Canadian Groceries Rely on Electronics To Catch Up With US
WAL-MART is coming to Canada and Price Club is already here.
The grocery industry is worried that Wal-Mart Stores Inc., which will open 122 stores in more than 80 Canadian communities starting September, will eat into its market share. Its concern is founded: Big warehouse chains have already taken a slice of the market with their low prices.
``There is no question that the US is moving into the Canadian market,'' Doug Smith, president of Kraft General Foods Canada, told a June convention of food executives in Toronto. ``Witness Wal-Mart and Home Depot. They do enjoy a cost and price advantage. They are already employing many ECR techniques.''
ECR means efficient consumer response. The term was coined in a January 1993 study done for the Food Marketing Institute, an industry lobbying group in Washington. Its definition: using computers, modems, and other electronic management techniques to take the fat out of the grocery business.
``The object of ECR is to take the inefficiencies out of the system from the farm to the table,'' says Rick Britton, vice president of William M. Dunne & Associates Ltd., one of Canada's largest food brokers. ``There's nothing magic about this. ECR is just the acronym the American grocery industry has invented for shifting to electronic commerce.''
Electronic commerce means using computers - from the scanner at the checkout counter to sending invoices computer-to-computer over phone lines. It is the way Wal-Mart and other warehouse stores already operate.
Mr. Britton says many Canadians continue to worry about the giants. ``Wal-Mart is coming: How do we do business?'' they ask. He suggests doing what CARA, a large Canadian fast-food company, did in January: It told its suppliers to go electronic or forget about doing business.
It may be expensive at first, but fine-tuning the grocery industry in Canada will save a minimum of $3 billion (Canadian; US$2.18 billion) in annual inefficiencies, by some estimates.
ECR combines a number of different technologies to make the grocery system work better. One of the major ways is to follow Wal-Mart's example and cut inventory. According to a company spokesman in Toronto, Wal-Mart moves a large percentage of its products from the supplier directly to the store. That way there are fewer warehouses in the middle.
The chain stores and grocery suppliers have emphasized from the top that ECR is going to take hold in their organizations.
``ECR is a series of initiatives under one umbrella,'' says Doug Stewart, president of Sobey's, a large grocery store chain based in Halifax, and a member of the committee of 24 top Canadian grocery executives who are proponents of going electronic.
Canada was the first country to introduce scanning at the grocery store checkout as part of a joint project between Steinbergs, a now-defunct Montreal-based grocery chain, and IBM in 1974. Mr. Stewart was the project leader.
To run a modern supermarket, he says, you need perfect data from the cash register. But of course there are problems.
``One of the things we've found is that data is only as good as its integrity,'' Stewart says. ``Sometimes the symbols don't read well so our cashiers, being practical people, will compensate and just ring it through.
``There is also a training issue with our cashiers. They may not scan every item and [they may] take shortcuts. People think they are scanning well and that is not the case.''
SUPERMARKET managers are now looking to the United States to see how to fine-tune the system in order to get to the so-far elusive goal of 100 percent accuracy.
There is general agreement that the US is ahead in electronic technology at the grocery store, but Canadians are convinced that they can catch up, learning from mistakes the Americans have made.
Britton says the big weakness of the American approach is that in the US, not all ECR systems are created equal. ``The American ECR systems are proprietary - Wal-Mart is different, Super Valu is different,'' he says. ``Each supplier has to build an individual interface. Canada has been just far enough behind to reap huge benefits.''