Web-based niche applications are getting their small pieces of the retail market
By Kurt Peters
Retailers invest a lot of effort into devising promotional campaigns with CPG manufacturers, including working out details about point-of-purchase displays, endcaps, and supporting signage inside and outside of stores. But the effort all amounts to nothing if store staffers don’t get displays up in a timely fashion or fail to install the correct signs, or if the consumer packaged goods company doesn’t deliver the product when it should.
Such lapses are common. BP Oil Corp.’s convenience stores, for instance, experience promotional execution rates as low as 60-70%. “That’s clearly not acceptable,” says John Anderson, U.S. manager of marketing and merchandising for BP Oil.
Thus BP Oil was open to trying out web-based POP display monitoring technology in its convenience stores when developer Goliath Solutions approached it nearly two years ago. After an 18-month test in five cities, the execution rate for POP promotions in test stores hit 98%, Anderson reports. The result: “We’ve optimized sales, improved our margin, increased our sales per square foot and increased same store sales,” Anderson says.
Invisible to the consumer
Using the web to help stores execute POP promotions and other special displays is only one example of the way the Internet is affecting store operations in subtle ways. From web-based central management of sign printing to monitoring how often the rest room door opens and closes, the web is having a big impact on store operations. And in some ways, the impact is as big as the impact that selling online has had. “More and more we see the best growth opportunities coming from these web-oriented companies that are not obvious to the end consumer,” says Todd Marcy, principal with Dolphin Equity Partners, a venture capital company that has invested in a number of Internet-based companies.
In many of the applications, the technology is strictly b2b and it’s likely that few people outside of those with a direct interest in the technology—or the outcome of the solution that the technology provides—even think about the problem being solved, much less know the companies that are solving it.
Take sign printing. Retail chains use millions of signs, and they all have to be coordinated with marketing programs and placed in the proper spots in stores. Office supply retailer Staples Inc.’s 1,100 stores, for instance, print more than 2 million signs a week, from signs hanging from ceilings to shelf price tags.
Wanting to streamline its sign printing systems, Staples implemented a web-based sign printing system from Seattle-based AccessVia nearly two years ago. The AccessVia Web dSignShop program allows retailers to load sign data at headquarters. Associates at each store download the sign data via a PC equipped with a browser. Previously, associates accessed a sign program via a green-screen computer terminal. Headquarters had to download software and print instructions to every store, which meant robust data connections to every store and maintenance and management issues at every store. In addition, the program was difficult to use. Staples had to a have sign-printing expertise at its help desk to answer calls from store associates.
Focus on the customer
With the web-based sign program, calls to the help desk have decreased by 90%, Staples says, while the timeliness and accuracy of signs have increased. Staples won’t put a dollar figure on the improvements. But Bob Madill, Staples vice president of sales and merchandising, says Staples has achieved multiple benefits from web-based sign printing. “The accuracy of pricing at the store level has increased and the consistency of presentation at the store level has improved,” he says. Noting that Staples has registered increases in store personnel productivity and increases in comparable store sales, Madill says, “The metrics have risen significantly and this has been a contributing factor. This allows our associate to spend more time interacting with customers.”
The major reason that associates are more productive is that the system is so easy to use, says David Hubbard, Staples director of visual merchandising systems and processing. “There are so many efficiencies in this system, things like prompting the user as to what to do next and showing the user in a visual way how to load the sign stock,” Hubbard says. In addition, the signs come into the system and out on the printer in plan-o-gram order, so the associate does not have to sort them before installation. “That kind of interaction didn’t exist with the previous system,” Hubbard says.
Further, a web-based sign program allows stores to change shelf labels more quickly as products change. “Especially when we roll out technology products, the features could be changing,” Madill says. “Instead of having a rigid template, we now have the flexibility to communicate that information as it changes.”
All stores need to access the sign printing program is an Internet connection and a browser-equipped PC. Stores pay a monthly fee for the AccessVia service, starting at $1,500 for a chain of 35 to 50 stores. The per-store fee goes down as the number of stores goes up, says Dean Sleeper, president of AccessVia. AccessVia’s 150 customer include Bed, Bath & Beyond Inc., The Sports Authority Inc., Target Corp., Kroger Co. and Safeway Inc.
Beep, beep
While the AccessVia system moves data from headquarters to store, Goliath Solutions uses the web to move data from the store to headquarters. Chicago-based Goliath Solutions provides a system of radio frequency i.d. tags and in-store sensing devices that feed data from the RFID tags to a web site that retail or CPG executives can access to make sure stores are executing marketing plans. “For our customers, being able to access this information over the web in real time is key,” says Robert Michelson, president of Goliath Solutions.
The battery-operated sending devices, about the size of a videocassette, read RFID tags within 100 feet. They can report not only that the sign or display has been installed, but also where within the store it is, so executives can make sure that they are in the agreed-upon places.
In addition, the program includes an alert system that flags stores that are not in compliance, meaning management can react quickly, Anderson says. “The way we normally check compliance is with field people,” he says. “We have one field person for every 60 stores, meaning it was very hard to make sure all stores were in compliance. Now I don’t need any field people and I have every store covered.”
The reasons stores fail to comply with marketing plans can be many, from a lack of adequate staffing at stores due to illness or just plain failure to show up for work to failure of the vendor to deliver the display or product at the right time. Information from this system can help manage those situations, Anderson says.
BP has not computed ROI, Anderson says—”That’s till being worked through because the technology is so new,” he says—but he notes that, in addition to less need for labor, test stores achieved better increases in same-store sales than did the chain as a whole.
Anderson says that, from BP’s point of view, installation of the system was easy. Goliath provides the RFID technology to the manufacturers of signs and display, installs the systems in the stores and meets with managers to promote the system, he says. “It was very easy for the store managers because they didn’t have to do anything over and above what they were doing already,” Anderson says.
As BP rolls out the technology, executives will be looking very closely at which products they want to monitor. “This technology is very good, but understanding what you want to measure and why is key,” Anderson says. “Measuring an item that is only 1% of your sales won’t get you to the promised land. Measuring an item that accounts for 8% of your sales will be much more effective. You want to be strategically looking at your best selling items.”
Senior level advice
While he won’t provide details, Michelson says the RFID system costs “in the single-digit dollar range per month per display.” He adds: “We wanted to price it at a fraction of what it would cost to use auditors to monitor displays.”
He reports that interest has been strong, with a drug store chain and a supermarket chain exploring the system. He also notes that Goliath believes there is a large market for its systems and an ongoing need. “A chain with 1,000 retail locations could have 200 different promotions going on in stores,” he says,
Goliath’s board of advisers include Tom Smith, former CEO of Food Lion, and Vern Brunner, former executive vice president of Walgreen Co. “That kind of expertise on our board makes us a more serious player,” Michelson says. In addition, Goliath in February received a $2.5 million investment from Checkpoint Systems Inc., a provider of RFID systems for tracking consumer products, the first outside funding.
A systems developer with a more ambitious plan of store monitoring is Siva Corp., which primarily serves the restaurant industry. Siva deploys a series of devices that deliver information via the web to management. Among its applications are sensors that report oven and refrigerator temperatures and issues alerts so remote management can make sure food is being stored and prepared properly. The company also has a number of customers who use the sensors to detect how often restroom doors are opened so an employee can be alerted when the restroom might need cleaning. The door-opening technology can also be applied so a central management team can know if someone showed up to open the store in the morning.
In using this technology, president Jim Melvin says management has to make decisions, much as those using the Goliath system must do, as to what’s important enough to monitor—and how often. “There can be too much information,” he says. “Managers have to focus on the three or four things that can make the most impact if improved over the next 90 days. Once that improvement is achieved, they can rotate to the next four or five most important things.”
Aside from behind-the-scenes applications in stores, many web technology companies are providing behind-the-scenes support on the web. Among Dolphin Equity Partners’ recent investments was participation in a $4.5 million round of funding along with Hudson Venture Partners in inQ Inc., a provider to online retailers of post-sale cross-sell and upsell technology.
Once a sale at a participating retailer is complete, inQ launches what it calls a chatskin—a live chat box that appears after the order confirmation. It offers the customer the chance to buy coupon books, discount packages or other products outside the retailer’s core offering. The chatskin’s appearance mimics that of the retailer’s web site, so the customer is unaware that the offer is coming from outside. Says Marcy: “It’s a good example of the kind of Internet technology by a company that consumers don’t know at all.”
kurt@verticalwebmedia.com
