Metro's Future Store
By John Hall, Managing Editor
The Metro Group of Germany and approximately forty technology and consumer goods partners have pulled retail into the future with the opening on April 28, 2003 of the Metro Groups Extra Future Store in the town of Rheinberg, Germany outside of Dusseldorf. The store of the future, Future Store, is now.
Metros Future Store Initiative has created a permanent test lab of integrated future technologies in a real-time, consumer-driven store environment. This is according to Zygmunt Mierdorf, a member of the management board of Metro Group and Dr. Gerd Wolfram, the project manager of Metros Future Store Initiative. Both gentlemen joined RIS News and other media outlets in a recent hour-long phone call on the second day of Future Stores public operation. Metro Group spokesman Albrecht von Truchsess also joined the call, speaking directly from Future Store.
The objective of Metros Future Store is to test and further develop, in a real-time consumer environment, the technologies and concepts that will shape future efficiencies and consumer experiences at retail. This is the goal shared by Metro and its technology and consumer goods project partners. For Metros Future Store to have the greatest impact on the industry, Metro intends to share its findings with the rest of the retail community. Mierdorf explains the reasoning behind that strategy this way: We want to change and modernize the industry with these upcoming technologies. There is no way Metro on its own can change the industry. We need our competitors and other retailers to go the same direction. Thats why we are open to share the results of our test lab and (consumer) surveys.
A Global Partnership
The Future Store Initiative is a true global partnership involving a visionary, industry-leading retail organization, its technology partners and many of its key trading partners. Most of the companies are also involved with the Massachusetts Institute of Technology (MIT) Auto-ID Center.
Three key Future Store technology partners are IBM, which has provided the overall integration technology; Germany-based SAP, which is supporting the Future Store initiative with software and application technology solutions that allow Metro to test RFID readings and achieve the aggregation of data and reports; and Intel, which is contributing system architecture components and hardware. Also tightly involved on the technology side at Future Store are Cisco and Wincor Nixdorf as well as Philips, Avery-Dennison and Intermec. Non-technology partners represent a range of consumer product firms including Gillette, Kraft and Procter & Gamble all three of which are using RFID tags on products for Future Store.
In the opinion of Metro, the involvement of both consumer goods firms and technology partners acknowledges the required participation from all partner areas for the sustaining of long-term solutions and advancement for the entire industry. A key objective for all partners on the Metro project is the development of global standards to govern the new technologies going forward.
RFID On Full Display
Radio frequency identification (RFID) plays a key role in the Future Store initiative and in the broad future of retail. Although most retailers and analysts agree that RFID will first find its place in the supply chain, at Future Store, RFID tags are also applied to approximately 30 percent of the products for in-store testing and benchmarking.
Gillette is applying RFID tags to packages of razor blades in the Future Store. RFID tags can also be found on CDs and other high-theft items. Gillette will use this test environment, and similar ones with Wal-Mart in the United States and Tesco in the U.K., to evaluate the deterrent effect RFID can have on product theft. According to Mierdorf however, Metro is testing the RFID tags to gain an understanding of just how the technology really works. He adds that RFID is also being used in the back office at Future Store and in monitoring logistics flow. In the distribution center Metro uses RFID readers from Intermec to scan tags on cases as pallets are being loaded with product.
With the in-store RFID-tagged product, Metro is now able to explore the on-demand, in-store impact of smart-shelf technology on re-stocking capabilities. If we get inventory management controlled with RFID, it will have a major impact on process efficiency and cost structure, says Dr. Wolfram, the initiatives project manager. When an RFID-tagged product is removed from a Future Store shelf, it triggers a re-stock alert to store associates and also the distribution center. In an industry where out-of-stocks may hit shelves ten percent of the time, this is an area of particular interest.
Metro has also made certain that consumers understand how the new technologies will improve their shopping experience by making it easier and more personal. Metro is very conscious of consumer trust and privacy issues. At the end of the day, every technology for the store environment is evaluated in terms relating to the consumer shopping experience and its ability to improve process efficiencies.
Planning Future Store
So what does Metros Future Store look like and how did it come to be? According to Mierdorf, the Rheinberg store is part of Metros Extra supermarket chain. The specific Rheinberg store that is now Future Store was already slated for a remodeling when Mierdorf sat down with Metros technology partners to discuss taking one quantum leap further to make it the Future Store. In terms of the stores basics, it has 125 employees and an 85 percent food / 15 percent non-food product mix. Company spokesman von Truchsess says the store is a lot like a regular Stop & Shop in White Plains, New York. The store has approximately 35-40,000 SKUs.
The future store discussion began ten months before the store opened. The objective: to see how a range of new retail technologies would work together in a single, real-time, integrated store environment. The key to the project was going to be the systems integration.
Originally the Metro team thought it might all be too complicated, but they decided to proceed with a clear focus on improving the consumer shopping experience and procedural efficiencies. On the consumer side, the key is educating the consumer on the value and consumer shopping experience benefits of using the new technologies. This focus on consumer education appears to be better implemented, if not understood, on the European side of the Atlantic. Marks & Spencer is another European retailer that has successfully educated its consumers on the benefits of RFID, thus avoiding the pitfalls that snagged Benettons recent effort.
Metros Mierdorf says that at the moment, Metro and its partners are in the behavioral phase of the project in terms of evaluating both employee and consumer acceptance of the new technologies in the integrated environment. Although the store is overwhelmingly driven by technology, Metro and its partners have made certain that the technology is transparent at the consumer interface.
Metro has previously used electronic shelf labels in its Cash and Carry environment, but by adding self-checkout, RFID and many other technology products to the Future Store environment, the true test for this concept is the integration of all technology elements that is the biggest challenge.
To achieve a seamless integration, Metro turned to IBMs middleware and RFID integration services. All the RFID smart tags communicate through a single, central system hub that IBM developed specifically for Metro Group. In addition to providing the overall systems integration at the store, IBM provided a new kiosk information system and the Veggie Vision innovation. Veggie Vision is a produce-scale camera that recognizes fruit and vegetables being weighed without any consumer input.
In our phone conversation with the Metro executives, they described what was going on in the Rheinberg Future Store as a masterpiece of integration. Says Mierdorf, We now understand that the integration of these technologies in one store is possible.
At the moment, there are three checkout options at Future Store. The first is the personal shopping assistant (PSA) with the main technology partner being Wincor Nixdorf. When the consumer arrives at the store, they check out a PSA and attach it to their shopping cart. Then the consumer scans each product before they drop it into open shopping bags in the cart. To check out, the consumer pushes a button to download the information in the PSA to the payment system which charges a pre-established payment account. The consumer then leaves the store without any further check-out activity. To achieve the ultimate checkout, where the customer simply wheels through an RFID-reader tunnel, the store will have to have 100 percent RFID-tagged product up from its current 30 percent.
The second checkout option is the self-checkout process we are familiar with here in the U.S. Metro has chosen the FastLane system from NCR. Finally, consumers at Future Store are offered the option of a full conventional checkout.
Permanent Test Lab
Metros self-described permanent test lab will be where the company and its partners continuously test new technology in the retail space. For the time being, the Rheinberg store is the only future store planned.
When Metro finds consumer acceptance of new technologies, or where those technologies help efficiencies, the company plans to do further testing in its other business units. Metro is already looking at running an additional test of RFID in the apparel segment within its department store chain, and executives have also determined they will deploy FastLane checkout in a bigger way. They feel the FastLane technology has great potential for their store operations and plan to install it in the Hypermarket chain in Germany.
We asked Mierdorf why Metro took this dramatic step forward with technology at this time. He explains, If we as the fifth biggest retailer in the world are not in a position to do this, then who will?
As this extraordinary project begins its long-term live test, Metro CEO Hans-Joachim Krber admits that most of Future Stores high-tech installations will not find their way into mass use for a number of years, but he is certain the investment will pay off, stating, Whoever is first with all this will also be the first to profit from it. For Metro, Future Store is not an ROI decision, but a return on opportunity decision.