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O, Supermarkets

BY Jeff Green

When we think of our neighbors to the north in Canada, there are plenty of iconic symbols and traditions that come to mind: hockey, moose and the Mounties to name a few. When it comes to retail real estate in Canada, something else that could be considered “iconic” would be the fact that many regional malls there often have supermarkets as their major anchor.

What’s interesting to me is that mall supermarkets have been a reality in Canada for 40 or 50 years, yet here in the states, you rarely — if ever — see a supermarket at the regional mall. It’s amazing when you think about how dramatically different the shopping center development model in Canada is from the U.S. model. I’ve been asking myself lately, “Why haven’t supermarkets caught on in regional malls here like they have in Canada?”

To start with, I think the U.S. mall concept has always been a bit more rigidly defined compared with the Canadian model. We tend to look at our regional shopping centers in very black and white terms: as destination retail environments. To a certain extent, I think we might be stuck in tradition; we as consumers expect our supermarkets to be at the local strip malls and neighborhood centers, so they are. I also think there’s always been this feeling that the retail mechanics of supermarkets don’t promote cross-shopping, which is very much expected from our mall tenants, especially the anchors. Anyone who has tried to do a little leisurely window-shopping with a bag full of frozen groceries in their arms understands what I’m talking about. There’s also the fact that most supermarkets, even a small or specialty grocer, requires a fairly large parking allotment, which can be hard to achieve at a regional mall.

From my perspective, grocery owners/operators aren’t necessarily averse to exploring mall locations, it’s more that developers have had a hard time really seeing how it could work. But, I think developers around the country are realizing that, in order to have a truly successful regional mall, you need neighborhood components that can help establish a diverse and engaging mix of uses. Even without an optimal cross-shopping dynamic, these “necessity-based” tenants do bring people in, creating tremendous exposure for the center.

As an industry, I think we need to start getting away from our inflexible mall definitions. Going forward, I see centers becoming more “hybrid,” with a mix of traditional and non-traditional uses. In some ways, the emergence of lifestyle centers and other mixed-use venues has already started to break down traditional definitions of what a mall should look like. And, with discounters like Costco starting to move into regional shopping centers around the country, we’re already witnessing the beginnings of a change. Even Aldi recently made its U.S. mall debut with a 20,000-square-foot store in Westfield Chicago Ridge (Chicago Ridge, Illinois).

Things definitely won’t change overnight. I think it will probably be more like a 20-year process, so you won’t have to start dodging grocery carts … yet. I do think, though, the Canadians clearly know something we don’t. After all, it’s been working for them for decades now.

What do you think? Is this the beginning of a more grocery-centric American mallscape? Can you think of other examples that show we’re heading in this direction? Email me at [email protected].

Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.

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DataBar: Is your supply chain prepared?

BY CSA STAFF

By Jane Fazzalari

Since the global standards organization GS1 first announced its plans for DataBar — a new labeling system that stores massive amounts of product data — retail industry stakeholders have been discussing its potential impacts. Major retailers such as Target and Walgreens have already started replacing the standard UPC code on their coupons with DataBar bar code and updated their POS systems according to accommodate the new labelling system.

Capable of holding 14 Global Trade Item Numbers (GTINs) and up to 74 application identifiers, DataBar labels can carry much more information than traditional EAN/UPC labels, including serial and batch numbers, processing facility of origin, manufacturing standards, expiration dates and other details. All this information is encoded in a small, flexible format that can be resized for many specific product applications.

DataBar labels can be used in open global trade, on any product, by 2014. But already many companies are exploring its usefulness for these and other applications:

  • Dairy, fresh produce and other perishables that have short expiration dates
  • Products that are manufactured according to kosher requirements and other strict standards
  • Small products, like jewelry, where an EAN/UPC label might be precluded by size
  • Hardware or other products with an unusual shape that makes them hard to label
  • Pharmaceuticals and other products that have recall concerns — making the processing facility and batch number critical
  • Fashion and apparel products which could be coded to reflect distinct dye, fabric or sewing batches that may vary across multiple production runs

According to GS1, within the next three years every consumer products manufacturer and retailer should be prepared to manage transactions using DataBar-enabled technology. Whatever the eventual acceptance level of this emerging labeling system, it does hold promise for many companies who could benefit from having easy access to volumes of information at the individual product level.

However, before your business fully embraces the DataBar concept, it is critical to ask: Are we prepared to manage this new volume of granular product data? How can it help our supply chain operate more efficiently, improve customer service, protect margins and accomplish other key strategic goals?

More data: An obvious benefit for retailers
As anyone who works in retail is aware, store-level point-of-sale (POS) data is often filled with inaccuracies because of shrinkage, expired products that will remain unsold, damaged packaging and other issues. Manual corrections consume precious time and money, while throwing off the accuracy of the entire supply chain.

By maximizing item traceability, DataBar labels can help minimize errors and provide a highly accurate picture of actual store-level sales and on-hand, sellable inventories. Retailers can maximize their profits by displaying and selling items according to expiration date, instead of having consumers reject expired products, or products approaching their sell-by date, in favor of newer items. The value of traditional EAN/UPC barcodes is limited for items with varying expiration dates, because they contain only minimal product information. While DataBar labels can’t stop consumers from “shopping from the back of the shelf,” the freshness information encoded in the DataBar label can help retailers understand the impact of this behaviour on their inventories.

DataBar labels also enable retailers to track and study the impact of markdowns and waste across all their products. When older products are discarded as waste, retailers can track this obsolescence in real time, instead of waiting for individual stores to manually process their inventory corrections. As a result, they can make more exacting purchase orders that minimize waste and maximize profit margins.

As retailers place more and more emphasis on extremely fresh categories such as bakery items and prepared foods, new DataBar labels can have obvious benefits. By tracking sales of these very fresh categories at the item and shelf level, the DataBar labeling system can help retailers manage demand and maximize margin. For example, retailers can code fresh products so that after a certain period, the price is marked down automatically. They can also more effectively manage multiple deliveries of identical items delivered on the same day — distinguishing between produce delivered at 6:00 a.m. and produce delivered at 4:00 p.m. The conventional inventory rule of “first in, first out” is not always observed when shoppers are making choices — and DataBar can reveal what is really happening in the aisle.

Because their small size makes DataBar well-suited for individual products, this new labeling system can also save retailers the time and money that is often invested in breaking down manufacturers’ or shippers’ cases and relabeling individual products. With DataBar labels already affixed at the item level, products can quickly be unpacked and moved directly to the retail shelf.

Cases can also be packed to include mixed units, with DataBar providing the capability to track which items are actually selling. If there are continuing issues with deliveries — for example, certain produce is always arriving bruised — the granular information encoded in the DataBar label simplifies the process of tracking these errors back through the supply chain, making it possible to eliminate careless shippers and other problem vendors that are affecting sales performance at retail.

While it remains to be seen whether DataBar will truly be embraced by the worldwide retail industry by 2014 — which is the goal of the GS1 organization — one thing is certain. Combined with advanced supply chain solutions that are designed to manage and apply data in a strategic manner, the new level of information provided by DataBar has the potential to deliver significant benefits for many manufacturers and retailers. This new item- and shelf-level labeling system has the potential to raise the bar in the retail industry — but only you can decide if DataBar is the right choice for your own business.

Jane Fazzalari, VP, Retail Industry at JDA Software.

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New leadership era begins at Costco

BY CSA STAFF

ISSAQUAH, Wash. — First it was Steve Jobs, and now Costco’s legendary co-founder Jim Sinegal is stepping down as CEO.

He plans to retire effective Jan. 1, at which time current president and COO Craig Jelinek will assume the top job. The company telegraphed the move back in February 2010 when Jelinek, 58, was given his current responsibilities so analysts took the news in stride when it was officially announced Thursday morning in conjunction with the release of sales results for the month, quarter and fiscal year ended Aug. 28. Sinegal, 75, and Jelinek have worked closely together during the past 18 months, according to the company, and Costco co-founder Jeffrey Brotman, 68, will continue to serve as chairman.

The transition isn’t expected to result in any type of new strategic direction due to the fact that it is being made from a position of strength with Costco reporting some of its best financial results in years. In addition, Jelinek is a 28-year Costco veteran steeped in the company’s ways who began his Costco career as a warehouse manager in 1984, the year after Sinegal and Brotman founded the company. He has since served in every major role related to Costco’s business operations, most notably as EVP merchandising from 2004 until 2010 when he was given his current responsibilities and named to the Costco board. To further ensure a smooth transition, Sinegal will remain with Costco in an advisory capacity through January 2013 and in all likelihood will continue to serve on the company’s board as he will stand for re-election at the January 2012 shareholders’ meeting.

“I have total confidence in Craig’s ability to handle his new responsibilities and feel we are fortunate as a company to have an executive of his caliber to succeed me as chief executive of Costco,” Sinegal said in a prepared statement.

News of the leadership transition overshadowed Costco’s otherwise solid sales results for August and its fiscal year ended Aug. 28. The company said sales for the month increased 17% to $6.9 billion for the four-week period ended Aug. 28. Results were aided by inclusion of sales from a Mexican joint venture without which the sales gain would have been 14%. For the year, sales increased 14% to $87 billion or by a less 11% if Mexican joint venture results are excluded.

Same-store sales for August, excluding gas, were 6% in the U.S. For the quarter and the full year comps increased 6% and 5%, respectively. Internationally, same-store sales on a constant currency basis and excluding gas increased 11% in August and 10% for the company’s fourth quarter and fiscal year. The company plans to report fourth quarter and fiscal year results on Oct. 5.

Costco ended its year with a total of 592 clubs, including 429 in the U.S., 82 in Canada, 32 in Mexico, 22 in the United Kingdom, nine in Japan, seven in Korea, eight in Taiwan and three in Australia.

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