What's the difference between a tomato and an organic tomato?
About $1.50 per pound, more or less.
Any good retailer can probably give you the answer down to the penny. But chances are, not all of that retailer's cashiers can even tell those tomatoes apart, making real the possibility that the pricier organic tomato gets keyed in at the regular tomato price. A 2003 study from the National Supermarket Research Group found that cashier-caused loss is the biggest component of shrink—and whether by accident or by dishonesty, it rose 26 percent in 2002.
And even the most obsessive retailer might not know just how many tomatoes, organic and conventional, are out on the floor—or sitting in the stockroom, slowly expiring—at any given time.
Those are some of the problems the Universal Code Council Inc. hopes to help retailers solve. Based in Lawrenceville, N.J., UCC is the industry organization that nearly 30 years ago pioneered the development of the Universal Product Code barcode symbol.
Since 1995, the UCC has been working with retailers, food suppliers, trade associations and technology developers to build a new set of symbols that do something the current 12-digit UPC can't: They allow individual tomatoes to be labeled with a UPC sticker the size of a thumbnail. That code will identify the tomato as organic or not, allow it to be rung up at the correct price and, amazingly, also identify the supplier of that tomato, the case, pallet and lot the tomato came from, as well as the sell-by date.
Capturing more detailed identification from tomatoes and other perishables, including produce, meats, poultry, seafood, deli and bakery items, will be possible because of the UCC's new generation of Reduced Space Symbology. RSS—a family of smaller barcode symbols that encodes up to 14 digits—was specifically designed to address the grocery industry's need to place more product information on small and variable-weight products, says Greg Howe, director of food and beverage for the UCC.
"With RSS, you're getting better scan data, you're understanding your inventory better," Howe says. "If you look at what RSS promises to deliver to the market, it's the revolution the UPC [initially] caused all over again."
A Barcode Renaissance
On June 26, 1974, a 10-pack of Wrigley's chewing gum was passed across a scanner at a Marsh Supermarket in Troy, Ohio, making it the first item scanned at a checkout and ushering in a new era of category management. Since that time, the UPC has become a global standard for identifying products. Today, the UCC estimates, products carrying the UPC are scanned as part of more than 5 billion transactions around the world each year. UPC codes have made the checkout process easier and helped the supermarket industry save billions of dollars annually—money saved because the UPC eliminates product identification and pricing errors, is faster than hand keying, and enables grocery stores to better track and manage their inventory. But the barcode that changed the world of commerce has its limitations. Among them: a fixed size and format that prohibits it from being used on loose fruit and produce.
To compensate for this, the Price Look Up number was developed. PLUs are four- or five-digit numbers (four for regular items, five for organic) that cashiers hand-key at the register. They identify the product generally by type—tomato, lettuce, cucumber or apple, for instance. There's no accommodation for brand. In addition, its use requires that cashiers memorize the PLU codes for fast checkout and guess the item if the sticker is gone. How often does human error come into play? It's a question that retailers are hard-pressed to answer, but the UCC estimates that such errors can cost 1 percent of category sales.
"To the naked eye, it's just hard to differentiate if it's a regular or organic product," Rowe says. "The clerk may just look at an apple and say it's a 4016. If it's an organic product, now a retailer stands to lose money on that transaction. On the other side, a consumer can get overcharged. Having a barcode eliminates that problem."
Another limitation of the UPC is its inability to provide more detailed information about variable-weight products, such as meat, poultry, deli items and seafood. Until now, the UPC could only encode the commodity information—ground beef or T-bone steak—and the price. The lack of supplier information inhibits a retailer from taking full control of his or her inventory. And that's a problem when you consider that spoilage and shrink can account for as much as 15 percent of category sales, the UCC notes.
The RSS barcodes allow retailers for the first time to track perishable goods—which typically account for up to 50 percent of store sales—from shipment to the point of sale, Rowe says. And that means retailers can, also for the first time, compare the store's point-of-sale scan data against their records of goods received to get a true measure of inventory at any point in time.
An August 2001 study conducted by the UCC and the Chicago-based Perishables Group Inc. found that using the RSS labels will result in annual operating savings for an average 100-store chain of $4.65 million ($2.32 million in produce; $2.33 million in meats). And RSS' accuracy translates into a savings of more than $7.3 million in shrink dollars for those 100 stores.
But the benefits of RSS are not limited to large chains, Rowe adds. The cost savings from reducing shrink and spoilage improves the bottom line for all retailers. "The cost is part of the process of upgrading the system," he says. "But by reducing shrink, it will help reduce your costs even if it takes a period of time for your investment to pay off. You are reducing shrink as opposed to maintaining a level of shrink on an ongoing basis."
RSS also promises to give retailers better information on their customer purchase patterns, simply because it captures more detailed sales information. RSS also benefits consumers by aiding in food safety. Since sell-by-date information can be encoded into the barcode, cashiers will be able to alert consumers at checkout that a particular product has passed the expiration date. In the event of a food recall, food suppliers can work with retailers to track down tainted goods. That adds up to a quicker response time to food safety concerns, enabling "retailers and suppliers [to] react faster, minimizing the negative outcome," the UCC and Perishables Group found.
Add to that the fact that RSS also speeds the checkout process and it's not hard to understand why major retailers and suppliers have been working with the UCC on the project. Participants include Wal-Mart, Wegmans, Kroger, A&P, PathMark, Winn Dixie, Giant Foods, Chiquita, Dole, Tyson, Hormel, Perdue, Foster Farms and Melissa's.
"In the future, we won't have to train cashiers on PLU codes, nor will we have to worry about incorrect PLU entries," Norman Mayne, president and chief executive of Dorothy Lane Markets, said after his family-operated grocery stores in Dayton, Ohio, completed the in-store pilot for RSS in 2001. "Most importantly, RSS helps get customers through the checkout lane faster. Your store can have great ambiance, prices and selection, but if the checkout process is long and cumbersome, all that hard work is for naught."
Since that pilot, numerous other retailers have been at work upgrading their systems to handle RSS, which will become a fact of life for many retailers in 2004, when the final technical work on the RSS standard is complete.
But the time to consider taking advantage of the new barcodes is now. In its 2001 study, the UCC and the Perishables Group estimated that the capital cost for retailers to upgrade equipment and software to accommodate RSS was about $2,600 per store, while the cost to purchase new equipment and software was about $62,000 per store. Those estimated costs may decrease as work advances by equipment manufacturers, including NCR, IBM, BASS Software, Hobart Scales, Bizerba Scales and others, Rowe says.
What must happen before a retailer can take advantage of RSS? Here's Rowe's checklist:
- Upgrade the checkout scanners to read RSS.
- Upgrade POS software to accept RSS data.
- Upgrade the scales in the meat room and service counter to support RSS.
- Add additional records in category management programs to accommodate the new company and item information that RSS encodes.
- Train cashiers to look for and scan items labeled with RSS.
Rowe acknowledges it may take several years for the majority of retailers to adopt RSS. After all, it took five to seven years after that pack of gum was scanned in 1975 for most stores to upgrade their checkout counters with scanners. But like UPC before it, RSS's adoption by the supermarket industry is not a matter of if but when, Rowe says. Simple business sense will rule. "You're making sure the right product is charged at the right price."
Connie Guglielmo is a freelance writer, editor and novelist in Los Gatos, Calif. Reach her at [email protected].
Natural Foods Merchandiser volume XXIV/number 9/p. 38, 42, 44