GTIN Called Obstacle to In-store Promotion
Editorial By Bill Bittner, President, BWH Consulting
In our efforts to enable greater efficiency in the supply chain, we have emphasized the physical characteristics surrounding the goods we sell at the store. For package goods, Global Trade Item Numbers (GTIN) are assigned (and reassigned) based on the packaging, net weight, and dimensions of the item being sold. The emphasis is on linking all the various physical containers associated with an offering so that replenishment and shelf allocation systems can take those into consideration when making their recommendations. Special labels are often an afterthought. GS1 recognizes the need to differentiate these labels during checkout, so labeling is a factor in deciding the GTIN but this is where things begin to get complicated because not everyone appreciates the distinction.
Labeling such as cents-off or pre-priced and special holiday labels are all variations of a physical unit. It used to be (before GTIN’s) that for a manufacturer to run their own in-store promotion they just slapped on a different label. All they had to do was notify the buyer / merchandiser that a special label was beginning to ship in place of the regular and in most cases (no pun intended) the retailer was more than happy to accept the incremental sales because the label variation (e.g. pre-priced) might even give them operational advantages because it didn’t require price marking.
Most people outside the retail business and perhaps too many within it equate the GTIN to the item. Business practices have been built around the concept that a new GTIN is the “same as a new item” and fees are associated with introducing it. Instead of the retailer welcoming the promotion label they have built a barrier to its acceptance. Instead of a promotion label being a win-win for both parties it has become a nuisance with costs at both ends to get the new GTIN in place.
Although it is a little bit of hype to blame this all on the GTIN, I believe there has to be a concerted effort to reduce the misunderstanding of what it represents. Instead of thinking of the GTIN as an item we have to appreciate that it is really a selling unit and the same item can have many GTIN’s based on how many labels are in circulation.
This means efforts to do replenishment and measure performance cannot be done strictly on GTIN. Perhaps the real culprit in all this is not the GTIN, but the way we think of product hierarchies. We tend to think of the hierarchy like a funnel, broad at the top with ever narrowing classifications until we get to the item at the bottom. Maybe a better perspective is an hourglass with the item at its waist. The top classifications narrow the perspective down to the product, brand and generic size (small, medium, and large). At the waist of the hourglass is our traditional item. On the bottom are the various net weights and labels that represent it. Business practices, replenishment systems and data bases would all be built around this new understanding that an item can really be made up of multiple GTIN’s or selling units.
Moderator’s Comment: Do you agree with the author’s assessment as the current use of GTIN as an impediment to in-store promotion? If yes, what can be
done to mitigate the impact of the GTIN and remove obstacles to effectively promoting products in stores? –
Bill Bittner – Moderator
The retailing business has such wide variation in its technology adoption skills! I have a supermarket client who has trouble replenishing imported groceries because his sources in Israel “save money” by using the same bar code for every product. The retail industry needs a neutral certification organization that software suppliers, financial suppliers (such as credit card processors), packaged goods suppliers, wholesalers, farmers, and retailers could rely upon to test and approve, based on published standards, appropriate performance for systems, bar code labeling, data transmission, etc. There are some standards out there, but there is no UL-type organization empowered to label software, etc. as “compliant” or “not compliant.” So reporting, procedures, and processing is inconsistent, which leads to damage.
Although I have not worked much with the GTIN, yet, this is not a new problem. It is very much the same problem that the UPC presented when trying to clearly identify the forms of the product and match supply chain to consumer perception of what an item is.
This has been an issue that many retailers attempted to solve by simply using their stock code rather than the UPC to identify items. This worked until it reached the shelf and everyone realized that you could not identify an item by it’s stock code by looking at it.
I am not sure what the solution is, but I would celebrate the day that there is a solution that can clearly identify selling units universally so they can be linked to all of their parent and children variants and finally make real improvements to data integrity.
I hope they get it figured out before system changes make the conversion too cost prohibitive to manage. I did think that the GTIN was supposed to make this transition. Sounds like it isn’t there, yet.
Interesting issue Bill. I think for promotional purposes, at least, there are alternatives, like instantly redeemable (on-pack) coupons that, if I understand the issue correctly, would allow a cents-off promotion on-pack without changing the GTIN. It may also be easier for a brand manager to execute than put through a packaging change. (Mandatory plug here for the quick execution and impact of an online coupon campaign as well!)
But many other forms of promotion, % free, decorative box, or whatever, would be affected. I’m not familiar enough with GTINs and the shelf space and inventory systems they drive, but I will make the general comment that technology is supposed to enable business practices, not dictate them.