February 17, 2009
P&G Pulling Tags on Promotional Displays
With
all the talk about read rates and various performance issues related to
radio frequency identification technology, the best information in the world won’t do a retailer or vendor
any good if there is a lack of human execution based on the findings derived
by the technology’s use.
A
case in point comes with the revelation that Procter & Gamble
has decided to stop placing EPC tags on promotional displays at Wal-Mart
Stores.
According
to a RFID Journal piece citing an anonymous source, P&G made
the move after becoming frustrated over a lack of compliance at store-level
even after it had identified issues with Wal-Mart.
"I
think they felt Wal-Mart should be doing more to live up to their end of
the bargain,"
said the source. "Why put the tag on if Wal-Mart’s not going to act
on the data?"
Paul
Fox, P&G’s director of global external relations, said,
"We’ve been working on these applications for close to 10 years. We
have learned that to secure sustainable benefits, the use of EPC requires
deep levels of collaboration between the manufacturer and the retailer, and
a commitment to use the actionable visibility provided by the EPC to change
business processes."
"The
work we conducted with Wal-Mart has shown that this use of the EPC can
deliver improved promotional effectiveness, better sales and, most importantly,
higher shopper satisfaction. That validation work with Wal-Mart is now
complete. But we will continue to focus on working with our retail partners
on collaborative programs that can benefit the shopper," Mr. Fox added.
While
moving away from tagging promotional displays, Mr. Fox said P&G believes "EPC
can have profound benefits for the retail/consumer packaged goods industry…
we continue to work with Wal-Mart on other EPC projects."
Discussion Question:
How do you interpret what is going on with the EPC tagging situation
at Wal-Mart? Shouldn’t there be plenty of incentive in tracking promotion
compliance and effectiveness to warrant the use of the technology?
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It’s easy to cut payroll. It’s hard to cut payroll and still get the work done. If Walmart’s folks can’t do the job in store after store after store, whose fault is that? If Walmart saw the economic value of the task, the payroll dollars would be there. How many retail chains get the work done only because the staff skips their breaks and works unpaid overtime? Yeah, there are lawsuits on that subject, but nowhere near the number of guilty parties.
And Walmart can’t see their shelves aren’t stocked and their displays aren’t erected on time? They have managers, field executives and TV cameras. They know exactly what’s going on, every minute. They don’t need RFID any more than a fish needs a bicycle.
Collaboration is key to driving execution in just about any business venture. Both Walmart and P&G can understand there is value to be derived for their respective line organizations measured by lift in sales, improvements in sustainability goals, decluttering the stores, and most importantly, meeting the consumers’ shopping needs.
Shopper insight is the holy grail in the middle of these initiatives. Getting at the data and driving actionable intelligence horizontally and vertically within the organizations and partner chains (including contract manufacturers who are packing the displays) is the where mutual benefits can be measured, analyzed and refined for the next implementation. It’s a process, not an event and P&G is sending the message that they want to be a partner but need reciprocal help on the execution side to realize promised benefits. If you are in a marriage it has to be a win-win.
Compliance usually happens more frequently on the side of the table where the funding is occurring.
I find it very interesting that a global giant like P&G would choose to go this route, especially with the other global giant Walmart! It’s refreshing to see a company stand up to Walmart and refuse to pour good money after bad into a process that, if followed effectively by both sides, is a phenomenal program with powerful, unlimited financial rewards.
Only an animal the size of P&G, with powerhouse brands consumers demand, has the ability to exercise their decision, based on the common sense strategy that as long as Walmart is going to allow their associates to “throw” the product on the shelf, without following the necessary processes to maximize the effectiveness of EPC.
But this also leads to the perfect storm of employing associates that are capable and responsible enough to follow the program; not to discount Walmart associates in the least, but they are charged with getting the product on the floor, as in “door to floor” immediately due to the velocity of the chain. To employ associates that can and will follow due process, they’d have to raise the average pay, resulting in higher costs to the consumers and the merry-go-round continues.
There are all kinds of technology issues remaining with RFID, but it has never been difficult to determine which stores were great on execution. The easiest way used to be to check the restrooms; of course outsourcing has made that a little less effective. But as the P&G experiment has apparently proven again, there is often a big gap between knowing there is a problem and eliminating it.
The interesting thing Walmart has to ponder is whether their salary structure is self defeating. Could they get better performance at store level by paying higher salaries, increasing the full-time labor mix, and making career development a priority? Interesting thought.
Monitoring stores for operational behavior has never been easy. The siren song emitted by EPCs has tempted some to hope for a solution less dependent on the armies of resources that were once called “supervisors” (retailer side), “sales reps” (supplier side), or “brokers” (somewhere in between).
What’s the real goal here? To make sure the promotional funds are earned or to increase the exposure of the promotion to the consumer? Seems like we’ve lost sight of an important thing in the effort to apply some sexy new technology to an old problem. Are EPCs the lipstick on the pig of store operations?
It is disappointing that retail execution is still a challenge after so many years of talking about it. As many here have said, it is the human factor. Technology is there when we are ready to utilize it properly. This is pure business process. I would like to see more tactical discussions with Retailers/CPGers around how to get this done. Stopping something that could work (EPC) because human execution isn’t happening is treating the symptom, rather than solving the problem. It is very possible to make this work, as we are seeing in other regions, like in the Nordics, where RFID is rolling out for fresh meats from the farm to the shelves. It can be done. Diligence is the key. Don’t give up.
Years ago when I worked at Sears, our biggest issue at corporate was trying to get compliance in the stores–and theoretically we were all part of the same organization with the same goals. Technology is a great enabler for getting lots of information quickly but is and always has been subject to the quality of information going in and the quality of action coming out.
Many retailers suffer from having data, but no insight. It appears Walmart has insight but not the will to act on it. Whether this comes from lack of ability or a calculation that says it will take more money to make it happen than it will bring in, I don’t know. I do know i respect P&G for understanding the limitations and refusing to throw good money at a problem if their partner won’t help them solve it.
We are working on our own story on this, but what happened is pretty clear – the EPC data is really only useful to alert Wal-Mart store managers that the display is not being executed correctly (not on the floor for the advertised date, etc.).
P&G is saying, barely between the lines, that it can’t force Wal-Mart to use the data, though P&G/Gilette’s own tests (when they took more direct responsibility for acting on the data) showed enormous benefits. (I believe the first test showed a 19% sales lift, mostly because the retailers just can’t do the execution very well – abysmally bad, actually.)
If Wal-Mart won’t change processes or act on the data, then the effort to tag the displays is simply a waste of time and money.
That is the story here, plain and simple. P&G sees enormous value, but can’t do it alone. Wal-Mart either just has other fish to fry, or simply can’t muster the organizational effort to make it work.
P&G is sending a big message here.
As usual, George nails what my father used to call “The $64 Question” on the head:
“Shouldn’t there be plenty of incentive in tracking promotion compliance and effectiveness to warrant the use of the technology?”
But perhaps we have to go just a bit deeper — and ask “incentive for whom?” Certainly the manufacturer has incentive. They are providing the initial funding for the activity. Likewise the retailer, or at least the HQ, has incentive. Any of the manufacturer’s funding they choose to pass through, as well as their internal effort and resource, are wasted if they don’t reach the consumer.
But the folks who have to execute better are in the stores and in the warehouses. Where’s their incentive?
When it comes to at-retail compliance–potentially the largest business improvement opportunity presently facing the retail consumer products industry–point solutions are pointless. The system of practices is everything.
This reported decision by P&G, if accurate, exemplifies the frustration held by many manufacturers with In-Store Implementation or promotions. There is no routine, repeatable, measured and collaborative practice to execute planned promotions in stores. Data on compliance, if available at all, arrives weeks or months after the fact.
Even the mighty Walmart, it seems, has so far been unable to master this challenge on behalf of its trading partners. It means that billions of dollars in trade and promotional funds are spent ineffectively, while we debate which brand of ID code to attach to the display headers.
It’s the practice that matters most here, not the choice of technology. For the past two years, the In-Store Implementation Network has advocated establishment of a fully collaborative “plan-do-measure” retail compliance discipline that would ensure real-time visibility and accountability. We cannot improve what we do not measure. Retailers – and that includes even Walmart – must step forward on this issue if we are to see real progress on retail effectiveness and shopper experience.
Our story (as noted in my previous comment) is now finished and has a bit of a different slant, and can be found here if any one is interested.
Liked this quote from our interview with P&G’s Paul Fox.
“If you are going to achieve those sustainable benefits from EPC, you have to be committed to changing business processes,” Fox added. “All we showed with our work at Wal-Mart was that the EPC can have a profound effect on merchandising effectiveness. We proved that. Now we are moving on.”
Ouch!
This may be a window into the soul of a retail giant. Walmart has always had a reputation of being single minded on pricing issues. Traffic generated by being great buyers and passing savings on to consumers provided tons of volume for suppliers. This worked as long as expansion continued but as expansion slows and Walmart tries to deliver bottom-line results, it would seem that maybe, just maybe, “traditional retail” is sticking its nose under the tent.
Could it be that Walmart is holding back promotional buys to sell at regular price after the promotion? This is an old retail ploy but even more frightening is the prospect that the grocery personnel brought in to Walmart when the decision was made to enter the supermarket business in a big way are dragging their old habits into Walmart. Are we seeing the beginning of supermarket retailing in Walmart? It’s worth watching!
As always, what happens in head office does not translate onto the floor. How any VP expects a hassled store manager and a spotty sixteen year old part-timer to implement head office procedure is always beyond me.
Case in point re: stacking of shelves, a case of 24 items is delivered to the store yet this item is supposed to receive a facing of two on the shelf with a maximum display level of 12 items. The stores system sees that the level of stock is down to 4 and orders in a case, the case is ready for night crew to pack and 2 items from the case of 24 are put on the shelf. This opened case now has to be brought back to store room and then stored until the system requires it again. How much work is that?!–put all 24 on display and be done with it! One step–one job, oh but no, it will take from other facings… Well you come down here and stack shelves!!
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It’s easy to cut payroll. It’s hard to cut payroll and still get the work done. If Walmart’s folks can’t do the job in store after store after store, whose fault is that? If Walmart saw the economic value of the task, the payroll dollars would be there. How many retail chains get the work done only because the staff skips their breaks and works unpaid overtime? Yeah, there are lawsuits on that subject, but nowhere near the number of guilty parties.
And Walmart can’t see their shelves aren’t stocked and their displays aren’t erected on time? They have managers, field executives and TV cameras. They know exactly what’s going on, every minute. They don’t need RFID any more than a fish needs a bicycle.
Collaboration is key to driving execution in just about any business venture. Both Walmart and P&G can understand there is value to be derived for their respective line organizations measured by lift in sales, improvements in sustainability goals, decluttering the stores, and most importantly, meeting the consumers’ shopping needs.
Shopper insight is the holy grail in the middle of these initiatives. Getting at the data and driving actionable intelligence horizontally and vertically within the organizations and partner chains (including contract manufacturers who are packing the displays) is the where mutual benefits can be measured, analyzed and refined for the next implementation. It’s a process, not an event and P&G is sending the message that they want to be a partner but need reciprocal help on the execution side to realize promised benefits. If you are in a marriage it has to be a win-win.
Compliance usually happens more frequently on the side of the table where the funding is occurring.
I find it very interesting that a global giant like P&G would choose to go this route, especially with the other global giant Walmart! It’s refreshing to see a company stand up to Walmart and refuse to pour good money after bad into a process that, if followed effectively by both sides, is a phenomenal program with powerful, unlimited financial rewards.
Only an animal the size of P&G, with powerhouse brands consumers demand, has the ability to exercise their decision, based on the common sense strategy that as long as Walmart is going to allow their associates to “throw” the product on the shelf, without following the necessary processes to maximize the effectiveness of EPC.
But this also leads to the perfect storm of employing associates that are capable and responsible enough to follow the program; not to discount Walmart associates in the least, but they are charged with getting the product on the floor, as in “door to floor” immediately due to the velocity of the chain. To employ associates that can and will follow due process, they’d have to raise the average pay, resulting in higher costs to the consumers and the merry-go-round continues.
There are all kinds of technology issues remaining with RFID, but it has never been difficult to determine which stores were great on execution. The easiest way used to be to check the restrooms; of course outsourcing has made that a little less effective. But as the P&G experiment has apparently proven again, there is often a big gap between knowing there is a problem and eliminating it.
The interesting thing Walmart has to ponder is whether their salary structure is self defeating. Could they get better performance at store level by paying higher salaries, increasing the full-time labor mix, and making career development a priority? Interesting thought.
Monitoring stores for operational behavior has never been easy. The siren song emitted by EPCs has tempted some to hope for a solution less dependent on the armies of resources that were once called “supervisors” (retailer side), “sales reps” (supplier side), or “brokers” (somewhere in between).
What’s the real goal here? To make sure the promotional funds are earned or to increase the exposure of the promotion to the consumer? Seems like we’ve lost sight of an important thing in the effort to apply some sexy new technology to an old problem. Are EPCs the lipstick on the pig of store operations?
It is disappointing that retail execution is still a challenge after so many years of talking about it. As many here have said, it is the human factor. Technology is there when we are ready to utilize it properly. This is pure business process. I would like to see more tactical discussions with Retailers/CPGers around how to get this done. Stopping something that could work (EPC) because human execution isn’t happening is treating the symptom, rather than solving the problem. It is very possible to make this work, as we are seeing in other regions, like in the Nordics, where RFID is rolling out for fresh meats from the farm to the shelves. It can be done. Diligence is the key. Don’t give up.
Years ago when I worked at Sears, our biggest issue at corporate was trying to get compliance in the stores–and theoretically we were all part of the same organization with the same goals. Technology is a great enabler for getting lots of information quickly but is and always has been subject to the quality of information going in and the quality of action coming out.
Many retailers suffer from having data, but no insight. It appears Walmart has insight but not the will to act on it. Whether this comes from lack of ability or a calculation that says it will take more money to make it happen than it will bring in, I don’t know. I do know i respect P&G for understanding the limitations and refusing to throw good money at a problem if their partner won’t help them solve it.
We are working on our own story on this, but what happened is pretty clear – the EPC data is really only useful to alert Wal-Mart store managers that the display is not being executed correctly (not on the floor for the advertised date, etc.).
P&G is saying, barely between the lines, that it can’t force Wal-Mart to use the data, though P&G/Gilette’s own tests (when they took more direct responsibility for acting on the data) showed enormous benefits. (I believe the first test showed a 19% sales lift, mostly because the retailers just can’t do the execution very well – abysmally bad, actually.)
If Wal-Mart won’t change processes or act on the data, then the effort to tag the displays is simply a waste of time and money.
That is the story here, plain and simple. P&G sees enormous value, but can’t do it alone. Wal-Mart either just has other fish to fry, or simply can’t muster the organizational effort to make it work.
P&G is sending a big message here.
As usual, George nails what my father used to call “The $64 Question” on the head:
“Shouldn’t there be plenty of incentive in tracking promotion compliance and effectiveness to warrant the use of the technology?”
But perhaps we have to go just a bit deeper — and ask “incentive for whom?” Certainly the manufacturer has incentive. They are providing the initial funding for the activity. Likewise the retailer, or at least the HQ, has incentive. Any of the manufacturer’s funding they choose to pass through, as well as their internal effort and resource, are wasted if they don’t reach the consumer.
But the folks who have to execute better are in the stores and in the warehouses. Where’s their incentive?
When it comes to at-retail compliance–potentially the largest business improvement opportunity presently facing the retail consumer products industry–point solutions are pointless. The system of practices is everything.
This reported decision by P&G, if accurate, exemplifies the frustration held by many manufacturers with In-Store Implementation or promotions. There is no routine, repeatable, measured and collaborative practice to execute planned promotions in stores. Data on compliance, if available at all, arrives weeks or months after the fact.
Even the mighty Walmart, it seems, has so far been unable to master this challenge on behalf of its trading partners. It means that billions of dollars in trade and promotional funds are spent ineffectively, while we debate which brand of ID code to attach to the display headers.
It’s the practice that matters most here, not the choice of technology. For the past two years, the In-Store Implementation Network has advocated establishment of a fully collaborative “plan-do-measure” retail compliance discipline that would ensure real-time visibility and accountability. We cannot improve what we do not measure. Retailers – and that includes even Walmart – must step forward on this issue if we are to see real progress on retail effectiveness and shopper experience.
Our story (as noted in my previous comment) is now finished and has a bit of a different slant, and can be found here if any one is interested.
Liked this quote from our interview with P&G’s Paul Fox.
“If you are going to achieve those sustainable benefits from EPC, you have to be committed to changing business processes,” Fox added. “All we showed with our work at Wal-Mart was that the EPC can have a profound effect on merchandising effectiveness. We proved that. Now we are moving on.”
Ouch!
This may be a window into the soul of a retail giant. Walmart has always had a reputation of being single minded on pricing issues. Traffic generated by being great buyers and passing savings on to consumers provided tons of volume for suppliers. This worked as long as expansion continued but as expansion slows and Walmart tries to deliver bottom-line results, it would seem that maybe, just maybe, “traditional retail” is sticking its nose under the tent.
Could it be that Walmart is holding back promotional buys to sell at regular price after the promotion? This is an old retail ploy but even more frightening is the prospect that the grocery personnel brought in to Walmart when the decision was made to enter the supermarket business in a big way are dragging their old habits into Walmart. Are we seeing the beginning of supermarket retailing in Walmart? It’s worth watching!
As always, what happens in head office does not translate onto the floor. How any VP expects a hassled store manager and a spotty sixteen year old part-timer to implement head office procedure is always beyond me.
Case in point re: stacking of shelves, a case of 24 items is delivered to the store yet this item is supposed to receive a facing of two on the shelf with a maximum display level of 12 items. The stores system sees that the level of stock is down to 4 and orders in a case, the case is ready for night crew to pack and 2 items from the case of 24 are put on the shelf. This opened case now has to be brought back to store room and then stored until the system requires it again. How much work is that?!–put all 24 on display and be done with it! One step–one job, oh but no, it will take from other facings… Well you come down here and stack shelves!!