Most people don't consider the supermarket a high-technology haven, but if one company has its way, technology may play a bigger role in food shopping than most folks expect.
This week WhereNet Corp., a wireless technology company, and Sorensen Associates Inc., a research organization for the Fortune 100 consumer packaged goods industry, will join forces to present a retailing technology that has the potential to blow open assumptions about store traffic patterns.
In a pilot study now under way, small, computer-like chips called radio tags (Real Time Location System Radio Frequency Tags) from WhereNet are attached to both supermarket shopping carts and the store hand baskets -- giving retailers and their suppliers Internet-like clickstream data of what sites or locations in a store each shopper visits and how long they stay at the site.
The system, called PathTracker, tracks the movement of a shopper up and down the aisles, taking locations reads every four seconds and sending one million "blinks" per day of where each shopper went.
The WhereNet tags transmit their ID to seven sets of antennas around the store, and through a process of triangulation or tri-lateration algorithms the antennas determine the location of the tagged cart. The antennas are connected via coaxial cable to the in-store WhereNet Server and database which incorporates an API to link it to any third-party program and send the data on as it happens. The location data is mapped to a CAD layout of the store, called an electronic planogram, which shows the placement of more than 30,000 different products on the shelf. Finally, that data is integrated with the scanned data of shopper purchases recorded at checkout.
"What it amounts to is we have the X, Y, and Z coordinates for every product in the store," said Herb Sorensen, president of Sorensen Associates in Troutdale, Ore.
One of the first sacred cows of grocery merchandizing to be overturned by the data is the assumption that shoppers travel up and down each aisle.
"People do not go up and down the aisle. Typically it is an excursion, part way up and back is the dominant form of shopping that had not been recognized," Sorensen said.
Although there is a tremendous amount of research available on why people buy what they buy, there is practically no research on what led up to the buying decision, according to Peter Fader, professor of marketing at the Wharton School, at the University of Pennsylvania, in Philadelphia.
The PathTracker system adds a new channel of information for retail researcher departments to incorporate as they seek to increase sales. Tracking customer shopping patterns will also benefit the supermarket suppliers, one of whom warns that more data is only part of the solution.
"Technology opens the door, if the researcher is smart. If we don't get bogged down with too many gigabytes of information we can get some insights into how the American consumer has changed and help us to go to market and readjust," said Sandy Swan, director of brand and marketing information at Dr. Pepper/7-Up, in Plano, Texas.
Wharton's Fader couldn't agree more with Swan and, in fact, blames technology devoid of a systematic understanding of the industries in which it was deployed for the dot-com implosion.
"It is not spoken about much, but the dot-com failure was a result of throwing technology solutions at problems or industries that the company knew nothing about," Fader said.
According to Fader the basic behavioral patterns driving customer choice are well understood only by a handful of people around the globe who know what they are looking for.
"There are a lot of data warehousing folks without any understanding of the patterns," Fader said. "It doesn't get taught in business schools."
The major breakthrough came with e-commerce technology that allowed researchers to look at visit patterns along with purchasing. Fader calls the interplay between the two the "golden spike" akin to when the East Coast and West Coast railroad systems were finally linked in the United States during the 19th century.
"PathTracker pulls it all together. [We have] all the rich purchasing data and now we have the clickstream-type data we all know and have come to love," Fader said.
Another finding that surprised company executives was the fact that most shoppers shop the perimeter of the store, called the "race track" in supermarket parlance, rather than the entire store and that most shoppers enter an aisle from the back rather than the front and go no more than four feet down the aisle.
Another salient discovery is the fact that shoppers make their purchase not by product but by its location in the aisle and on the shelf.
The point three feet up and less than four feet in from the back on an outside aisle is the absolute best location, according to Ron Woddin, store manager for Troutdale Thriftway, the pilot store in Troutdale, Ore., a Portland suburb.
Wooden also said that as a result of the study, the store moved its bakery further back in the store. The tracking system revealed that morning commuters came to the front of the store where the bakery was located to buy coffee and a donut. By placing the bakery farther back and relocating the snacks along the aisle leading to the bakery sales of candy bars and chips have increased dramatically, Woddin said.
Other changes in the pilot store are also under way, with displays now facing back instead of toward the front of the aisle to accommodate most shoppers who enter aisles from the back.
Just as the Internet made a great deal of information available to the public and in a sense put the consumer in the drivers seat, a system like Path Tracker may make the store conform to what the consumer wants rather than the other way around, Fader said.
Up until now, shelf placement and design have been somewhat artificial, according to Fader, and the job of the merchandiser has been to try and push or pull a shopper down an aisle to where they want them to go. This will change.
"Putting the stuff where people are more likely to go is the big payoff. It runs contrary to what marketing managers do for a living but it is good for their shareholders," Fader said.
All parties agree that PathTracker will generate a huge volume of new information and that the question is where to take action on it. Certainly, it will radically change store designs and how the aisles are laid out, said Fader. But if the right decisions are made the return on investment can be dramatic.
Because supermarkets typically work on a 1 percent to 2 percent profit margin with a store that does $20,000, 000 in sales earning about US$200,000 a 1 percent increase in sales can double a store's profitability, Sorensen said.
The PathTracker system fee structure is not final yet, but Sorensen said it is in the neighborhood of $5,000 per month for a typical 40,000 to 70,000 square foot supermarket.
In related news Compaq's Non-Stop Division, formerly known as Tandem, is working with Sorensen in conjunction with Compaq's ZLE, zero latency enterprise, retailing efforts which also integrate many channels of information to improve marketing and merchandizing.