Digital Networking: Hannaford Bros. is a Cut Above

If a handful of sirloin steaks is nearing the sell-by date at the Hannaford Bros. supermarket on Plaza Road in Kingston, N.Y., assistant manager Mark Hayward knows just what to do: To quickly move beef, chicken or pork off the shelves, Hayward prints out bar-coded discount coupons on a wireless handheld device and affixes one to each package of meat. When a customer checks out, the bar code is scanned and the discount information is transmitted to a data warehouse for storage and analysis at Hannaford’s headquarters in Scarborough, Maine.

The store’s butcher can access this sales data through an application that runs on an in-store database that pulls the information from the corporate mainframe. Knowing that there’s a surplus of, say, lamb chops, he will cut fewer for the following day.

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This may not sound like the last word in high technology. But such instant data transmissions make it possible for Hannaford and other grocers to hold their own in an industry well known for its slivery profit margins, which hover between 1% and 2%, according to the Food Marketing Institute, a trade association that represents food retailers and wholesalers.

For supermarkets and other traditional retailers, technological advancements in the last decade have transformed both customer service and business operations. Ten years ago, sending information continuously via a reliable network was simply not possible, according to Lee Holman, vice president of product development at IHL Consulting Group, a Franklin, Tenn., research and consulting firm that specializes in retail and hospitality technology.

Using software in a store that relied on a central server for processing was a “pipe dream,” Holman says. Many retailers didn’t even have a CIO or VP of information technology, let alone a voice heard by the board, he says.

As retailers built or acquired more stores, they added transmission lines and storage servers to create distributed networks with little regard for how such a computing strategy could scale. “Getting the system to work in the near term definitely took precedence over anything else, including future scaling,” Holman says.

In the last decade, retailers have adopted numerous technologies, but none has changed the landscape more than advanced data networks, according to several retail analysts. “Persistent broadband between the home office and stores makes retailers much better able to react to changes, troubleshoot and grow faster,” says Paula Rosenblum, vice president of research and content for Retail Systems Alert Group, a research firm based in Newton Upper Falls, Mass.

Analysts attribute the rise of pervasive retail networks in the late 1990s to a few factors: an unexpected price drop in broadband connectivity that meant a month of service cost about half as much as dial-up connections (about $100 per line per month); a surge of managed service providers that had the capacity to build large, scalable networks; and a technologically advanced, threatening competitor in Wal-Mart.

For non-grocery retailers, returns management has been one benefit of new and improved infrastructure, says Nikki Baird, senior analyst at Forrester Research. Customers at stores like Best Buy and Ann Taylor can return items at any store, regardless of where they were purchased. Sales personnel can locate the exact transaction in a central server via the point-of-sale system by swiping the credit card used to purchase the products.

It’s the network connection between the store and the home office that makes this service possible. That’s good for customers, who are no longer limited by location, Baird says, and it’s also good for retailers: Companies can analyze returns information for patterns, such as “serial returners,” and then implement policies to prevent the culprits from making additional returns.

Inventory lookup is another area that has offered retailers the opportunity to “save the sale,” Baird says. For example, if one Nordstrom’s store doesn’t have a shoe in the customer’s size, a salesperson can access all Nordstrom inventory via a persistent network connection and arrange to have the desired shoes shipped directly to the customer’s home.

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