Walgreens to Track Displays
By George Anderson
A lack of in-store compliance with manufacturer promotional programs may be a thing of the past now that Walgreens, in partnership with 15 package goods companies, is rolling out a system to track displays in the drugstore chain’s more than 5,000 stores.
The pilot program will involve placing radio frequency identification (RFID) chips on displays to electronically track when, how long and where the merchandising units are placed in stores. The units will enable manufacturers to time displays being put up with advertising and promotional programs and to alert local account people when stores are not in compliance.
George Riedl, senior VP-marketing for Walgreens, told Ad Age that the RFID-enabled displays can help the chain and its partners “customize merchandising on a store-by-store basis and ultimately increase sales and profit per square foot.”
“It also will help both our own purchasing department and our vendors evaluate past promotions and plans for future programs,” he added.
Ken Harris, managing director of Cannondale Associates, said, “This could be perhaps one of the most important new developments in promotion materials in the last 20 years if it works. It provides real-time feedback on what’s working and what’s not and could be an exceptional tool for manufacturers to use.”
One of the concerns with the displays is cost. An anonymous person Ad Age reported was familiar with the system said the “semi-active” RFID tags needed for the displays cost $6 each compared to less than $1 for the passive tags being used in studies elsewhere.
Robert Michelson, CEO of Goliath Solutions, the display system’s creator, would not publicly comment on the cost.
Moderator’s Comment: What do you see as the opportunities and issues facing Walgreens and its CPG partners in connection with the use of the RFID-enabled
displays? –
George Anderson – Moderator
It’s an odd commentary on Walgreens’ organization. Does this mean that the company and its suppliers have so little faith in the staff that they need to track the evidence of crisp compliance? Why not install internet-enabled CCTV cameras in every store so that suppliers, management, and the customers can see the merchandise on the shelves, the cashier lines, and the number of people waiting for the pharmacist? The cameras could be randomly monitored by low-cost outsourcing staff in Asia, who’d track customer service issues, shoplifting, cashier fraud, and store management performance.
All very good discussion — as always, what is the Value? Value = Benefits / Price vs. Competition. Building the “benefits” part of the equation, given the fixed price/cost of $6 for this tool will drive up the value. I believe that there are all of the benefits suggested, and more. We have suggested this to clients and audiences across the country numerous times. The value of passive and active RFID, needs to be explored and quantified based on all of the benefts that can be provided.
Active RFID tages can be used to carry and communicate information to consumers and retailers. They can be used in conjunction with new promotions. They can communicate important store data. They can monitor time and temperature, shock and vibration information. These tags can potentially help to drive top line and bottom line results.
Something tells me that Walgreens already knows all of this!
The article concerning Walgreen’s use of RFID to track product displays leaves me with some questions that perhaps can be answered. It seems unlikely that the only use Walgreens and Goliath Solutions has for RFID is to track placement and sales performance of product displays. Based on the information I have seen, out-of-stock conditions on the shelf and in the backroom were reduced by about sixteen percent when using RFID in a controlled environment. I have also read there are consumer groups that are concerned about RFID since the retailer may be gathering too much information about the consumer. Having said all of that, my question is whether Walgreens is perhaps looking beyond displays. The cost factor in my mind has a lot to do with the fifteen CPGs being tracked, since I am assuming margins, turnover, inventory and many other factors were considered before a selection was determined. Can the fifteen CPGs be identified? Wal-Mart is moving quickly into RFID and others like Walgreens are active. I think retailers will follow and, as they do, cost will decline as production and technology increase. I am new to RetailWire and have been very impressed with the format and information. Hopefully, someone can answer my questions. Thanks
What an absolutely fantastic product. There are three primary factors that determine the effectiveness of a promotion (disregarding competitive reaction): size of price reduction; media exposure; and in-store display. The first two were always pretty well understood (although media performance required some monitoring) but store performance was always a question mark.
Looking at their website (www.goliathsolutions.com), it appears that this solution will not only be able to detect the arrival of the material but its placement in the selling area. I wonder if this could be expanded to monitor other activities in the store. Then the question becomes, who owns this data? Sound familiar? It is kind of where we have been with customer data for a long time.
The most amazing thing is how they have addressed the typically challenging exercise of “getting from here to there.” The tag readers are battery operated so they can be installed without a power outlet and the data can be transmitted without using the retailer’s data network. It sounds like the only thing that needs to be done in the store is to hang the readers up somewhere in a corner.
Great idea, my kudos to the developers.
Well, it’s nice to see other forms of advertising and promotion starting to be held to the same standards of micro-accountability that interactive has been held to for so long. The ability to know whether an ad was at least able to be seen as intended is going to be ubiquitous. Even television ads will have their day–with PVR buffers recording everything, advertisers will soon demand to only pay for impressions that were actually delivered, not some gross estimate of audience.
Our 2005 survey of In-Store Marketing Leadership shows “lack of adequate measurement” as one of the key barriers to effective in-store programming. We will discuss this more in the webinar on Monday, but we would expect this type of tracking data on display compliance to be viewed as extremely useful — at least by manufacturers. Of course progress in measuring consumer response and display effectiveness will be welcomed by all.
Isn’t this a bit like killing an ant with an elephant gun? As Mark points out above, there are CCTV camera-based applications that can tell you some information about whether a display is present, whether customers stop at it and other details, along with providing other functions.
Task management systems can also be used collaboratively with CPG manufacturers (i.e.: Did the display arrive? Yes. Did you put it on the floor? Yes.), accompanied by random samples of audits to solve the same problem.
Sometimes I think that much of what we hear about RFID is a solution looking for a problem. One unanswered question – how is the CPG manufacturer going to read this tag? Send an account exec into the store? GPS? And who is going to pay for that part?
Wouldn’t it be better to also know WHERE the display is set up, not just IF it is set up? And how about if it is properly set up with the right product/SKU’s and merchandising materials, toppers, tear cards, etc? I hear from clients that yes, their display was installed, but it wasn’t installed properly, restocked regularly, or set up in the right place where the right shoppers will see it.
Since I am not a certified retail industry specialist, maybe I too am missing something in this great discussion. But simply from the perspective of running an advertising campaign which has in-store promotional execution, I see what has been outlined using RFID technology to assist in tracking when the in-store display is installed is very useful information for the marketer to have. For instance, it’s verifiable proof that the in-store display is up and one has useful information in tracking the overall success of the campaign. I agree with Zel; just knowing that the display is up is good information to have. No, it’s not telling one the whole story, it’s just one more additional tool in measuring success.
First, in answer to Peter Fader’s comments — once you have collected the data on presence of the display, then you can integrate it with the POS data. This would enable better modeling of lift factors for display-only, display with ad, display, with varying discounts etc. Having good lift factors then leads to better forecasting and accompanying supply chain efficiencies on top of better promotion planning.
I guess the obvious isn’t being stated. Display compliance has always been hit and miss. Manufacturers pay allowances for many displays that never get built.
Finally, I think everyone has overlooked one of the most critical aspects of this story. That is Walgreens’ stated intent to “customize merchandising on a store-by-store basis.” Walgreens has recognized that item performance varies tremendously across stores. There is enormous opportunity to increase sales by customizing assortment and promotions BY STORE (actually it will be done by clusters of similar stores), but it is very difficult to do.
Store level customization will have enormous ramifications for CPG brands. For example, the traditional measure of distribution by ACV will be meaningless. It will be the QUALITY of distribution that matters. That means understanding the potential for your items for each STORE (or cluster), and ensuring that you have those items in distribution there.
Although I agree with Bernie’s comments that knowing what is selling is really the way to go here, for many manufacturers, just knowing that the display is up is progress. Can you really rely on the store personnel to make sure displays are set up and set up properly? How many great displays that are part of in-store promotional programs end up staying in the stock room, because no one at the store knows “who’s on first”?
If promotional money is to be spent based upon actual use of a system, then proof of compliance is required. What is the value of a $6 tag compared to the value and/or price of having employees or third party providers check and document compliance? The RFID may be cost effective. Beyond that basic business decision, however, is the more important question. Can the information provided by the tag be used to understand buyer behavior and the relationship between the type of promotion and buyer response? As with most innovations, the value depends upon what information is collected and how it is used.
I must be missing something here. All this will tell us is whether the display is present in the store or not. It tells us nothing about the actual sales of the displayed items, nothing about the customers who buy those items, and nothing about the impact on other parts of the store (or shopping basket).
This is a classic example of the kind of data collection that is “nice to know,” but not particularly critical to the retailer’s overall operation.
In a previous life, I owned a distribution company that worked with many of the nation’s largest retailers as well as many large CPG manufacturers.
As a “middle-man” I understood the retailers need for MDF funds and the reluctance from the manufacturer to give out funds when there was poor compliance at store level.
Whether or not RFID will be a solution is still to be determined. Will it be more effective than using mystery shoppers to audit? Will it be more effective than using a third party to put up the display? What is the more cost effective method?
In my opinion, what RFID might accomplish is more detailed tracking. More detailed measurement. And as we tell our clients, “if it isn’t measured, it doesn’t get done.” But that is only part of it. Once the information is reported, what will be done with it?
One thing is certain, if compliance is not improved, the day will come when the manufacturer will become more reluctant to part with the marketing funds.
Follow the money:
“One of the concerns with the displays is cost… the ‘semi-active’ RFID tags needed for the displays cost $6 each… the display system’s creator would not publicly comment on the cost.”
The problem of deploying any RFID technology on the sales floor is primarily cost. When the cost is low enough to replace bar codes with RFID tags, and readers are widely deployed for monitoring inventory, then this type of application will be practical. I’m no prophet, but five to ten years seems about right to me. Meanwhile, current technology WILL work adequately for research purposes, and investor funded demonstrations.