Future Store models advanced SCM, CRM

Waldemar Wiesner looks a bit annoyed. He’s just scanned a package of carrots into a small touch-screen computer mounted to his shopping cart but the scanner wouldn’t identify the product.

“This is the fourth item from the produce section that I’ve been unable to scan today,” he said. “If it weren’t for the thousands of other products that I can scan directly into this device, I’d be inclined to ignore it. But the technology, which keeps a running tally of my purchases and helps me locate products, is actually pretty neat.”

Wiesner, a middle-aged consumer, is one of a growing cadre of shoppers using the personal shopping assistant (PSA), a small touch-screen computer, as well as numerous other cutting-edge IT retailing gizmos at the Extra supermarket in Rheinberg, Germany. Extra is a member of Metro AG group, which is using the store as a retail laboratory of sorts for its Future Store initiative, together with its some 40 hardware and software partners from around the globe.

The collection of technology in Rheinberg aims, among other things, at boosting store efficiency, enabling targeted marketing and ending long queues. Indeed, if there were ever a store where the acronyms SCM and CRM could be written in big, bold letters above the front door, here’s the place.

Of all the technologies being tested, two stand out: wireless and radio frequency ID (RFID). In one way or the other, the two are linked to just about every new technical gadget being tested in the store.

Cisco is providing a huge chunk of the hardwired and wireless IP infrastructure, including a content delivery platform that broadcasts audio and video content and data from a central source to any number of delivery points.

Wireless mobile devices

The entire 4,000 square foot building is covered by a wireless LAN (WLAN), based on the 802.11b standard. The network links all mobile devices, such as the PSAs, personal digital assistants (PDAs) and some stationary devices, such as electronic shelf labels (ESLs), check-out points and flat screen displays for product promotion.

The PSA is, essentially, a mini-computer attached to the shopping cart and linked directly to the WLAN. Manufactured by Wincor Nixdorf International GmbH, the PC includes a touch screen with integrated scanner that allows shoppers to scan their own purchases for quick payment at the check-out point. Purchase data is transmitted over the WLAN to the check-out terminal. Here shoppers give the clerk their reference number assigned by the PSA and pay without having to handle any merchandise.

Store employees are equipped with PDAs. The Future Store is testing Hewlett-Packard Inc.’s iPaq 5450 and 3970 models as well as Symbol Technologies Inc.’s PDT-8100. The handheld devices run Microsoft Corp.’s Windows Pocket PC operating system.

Linked to the WLAN, the PDAs allow employees to check inventory or reorder goods by directly accessing Metro’s merchandise management system at any time and any point in the store. The next phase of development calls for the PDAs to receive ‘soft phone’ functionality, enabling staff to make calls in addition to sending messages or downloading information. The service will be based on voice over IP (VoIP) technology, as are all other hardwired and wireless in-store communication systems.

Electronic labels

Almost all products in the Future Store have electronic labels. These receive price information directly from the merchandise management system via the radio network using base stations located in the ceiling. Price information is transmitted simultaneously to the shelf and check-out point to avoid price differences due to erroneous labelling. The price labels are equipped with an easily legible digital LCD, battery and radio receiver.

Plasma advertising screens, serving as either a complement to or replacement for classic print advertising, offer multimedia information, including videos, about products. Linked to the WLAN, the displays allow product promotions to be steered quickly and selectively from a central point.

Certainly, one of the most talked about technical novelties of the Future Store is RFID. But it’s also one deeply criticized by privacy advocates, like Consumers Against Supermarket Privacy Invasion and Numbering (Caspian). They worry that such technology could create an Orwellian world where sales clerks or, worse, law enforcement officials could read the contents of a handbag with the wave of a wand. Consumer concerns about RFID have prompted one of the biggest names in the retail world, Wal-Mart Stores Inc., to scale back its ambitious plans for deploying the smart tag technology.

For the moment, though, let’s put privacy issue aside to have a closer look at what RFID is and why Metro and others are so keen to deploy the technology.

RFID systems are being used, albeit in limited numbers due to the cost of manufacturing the chips, for delivering packages, handling luggage and monitoring highway tolls. A typical RFID tag contains a computer chip and an antenna. Unlike bar codes, which need to be scanned manually and read individually, radio ID tags don’t require line-of-sight reading. So it’s possible to read hundreds of tags a second.

Moreover, when stimulated by a radio signal, the chip transmits a unique code to identify whatever product the tag is fixed to. This unique identifier carries not only the product’s universal product code (UPC) as bar codes currently do, but also gives that particular item its own unique identify. For example, instead of a bar code saying: “This is a box of Brand X detergent,” the RFID chip says: “This is box number 12345 of Brand X.”

If the difference is subtle, the impact is huge. A retailer, for instance, could quickly trace and remove a bad lot of canned goods.

Metro is using two types of RFID technology in the store: one operates at the 13.65-MHz high frequency range; the other uses the 900-MHz to 1000-MHz ultrahigh-frequency (UHF) band. The high-frequency RFID technology is used to track individually tagged items within a 1.5m range inside the store. The UHF version tracks pallets and boxes, and can read at a distance of up to 7m. Koninklijke Philips Electronics NV is supplying both systems.

Smart shelf

One new system being tested in the Future Store and involving RFID tags is the ‘smart shelf.’ Tagged items are located on shelves with embedded readers that communicate directly with the merchandise management system via the WLAN. The shelves automatically recognize when tagged goods are removed or replaced, and report the movement of goods to the system. A big advantage of the system is that shelves automatically trigger requests for fresh supplies.

In addition to tracking goods, RFID technology allows shoppers in the entertainment section to swipe tagged music CDs on a system that plays a music sample from the disk.

Another RFID application under testing is delivery. Pallets and boxes are tagged at Metro’s distribution centre in Essen and recorded as they pass through a gate in the Future Store. The system is designed to provide real-time information on warehouse shipments and shop-floor inventory levels.

A huge challenge, admits Gerd Wolfram, project manager of the Metro Future Store, is managing the data generated from the movement of tagged products – from delivery and stocking to selection and payment. SAP AG is testing an RFID inventory control system aimed at connecting every piece of RFID technology to the enterprise. Technology to crunch these numbers is being provided by Intel Corp., which, together with SAP, is a principle technology partner behind the Metro pilot.

If and when RFID tags replace bar codes, Metro foresees PSAs and check-out counters being equipped with tag readers. Readers integrated in the PSAs would automatically register what shoppers have in their carts. For those shoppers preferring not to use the PSA, purchases would be automatically recorded by check-out gates equipped with readers.

Of the Future Store’s nearly 40,000 products, only around 30 carry individual tags, including razor blades from The Gillette Co., cheese from Kraft Foods North America Inc., shampoo from Procter & Gamble Co. and some CDs.

Cost and privacy concerns

The day when radio ID tags push bar codes completely to the sidelines, however, could be several years away, warns Wolfram. The price of the chip is a big factor. It’s current cost between (US) 34 cents and 67 cents needs to fall to around 3 cents or even lower, he says.

If the price of manufacturing RFID chips is a concern now, the issue of privacy could prove a potential drawback in the long term.

Metro is aware of the privacy concerns linked to RFID, says Future Store guru Wolfram, and will do what is necessary to ensure that consumer’s privacy rights aren’t violated. But the company, he is quick to add, recognizes the huge benefits of this technology – for consumers and retailers alike – in terms of service and cost.