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Retail Technology Trends, 2011

The top 5 areas of investment

Bjrn Weber

Research Director Retail Technology

Joachim Pinhammer
Senior Retail Technology Analyst

Sarah Herrlein

Senior Retail Technology Analyst

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Planet Retail is the leading provider of global retailing information, from news and analysis to market research and digital media. Covering more than 9,000 retail and foodservice operations across 211 markets around the world, many of the worlds leading companies turn to Planet Retail as a definitive source of business intelligence. For more information please visit www.planetretail.net

All images Planet Retail Ltd unless otherwise stated.

Cover images: 10 - Cincysavers; Q - Gerry Weber

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

1 3

2. Customer Facing Technologies:


Enabler for a new generation of pinpoint marketing

16

3. Price optimisation:
Higher margins without increased turnover

33

4. RFID (Radio-Frequency Identification):


Back from the brink

42

5. Warehouse Automation:
Machinery picks and packs more precisely

54

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Executive Summary
Bjrn Weber, Research Director Retail Technology

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 worlds major retail companies and their technology vendors. They are also founded on Planet Retails continuous monitoring of the technology deployment and strategies of all major retail groups. As one module of its database offer, Planet Retail offers the worlds 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 Retails 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 goods 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 havent yet done their homework in terms of merchandise management and data accuracy have been left behind.

This report highlights key technologies for which Planet Retails Retail Technology research team predicts major investments by retailers over the next five years.
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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 reports readers by surprise that RFID is identified as a major trend. Wasnt 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.

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1. Self-Service Checkouts:

New technologies change the game

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 selfservice 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 selfservice picking of goods. Nowadays, 18 years after the first selfcheckout 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-checkoutonly stores are rare. They exist with Tescos 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 MlheimKrlich 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 selfcheckout-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 Sainsburys, 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.
and self-scanning with Re-vision and Motorola. The photos from the concept store Carrefour planet in Vnissieux, France, show the new colour guidance system through the different forms of self-service checkouts. Carrefour equipped all hypermarkets in France and Belgium with both stationary self-checkouts from Wincor Nixdorf

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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 selfservice 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 IBMs 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 cash handling and user-friendliness. With the new modularity, we protect retailers investments, explained Fredrik Carlegren who oversees the global marketing of IBMs selfservice 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 didnt 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.
In the US, self-checkouts are conquering new formats, such as those from CVS pharmacy, here with IBM devices.
IBM

and are a quantum leap in terms of modularity,

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 IBMs Fredrik Carlegren.

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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 NCRs new Version Five Selfserve Checkout, new installations will often be equipped with cash recycling technology at NCRs 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 USAs 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 todays 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 worlds first tunnel scanner in a real life store


Nevertheless, it was Kroger that, in 2010, became the worlds first retailer testing fullyautomated tunnel scanners at the checkouts of a real life store. For this, the retailer was received Planet Retails 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 worlds 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 worlds first test of a fully automated tunnel scanner in a real store.

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Cincysavers

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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 IBMs POS software and was custom built for Kroger with components from different technology providers. Three months after Planet Retail unveiled the details of Krogers tests with tunnel scanners to the retail industry, Michael (Mike) Schlotman, Krogers 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 grocers research and development team, could only read about 90% Krogers 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 selfservice 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

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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 worlds 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 doesnt 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. Wont 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 wasnt 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 retailers 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 McDonalds 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 selfscanning with mobile devices from Motorola and self-checkouts from Fujitsu in Auchans 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 Groups hypermarket operation Real, Rewes Penny and Billa as well as Schwarz Groups Kaufland tested stand-alone self-service payment terminals. These have not always been successful. Metro Groups Real re-introduced cashiers at the first self-service payment only store in Mlheim-Krlich, 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 Systme 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 Groups 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 Kings 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 Hvener in Wuppertal installed Scan Coins 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
Retailers are looking for new ways to make item handling more convenient for the shopper without an increased theft risk: Intermarch is testing a trolley-to-trolley self-scanning with IBM in Rennes, France.
IBM

inbuilt theft control. ITM Intermarch in France is testing a selfcheckout 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 Intermarchs 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 customers 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.

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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 selfscanning 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, Casinos 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. Motorolas 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 Hft & 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 selfscanning 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-

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.

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.

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Global players such as Ahold, Casino and Delhaize Group now base their selfservice checkout strategy predominately on self-scanning with mobile devices. Also the worlds 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 cant 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 worlds first retailer testing self-scanning with mobile phones. In the project in Reals Future Store in Tnisvorst, Germany, Metro Group will soon test self-scanning with iPhones. Metro Group

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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 Tnisvorst. 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 Metros in-house IT subsidiary and Deutsche Telekom. It allows registered customers to use the phones 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 Carrefours equipping its hypermarkets with hybrid selfcheckout processes in France, Belgium and Spain. Others will follow soon. All over the world, self-checkouts will increasingly be deployed by specialist retailers, especially in the home sectors (furniture and DIY) as well as electronics, entertainment and office. Self-checkouts are no longer a tool for large grocery stores and hypermarkets only. There will be new tests in Asian countries but these are still at an early stage with no significant roll-out plans so far. In the high developed Asian markets, projects on the further deployment of shoppers mobile phone as a means of payment and as a marketing tool have a higher position on the prioritisation list of the retailers than self-service checkouts. North America will see a significant number of new self-checkouts installations in Canada. Also, in the USA, we will see new installations, but predominately in the stores of smaller retail companies. As most of the major grocery retailers are already deploying self-checkouts, larger projects are expected at the major pharmacy and drugstore operators. In Europe, the number of stores with any kind of self-service checkout technology is likely to triple by the end of 2012. In the same timeframe, the number of installed stationary self-checkouts in Europe will quadruple. The number of stores with self-scanning technology will triple.

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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 Carrefours hypermarket operations and Aholds Albert Heijn in these countries, almost all major full-range grocery retailers are in the process of implementing a significant number of selfcheckouts or self-scanning installations in their stores. Some of the projects will not be completed before 2012. The UK - until two years ago the only market in Europe with an extensive deployment of self-checkouts - is currently seeing a significant rise in the numbers of installed self-checkouts. Sainsburys and Morrisons are following Tesco and Walmarts Asda and are installing the machines in almost all stores. With Kingfishers B&Q and book retailer and newsagent WH Smith also starting to deploy self-service tills, UK non-food retailers have also started to invest seriously. Germany, Switzerland and Austria, as well as Poland - which are more or less virgins in terms of self-service checkouts - will also see a significant number of initial pilots in 2011, likely to be followed by roll-outs in 2012. In the largest market of Europe, Germany, selfcheckouts are today still a rarity. Only IKEA, surprisingly, converted half of all manned tills in Germany to self-checkouts at high speed.

In the grocery sector, until recently, only Metro Group and some independent shop owners of Edeka were experimenting with some self-checkouts. But this is very likely to change. According to research at Planet Retail, the major players Schwarz Group as well as drugstore operator dm and the DIY retailers Obi (Tengelmann Group), Hornbach and Bauhaus are all planning their first ever self-checkout pilot tests in 2011. Some of them have already made a decision with which IT vendor to go, while others are still evaluating the adequate partner. In September 2010, Rewe Group started a series of test installations of self-checkout in its German retail stores. Planet Retail learned that Rewe Groups IT subsidiary RIS installed NCRs 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 groups 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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2. Customer Facing Technologies: Enabler for a new generation of pinpoint marketing


C
onsumers are more versatile than ever, better informed and often acting less Using pictures and moving images at the point of sale can influence customers in a positive way and increase sales and margins. According to the global retail marketing association Popai, 70% of customers buying decisions are made at the point of sale, while retailers and consumer goods suppliers are still spending most of their advertising budgets on print or TV campaigns. Since the impact of traditional advertising media is reportedly decreasing, it is very likely that both retailers and suppliers will shift significant portions of their marketing spending not only towards the internet, but also to instore marketing. So far, only the most advanced and innovative retailers have fully implemented digital merchandising strategies. Most others are still experimenting, trialling different options of implementation and business cases. The most common business model is based on selling advertising space and time to suppliers of consumer goods brands or other third parties, which allows the system to practically pay for itself. loyal. They want to buy at the best prices while at the same time expecting excellent service from retailers. Traditional mass marketing is losing impact in a world in which customers are confronted with thousands of advertising messages daily. The newly empowered customers have nearly unlimited access to information on products and prices through the internet. And they use this information, even if they continue to shop in bricks and mortar stores. In 2011, retailers will increasingly invest in technologies that allow them to reach their customers more individually and efficiently across all channels. These Customer Facing Technologies comprise online and mobile applications as well as instore solutions such as kiosk systems, electronic shelf labels or digital merchandising equipment. Some of these, for example kiosks or electronic shelf labels, have been around for quite a while and are gaining renewed interest since new applications can be deployed. Others, such as mobile commerce applications, are relatively new. Often, it is not yet clear to which degree they substitute other forms of communication and transaction and to which degree they create additional value.

Tesco learned the hard way


Tesco, one of the pioneers of instore TV, had been using screens in its stores since 2004. In March 2009, Tesco announced it was to shut down the network, five years after the service was launched. At this time, the network consisted of 5,000 LCD and plasma screens across 100 Tesco superstores and Extra hypermarkets. The grocer said the decision had been taken as the equipment was outdated and energy inefficient. But instead of another green initiative this decision was in its core more likely a general problem of the instore advertisement market in Europe and the UK. In truth, Tesco TV wasnt living up to its expectations and always had a lack of advertisers. Even Tescos famous in-house consultancy and data analyser dunnhumby, which tried a turnaround with taking over responsibility for Tesco TV in August 2007, failed with a new concept.

Retailers will invest in digital merchandising


Usage of digital media for advertising and information purposes has become extremely popular in public spaces and customer areas, such as malls, restaurants, banks, petrol stations and retail stores. In some cases, digital media was installed to simply create a specific ambience in a store or a mall. The use of this technology is showing significant growth rates inside as well as outside of the retail space. In the world of retail, digital merchandising solutions so far mostly support promotions or new product introductions, provide more detailed product information or help to create an atmosphere that engages customers and enhances the shopping experience.

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The end of Tescos 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 didnt 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 Tescos 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 42inch 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 Tescobranded 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 retailers 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.

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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 Thomsons 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 retailers 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

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In February 2010, Walmart stated that its Smart digital signage network were a huge success compared to its predecessor WalMart TV. At the Digital Signage Expo in Las Vegas, the retail giants 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.
Source: Walmart 2010

Walmart Instore TV in Mexico

Increased Sales Through Walmart Smart Network


Sales Lift by Department Electronics Over the counter TC Food Health/Beauty % 7 23 13 28

Sales Lift by Department Mature item boost Item launch Seasonal push Price leadership

% 7 9 18 6

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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


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

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.

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

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

Lessons learned: Balance strategy


Content is king
Fresh & interesting Consumer orientated Controlled by the retailer

Instore marketing is NOT TV

Content

Placement makes a difference


Guide the customer Near the products At eye level

Short attention span Formats designed for retail Be careful with audio Balance information & entertainment Avoid visual overkill

Instore Digital Media Technology


A learning system
Response measurement Message optimisation

Marketing
Integrated concept
Tied into POS data Integrated marketing concept

Sustainable implementation
Energy efficient User friendly Centrally manageable Locally adaptable Future-proof

Sound business case

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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.

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-ofthe-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.

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

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

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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-waycommunication 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.
ESLs enable dynamic prcing at Systme Us U Express neighbourhood store in Vincennes, France.

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

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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 companys standard design for pricing or promotions.

However, employees in the stores are also able to override price changes with a custommade mobile solution within a predetermined time frame in case they do not agree with the suggested price changes. 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 Institutes 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 Apples 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.
Capgemini

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

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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 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 Ocados 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 grocers 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 Ocados 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 Apples app store. Using the application, the shoppers can access and order from LeShops 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 retailers 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 LeShops 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.
Ocado

UK - have released smart phone apps with a

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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.coms head of R&D, Nick Lansley, stated: Our core customers are busy mums who dont 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: iPhones 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 retailers website, via a retailers 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.

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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 users 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. Googles mobile Android operating system supports the use of QR codes by natively including the barcode scanner (ZXing) on some models. Nokias 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.

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

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 shoppers 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 Intermarch, have started to use them to provide shoppers with additional product information.

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Insights from Planet Retails database


How retailers step into the world of mobile marketing
Mobile marketing via text message at Seven & I in the USA
In late 2009, 7-Eleven Inc in the US (part of Japans 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. 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%.

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 phones 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.

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 shoppers 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. Targets 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.
Target

Paperless coupons at Kroger in the USA


Since 2009, Kroger has been participating in AOLs electronic coupon service Shortcuts.

Target mobile coupons can be scanned directly from the phones display at the POS.

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Savings through paperless coupons at Walmarts Sams Club


In August 2009, Walmart-owned cash & carry operator Sams 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. Sams 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, Sams 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 members preferences, purchase history, and in-club product availability to maximise offer relevancy and profitability.

Extended consumer information at Rewe Group Billa, Austria


Since the end of June 2010, customers of Rewes 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 Sainsburys


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

Amazon Remembers take a picture of any product and receive the best price offer
Amazons mobile app is featuring a thus far unique service called Amazon Remembers. Users can take a picture of any given item with the phones 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 retailers 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 retailers 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.

Information on food items via mobile phone at Aholds 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 p 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.

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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 startup 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, Sainsburys 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. Walmarts 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 Intermarch runs a mobile website called Discount Utile, which was launched in March 2009 and allows customers to check the retailers prices wherever they are. The site provides prices for Intermarch and Ecomarch 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.

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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.

The app comes from start-up company Shopkick and uses transmitters in the store, which broadcast a constant signal announcing the stores 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 customers 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 Shopkicks CEO Cyriac Roeding, there are so far no efforts taken to integrate a customers purchase history with the application. Best Buy is paying Shopkick for every customer who uses the app in its stores.

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.

Shopkicks kickbucks can be earned just by entering a store.

Shopkick

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Meijers 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 Insides. 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 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.
Meijers Find-It application helps customers to locate products inside the store.
Meijer

Spot, which shows the location of a shoppers car

Summary
Retailers 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.

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3. Price optimisation: Higher margins without increased turnover


I
n 2011 and onwards, retailers will significantly invest in price optimisation software and 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 worlds 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, Aldis market entry a few years ago reshaped the retail structure of these countries. Aldis store openings in Australia caused Woolworths and Coles to lower their prices every time a new Aldi opened in their neighbourhoods. Aldis move into Switzerland has led to a gradual lowering of prices and the extension of economy ranges by the market leaders, Coop and Migros. 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

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

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Simply copying Aldis prices for their price entry range will not be a future-proof strategy for fullrange 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
Walmart

optimisation can be called self-learning.

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

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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 retailers assortment and planning of shelf space. However, even more importantly, the optimisation of prices also has an impact on a retailers 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.
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.

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 retailers private label crisps.

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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 retailers 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 retailers 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 retailers 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.

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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.

Planet Retails List of 10 Price Optimisation Solutions to Watch


Demandtech dunnhumby KSS Retail Revionics Oracle Profitlogic SAP Khimetrics Predictix Dacos SAS (Regular Price Optimization) Retalix TCI Accenture (Pricing and Profit Optimization Services)
Source: Planet Retail

While Walmarts 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 retailers markets, including Asia. In the US, Walmart uses Demandtecs price optimisation for all its banners, including Sams 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 Demandtecs 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 Demandtecs server. In fact, also Safeway in the US is also using Demandtecs 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.

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 Walmarts 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 markdowns for seasonal apparel.

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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 upfront 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 Product categories in focus Pricing focus Grocery, moving into apparel Basic rage optimisation Software-as-aservice Assortment optimisation Promotion optimisation and execution Shopper insights Collaborative promotional planning dunnhumby KSS Retail Grocery Revionics Grocery, general merchandise, moving into textiles EDLP and promotion optimisation Software-as-aservice Promotion optimisation and planning Collaborative promotional planning between retailer and suppliers Inventory optimisation and store replenishment Kroger, Ahold, Walmart (fuel), Rite Aid, Modelo (Sonae) SuperValu, Dollar General, Save-aLot, Family Dollar SuperValu; Big Y; Lowe's; ShopKo Stores Walmart, Tesco SAP Khimetrics Grocery, textiles Oracle Profitlogic Textiles, seasonal ranges Mark-down optimisation Software installed at retailer Part of Oracle's Retail Suite

Regular pricing for whole categories Software installed at retailer Moving into assortment optimisation soon

Price image optimisation Software installed at retailer Part of SAP's Retail Suite

Way of delivery

Product diversification

Major retail customers

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

Source: Planet Retail

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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 retailers firewall.

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 companys standard layout for pricing or promotions. The employees in the stores are also able to override price with a custommade mobile solution within a predefined time frame if they do not agree with the suggested price changes. Simultaneously, the store merchandise system is updated with the new price information. Shoppers using mobile selfscanning 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.

Albert Heijn tests mark-down optimisation for perishables


Mark-down optimisation is widespread in nonfood 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.

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

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Capgemini

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.

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 Netherlands busiest forecourt store, the Shell Shop outlet near Amsterdams 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, Walmarts 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-Saturns 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.

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.

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

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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 retailers 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.

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4. RFID (Radio-Frequency Identification):


Back from the brink

t is not long ago that RFID technology has been expected to do nothing less than

RFID deployment described at this time that would not vanish even when the technology improved. 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.

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

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

The recent example of Walmarts 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.

Walmarts new approach towards RFID technology


In July 2010, Walmart started a new approach to implement RFID technology. The worlds 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 onshelf 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 retailers suppliers in Asia tag the clothes at the point of manufacturing with EPCglobals second-generation ultra high frequency (UHF) standard tags.

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Walmarts 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 stores stock room. Speaking with the RFID Journal, Myron Burke, Walmarts 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. Sams 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.

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.

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

Walmart RFID timeline


Jul-10 Feb-09 Walmart turns to a completely new approach towards RFID and starts tagging on item level (menswear and jeans) Procter & Gamble ends its highly touted practice of using RFID to track promotional displays at Walmart stores. 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. Walmart announces plans to adopt RFID for products delivered by its more than 1,000 Chinese suppliers from January 2009. 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 retailers requirements. As of 30 January 2009, Sams 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. Sams 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. Sams 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. Walmart starts to work with lift truck manufacturers to integrate RFID into its lift trucks. At that time, 1,300 of the retailers 3,600 US locations are equipped with RFID technology, but not yet the forklifts. 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. 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. Walmarts CIO states that moving forward the retailers 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. 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 Nestl Purina Pet-Care and Hewlett-Packard. With its DC in Mississauga, Canada, Walmart for the first time includes its international business in the RFID roll-out.

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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 retailers 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 Webers 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
Gerry Weber

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 Webers 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.

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

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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 RFIDsourced 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.

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 Groups facilities in Germany. The programme is part of Metro Groups 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.

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 Tnisvorst, 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 enables back-office store managers to know the exact stock level and ensure that no item has gone past its sell-by date.

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

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Metro Group

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

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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 & Spencers 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 RFIDtagged plastic trays pass by the RFID antennas directly and are read from the outside. The retailers 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: Weve 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 tags 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 mens 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 retailers 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.

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Otto Group phases out tagging at item level


While Gerry Weber and M&S invest heavily in RFID technology at item level, Germanybased 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 didnt see a business case for this in the long run. Otto Groups 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 Groups fashion suppliers had equipped their products with RFID tags already in the country of manufacturing. According to Dr Jrgen 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.

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 USbased Mojix with whom Rewe had already successfully completed a trial at its DC in Buttenheim in September 2009. With Mojixs 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.

Rewe Groups 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.

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

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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 systems 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 Rewes warehouse management system to provide RFID data to further business areas. Rewes 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.

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Market Potential of Different RFID Scenarios


Reusable RFID tag at item level / non-food

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

Costs

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

Resusable RFID tag at transport units / food

Source: Planet Retail

Retailers Savings

RFID on load carrier level RFID tags in the supply chain only make sense under certain circumstances. 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.

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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-ofstocks, 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 Walmarts 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 retailers stores are located, most likely a country with higher labour costs.

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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 SPARs outlets all over the country are permanently monitored. The technology is provided by Daily Service Tiefkhllogistik and has been exclusively developed in cooperation 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 DCs 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.

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5. Warehouse Automation: Machinery picks and packs more precisely


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

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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 Groups Lidl in Germany is the first discounter aiming to fully automate the picking and packing of ambient goods in one distribution centre, while Dansk Supermarkeds Netto in Denmark is looking for semiautomated 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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Schwarz Groups Lidl pioneers new way of warehouse automation


Schwarz Group-owned Lidl wants to be the worlds first discounter to fully automate large parts of its distribution centre. The automated picking system in the retailers 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 worlds first installation of the new automation technology which works differently from Witrons 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 Schfer. 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 visionbased optical recognition. This distinguishes the SSI Schfer 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.

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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 Schfers 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.

SSI Schfer

Layers are separated into single cases.

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

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SSI Schfer

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

SSI Schfer

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 Schfer solution from Witrons warehouse automation technologies that is already deployed at Kroger, Sobeys, Mercadona and Edeka. Witrons technology avoids robotics and simply pushes the cases onto the right place. With gantry robots, SSI Schfer now aims to handle about 96% of all ambient supermarket goods - more than the sites that are already automated with Witron technology can handle.

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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 Schfer 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 Schfer 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 Schfer 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 Witrons technology in Hamm while Lidl aims to pick and pack less than 1,000 different ambient SKUs with SSI Schfers 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 Schfer, 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 (Sd), 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 Sd 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 Sd: 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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Gebhardt

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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 Witrons solution for complete automation, the Order Picking Machinery (OPM), which has been installed at Kroger and Mercadona sites. Witrons 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 worlds grocery retailers to fully automate distribution centres and Spanish Mercadona was the first one in Europe to follow.
The picking shuttle brings the worker into an optimal position to pick the cases and put them onto the pallet.
Witron

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.

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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
Witron

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.

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

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Witron

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Edeka further automated its warehouse in autumn 2010


In autumn 2010, Edeka further automated its distribution centre in Hamm with Witrons 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 retailers 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.

At the new site in Len, Mercadona will also deploy Witrons 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 Len goes live, Mercadona will operate four highly automated distribution centres in Spain. Witron has already realised two distribution centres for Mercadonas 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. Mercadonas third, highly automated distribution centre is the non-perishable product warehouse in Huevar (Seville). This distribution facility is equipped with a rolldocking 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.

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 Witrons Case Order Machine (COM) for perishables as well as for frozen food. Additionally, in September 2009, Mercadona decided to use Witrons Automated Tote System (ATS) for fully automated whole tote picking at its Len site. It will be the first installation of Witrons 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.

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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.

Swiss Migros on the way to operate the worlds 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 worlds 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 cooperative 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 Schfer, the same solution that Lidl in Germany has selected. In Neuendorf, Migros has already installed the Schfer Carousel System (SCS), a small parts storage systems from SSI Schfer.

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 worlds 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 Witrons 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.

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Warehouse automation cannot be used for all products


While warehouse automation solutions such as Witrons OPM and SSI Schfers 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 Schfer 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.
Crisps packed in unstable cardboard cases cannot be picked automatically.

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.

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