decision management technology provider Fico. The predictive technology solution uses a combination of analytics, rules, and optimisation technology and takes into account a member’s preferences, purchase history, and in-club product availability to maximise offer relevancy and profitability.

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. Users can take a picture of any given item with the phone’s camera, which is then stored in the app and uploaded to the Amazon website. The product is identified by image recognition or, if this fails, by an employee, and matched with the Amazon product catalogue including the offers of the retailer’s Marketplace partners. The user then receives an e-mail comprising product details, price comparison and requisite links to the product. The app has been lauded not only for being innovative and useful but also for the fact that it really works. 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.

Extended consumer information at Rewe Group Billa, Austria

Since the end of June 2010, customers of Rewe’s Billa in Austria can download a free application that deciphers the European number code for food additives, the so called E numbers, on product packages and notifies on nutritional value of grocery products. Additionally, shoppers can search for the nearest Billa store, find promotions or pick and choose recipe ideas along the way.

Nectar rewards at Sainsbury’s

In August 2010, Sainsbury’s launched two new iPhone apps in conjunction with the loyalty programme Nectar. The free app allows customers to receive personalised offers from Sainsbury’s and other retailers using the Nectar loyalty card. The app also contains a store locator and the ability to check Nectar points balances instantaneously.

Information on food items via mobile phone at Ahold’s ICA in Sweden

In September 2009, ICA in Sweden launched an information service on food content which shoppers can access via its website ica.se and any kind of mobile phone. The system, called ’Koll på maten’ (Know your food), allows shoppers to look-up information about additives and E numbers via the internet or SMS text message.

Customers send a photo and Amazon remembers the product.

© A

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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. With applications

such as RedLaser, an iPhone barcode scanner

application recently acquired by eBay, or mobile

consumer platform Barcoo from German start-

up company Checkitmobile, shoppers scan

product barcodes and gain instant access to

competitive prices, ingredients, 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.

In the UK, mySupermarket.co.uk allows its

users to compare and shop from four grocery

online shops in one central place: Tesco,

Walmart-owned Asda, Sainsbury’s and Ocado.

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. Currently, this service only

compares web store prices, which for grocery

products are usually higher than in bricks &

mortar stores.

The examples show how much price

transparency consumers will gain in the future

across markets and retail verticals. Retailers

have to answer with appropriate strategies.

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.uk, supplemented with

price data collected from four Morrisons

supermarkets. French grocer Intermarché

runs a mobile website called Discount Utile,

which was launched in March 2009 and

allows customers to check the retailer’s prices

wherever they are. The site provides prices for

Intermarché and Ecomarché stores, initially

listing the best prices for the most commonly

consumed produce. Prices are updated daily,

applying a pro-active price policy is one way

to respond; another route retailers may take

is by improving the shopping experience and

providing more customer service. The new

communication tools in the hands of consumers

have become a threat and an opportunity for

retailers at the same time. 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.

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). Many retailers are already

offering a store locator function that guides

customers to their nearest outlet. They could

also send messages to customers related to the

position in a store or in the vicinity, providing

them with personalised offers or additional

services. This may be taken even further.

Mobile scanning app RedLaser has been acquired by eBay.

© R

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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.

Such details could be individual preferences,

special diets, allergies or other health related

requirements. This would enable nearly infinite

possibilities to exploit marketing opportunities.

But services such as these do need the

permission of the customer to avoid the recipient

of the messages being annoyed. Shoppers may

feel intimidated in respect of their privacy if they

did not actively opt into this offer. But even if

permitted, receiving a large number of messages

from retailers could be perceived as spam.

Best Buy rewards customers who open up their phones

In August 2010, Best Buy demonstrated in San

Francisco its new mobile application that can

detect shoppers who are in or near stores. The

new app will initially be available on the iPhone

with applications for other smart phones to

follow suit.

The app comes from start-up company

Shopkick and uses transmitters in the store,

which broadcast a constant signal announcing

the store’s identification number. This sound,

which is inaudible to humans, is detected by

mobile phones in or near the store, but only

when the phones have launched the Best Buy

mobile app before. Consumers then receive

various discount coupons redeemable at the

particular store.

In a first step, Best Buy integrated Shopkick

into its point of sale system in its San Francisco

store to streamline the redemption of special

offers. Consumers give their mobile phone

number to a cashier, allowing any applicable

personalised discounts to immediately appear

on a customer’s receipt. Shoppers can also earn

points, called ‘kickbucks’ for simply entering a

store, even if they do not buy anything. These

points are redeemable for a variety of things,

including gift cards and Napster (owned by Best

Buy) song downloads.

Initially Best Buy offers around 10% off of

an entire product category for everyone in

the store. However, the retailer plans to use

customers’ volunteered demographic details to

fine-tune recommendations soon. According to

Shopkick’s CEO Cyriac Roeding, there are so

far no efforts taken to integrate a customer’s

purchase history with the application. Best Buy

is paying Shopkick for every customer who

uses the app in its stores.

Shopkick’s “kickbucks” can be earned just by entering a store.

© S

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PlanetRetail

Meijer’s app helps shoppers find products inside the stores

In August 2010, Meijer launched a product

locator app called ‘Find-it’, built upon a mobile

destination content platform from solution

provider Point Inside’s. Shoppers can see the

location of more than 100,000 items in a Meijer

outlet using their smart phones, eliminating the

need to ask store employees where particular

items are. The free app shows items as pins

placed on an interior map of the store. The

application also provides updated information

on weekly specials and price promotions

available in the store, with the ability to

instantly locate sale items.

During this pilot phase of the programme, four

Meijer supercenters have been enabled with

the service. It allows shoppers to quickly find

products, specific departments or services such

as a fitting room or restroom. The app also

features a tool called ‘Remember My Parking

Spot’, which shows the location of a shopper’s car

in the Meijer parking lot, allowing the customer to

navigate to the correct exit when their shopping

is completed. Finally, location and contact

information for all Meijer stores is available.

Meijer’s Find-It application helps customers to locate products inside the store.

© M

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r

SummaryRetailers and their customers are only just beginning to fully realise the possibilities of mobile

marketing and mobile commerce. 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. They have to keep in mind that there are possible pitfalls. They will have to

make significant investments to develop winning strategies and best practices. But there is no

doubt that those efforts will be taken by the most innovative and potent market participants.


PlanetRetail

n 2011 and onwards, retailers will significantly

invest in price optimisation software and

services. Confronted with price wars and

saturated markets in many parts of the Western

hemisphere, they will deploy new ways to

improve their margins. A new generation of

price optimisation software will help them to

optimise retail prices based on simulations

of customer behaviour. In the future, these

sophisticated tools will be crucial for retailers

if they want to survive the counterproductive

price competition. Slowing down the rate of

decline for shelf prices, which the trade industry

experiences in major countries, will not only

benefit retailers, but will also highly

be welcomed by their FMCG suppliers.

Price wars dominate retailing in saturated markets

Even though retail landscapes in the Western

hemisphere vary from country to country, the

one thing they have in common is increasing

market saturation. As a consequence, retailers

see themselves not only exposed to ruinous

price wars but also to growing price sensitivity

among shoppers as well. Furthermore,

fluctuations in purchase prices have become

more frequent during the last few years, partly

due to a rising volatility in commodity prices.

Consequently, it has become a necessity for

retailers to adapt their selling prices more

often. Major retailers around the world have

already discovered that price optimisation

technology can be a very helpful and profitable

tool for this purpose.

Even the world’s largest retailer, Walmart, is

using price optimisation technology. In the US,

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.

However, 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, at least in a

few product categories. Due to this changing

competition, Walmart has started to rely on

price optimisation technology.

In Germany, where Aldi has traditionally

dictated the prices, other players are constantly

challenging its price hegemony. Last year alone,

14 rounds of price cuts impacted the German

grocery market. Even though these cuts were

led by discounters, they have lowered the price

level in general. In Australia and Switzerland,

Aldi’s market entry a few years ago reshaped

the retail structure of these countries. Aldi’s

store openings in Australia caused Woolworths

and Coles to lower their prices every time

a new Aldi opened in their neighbourhoods.

Aldi’s move into Switzerland has led to a

gradual lowering of prices and the extension of

economy ranges by the market leaders, Coop

and Migros.

3. Price optimisation: Higher margins without increased turnover

Retailers have to position themselves in an environment characterised by market saturation and frequent price cuts.

I


PlanetRetail

Simply copying Aldi’s prices for their price entry

range will not be a future-proof strategy for full-

range retailers anymore, as they do not have

the discount-specific low cost structure that

Aldi is famous for. 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, there is another important

aspect which will drive the investment in

price optimisation technology. Looking

at demographic projections for European

countries, 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. It is also doubtful whether

product proliferation will lead to an increase of

the number of products sold.

With price optimisation tools, retailers can find

an answer to the increasing competition and

might even earn more money without selling

more items. 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. Within the last ten years,

automated ordering has certainly been the

technology which brought the largest benefits

to retailers. It helped them to not only increase

their sales and boost shopper satisfaction

through lowering out-of-stock rates, but it also

reduced waste and decreased fixed capital and

stock-keeping costs significantly.

Price optimisation predicts consumer behaviour

While the retail environment has become

increasingly competitive during the last few

years and will continue to do so, pricing

is for many retailers still a comparably

manual process. However, if retailers want

to survive the present counterproductive

price competition, investing in new price

optimisation tools will be crucial for them.

Compared to earlier software versions, the next

generation solutions have heralded a new era

of price optimisation. Older tools were limited

to specific questions of item-level pricing and

could not support a complete pricing process.

On the contrary, new price optimisation

software not only takes into account traditional

rules which segment products (price elasticity

vs. non-price elasticity; traffic building vs. profit

building) and enable retailers to set their own

rules such as ‘always match competitors’ prices

on item X’. They also use actual consumer

behaviour, saved in the form of historical POS

and loyalty card data, enabling retailers to

predict shopper behaviour.

These tools enable retailers to forecast units that

will be sold of a certain item at a certain price

on a weekly, daily or hourly basis and break

down demand by region or store level. 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. Being able to not

only generate prices, but also monitor the

effectiveness of price changes and feeding

this information back into the system, these

optimisation can be called self-learning.

Despite its everyday low prices promise, Walmart has been using price optimisation tools for more than three years.

© W

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PlanetRetail

There are four different kinds of prices which

can be optimised: initial prices of new product;

prices of the basic range; and the prices of

promotions and mark-downs. All of these are

not only interdependent on each other, but also

affect the retailer’s assortment and planning of

shelf space. However, even more importantly,

the optimisation of prices also has an impact

on a retailer’s replenishment orders. New price

optimisation tools therefore offer integration

with assortment and shelf space optimisation

tools and also feed into retailer replenishment

orders accordingly. Looking ahead, it is likely

that there will also be integrated optimisation

tools available in the future. New software

specialists such as US-based Predictix and

German Dacos promise to develop tools that

use the same simulation engine for assortment,

shelf, price and order optimisation.

How price optimisation works

An important factor in predicting consumer

behaviour in this context is the price elasticity,

which describes the relationship between the

price change of a good and its unit sales.

The price elasticity of a banana yoghurt, for

example, is very high. If the yoghurt becomes

too expensive, customers will buy another

flavour. Conversely, the price elasticity of

tobacco products and petrol is very low. If

customers do not decide to stop smoking or

buy an electric car, they will have no other

choice than to pay the higher price.

Price awareness is also an important factor.

Although shoppers only rarely recall the price

of a certain product correctly after they bought

it and thus react sensitively to a price change,

they nevertheless have a feeling for a price

benchmark of specific products that they buy

frequently, such as a litre of milk or a pound

of coffee. 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.

By pricing products with high price awareness

competitively, retailers can convey a good

overall impression of their prices. Contrary to

this, they can price goods which are not KVIs

and/or do not have a high price awareness

with greater freedom. By predicting consumer

sensitivity to future price changes and seeing

which SKUs are the most sensitive, retailers

are able to adjust prices according to margin

and profit goals and improve their price image

against their competitors.

However, when optimising prices, 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. A halo effect is given when

the price of a given item positively influences

the sale of other items. An aggressive price

promotion for charcoal could drive up sales for

meat and barbeque sauce. Contrary to this, a

cannibalisation occurs when a significant price

reduction for branded crisps reduces the sales

of the retailer’s private label crisps.

The price elasticity of yoghurt is very high (here at Ahold Stop & Shop in the US). If, for example, strawberry yoghurt becomes too expensive, customers will go for another flavour.


PlanetRetail

In addition to the pricing cross effects, there

are also external effects which can influence

the results of a price optimisation processes.

For example, if retailers price a certain SKU

so competitively that customer cannot resist

and start stockpiling that item, they do not do

themselves any favours. As soon as the price

goes up again or the promotion ends, sales

will go down dramatically. Other important

influence factors are seasonality, current

trends/fashions, alternative shopping locations

or promotions/couponing.

When taking these effects into account, it is

necessary to see that they can also vary over

the course of time. While a heat wave has

dramatically driven up sales of ice cream in July

2010, this does not necessarily mean that ice

cream sales will go up to the same extent next

year. Maybe, July 2011 will be an unseasonably

cold month. 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. Due to this, they might

have to be flattened out when completing price

optimisation on an ongoing basis.

Reliable data input is necessary

Even the best price optimisation tool is useless

if it is not fed with meaningful data. 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. Sources of valuable data

could be the retailer’s own POS and loyalty

card data as well as market research data

from external providers. Depending on the

competitive environment of a retailer, it can

also be important to incorporate data about

competitors’ prices and their strategies into a

price optimisation tool.

When it comes to analysing customer data

from loyalty cards and translating this data into

actionable marketing and retailing insights,

Tesco and its consultancy and data mining

specialist dunnhumby have set the standard.

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, in June 2009, dunnhumby

and KSS Retail created a strategic alliance that

allowed dunnhumby to utilise the KSS Pricestrat

solution for price modelling and optimisation.

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. Earlier, dunnhumby had

formed a joint venture with Kroger in 2003, 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.

dunnhumby and KSS Retail helped Kroger improve its price image against Walmart.


PlanetRetail

While having loyalty card data might seem

to be essential to link up customers with

shopping trips, even retailers who do not

deploy loyalty cards can find a way to track

transactions by shopper to a certain extent,

for instance by using the payment card data.

However, depending on the country the

retailer operates in, legal restrictions have

to be considered. Even in countries where

laws permit the use of payment data to track

shopping trips, retailers still have to worry

about how their customers perceive this

approach if it enters the public domain.

When it comes to mark-down optimisation, where

retailers want to reduce inventory or get rid of

end of shelf life products, they often struggle

with the accuracy of inventory data in their

merchandise management system. But obviously,

for mark-down optimisation, 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.

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. But now,

Walmart itself, once famous for developing all

business critical software in-house, is deploying

standard optimisation tools for its pricing.

In the second quarter of 2007, Walmart started

to optimise its prices with a software tool from

Oracle. In just 14 weeks, Walmart installed the

former Profitlogic solution to optimise mark-

downs for seasonal apparel.

While Walmart’s Information Systems Division

(ISD) was famous for its strategy of developing

each business critical application itself, this

seems to have changed due to the complexity

of a new generation of simulation and

optimisation tools. For fast movers, Walmart

now also deploys the price optimisation tool

from Demandtec. In July 2010, the solution

was already live in seven of the retailer’s

markets, including Asia. In the US, Walmart

uses Demandtec’s price optimisation for all its

banners, including Sam’s Club.

The Oracle Profitlogic price optimisation project

was the first step of the Bentonville giant into

the world of standard software, which is be used

by its competitors. For example Target also

uses Demandtec’s price optimisation tool which

is offered as a software-as-a-service tool. 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. In fact, also Safeway in the

US is also using Demandtec’s solution. Contrary

to this, the second largest retailer in the US,

Kroger, installed the price optimisation tool from

dunnhumby KSS Retail on its own servers.

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


PlanetRetail

Sensible price data calculated by service providers

When starting to deploy price optimisation

technology, 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, hosted and operated by the

software provider. Both have their advantages

and drawbacks.

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.

The latter require five to 10 times more up-

front investment than the typical off-premises

deployment. Secondly, SaaS solutions are ready

to be used much faster than installed solutions,

resulting in a quicker return on investment. To

get the software fully launched, SaaS solutions

need between 60-90 days, whereas the process

of implementing a new optimisation tool into

existing, complex IT architectures could take

between six and eight months.

Overall, 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, but only pay for the

applications and functions they need within a

‘pay-as-you-go’ model.

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. Off-premise

software is usually always offered in its latest

release while installed software need to be

upgrades on a regular basis.

A Closer Look at selected Price Optimisation Provider

Demandtec dunnhumby KSS Retail Revionics SAP Khimetrics Oracle Profitlogic

Product categories in focus

Grocery, moving into apparel

Grocery Grocery, general merchandise, moving into textiles

Grocery, textiles Textiles, seasonal ranges

Pricing focus Basic rage optimisation

Regular pricing for whole categories

EDLP and promotion optimisation

Price image optimisation

Mark-down optimisation

Way of delivery Software-as-a-service

Software installed at retailer

Software-as-a-service



Product diversification

Assortment optimisation

Promotion optimisation and execution

Shopper insights

Collaborative promotional planning

Moving into assortment optimisation soon

Promotion optimisation and planning

Collaborative promotional planning between retailer and suppliers

Inventory optimisation and store replenishment

Part of SAP's Retail Suite

Part of Oracle's Retail Suite

Major retail customers

Best Buy, Casino, Office Depot, Walmart, Target, Delhaize Group (Hannaford), Ahold (US)

Kroger, Ahold, Walmart (fuel), Rite Aid, Modelo (Sonae)

SuperValu, Dollar General, Save-a-Lot, Family Dollar

SuperValu; Big Y; Lowe's; ShopKo Stores

Walmart, Tesco



PlanetRetail

Another benefit of SaaS solutions is their higher

scalability. They support retail operations of any

size and can scale the system to any number

of stores. From family-owned, single-store

operations to multi-banner conglomerates with

hundreds of pricing zones globally.

While SaaS provides all the above mentioned

advantages, there is one big drawback that

accompanies every off-premise installation:

concerns on data security. Retailers might

be worried about the fact that their prices

are optimised on the same server as their

competitors’ prices.

According to experts from Demandtec - which

offers its price optimisation as SaaS - Walmart

and Target have initially both been concerned

about calculating the prices for parts of their

product range on the same server. However, any

doubts about data projection have been cleared

out and both retailers are now customers of

Demandtec. On the contrary, 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.

Albert Heijn tests mark-down optimisation for perishables

Mark-down optimisation is widespread in non-

food retailing. But it can also be useful for

product categories which are perishable and

cause high write-offs for the retailer. In early

2010, 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, the retailer teamed up with

Toshiba Tec Europe, the consultancy Capgemini

and Impulselogic, a provider of consumer

messaging solutions.

At an Albert Heijn outlet in Amersfoort, the

Netherlands, 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. Prices are marked down

accordingly. They are communicated via Wi-Fi

to 92 15-inch full colour instore displays, which

reflect the company’s standard layout for pricing

or promotions. The employees in the stores

are also able to override price with a custom-

made mobile solution within a predefined time

frame if they do not agree with the suggested

price changes. Simultaneously, the store

merchandise system is updated with the new

price information. Shoppers using mobile self-

scanning receive the updated prices directly

onto their mobile devices.

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. The headquarters can monitor exactly

which item has been sold at what time and

at which price. Additionally, the new solution

also enables the retailer to reduce labour and

printing costs and to avoid price discrepancies

between product location and POS systems.

Instore displays always show the latest price for fruit and vegetables in an Albert Heijn store in Amersfoort.

© C

apgem

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PlanetRetail

In autumn 2010, Albert Heijn started to work on

another markdown optimisation pilot, this time

for game and poultry products, but without the

usage of advanced price optimisation software.

In one store in Zaandam, the Netherlands, the

checkouts automatically apply a 35% discount

to the normal price of the products on the day

of its expiry. To do this, 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, lot

numbers and expiration dates. Instore, products

from the game and poultry range are promoted

with their normal prices, with markdown prices

also promoted on the day of expiry.

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. However, when

using this technology, retailers have to be aware

of the fact that price optimisation does not

necessarily mean more frequent price changes.

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, Shell De Lucht in the Netherlands

together with Toshiba Tec and filling station

technology specialist Extendas, started to equip

its forecourt stores with Electronic Shelf Labels

(ESLs) from Pricer. The store operators change

the prices for groceries four times over the

course of the day and the week.

In July 2010, the Netherland’s busiest forecourt

store, the Shell Shop outlet near Amsterdam’s

Schiphol Airport, followed suit and installed

ESLs from e-paper specialist ZBD, thus

enabling dynamic pricing. While customers

might accept these different prices over the day

in a forecourt store due to convenience-driven

reasons, it is doubtful they will accept this in a

supermarket. In general, retailers have to be

very careful about what price image they would

like to convey to their customers.

Aldi, Walmart’s Asda and IKEA, for example,

are very successful with their strict strategy of

‘national pricing.’ In particular, when retailers

decide to enable customers to create a

shopping list online with prices or operate an

online shop, they have to rethink their strategy

of regional pricing. 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. The launch of Media-Saturn’s

online shop, for example, has been hampered

for years due to conflicts with managers of

bricks & mortar stores, who own minority

stakes in the outlets they manage and who run

their own pricing strategies. Looking ahead,

the Metro Group-owned consumer electronics

retailer will pursue regional online pricing

strategies to resolve these conflicts.

Electronic Shelf Labels (ESL) can be an effective tool when retailers want to change their prices frequently.


PlanetRetail

41

Looking ahead

In order to tackle increasing market saturation

and price wars, it will be crucial for retailers

to invest in price optimisation technology.

Those who have done their homework and

have already invested into a data warehouse

strategy, a reliable merchandise management

systems and consistent master data can

now take the next step and move into more

sophisticated optimisation. However, before

investing in price optimisation tools, 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.

Even though price optimisation software can

be an effective tool to improve bottom lines,

retailers should not confuse optimisation

with frequent price changes. Neither

should they overdo a strategy of regional

differentiation. Price transparency can be a

useful strategy to improve the price image.

In contrast, price differences could also

backfire, undermining a retailer’s price image

and impairing customer loyalty.

Retailers can start to deploy price optimisation

tools right now, if they have done their

homework and have reliable data in a modern

merchandise management system and

data warehouse. Price optimisation can be

the next success story of retail technology

after the automated replenishment based

on forecasting tools. Nevertheless, it will

take some time until one-stop solutions that

support decisions on assortment, space, price,

promotion and order quantity out of the same

simulation engine will be deployable.

In times of price wars and saturated markets, price optimisation technology can help retailers optimise retail prices based on simulations of customer behaviour.


PlanetRetail

t is not long ago that RFID technology has

been expected to do nothing less than

revolutionise retailing and logistics. 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. However,

the retail industry has learned from its

mistakes. 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.

Five years ago, the retail and FMCG industry

enthusiastically moved into the deployment of

RFID technology. Driven by highly motivated

technology providers and consultants, 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, from the field to the fork - and even

further, to the waste management of the

packaging. 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. They warned that there

were some core issues with the scenarios of

RFID deployment described at this time that

would not vanish even when the technology

improved. Additionally, in those early days, the

projects often failed to deliver a clear business

case behind the replacement of the good old

barcodes with the more expensive RFID labels.

However, this is now history. Retailers,

including the dominant player Walmart, have

learned from the mistakes they made earlier.

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.

In general, there is no reason to opt for

RFID tags if the relatively same effect can be

achieved with barcodes, which can also be read

automatically if placed according to industry

standards at the transport unit.

In terms of tagging transport units, retailers

are now moving into the deployment of

reusable RFID tags on pallets, boxes and

crates. This results in significant lower costs

and more benefits for the retailers and its

business partners. And, with this approach,

the transport units themselves are monitored,

too. Consequently, service providers such as

pallet pool operators can be brought onboard

as well, ideally helping to pay the costs for

the technology.

4. RFID (Radio-Frequency Identification): Back from the brink

I

42


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 is

also the way the technology is deployed at

item level. 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. 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.

The expectation that the deployment of RFID

tags in the food industry would firstly happen at

pallet level, later at case level and finally also

at item level is no longer articulated. Retailers

have now realised that non-food, which does

not contain liquids and rarely has metal

packaging, is the area in which RFID at item

level is promising. Even though this scenario

means high costs for suppliers, it results in high

savings for the retailers. Additionally, not only

one-way but also reusable tags at item level

for non-food are a promising approach. Even

though they are associated with high costs due

to reverse logistics for the tags to the point of

manufacturing, 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.

Only recently, the second generation of RFID

projects has started. Very different from

their predecessors, they now have promising

business cases and are likely to spread rapidly.

RFID has become a top trend again, this

time with significantly enhanced chances of

success. The projects are founded on a shift

in strategy and a new approach towards the

usage of radio communicating labels. Due

to this, in 2011 and onwards, RFID will see

significant investments by retailers.

The recent example of Walmart’s latest RFID

implementation illustrates this shift in strategy.

Having largely failed with its previous initiatives

to deploy the radio tags at pallets and cases of

fast moving consumer goods, Walmart is now

taking a completely new approach and decided

to tag non-food goods at item level.

Walmart’s new approach towards RFID technology

In July 2010, Walmart started a new approach

to implement RFID technology. The world’s

largest retailer is now selling menswear tagged

with RFID labels in its US stores. The main goal

of this is to improve inventory accuracy and on-

shelf availability. This project is not just another

trial to deploy this technology in retail. In fact,

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, Walmart was quietly testing

the usage of RFID tags at item level in two

Arkansas stores for several months. 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.

RFID technology at item level helps Walmart to speed up stocktaking and increases inventory accuracy.

© B

artira

h/F

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PlanetRetail

Walmart’s new programme concentrates on

those types of products that have multiple

SKUs and are, therefore, a challenge to

manage from an inventory perspective. Apparel

for example often requires a lot of manual

labour to keep track of a wide variety of sizes,

colours and styles.

However, the new initiative will not require

every apparel supplier to tag its items with

RFID tags. Seasonal clothing items, for

instance, which are only available in stores for

a few weeks will not be tagged. Walmart also

uses RFID tags for its own private label apparel

items. Due to this, it can share the experience

gained and the needs for business process

changes in the supply chain with its suppliers of

branded goods.

Walmart is reading the radio tags not only

when the clothing items arrive at the stores’

receiving docks, 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.

The retailer is deploying new RFID hardware

and software systems which are able to tell

which items need to be replenished soon,

if they are on the wrong shelf or if they are

missing at all. Consequently, 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, Myron Burke,

Walmart’s Director of Store Innovation, said:

“Walmart is focused on items that require

a more complex purchasing decision by the

customer. With denim, the customer has to

make a decision based on brand, style, size and

cut, in addition to price of course. There are

other areas of the store where we sell items

with similar attributes. Tyres are one. Some

electronics items, such as TVs are another.”

However, even though Walmart predicts good

results in denim and basics, there are no

immediate plans to begin tagging these other

types of items yet, according to Burke.

Contrary to its previous deployments of this

technology, Walmart is now taking a more

co-operative approach towards its suppliers

which it has, after all, caused to make

significant investments in a first round of RFID

enthusiasm. Burke explained that Walmart

is “sensitive to the impact this will have on

suppliers. We will give them time to engage,

review their processes and ultimately change

their processes. We do not want to accelerate

unnecessarily and put undue pressure on them.”

According to the RFID Journal, 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. Consequently, even

suppliers that only deliver a small amount of

jeans or socks to Walmart will get a better price

for the tags. Walmart will not give money to its

suppliers to compensate them for buying the

tags, 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.

Looking ahead, 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. Sam’s Club is so

far not participating in the scheme.

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. Walmart said that it expects its

customers to cut off and discard the tags prior

to wearing the items, as they would normally

do with other non-RFID labels and hangtags.

The retailer did not ask its suppliers to sew the

tags into the clothing, thus making it easy for

customers to remove the labels before they

wear their new clothes for the first time.

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However, one very interesting question is

why Walmart does not remove or deactivate

the tags at the checkout. First of all, Walmart

could save customers the time they need to

remove the tags at home. Secondly, also in

terms of privacy and environmentally concerns

it would be better to use reusable RFID tags

and remove them at the checkout. However,

the reason for Walmart to opt for one-way

tags is very simple. The costs for reverse

logistics shipping the tags back to the point of

manufacturing are too high.

A strategic shift from food to non-food

Unlike in previous efforts, Walmart is now

taking a different approach towards RFID,

having realised that the approach at pallet and

case level did not deliver the kind of data and

analytical insights that were expected to take

the retailer forward. Also, compared to simple

and cheap barcodes, the use of RFID tags in the

food business did not really bring a significant

advantage to the retailer, instead proving itself

a waste of suppliers’ resources. Contrary to this,

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.

Without doubt, the new RFID project at

Walmart has the largest impact on the global

retail industry. But it is not the first of its kind.

Marks & Spencer in the UK, for example has

been tagging apparel with radio tags for quite

a long time. Other retailers have also noticed

that the usage of RFID tags on clothing items is

a promising strategy.

Walmart RFID timeline

Jul-10 Walmart turns to a completely new approach towards RFID and starts tagging on item level (menswear and jeans)

Feb-09 Procter & Gamble ends its highly touted practice of using RFID to track promotional displays at Walmart stores. 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.

Nov-08 Walmart announces plans to adopt RFID for products delivered by its more than 1,000 Chinese suppliers from January 2009.

Oct-08 Walmart for the first time puts pressure on suppliers to fulfil its demand to tag pallets with RFID labels. Suppliers will be fined USD2 per pallet if they do not meet the retailer’s requirements.

Aug-08 As of 30 January 2009, Sam’s Club requires RFID tags on all single-item pallets irrespective of which DC or store is supplied. Suppliers failing to meet these requirements will be charged USD2.50 per pallet.

Aug-08 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.

Aug-08 Sam’s Club requires several suppliers to also tag single items with the radio labels by 31 October 2009. This concerns around 5,000 club-sized bulk packs, but not conventional store items.

Apr-08 Walmart starts to work with lift truck manufacturers to integrate RFID into its lift trucks. At that time, 1,300 of the retailer’s 3,600 US locations are equipped with RFID technology, but not yet the forklifts.

Dec-07 Walmart, 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. The Reusable Pallet & Container Coalition (RPCC) ships produce in thousands of reusable containers with affixed RFID tags being used throughout the supply chain.

Jul-07 Walmart implements RFID at 12 of its 137 distribution centres and at the receiving docks of 1,000 of its around 4,000 Walmart and Sam's Club stores in the US. Around 600 suppliers which account for 200,000 items (SKUs) are participating.

Sep-06 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'. Walmart converts all of its systems to only read Gen 2 tags.

Feb-04 Walmart receives the first pallets tagged with RFID labels in a DC shipped from Procter & Gamble, Gillette, Unilever, Kraft Foods, Johnson & Johnson, Kimberly-Clark as well as Nestlé Purina Pet-Care and Hewlett-Packard.

2006 With its DC in Mississauga, Canada, Walmart for the first time includes its international business in the RFID roll-out.

Source: Walmart

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Gerry Weber spearheads RFID in Germany

In Germany, clothing manufacturer and

retailer Gerry Weber is spearheading the RFID

movement by deploying radio tags at item level.

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.

With this move, Gerry Weber hopes to boost

supply chain efficiency and transparency and, at

the same time, reduce theft through customers

and unfaithful employees.

RFID-facilitated weekly stocktaking enables

Gerry Weber to detect shrinkage due to theft

or flaws in the supply chain earlier. It will also

be impossible to steal an item in one store and

return it in another outlet, pretending that it

does not fit and the receipt is lost. The retailer’s

merchandising system will immediately realise

when an item has never been paid for and will

alert the cashier. Similar, when customers try to

leave the store without paying, the system will

give an alert because the EAS function on the

tag has not been deactivated.

In August 2010, the retailer started to equip all

clothing items with a retail price of more than

EUR30 (USD37) with RFID tags, amounting to

25 million items annually which is around 50%

of Gerry Weber’s total production. The tags

will be sewn directly into the items at the point

of manufacturing. For more expensive items

more than one RFID tag could be used. In this

case, the EAS function on all tags has to be

deactivated at the checkout.

Gerry Weber opted for one-way tags.

According to the retailer, the currently available

reusable RFID labels were not suitable for

implementation in the clothing industry for

several reasons, one of which was the high

price. Due to this, Gerry Weber developed

together with partners a new, single use

solution which combines the washing label,

Electronic Article Surveilllance (EAS) and

Electronic Product Code (EPC) in one tag.

All of Gerry Weber’s own stores in Germany and

abroad have been equipped with RFID antennas

at the ceiling, replacing traditional electronic

article surveillance technology. 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. The first RFID-equipped

clothing was delivered to the stores in October

2010. From January 2011 onwards, all items

which have come into the stores have been

equipped with RFID.

RFID-facilitated weekly stocktaking will enable Gerry Weber to detect shrinkage due to theft or flaws in the supply chain earlier.

© G

erry

Web

er

Gerry Weber combines RFID and Electronic Article Surveillance (EAS) in one tag.

© G

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Web

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Additionally, all other stores which sell Gerry

Weber fashion - such as department stores -

receive the RFID tags and the EPC data free of

charge. Within the next five years, the retailer

will invest EUR2.7 million (USD3.3 million)

into the project for hardware only, expecting

a return on investment within two years.

Regarding privacy concerns, Gerry Weber stated

that it does not relate customer data to the RFID-

sourced information in the database. Moreover,

the retailer expects the RFID tags to be physically

deconstructed after three laundries.

Looking ahead, a new generation of RFID tags

at Gerry Weber will be also be able to read a

so-called security thread, which goes through

the entire washing label. This will give an alert

in case it is being cut through in the fitting

rooms, where Gerry Weber plans to install

additional RFID receivers.

Metro Group combines RFID and EAS too

Similar to Gerry Weber, 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.

The project is based on the guidelines of the

standardisation bodies GS1 and EPCglobal.

Different from Gerry Weber, Kaufhof works

for the combination of identification and theft

protection with the technology of a dedicated

EAS specialist, Checkpoint Systems.

Metro Group is also using RFID technology for

many other purposes. In its Future Store in

Tönisvorst, for example, Metro Group is testing

a so-called Smart Cooler system together with

Bizerba and further specialists. This technology

uses ‘intelligent’ shelving located in the fresh

meat refrigerator.

All items on the Smart Cooler shelf are tagged

with RFID labels that carry a unique number

for each item. This number refers to a central

database in which the sell-by date is stored. The

database enables back-office store managers to

know the exact stock level and ensure that no

item has gone past its sell-by date.

Contrary to comprehensive usage of RFID tags

on food products, which does not work due to

liquids and metal problem, this deployment

of RFID technology for food products makes

sense. 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. Every time

a customer picks a package, 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, Metro Group decided to

extend its ‘Tag It Easy!’ programme with its

Asian suppliers in July 2009. For this, the

retailer uses RFID technology from Checkpoint

to track merchandise throughout the supply

chain. The third phase of the programme

involves more than 75 Chinese and Indian

suppliers, in addition to the 100 manufacturers

delivering from Hong Kong which are already

in the programme. ‘Tag It Easy!’ participants

apply RFID labels on shipments bound for Metro

Group’s facilities in Germany. The programme

is part of Metro Group’s Advanced Logistics

Asia (ALA). As a third-party solutions provider,

Checkpoint continues to supply pre-printed RFID

labels and services to suppliers in the region.

Outgoing goods at Fat Kee Stevedores, one of Metro Group’s logistics service providers in China.

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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, Marks & Spencer

(M&S) is, in relation to its size, the heaviest

user of RFID tags globally. The retailer moved

the technology from trial to implementation in

April 2007. However, in contrast to Walmart and

Metro, M&S decided right from the beginning

of the project to only use reusable RFID tags

in its food business on returnable plastic trays.

Avoiding one-way transponders, M&S reduces

costs for itself, its suppliers and last, but not

least, for the environment. But, with the RFID

deployment, the retailer achieved a quicker

and more reliable food delivery between its

suppliers, warehouses and food divisions.

However, 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. As suppliers

produce and pack exclusively for M&S, there

are no additional process costs involved in

using the tray pool of the retailer, which is

handled by a third party logistic provider.

Around 90% of M&S’ food assortment is

transported in returnable trays.

M&S also avoids the reading problems

associated with metals and liquids. The RFID-

tagged plastic trays pass by the RFID antennas

directly and are read from the outside. The

retailer’s depots read the information on two

million trays per week just by passing them by

a mobile reader. The company had no plans to

tag single food items.

But, contrary to the RFID deployment in its

food business, M&S uses radio tags at item

level for its apparel range. 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,

such as suits and tailoring, as it allows us to

manage our stock levels better and ensure we

have the right product mix on display.”

RFID tags are embedded into the paper barcode

label, which is marked ‘Intelligent Label’. To

scan garments in a weekly stock check, staff

use handheld devices which transmit each

tag’s unique number to an ‘Intelligent Mobile

Store Reader’ base station over a Bluetooth

connection. The next step sees the base stations

send the information to a managed database,

which can be interrogated by M&S’ head office

applications. According to the retailer, it is 100

times quicker to run a stock check using RFID

than with manual methods. More than 7,000

items can be scanned in an hour and a half

using handheld devices. As costs for antennas

in its roughly 30,000 tills would be too high,

the retailer has so far no plans to extend the

RFID deployment to the checkout tills. Due to

this, M&S will go on scanning barcodes at the

checkout for the time being.

In July 2010, it became known that M&S is

planning to trial a second generation of RFID

tags in the first quarter of 2011. 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. Looking ahead,

M&S hopes to expand the use of RFID especially

in its international business and for men’s

shoes. However, M&S said that with GBP0.10

(USD0.15) cost of each tag the technology was

not yet cost-effective for basic products such as

socks. Carried out by M&S’ general merchandise

packaging team, the project covers all the

retailer’s non-food products. Furthermore, M&S

is also considering RFID technologies such as

printed electronics. However, according to a

company’ spokesperson, the project was still at

an early stage.


PlanetRetail

Otto Group phases out tagging at item level

While Gerry Weber and M&S invest heavily

in RFID technology at item level, Germany-

based mail order and e-commerce specialist

Otto Group has, after extensive testing,

decided not to use RFID tags at item level

anymore. The retailer tried to optimise its

goods receiving area with single-use RFID

tags at item level, but ultimately didn’t see

a business case for this in the long run. Otto

Group’s calculations have shown that it would

save less than EUR0.04 (USD0.05) per item,

but only if all items were equipped with RFID

tags. Previously, some of Otto Group’s fashion

suppliers had equipped their products with RFID

tags already in the country of manufacturing.

According to Dr Jürgen Schieleit, Head of

Logistics System Development, Otto Group has

for the time being no plans for further RFID

activities. However, the group is constantly

observing RFID technology developments and

is well prepared in case it will be interesting to

follow new RFID approaches.

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, the retailer

stopped all projects with suppliers labelling

pallets and cases with one-way RFID tags.

As a reason for this shift in strategy, 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.

Even though testing with current suppliers was

not stopped, no further suppliers were added

to the programme. At this time, around 50

suppliers labelled around 2,600 pallets per week

with RFID chips for the three Rewe distribution

centres in Norderstedt, Wiesloch and Rosbach.

Original plans foresaw the roll-out of the RFID

technology to further Rewe DCs.

In October 2010, it became known that Rewe

will, in addition to its roll-cages, equip all of

its 40,000 reusable transport units for frozen

goods with RFID tags to also improve the

tracking of these units along its supply chain.

The boxes, which are owned by the retailer and

cost around EUR700 (USD855) each, will be

labelled with both fix-mounted RFID tags which

bear the Global Returnable Asset Item (GRAI)

number as well as with barcodes.

For the time being, Rewe plans to only read the

RFID tags at the ramps of its around 30 DCs

when the reusable transport units return. In all

other stages of the supply chain, the transport

units will be identified with the help of their

barcodes, thus limiting the financial investment

into RFID reader technology for the retailer.

The RFID reader technology comes from US-

based Mojix with whom Rewe had already

successfully completed a trial at its DC in

Buttenheim in September 2009. With Mojix’s

technology, the retailer can identify all pallets,

boxes, roll-cages and crates that are located

in a certain area of a warehouse. Passive RFID

tags at the transport units are read by ceiling

mounted receivers without passing the units

through gates with antennas.

Ceiling-mounted receivers read passive RFID tags at the transport units.

© R

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PlanetRetail

Mojix E-Nodes systems provide energy to

all passive RFID tags within their specified

interrogation spaces, while the centralised,

high-sensitivity receiver reads the resulting tag

signals from across the system’s potentially vast

coverage area which can be up to 23,000 square

metres. With several receivers, Rewe is covering

a complete 40,000 square metre warehouse.

The technology enables the tracking of assets

in large spaces, according to the technology

provider, with 99.9% accuracy. The system

can help to address past problems in shipping

errors, staging, and mixed pallets. With this

level of reliability, 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, effective tracking of

goods through the shipping process, and more

efficient cost-allocation for reusable transport

items to the outlets. For this deployment, the

Mojix Star system is integrated with Rewe’s

warehouse management system to provide

RFID data to further business areas.

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. This

would enable the retailer to even search for

one specific unit.

Looking ahead, 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. Used throughout the

entire supply chain, the involved parties could

also write additional information on the tags

during different steps. In July 2010, Rewe

Group, brand manufacturer Mars, 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.

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.

With this concept, loading and unloading of

trucks should be made easier. Additionally,

tracking of goods throughout the supply chain,

temperature controls and control of external

service providers should be facilitated.

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. For this purpose, the IML

is creating software interfaces that enable

communication across all involved software

systems. Additionally, new RFID tags will be

developed which combine UHF (ultra high

frequency) and HF (high frequency). They will

be integrated into the pallets.

Research project Smarti has a pan-industry

approach. In addition to ‘smart pallets’, ‘smart

letterboxes’ for Deutsche Post and smart air

cargo pallets for Lufthansa Cargo will also be

developed. Testing regarding reading accuracy

will start in the first quarter of 2011. In the

second quarter of 2011, the first pallets will be

put into circulation between selected locations

of Rewe Group and Mars.


PlanetRetail

Market Potential of Different RFID Scenarios


Cost

s

Retailers’ Savings

One-way RFID tag at case or item level / food

Reusable RFID tag at item level / non-food

One-way RFID tag at item level / non-food

One-way RFID tag at transport units / non-food

Resusable RFID tag at transport units / food

RFID on load carrier level

RFID tags in the supply chain only make sense

under certain circumstances. Deploying the

smart labels at reusable load carriers seems

to be a promising strategy for the time being.

Costs are lower and savings are higher, as

the reusable transport unit itself can also

be monitored along the supply chain. Pool

operators could help to pay for equipping their

transport units with RFID tags. 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.

RFID at item level

Similar to RFID tagging of pallets and cases,

RFID tagging at item level only makes sense

under certain circumstances. 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. Liquids

and metal packaging such as aluminium foil can

also hamper the accuracy of the technology.

However, with regards to non-food items, there

are product categories for which the deployment

of RFID makes more sense than others. Product

categories such as apparel, for example, which

often requires a lot of manual labour to keep

track of because of variations in size, colour

and style, are certainly attractive from a ROI

perspective and a good starting point for RFID

technology at item level. Radio tags at item level

for non-food are associated with high costs, but

also bring high benefits for the retailer.


PlanetRetail

The more the merrier - 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. From a

commercial point of view, only those projects

that rely fully on the industry standards of the

GS1 organisations including the EPC toolset will

be sensible.

And, in order to deploy the full benefits

from RFID technology, retailers and their

suppliers need to share their data and develop

standardised business processes. Again, 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-of-

stocks, a slashed inventory throughout the

supply chain, a reduction in counterfeiting and

automating shipping and receiving.

Strategy is important

Companies considering the usage of RFID

technology have to be clear about their

strategy first. RFID can only be sensible

if it works as an enabler for this strategy.

Nevertheless, in certain cases the deployment

of RFID technology will also lead to changes in

the organisation of the supply chain.

Looking ahead, RFID has the potential to

transform how business is conducted for both

retailers and their suppliers. Retailers will be

able to reduce out-of-stocks, save labour costs,

simplify business processes, improve and fasten

up inventory control, reduce shrinkage and

increase sales. Consequently, suppliers will also

benefit from RFID technology as their supply

chain can be made more efficient. Additionally,

reduced out-of-stocks will lead to increased

sales for the supplier.

Problems and concerns - RFID and the

environment

With more and more retailers and suppliers

using RFID tags, 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. Reusable tags on load carriers will

do less harm to the environment as they are

used for a longer period. However, the mere

figure of 250 million single-use tags annually

for Walmart’s menswear gives reason to worry

about the impact on the environment.

RFID transponders contain copper or lithium,

which could cause impurities in the recycling

of raw material such as paper, glass and

granulated plastics. Even small amounts of

copper could discolour recycled glass, whereas

lithium can make glass more fragile.

While the above mentioned reason speaks in

favour of reusable tags, there is one strong

argument against them. Nowadays, the

majority of products such as clothing and

electronics are produced in China or other

Asian countries. Due to the lower wages in

those countries, RFID tags are attached to

items directly at the point of manufacturing. If

a retailer decides to implement reusable tags,

this would mean that the labels have to be

brought back to the point of manufacturing.

Otherwise, this work would have to be carried

out in the country where the retailer’s stores

are located, most likely a country with higher

labour costs.


PlanetRetail

Looking ahead

Combination of RFID and EAS

The combining of RFID technology with

electronic article surveillance (EAS), as German

clothing manufacturer and retailer Gerry Weber

is doing, could be a promising strategy to save

money. If RFID tags replace the conventional

EAS tags, a ROI could easily be achieved in a

short period of time. But, this will only happen

if the retail industry manages to set common

standards. Individual company-owned solutions

are likely to be too expensive.

Control of the cold chain

Retailers are increasingly looking into deploying

active RFID Transponders that are able to

monitor the temperature. 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. Transport from the

central warehouse for frozen goods in Asten/

Linz to SPAR’s outlets all over the country

are permanently monitored. The technology

is provided by Daily Service Tiefkühllogistik

and has been exclusively developed in co-

operation with SPAR. A special temperature

sensor, which is attached to an RFID tag, was

created in order to measure the temperature

of the goods. One sensor is located in every

lorry, which every very few minutes measures

the current temperature and transfers the data

to a handheld device. Arriving at the store,

the driver hands over the handheld device to

a member of staff, who can see if goods have

been exposed to dangerous and higher than

acceptable temperatures during transportation.

In eastern Switzerland, Migros is deploying

a similar solution. 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.

RFID – a means against counterfeit goods

While counterfeiting might not be a problem

for every supplier, it is certainly an issue with

manufacturers of products such as perfumes,

drugs, luxury accessories or cigarettes. With

the help of RFID tags, manufactures could

create an electronic pedigree. Putting a unique

serial number on a product at the point of

manufacturing could be an effective means to

tackle counterfeiting.

Tracking batches with RFID labels in the

floor

In a distribution centre, RFID tags are not only

useful if they are attached to products, pallets

or cases. They can also be highly efficient

if they are built in a DC’s floor, thus helping

to locate forklifts and thus track batches.

German beverage manufacturer Gerolsteiner,

for example, equipped the floor of its DC with

2,500 RFID tags in order to track its daily

turnover of 9,000 pallets by batch throughout

the DC to assure traceability. 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. This idea is likely to be taken up by

further manufacturers. Retailers could not only

build RFID tags in the floor of their DCs, but

also in the floor of their outlets aiming to track

shopping trolleys throughout the stores. This

could provide them with meaningful insights

into shoppers’ behaviour.


PlanetRetail

54

5. Warehouse Automation: Machinery picks and packs more precisely

2011 will see significant financial

investments in different forms

of warehouse automation technology. While

the last few years have seen only full-range

retailers such as Kroger, Mercadona, Sobeys

and Edeka move to automate some of their

full-range grocery distribution centres, further

retail formats such as discounters are now

following suit. Not all are aiming to install

fully-automated picking and packing solutions

which make the traditional warehouse worker

completely redundant. A significant number

of retailers will also invest in semi-automated

solutions that support the worker in the

picking process. Now, also discounters, with

their business model relying on a fast-moving

and small assortment, are looking for specific

automation solutions that

fit their concept.

Interestingly enough,

the reduction of

labour costs is not

the only driver for

this. Imminent

government

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.

With the implementation of voice-picking and

optimised processes, the weight workers lift day

by day has significantly increased. “Employees

move 15 tonnes and more per shift, performing

this by bending, lifting and carrying,” explains

Helmut Prieschenk, CEO of warehouse

automation specialist Witron. At the same time,

it is likely that very soon regulations will limit

the weight one worker is allowed to lift each

day. Denmark aims to limit the weight a worker

lifts per day to six tonnes. Logistics experts

expect similar regulations EU-wide.

Another driver of this technology is the

demographic change which could soon make it

hard to find workers for manual goods picking.

Due to this, even discounters which usually

avoid investing in high tech and achieve low

costs through lean and simple processes,

are now looking for warehouse automation.

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, while Dansk Supermarked’s

Netto in Denmark is looking for semi-

automated solutions.

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. At a

time when retailers are desperately looking

for additional ways to reduce road mileage

and consequently

C02 emissions, the

opportunity to shrink

the volume of transported

goods is of very high interest.

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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 automated

picking system in the retailer’s distribution

centre (DC) in Kirchheim Teck expected to

start operations in July 2011, the company

revealed in talks with Planet Retail. 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, Sobeys,

Mercadona and Edeka.

The DC in Kirchheim Teck is currently being

extended from 27,000 square metres (290,000

square feet) to 36,000 square metres (387,000

square feet) to accommodate the fully-automated

case picking system from SSI Schäfer. The IT

implementation at the site will begin in January

2011. In July 2011, the new automated DC is

planned to go live and is scheduled to be fully

operational in January 2012.

Even though Lidl also stores dairy, frozen and

fresh products in this DC, the deployment of

automated picking will be limited to ambient

goods. Once the distribution centre is operative,

Lidl will be able to pick 60,000 cases of ambient

food per day automatically, compared to just

30,000 previously. With the new automation

technology, the DC in Kirchheim Teck will

supply 140 discount stores, compared to a

previous 90 outlets. The implementation of

this automated picking is seen as a test. If

successful, the technology will be rolled out to

additional distribution centres, a Lidl manager

explained in talks with Planet Retail.

The automated picking process step-by-step

Teach-in

In a first step, the so-called “teach-in” process

is carried out in the goods receiving area. Within

this process, 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. 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 vision-

based optical recognition. This distinguishes

the SSI Schäfer solution from the solutions of

other warehouse automation specialists such as

Witron which work with barcodes.

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. Being

fed with all characteristics such as size, weight

and stability against tipping over, the packing

software can determine that, for example, a

case of crisps can be put on top of a case of

tinned vegetables, but not the other way round.

Taking pictures of cases is also important for

products which vary by season. Even a washing

detergent might have a seasonal characteristic

on its packaging such as a Santa Claus picture

for a Christmas edition. With the help of visual

product recognition, normal packaging can be

distinguished from a seasonal one to ensure that

the seasonal one is shipped at the right time.

Finally, 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.


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 15,000 pallets. From there,

the pallets are retrieved and are automatically

depalletised into individual layers of cases.

With the help of vacuum cups and clamps, a

machine de-palletises around 300 layers per

hour. Complete layers are pushed onto one

tray each. While cases are identified with visual

product recognition, the trays are identified

through their barcodes. The data belonging to

the trays and the cases on them are ‘married’

in the warehouse management system.

Tray buffering

The trays are stored in a special high bay

warehouse until they are needed for the

automated picking.

The fact that complete layers are stored on

the trays distinguishes SSI Schäfer’s solution

from other warehouse automation technologies

which store individual cases. At the time trays

are demanded for an order, they are retrieved

from the tray buffering with the help of so

called tray shuttles - vertical lifts which are

located between the aisles of the high bay

warehouse. At this stage, for every order, the

packing algorithm of the software has already

developed an optimal design and has built a

‘virtual pallet’. The software now ensures that

the trays are retrieved from the tray buffering

in the right 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. This is carried out

with the help of 14 so-called case wheelers.

These horizontally moving conveyer belts

forward the right number of cases to one big

conveyer belt.

Layers are separated into single cases.

© S

SI

Sch

äfer

A palletising robot puts individual cases on a pallet according to a pattern determined by the packing software.

© S

SI

Sch

äfer


PlanetRetail

The trays with surplus cases are shuttled back

into the warehouse. Sophisticated packing

software not only ensures that the trays are

retrieved from the high bay warehouse in the

right order, 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.

Automated Palletising

The last step is the automated packing of

transport units with the help of palletising

robots. Due to the picture recognition

technology deployed, the control software

knows how the cases are situated on the

conveyors and how they have to be grabbed.

The palletising robot automatically lifts the cases from the conveyer belt onto the transport unit that will be shipped to the store, one after the other, according to the previously determined stacking pattern.

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, Sobeys, Mercadona and Edeka. Witron’s technology avoids robotics and simply pushes the cases onto the right place. With gantry robots, 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.

In a last step, the pallet is shrink-wrapped and equipped with a shipping label before it leaves the DC. © SSI Schäfer


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, 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. Due to this, Lidl was able to get the

automated warehouse tailored to its needs to a

certain extent.

Another reason for Lidl to work with SSI

Schäfer was that its system stores several

cases on one tray rather than individual ones.

This methodology fits into the mode of discount

operators, which ship high volumes to their

store and have a limited range. The SSI Schäfer

solution also needs, compared to the Witron

OPM (0rder Picking Machinery), less material

handling technology and less space. However,

Edeka currently handles 11,000 different SKUs

automated with the Witron’s technology in

Hamm while Lidl aims to pick and pack less

than 1,000 different ambient SKUs with SSI

Schäfer’s technology in Kirchheim Teck.

While Lidl plans to automate the shipment of

about 60,000 ambient food cases per day from

the Kirchheim Teck site with SSI Schäfer, Edeka

picks and packs about 200,000 per day cases

with Witron at its Hamm distribution centre.

However, with the new automated picking

system, 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. The responsible Lidl manager is sure

that in terms of ROI, the investment will pay

off, “maybe not within the next two years, but

certainly in 15 years”. 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, bigger DC nor managed

to find enough additional workers in the area of

Kircheim Teck. As a third reason for automating

the DC, the project manager named ergonmics.

Aldi opts for low cost solution

While Lidl decided to address the topic

of ergonomics with piloting a completely

automated warehouse, discount rival Aldi

(Süd), opt for a very simple low-tech solution

to reduce the weight its employees have to

lift. Aldi installed cranes on pallet trucks in its

distribution centres. The aim of this technology

is not to automate picking or packing. The

only reason for installing the solution that Aldi

developed together with technology provider

Gebhardt is ergonomics. 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. If

a worker lifts a case, the crane is holding his

hand and takes a significant proportion of the

load. 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.

Low-tech at Aldi Süd: To deal with ergonomics problems in the case picking process, the wrists of the worker are connected to a crane that helps to lift the goods.

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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, between

these extremes are further, semi-automated

warehouse automation solutions on the market

that fit to the discounters’ needs.

In spring 2010, warehouse automation

specialist Witron unveiled a complete new

picking technology in its laboratory in Parkstein

aimed exactly at discounters. The Ergonomic

Tray Picking (ETP) is not a fully automated

solution such as Witron implemented for the

likes of Kroger and Sobeys. The case picking

with the new machinery, which can handle up

to 4,000 SKUs, is still done by a worker. But it

supports the movement of the goods bringing

the worker and the transport unit with a Pick

Shuttle into the optimal position. The shelves

the worker picks from are replenished in a

fully automated fashion. According to Witron,

it is possible to pick up to 500 trade units per

employee per hour with the ETP. And, the

semi-automated solution bases the packing of

the pallets on the same truckload-optimising

software algorithms as Witron’s solution

for complete automation, the Order Picking

Machinery (OPM), which has been installed at

Kroger and Mercadona sites.

Witron’s new ETP system for smaller

distribution centres, such as those of the

discounters, does not need to store single case

units in an automated storage and retrieval

high bay warehouse like the fully automated

OPM, which needs to sequence single cases.

The replenishment of the picking shelves at

the semi-automated ETP is based on a tray

full of cases, but not on single case units. This

makes the technology significantly cheaper

than the fully automated warehouses. Also, the

technology needs less space than the huge fully

automated sites.

While the discounters have only started to

look into warehouse automation, full-range

retailers are already a step ahead. 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.

Edeka pioneers warehouse automation in Germany

In Germany, Edeka was the first retailer to

deploy warehouse automation technology.

Since September 2006, 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 regional

co-operative invested EUR120 million (USD150

million in 2006) in the complete site. The

automated picking systems alone cost them

EUR50 million (USD63 million in 2006), with

operations and maintenance Edeka completely

outsourced to the vendor of the technology,

Witron. The site automatically distributes up to

210,000 trading units per day, shifting 11,000

ambient SKUs with the help of 24 Witron Order

Picking Machines (OPMs). However, Edeka

has only automated the handling of ambient

products. Fresh, chilled and frozen food are

handled manually handled with the help of

voice-picking technology.

The picking shuttle brings the worker into an optimal position to pick the cases and put them onto the pallet.

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Pallets with ambient products arriving at the

DC are firstly stored in an 80 metres long

and 30 metres high, fully automated high bay

warehouse. Once the pallets are removed

from the high bay warehouse, they are

automatically depalletised as far as possible.

For this purpose, a Layer Picker machine from

Danish automation specialist Univeyor is used

which (similar to a huge vacuum cleaner)

sucks each layer from the pallet.

In a next step, conveyors running at different

speeds individualise the cases, which are

then loaded onto trays. 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. The trays with the cases are

stocked in a fully automated high storage area

provided by Austrian specialist TGW Logistics.

Once cases are needed for a certain order, they

leave the high storage area on their blue trays

and are forwarded to the loading machine.

The heart of the distribution centre is the Case

Order Machine (COM) from Witron. After the

cases have been separated from the trays, 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.

The items are brought into an order which

reflects the individual store layout. This

sequencing follows the way the employees

unpack the pallets or roll-cages in a specific

outlet and thus increases the efficiency

significantly. Another relevant benefit from the

software managed packing is the optimisation

of the supply chain. The algorithms pack

transport units much more condensed than

employees pack them, thus leading to a

substantial saving of transportation volume.

It is also noteworthy that this warehouse

automation from Witron does not use RFID

technology at all. In the receiving area, for

example, the serial shipping container bar

code (SSCC) is read automatically with fixed

laser scanners. In addition, the rest of the

automation process can do without RFID tags

and just uses barcodes on the trays.

The heart of the distribution centre in Hamm is the innovative Case Order Machine (COM) from Witron.

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The COM pushes the items onto the load carriers, contrary to the SSI Schäfer solution that uses a robot to grab the cases and put them onto the pallet.

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Edeka further automated its warehouse in autumn 2010

In autumn 2010, 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.

The new DPP system automatically stores,

stacks and consolidates half and quarter

pallets. This closes a gap for Edeka Rhein-Ruhr,

which directly delivers around 70 different

products on half pallets and 120 items on

quarter pallets such as promotional displays to

its stores. Additionally, the DPP machinery can

also place transport units onto rolling reusable

load carriers. 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. Looking ahead, the DPP system

in Hamm will handle up to 500 half and up to

1,800 quarter pallets per day.

Mercadona aims to also automate tote distribution

While Edeka so far limits the deployment

of automation to the handling of ambient

products, Mercadona in Spain also deploys

Witron’s Case Order Machine (COM) for

perishables as well as for frozen food.

Additionally, in September 2009, Mercadona

decided to use Witron’s Automated Tote

System (ATS) for fully automated whole tote

picking at its León site. It will be the first

installation of Witron’s ATS worldwide and will

enable Mercadona to pick more than 100,000

totes a day automatically from a range of

approximately 330 fresh articles. Various fruit

and vegetables, meat and fresh products will

automatically be stacked onto order pallets in a

store friendly manner.

At the new site in León, Mercadona will also

deploy Witron’s Order Picking Machinery (OPM)

which is planned to be up and running in March

2011. 108,000 trade units a day will be picked

from a range of approximately 1,100 fresh,

frozen and perishable products using 13 Case

Order Machines (COM), which are the heart of

the OPMs. The cases will be supplied to the COM

machines via a 26-aisle tray warehouse divided

into three temperature zones (minus 23 degrees,

plus 2 degrees and plus 12 degrees Celsius).

Replenishment will be carried out from a pallet

high bay warehouse with 8,800 storage locations.

Once the site in León goes live, Mercadona

will operate four highly automated distribution

centres in Spain. Witron has already realised two

distribution centres for Mercadona’s dry goods

assortment and temperature-controlled products.

The first is located in Ciempozuelos (near

Madrid) and works with the Witron Order Picking

Machinery (OPM), Module Picking System (MPS)

and Dynamic Picking Solution (DPS). Additionally,

the site uses a DPP (Display Pallet Picking)

solution for fully automated handling of half and

quarter pallets for ambient, fresh and frozen

goods. The second site is located in Ribarroja

(near Valencia) and uses the Order Picking

Machinery (OPM) system for frozen goods.

Mercadona’s third, highly automated

distribution centre is the non-perishable

product warehouse in Huevar (Seville). This

distribution facility is equipped with a roll-

docking system and deploys 67 roller conveyors

with dynamic buffer storage (at least 1.5

truckloads per article) for those 67 products

with the highest turnover (one conveyor for

each type of product). The haulier deposits

the suppliers’ pallets directly on the roller

conveyors which run along the width part of

the warehouse facility. Without entering the

warehouse, at the end of the conveyors the

goods arrive at the dispatch bays where the

orders are prepared.

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Mercadona employees pick the goods onto

pallets with fork-lifts, confirm the removal with

radio scanners and place the picked products

together at the assigned outgoing goods gate.

The implementation of the roll-docking system

was conducted by material handling and

storage solutions provider TGW Logistics Group

from Wels in Austria.

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, enabling

retailers to pick and pack food cases fully

automated. In 2003, the world’s first ambient

site with this technology went into operation in

Tolleson, Arizona. Later, Kroger also automated

its distribution centre in Aurora, Texas, with the

technology from the German specialist.

The algorithms of the COM machinery pack

“transport units much more condensed

than employees pack them”, explains

Witron’s Founder and Owner Walter Winkler.

“Kroger saves through this about 8% of the

transportation volume which is shipped from its

automated distribution centres to the stores”.

Kroger sees the work with Witron as a real

success. In 2009, Kroger decided to construct

two more almost fully automated distribution

centres in California. At the end of 2010, Kroger

opened its first fully automated distribution

centre for perishables and frozen food in

Compton. Close to the future Compton site,

Kroger is constructing an automated dry food

distribution centre in Paramount, California.

Swiss Migros on the way to operate the world’s largest fully automated warehouse

Swiss grocery retailer Migros is also a

customer of Witron. In June 2009, the retailer

ordered the technology for a fully automated

distribution centre. It is likely that from April

2011, Migros’ national distribution centre for

ambient goods in Suhr will be the world’s

largest fully-automated distribution centre

in grocery retailing. Witron is the general

contractor of this project and will install 28

Case Order Machines at Suhr – more than ever

in one single warehouse. The technology will

be able to pick and pack 315,000 cases per

day. From Suhr, Migros supplies all its stores in

Switzerland with ambient goods.

Migros also works with further warehouse

automation providers. Since 2008, the co-

operative Ostschweiz (Eastern Switzerland) has

deployed a fully automated picking machinery

from Swisslog for fruit and vegetables in

its distribution centres in Gossau. A total of

four machines, called Stack Runners, pick

between 20,000 and 50,000 cases per day.

The retailer decided to implement the solution

due to ergonomic reasons as, previously, the

employees had to handle cases with a weight of

up to 20kg.

The machinery from Swisslog depalletises,

stores and packs the boxes. Migros is thinking

about deploying the machinery also for

charcuterie products. Additionally, in its DC in

Neuendorf, the Swiss retailer will deploy the

fully-automatic case picking system from SSI

Schäfer, the same solution that Lidl in Germany

has selected. In Neuendorf, Migros has already

installed the Schäfer Carousel System (SCS), a

small parts storage systems from SSI Schäfer.


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, there is still one

drawback: warehouse automation cannot be

used for all products, there are still items which

require manual or semi-automated picking

solutions due to their packaging. For example,

large packages of washing powder have very

often an unfavourable tipping point and can

easily fall off the trays. Glossy cardboard

packaging is difficult to handle as well and crisps

which are packed in unstable cardboard cases.

And toilet paper, which is too light, soft and

unstable, can neither be picked automatically.

With the deployment of robotics on its Case

Picking solution, SSI Schäfer now aims to

handle about 96% of all supermarket items.

But, given stability of large variety of packaging

used in a supermarket range, this has not been

proven in real life yet.

In general, 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. In recent years, the

collaborative projects on Shelf Ready Packaging

led to easy to open but at the same time less

stable packaging. 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, as soon as they are available.

Warehouse automation will come on the agenda of every retailer

Looking ahead, not only the urge to save

labour and freight costs, 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,

at least in the developed and high labour

costs countries.

The example of Kroger in the US illustrates

another reason why warehouse automation will

be increasingly popular with retailers. 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.

Crisps packed in unstable cardboard cases cannot be picked automatically.

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United Kingdom:

Greater London House, Hampstead Road, London, NW1 7EJ United Kingdom

T: +44 (0)207 728 5600

F: +44 (0)207 728 4999

Germany:

Dreieichstrasse 59, D-60594 Frankfurt am Main, Germany

T: +49 (0) 69 96 21 75-6

F: +49 (0) 69 96 21 75-70

USA:

350 South Northwest Hwy, Suite 300, Park Ridge, Illinois 60068, USA

Tel: + (1) 847 656 5378

Fax: + (1) 847 656 5201

China:

10-1-202, 88 Tongxing Road, Qingdao 266034, China

T: +86 (0)532 85981272

F: +86 (0)532 85989372

Japan:

Minami-Magome 5-42-3-508, Ohta-ku, Tokyo 143-0025, Japan

T: +81 (0) 3 3775 4158

F: +81 (0) 3 3775 4162

2011

Retail Technology Trends-2011

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Transcript of Retail Technology Trends-2011