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UBC Theses and Dissertations

The design of a consumer information system in the supermarket environment Berman, Moira Elaine 1979

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THE DESIGN OF A CONSUMER INFOEMATION SYSTEM IN THE SUPEBMABKET ENVIBONMENT by MOIEA ELAINE [BEBMAN (BAENETT) BSc(Math), U n i v e r s i t y of Witwatersrand,1969 A THESIS SUBMITTED IN P AB TlAL FULFILLMENT OF THE EEQUIBEMENTS FOB THE DEGEEE OF MASTEB OF SCIENCE IN BUSINESS ADMINISTBATION i n The F a c u l t y of Graduate S t u d i e s (Commerce and Business A d m i n i s t r a t i o n ) We accept t i i i s t h e s i s as conforming to the re q u i r e d standard THE UNIVEESITY OF BBITISH COLUMBIA A p r i l , 1979 c) Moira E l a i n e Berman (Barnett) , 1979 I n p r e s e n t i n g t h i s t h e s i s i n p a r t i a l f u l f i l l m e n t of t h e r e q u i r e m e n t s f o r an advanced degree a t t h e . U n i v e r s i t y o f B r i t i s h C o lumbia, I agree t h a t t h e L i b r a r y s h a l l make i t f r e e l y a v a i l a b l e f o r r e f e r e n c e and s t u d y . I f u r t h e r agree t h a t p e r m i s s i o n f o r , e x t e n s i y e c o p y i n g of t h i s t h e s i s f o r s c h o l a r l y purposes may be g r a n t e d t o the. Head of my D i v i s i o n o r h i s r e p r e s e n t a t i v e s . I t i s understood t h a t c o p y i n g o r p u b l i c a t i o n of t h i s 1 t h e s i s f o r f i n a n c i a l g a i n s h a l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n s D i v i s i o n of A c c o u n t i n g and Management I n f o r m a t i o n Systems F a c u l t y of Commerce and B u s i n e s s A d m i n i s t r a t i o n The U n i v e r s i t y of B r i t i s h Columbia 2075 Wesbrook P l a c e Vancouver, B.C. Canada, V6T 1W5 ABSTRACT The purpose of t h i s thesis i s to explore the p o s s i b i l i t y of creating and maintaining a database in the public domain. The concepts considered, r e l a t e to general computerized storage of consumer goods information, allowing dissemination of t h i s information to the public. The focus however, i s on a Consumer Information System (CIS) in the grocery industry, with emphasis on price data. The major topics discussed include the advent of the Universal Product Code, the subsequent introduction of automated checkout and scanning systems i n supermarkets, i n t e r e s t groups involved, one possible design of the CIS, and the f e a s i b i l i t y of such a system. The system i s designed to meet a minimum set of objectives of the i n t e r e s t groups. Based on the analysis, the development of a CIS i s fea s i b l e ^ subject to the mutual cooperation of the i n t e r e s t groups involved;. Suggestions are made with regard to the p r a c t i c a l implementation of the ideas generated. Future implications and possible research constitute the f i n a l sections of the thesis^ Thesis Supervisor i i i TABLE OF CONTENTS CHAPTER I. THE NATURE OF THE PROBLEM ........ A . . . i . . . . . . . 1 1.1 I n t r o d u c t i o n 1 1.2 M o t i v a t i o n For The'Study ................ 2 1.3 Summary Of The Proposed Study' ..... i . . 7 1.3.1 L i t e r a t u r e Review ......................... 7 1.3.2 Consumer Information Systems .............. 7 1.3.3 Design Of A S p e c i f i c CIS ........... L...... 8 1.3.4 R e s u l t s Of A n a l y s i s ..... ,i .. . 8 1.3.5 D i s c u s s i o n ... 9 CHAPTEE I I . LITEEATUBE EEVIEW . . . . . . i . . . . . . . . . . . . 10 i 2.1 H i s t o r y Of UPC And Scanning ...... i .... I ............ . 10 2.1.1 Scanning In The U.S.A. .................... 11 2.1.2 Scanning In Canada 13 2.2 I n t e r e s t Groups ..................................... 14 2.2.1 The Consumers' View 14 2.2.2 Labour's View ...... . . ......... L; L . : i .... 23 2.2.3 Supermarket R e t a i l e r s ' View ............... 24 2.2.4 Manufacturers' View ............... ........ 30 2.2.4.1 Marketing Information System P o t e n t i a l . 31 2.2.5 Computer Manufacturers' View ... 32 2.2.6 Government's View 33 CHAPTEE I I I . CONSUMES INFORMATION ' SYSTEMS 35 3.1 Use Of E x i s t i n g Information S e r v i c e s ............. 35 3.2 P o t e n t i a l On A N a t i o n a l Scale .................... 37 3.3 A CIS In The Supermarket Environment . i i . . . 38 3.3.1 Scope Of The System 39 3.3.2 General F e a s i b i l i t y Of The System 44 3.3.2.1 Technology . . i ' : ' . ; . 44 3.3.2.2 P o l i t i c a l Aspects ,. 44 CHAPTER IV. CONSIDERATIONS IN THE DESIGN OF A CIS . 47 4.1 Design Issues . * j ........ . I 48 4,i 2 O b j e c t i v e s Of The I n t e r e s t Groups 50 4.2.1 Grocery Manufacturers . ,i..i,*........» . , i . . . 52 4.2.2 R e t a i l e r s 54 4.2.3 Equipment Manufacturers ................... 56 4,.2.4 Government ................................ 56 4,4-2.5 R e t a i l Unions i . . . . . . . . . . . . i . . . . . . . . . . . . . . . 57. 4.2.6 Consumers . . . . . . . . . . . . . . . i . . . . . . . . . . . . . . . . . 57 4,.3 Meeting,The O b j e c t i v e s ............................. 59 4.3.1 The Grocery I n d u s t r y ' s O b j e c t i v e s ....... '59 4.3.2 The Equipment Manufacturers' O b j e c t i v e s ... 60 4.3.3 Government O b j e c t i v e s 60 CHAPTER V.. DESIGN OF A SPECIFIC CIS i i„ . 66 5.1 Pr o p o s a l For A Vancouver Data Centre ............. 66 5.1.1 P h y s i c a l L o c a t i o n ......................... 67 5.1.2 G l o b a l Systems Design i . . . i . , i . 69 5.1.3 Database Desiqn ........................... 71 5.2 Economics Of The Datacentre ...................... 85 ...5.2.1 . Development Co s t s ........................ s, 85 5.2.2 Operating Costs '. . . i .............. . 88 5.2.3 P o t e n t i a l Savings - By I n t e r e s t Groups 89 i v 5.3 A n a l y s i s Of The C o s t s / B e n e f i t s Of The CIS ., 95 CHAPTER VI. RESULTS OF THE ANALYSIS AND GENERAL DISCUSSION ...... .. , 98 6.1 F e a s i b i l i t y Of The CIS . . 99 6.2 Suggestions For D i v i s i o n Of Costs ................ 100 6.3 Suggestions For P r a c t i c a l A p p l i c a t i o n ............ 10 2 6.4 Future Research , 105 REFERENCES. , ....... i ..... . ........... . 107 V ACKNOWLEDGEMENTS This study would not have been p o s s i b l e without the much a p p r e c i a t e d help^ a d v i c e , and encouragement of my t h e s i s committee: Dr. A l b e r t S. Dexter (chairman), Dr. Robert G o l d s t e i n , and Dr. fiichard P o l l a y . In a d d i t i o n , I would l i k e to o f f e r s p e c i a l thanks to the U.B.C. Commerce F a c u l t y members who, durin g the past t h r e e years, have given me the o p p o r t u n i t y of developing and extending my knowledge and a b i l i t i e s i n a c o n g e n i a l and s u p p o r t i v e atmosphere. 1 CHAPTER I THE NATURE OF THE PROBLEM 1.1 Introduction This thesis examines the events leading up to the existence of scanning systems in r e t a i l stores, i n p a r t i c u l a r grocery stores, and their impact on the r e t a i l environment. This technological advancement has not been without c o n f l i c t , p a r t i c u l a r l y between r e t a i l e r s and consumers i n the area of automated checkout i n supermarkets using scanning devices to replace key-entry. One area under current debate i s the removal of item-pricing from goods. There i s a threat of reduced price awareness among consumers, at a time when consumer advocates are s t r i v i n g f or greater awareness through inceased a v a i l a b i l i t y of information. Opposition to item price removal caused many r e t a i l e r s to delay plans to i n s t a l l these systems; Despite the present impasse, scanning systems seem l i k e l y to become a permanent feature of r e t a i l shopping. While the controversy continues, supermarket scanning systems are nevertheless slowly and quietly making the i r appearance. Some r e t a i l e r s are phasing i n the new technology, yet many consumers are s t i l l unaware of the existence or sig n i f i c a n c e of these systems. In the greater Vancouver area, three stores i n s t a l l e d scanners i n 1978 with a minimum of p u b l i c i t y . The 2 question i s not whether r e t a i l goods w i l l be checked out automatically, but rather whether or not t h i s w i l l be accompanied by the permanent removal of human readable item prices;. R e t a i l e r s with scanning systems are proposing (or already implementing) the elimination of item prices, without o f f e r i n g an e f f e c t i v e alternative for what i s considered a v i t a l source of consumer information. I t i s preferable that a substitute for the t r a d i t i o n a l method of disseminating price information be sought now^ while the UPC systems are s t i l l i n the early stages of development;. 1,i2 Motivation For The Study To date, the grocery industry has invested some $50 m i l l i o n to develop the concept of the universal product code (Assembly Of f i c e of Research 1977). I t has been suggested that " r e t a i l point-of-sale systems may become one of the most momentous marketing innovations, on consumers, on mass d i s t r i b u t o r s , on small r e t a i l e r s , on manufacturers, and on marketing researchers" (Moyer and Seitz 1 9 7 5 ) . A food chain president asserted that "few, i f any developments can anticipate the profound impact ... (of) t h i s s t o r e - l e v e l point-of-sale equipment" (Steinberg 1 9 7 2 ) . Time and money have been invested by grocery r e t a i l e r s and manufacturers on the basis of optimistic studies (e.g. McKinsey & Co.) i n d i c a t i n g acceptance of the system, and subsequent savings 3 f o r the grocery i n d u s t r y ; Despite a l l t h i s z e a l , and the apparent r e a l i z a t i o n of economic b e n e f i t s , the advancement of these systems has been slow; In the U.S.A. "... j u s t 208 s t o r e s , c o n s i d e r a b l y l e s s than 1% of the co u n t r y ' s 33,000 supermarkets, have so f a r been equipped with r e g i s t e r s than can read the code" (Coyle 1978).' The f e a r of government imposed mandatory'pricing of items has been a major concern t o supermarket chains: T h e i r f e e l i n g i s t h a t a l a r g e p o r t i o n of hard savings due to the system {.approximately 1% of s a l e s (Moyer and S e i t z 1975) ] i s from e l i m i n a t i o n of item p r i c i n g ; i n f a c t "... p o t e n t i a l b e n e f i t s of t h i s system are reduced (about 25-35% of hard savings) i f r e t a i l e r s are f o r c e d t o maintain the i t e m i z e d p r i c i n g of goods" (Assembly O f f i c e of Research 1977). By 1975, l e g i s l a t i o n i n "three s t a t e s and * numerous' U.S; c i t i e s " , made item p r i c i n g mandatory f o r supermarkets under t h e i r j u r i s d i c t i o n (Armstrong 1975). L e g i s l a t i o n was being c o n s i d e r e d at a f e d e r a l l e v e l i n both Canada and the U.S.A.. Consumer a s s o c i a t i o n s with p o t e n t i a l government backing have been a powerful contender i n the debate over item p r i c e removal. "In the e a r l y wave of con t r o v e r s y over scanning, many labour and consumer a c t i v i s t s charged ... t h a t the grocers were c o n s p i r i n g to r a i s e p r i c e s s e c r e t l y by computer. H a l f a dozen s t a t e s - C a l i f o r n i a , C o n n e c t i c u t , Massachusetts, Michigan, New York, and Rhode I s l a n d - rushed t o pass laws r e q u i r i n g t h a t p r i c e s be stamped on every item s o l d " (Coyle 1978). 4 Is there a way to maintain or increase consumer price awareness i n the absence of item-pricing? This i s a much discussed topic today,. In f a c t , the need for assimilation and dissemination of timely relevant data in a l l r e t a i l areas has long been recognized. In the supermarket environment, the question i s p a r t i c u l a r l y pertinent; The automated checkout system which threatened, i n 1974, to revolutionize the industry has hardly j u s t i f i e d even conservative predictions. Supermarket chains are loathe to i n s t a l l the system while the threat of l e g i s l a t i o n regarding price tags looms; consumer groups want to see price l a b e l i n g continued i n order to maintain consumer awareness and protection, and avoid a "possible abuse of consumer r i g h t s " (Armstrong 1975). The removal of item prices i s seen by consumer advocates as an "unnecessary and unjustified s a c r i f i c e of t h e i r r i g h t to basic price information" (Jones 1977). With consumers, themselves, reaction has been mixed, but studies have shown the response to be less than enthusiastic i n general; "A $10,000 f e d e r a l l y funded study, done i n conjunction with CAC (Quebec), found that many customers s t i l l don't know how the system works and they do not want the price removed from containers" (Pappert 1978). " I t i s i r o n i c that the food industry w i l l not agree on any uniform dating codes, or uniform grade standards, or uniform packaging, any of which would help the consumer decide on the best quality f o r her money, but they can agree on a uniform l a b e l i n g system, a 5 U n i v e r s a l Product Code t h a t takes i n f o r m a t i o n away from the consumer" (Yaunatta 1975). The consumer pressure and t h r e a t s of l e g i s l a t i o n i n both Canada and the U.S.iA* have t e m p o r a r i l y slowed down the implementation of automated checkout using the UPC. Even i n 1977, the i n d e f i n i t e postponement of the widespread use of scanners i n supermarkets seemed i n e v i t a b l e -p a r t i c u l a r l y i n Canada;. In 1978,, i t appeared that; c e r t a i n supermarkets were plan n i n g to go ahead with plans to implement scanners and remove i t e m - p r i c e s d e s p i t e consumer f e a r s and o b j e c t i o n s . The o b j e c t i v e o f t h i s t h e s i s i s the proposal of a consumer i n f o r m a t i o n system (CIS), based on the UPC, as a f e a s i b l e method of breaking the stalemate and ens u r i n g that a l l i n t e r e s t groups, p a r t i c u l a r l y r e t a i l e r s and consumers, b e n e f i t from the t e c h n o l o g i c a l developments on which the UPC systems are based: T h i s o b j e c t i v e encompasses: a) t a k i n g advantage of a v a i l a b l e technology t o improve s o c i e t y g e n e r a l l y b) a s s u r i n g the continued p r o t e c t i o n of consumers' r i g h t s s p e c i f i c a l l y . There are two fundamental c h a r a c t e r i s t i c s o f the supermarket system which are important i n the c o n s i d e r a t i o n of any i d e a s t o improve the consumer i n f o r m a t i o n environment. a) The i n h e r e n t s t a n d a r d i z a t i o n of the code p r o v i d e s a b a s i c key f o r product comparisons across s t o r e s , and f o r s t o r i n g and updating the i n f o r m a t i o n . Without the UPC, the c r e a t i o n of an i n f o r m a t i o n system would r e q u i r e the p r i o r 6 establishment of such a codei Not only would t h i s be p r o h i b i t i v e l y expensive, but would require f u l l cooperation of manufacturers and r e t a i l e r s i n i t s establishment. b) Every store using the computerized system w i l l be maintaining a f i l e of products and related price information. Thus, t r a n s f e r r i n g t h i s data to other systems f o r a variety of uses can be done at minimal cost and e f f o r t , i f the cooperation of the supermarkets i s secured. These two factors, a standard comprehensive code structure, and the existence of i n d i v i d u a l store data i n machine processable form provide additional motivation and lend f e a s i b i l i t y to the consideration of a computerized Consumer Information System that can provide direct benefits to the consumer as well as the r e t a i l e r . The CIS considered herein w i l l pertain largely to the grocery industry and w i l l meet a minimum set of objectives of the i n t e r e s t groups. Possible extensions w i l l be considered and suggestions w i l l be made regarding aspects of possible c o n f l i c t e;g^ marketing the concept to the various i n t e r e s t groups; deciding who should bear the costs of the CIS. 7 1 . 3 Summary Of The Proposed Study 113.1 Literature Beview The idea presented i n t h i s thesis i s o r i g i n a l i n that the concept was only recently proposed as a possible research topic (Dexter and Howson 1977; Barnett, Dexter, and Howson 1978). (The paper written by Dexter and Howson has been f r e e l y quoted in t h i s thesis;) Relevant l i t e r a t u r e r e l a t e s to the history of the UPC i n Canada and the U.S.A.; the development of the supermarket system and i t s e f f e c t on the various i n t e r e s t groups; and the economics involved in such a system as regards r e t a i l e r s and consumers. 1 . 3 . 2 Consumer Information Systems Generalized consumer information systems do ex i s t , and operate on a limited basis i n the private sector. Data i s colle c t e d from surveys., e.g. "market-basket" prices, service ratings, etc.) and distributed to interested consumers in printed form on subscription basis. Information i s also disseminated? by means of private t e l e v i s i o n channels. These systems are described further in Chapter I I I . The potential effectiveness of these systems on a national scale i s considered; In 'the supermarket environment, a s p e c i f i c application area f o r a CIS i s r e t a i l grocery price information. Not only i s there a need, but the necessary data 8 already exists i n an easily accessible form. Tbe technical and p o l i t i c a l f e a s i b i l i t y of setting up such a system i s discussed; 1.3.3 Design Of A Specific CIS In order to determine the economic f e a s i b i l i t y of a CIS as envisaged in Chapter IV, the design of a s p e c i f i c system within the bounds of a given environment i s examined. The objectives of the various i n t e r e s t groups as they r e l a t e to the supermarkets system are taken into account, and an e f f o r t i s made to meet these objectives within the scope of the CIS. The c h a r a c t e r i s t i c s of a basic CIS are described in d e t a i l , bearing i n mind possible future enhancements to the system. The costs vs. savings of the CIS are studied as the f i n a l step i n the f e a s i b i l i t y analysis. The assignment of costs for the system presents some d i f f i c u l t y and consideration i s given to the potential savings and benefits of t h e i n t e r e s t groups involved. 1.3.4 Results Of Analysis The analysis of Chapters IV and V i s used as the basis for considering the f e a s i b i l i t y of the CIS. Suggestions for the operation of the system; from a p r a c t i c a l point of view are made. 9 •1 .3 .5 Discussion The implications of such a system information publication are discussed,, p o s s i b i l i t i e s for future research, .on the future of along with the 10 CHAPTER II LITERATORE REVIEW 2.1 H i s t o r y Of UPC And Scanning The i n t r o d u c t i o n i n 1973 of the U n i v e r s a l Product Code (UPC), as a standard method f o r unique s p e c i f i c a t i o n of r e t a i l p roducts, has l e d to much r e l a t e d r e s e a r c h and made use of e a r l i e r t e c h n i c a l achievements. S p e c i f i c a l l y , i n the l a t e 1960's and e a r l y 1970's, the . i m p l i c i t merits of automated checkout systems were becoming apparent throughout the v a r i o u s l e v e l s of the grocery i n d u s t r y . More s p e c i f i c a l l y , i n 1966 g e n e r a l scanning systems were developed and, i n 1970, e l e c t r o n i c cash r e g i s t e r s were i n t r o d u c e d by major hardware venders, i n c l u d i n g IBM, NCR, and Sweda. I t was at t h a t time t h a t the Grocery Manufacturers 1 A s s o c i a t i o n ^ other t r a d e o r g a n i z a t i o n s and equipment manufacturers began t o d i s c u s s the f e a s i b i l i t y of coding products f o r scanning purposes - i . e . a method f o r "machine-reading" product i n f o r m a t i o n to e l i m i n a t e manual keying of p r i c e s a t the cash r e g i s t e r ; Powerful "minicomputers" capable of performing as w e l l as e a r l i e r l a r g e systems had a l s o made j t h e i r appearance. In 1970, the advantage of i n - s t o r e minicomputers to c o n t r o l e l e c t r o n i c cash r e g i s t e r s was r e a l i z e d . These, i n t u r n , could be connected to a l a r g e c e n t r a l i z e d processor which would 11 allow f o r p e r t i n e n t i n f o r m a t i o n to be r e l a y e d t o a l l i n - s t o r e computers s i m u l t a n e o u s l y . P r i o r t o mid-1973, no gro c e r y products c a r r i e d any machine-readable markings, and scanners had yet to be developed f o r use a t checkstands; The UPC was developed by a committee r e p r e s e n t i n g both r e t a i l e r s and manufacturers of the food i n d u s t r y , and w i t h i n two years at l e a s t nine computer manufacturers were making t h i s equipment.. The companies i n c l u d e d Data General C o r p o r a t i o n , Data Terminal Systems, NCB, IBM, Bunker fiamo C o r p o r a t i o n , N a t i o n a l Semiconductor, Univac, and Si n g e r Company. By October 1975 i t was estimated t h a t , i n Canada, 45% of a l l grocery items were UPC marked and, i n the United S t a t e s , the f i g u r e was put at 60%. Approximately 30 r e t a i l s t o r e s had UPC scanners, and t h i s was f e l t as j u s t the s t a r t of a popular t r e n d ; 2;1.1 Scanning In The U.S.A. In the United S t a t e s , Safeway Stores began t e s t i n g P o i n t -Of-Sale (POS) and UPC systems developed by Dymo I n d u s t r i e s Inc., and Data General C o r p o r a t i o n i n 1973,. They c o u l d not j u s t i f y the o p e r a t i o n with r e s p e c t t o s a v i n g s , although they d i d j u s t i f y the POS scanning system on the b a s i s of f a s t e r checkout* l e s s stocks-outs, and b e t t e r i n v e n t o r y c o n t r o l i . e . b e n e f i t s not e a s i l y q u a n t i f i a b l e , ( " s o f t " b e n e f i t s ) . F i n a s t Stores conducted s e v e r a l scanning t e s t s i n the 1973-1974 - p e r i o d . In Massachusetts they began t e s t i n g the Univac 12 Accuscan scanning system. In other s t o r e s they ran scanning t e s t s u s ing Bunker Ramo's E l e c t r o n i c Store Information System, and the NCR 255 System. A l l systems t e s t e d , c o n c l u s i v e l y demonstrated 10-15% i n c r e a s e d p r o d u c t i v i t y at the checkout. Kroger Stores L t d . a l s o t e s t e d the Univac Accuscan Scanning System i n 1974. T h e i r t e s t procedures r e s u l t e d i n a 14% i n c r e a s e i n p r o d u c t i v i t y at the checkout counter. Late i n 1975 they began t e s t i n g IBM's 3660 Supermarket System. Marsh Supermarkets i n Troy, Oregon were the f i r s t t o use scanning i n the supermarket environment i n the United S t a t e s over an extended p e r i o d of time. T h e i r t e s t was conducted on an NCR 280 725 scanning system. In 1977 the i n d u s t r y l e a d e r i n scanning was Giant Food, with 25 scanning i n s t a l l a t i o n s of a t o t a l of 173 at August month-end; T h e i r planned purchase of a f u r t h e r 1,500 e l e c t r o n i c scanner checkstand u n i t s w i l l more than double the number of Giant s t o r e s having scanning i n s t a l l a t i o n s . R e s u l t s of the t e s t s t o r e o p e r a t i o n s i n the U.S. were i n c o n c l u s i v e . "... surveys i n three U.S. s t o r e s t e s t i n g the new system showed t h a t the m a j o r i t y of shoppers were not bothered by the removal of the p r i c e s -.."/ yet "... a survey conducted by the U n i v e r s i t y of Southern C a l i f o r n i a ' s food marketing management program r e v e a l e d t h a t only 1.5% of housewives questioned were w i l l i n g to do without p r i c e t a g s " (Armstrong Oct; 1975) . 13 2.1.2 Scanning In Canada St e i n b e r g ' s L t d . , a l a r g e supermarket c h a i n was the o n l y supermarket i n Canada to have implemented a OPC scanning system by the end of 1975. The s t o r e i n D o r v a l , Quebec began t e s t o p e r a t i o n s i n J u l y 1974. I t e m - p r i c i n g was d i s c o n t i n u e d and grease p e n c i l s were provided f o r customers who wished to w r i t e the p r i c e s on the goods themselves. IGA i n D e l h i , O n t a r i o r e c e n t l y s t a r t e d u s i n g the scanning system while maintaining p r i c e t a g s on the goods. In August 1977 M i r a c l e Mart, a s u b s i d i a r y of S t e i n b e r g ' s Ltd,, began o p e r a t i n g a f u l l scanning system at a Toronto store,; They are r e l y i n g on t e s t data gathered by S t e i n b e r g ' s Dorval o p e r a t i o n ; Approximately 94% of the items c a r r i e d are item p r i c e d . "The checkout people appear to be scanning most products. I t i s not f a s t e r up to t h i s p o i n t ; on the c o n t r a r y e f f i c i e n c y i s down approximately 25%" from the l e v e l p r i o r to scanning (Pappert, 1978). E a r l y i n 1978, a l i m i t e d item food s t o r e opened i n Richmond, B r i t i s h Columbia with a f u l l s canning system and no i t e m - p r i c i n g . P r i c e s , i n g e n e r a l , appeared to be lower than i n the l a r g e r supermarkets (Evans-A t k i n s o n , Feb. 1978). This event was c l o s e l y f o l l o w e d by the implementation of a scanning system i n one of Canada Safeway*s s t o r e s i n Vancouver; A Super-Valu s t o r e i n Vancouver, a l r e a d y equipped with e l e c t r o n i c r e g i s t e r s , subsequently i n s t a l l e d scanners. Both planned to d i s c o n t i n u e i t e m - p r i c i n g (Evans-Atkinson, A p r i l 1978), 14 2; 2 I n t e r e s t Groups Supermarket systems r e c e i v e d the a t t e n t i o n of many d i f f e r e n t groups - not a l l of the a t t e n t i o n however being f a v o u r a b l e . In r e g i o n s where implementation of these systems had o c c u r r e d , or appeared imminent, r e a c t i o n was s w i f t i n coming. 2.2.1 The Consumers 1 View In both Canada and the 0,S., consumer advocates g e n e r a l l y took a negative view toward the i n t r o d u c t i o n of the OPC system. I t was not the system i t s e l f t o which they took e x c e p t i o n , r a t h e r the e f f e c t of one of i t s n a t u r a l consequences, - i t e m - p r i c e removal. I t was f e l t t h a t t h i s would c o n s t i t u t e a t h r e a t to consumers' r i g h t s and p r o t e c t i o n . P r i c e i n f o r m a t i o n i s viewed as a b a s i c r i g h t * not a p r i v i l e g e . For example, l a c k of i t e m - p r i c i n g makes comparison shopping more d i f f i c u l t and, thus, l e s s w i l l be done ( M a u r i z i 1972). Consumer groups i n both c o u n t r i e s o b j e c t e d s t r o n g l y to any decrease i n v i s i b l e consumer p r i c e i n f o r m a t i o n a t the r e t a i l l e v e l ; They f e l t t h a t consumers would be l e s s p r i c e c o n s c i o u s and t h e r e f o r e easy prey f o r unscrupulous supermarket owners. In the U.S., consumer unions were p r e s s i n g f o r government i n t e r v e n t i o n at a l l l e v e l s ; and by 1975, l e g i s l a t i o n i n "three s t a t e s and 'numerous' U.S; c i t i e s ..*" made p r i c i n g mandatory f o r supermarkets under t h e i r j u r i s d i c t i o n (Armstrong 1975),. . L e g i s l a t i o n was being 15 considered at the federal l e v e l i n the United States at that time. Despite loud protest from the Consumer Association, the Canadian federal government was loathe to i n t e r f e r e i n the matter. However, l e g i s l a t i o n was being considered here too and was a definite p o s s i b i l i t y should the need be f e l t . The Consumer Associaton i s watching the progress of the new systems c a r e f u l l y . The R e t a i l Council of Canada set up a Steering Committee to make policy recommendations on issues a r i s i n g from the the implementation of scanning systems. There now ex i s t s a Pubic Advisory Committee to the Steering Committee: "Our group, together with a Technical Advisory Committee from the equipment manufacturers and supermarket industry, conducts an ongoing dialogue in an e f f o r t to implement th i s system ( i f i t i s to be implemented) in a way that i s b e n e f i c i a l to store and customer a l i k e " (Pappert 1978)i (Mary Pappert i s CAC (Ontario) Chairman of the Committee dealing with the Computerized Supermarket Checkout System). I t should be mentioned that the automation i t s e l f was not c r i t i c i z e d and a consumer advocate in Vancouver praised the advent of supermarket scanning with either price-^marking or the provision of grease pencils (Wise 1976). In the U.S. however, the use of grease pencils for customers to mark products themselves i s not considered a suitable substitute for price-marking i n states were l e g i s l a t i o n has been passed. 16 How do consumers themselves r e a c t to the implementation of these systems? S e v e r a l s u r v e y s have been made of consumer a t t i t u d e s toward i n s t a l l e d UPC systems both with and without u n i t p r i c e s marked on the grocery items. With the e x c e p t i o n of item p r i c e removal consumer r e a c t i o n has been f a v o u r a b l e . In a t y p i c a l U.S. study ( G y l l i n g 1976) of a sample of 150 customers o f one s t o r e , 87% expressed f a v o u r a b l e r e a c t i o n s to the system. The advantages mentioned were - f a s t e r checkout time (42% of a l l respondents) - d e s c r i p t i v e s a l e s s l i p (32% of a l l respndents) - accuracy o f the computer system (12% of a l l respondents) However, c o n s i s t e n t l y , the removal of item p r i c e s i s i d e n t i f i e d as a dominant n e g a t i v e c o n s i d e r a t i o n i n o v e r a l l acceptance of UPC systems, p r o v i d i n g support f o r the stand taken by consumer advocates. A Vancouver supermarket manager admitted concern about a d e c l i n e i n s a l e s revenue s i n c e the implementation of scanners and the removal of item p r i c e s (A c o n v e r s a t i o n with i the l o c a l CAC board member - 1978). U n t i l r e c e n t l y , S t e i n b e r g ' s L t d . was the o n l y supermarket c h a i n i n Canada t o have placed scanners at the checkstand. Consumer r e a c t i o n , r e p o r t e d l y f a v o u r a b l e , had been gleaned l a r g e l y from i n f o r m a l surveys. However, as mentioned p r e v i o u s l y , a CAC study showed t h a t many customers are s t i l l unaware of how the system works (Pappert 1978): The s t u d i e s mentioned above concentrate on the a t t i t u d e s of shoppers as expressed on survey q u e s t i o n n a i r e s . They a r e . 17 of course, subject to the drawbacks inherent i n opinion surveys (subjectivity, bias, et c . ) . However, i n 1976, a study was undertaken at Michigan State University (MSU) which went beyond the, attitudes of shoppers to investigate shopping behavior,. For t h i s reason,; i t i s f e l t to be the d e f i n i t i v e work on the subject. The report from MSU c r i t i c i z e d price removal, based on a study that led to four general conclusions: a) Item price removal may reduce price awareness of shoppers who become less a l e r t to price changes and price trends, b) There i s potential inconvenience as shoppers have to match products to shelf prices and make price comparisons at d i f f e r e n t points within the store, c) There i s a loss of price information i n the home as items on the kitchen shelf no longer have marked prices, d) There i s a danger of inaccuracy i f shelf prices are not kept current to r e f l e c t prices currently charged by the computer system (Harrell, Hutt, and Allen 1976). The issue of item-price removal was s p e c i f i c a l l y addressed, comparing behavior of shoppers i n stores with and without conventional item-price data. In summary, i t supports the following hypotheses: elimination of item prices reduces the short term 18 price awareness of shoppers (There was only weak support f o r a reduction of long term awareness.) shoppers in an environment without item prices make fewer price comparisons (although there was no difference i n the percent of shopper using unit price information). I t would appear from t h i s l a s t statement that shoppers f i n d i t more inconvenient to compare prices i f they have only the shelf price as an information source. Onit price information (when provided) has been printed on the shelves only which i s why no difference was found i n the percentage of customers using t h i s information f o r comparison,. In general, unit price i s a l i t t l e used comparison indicator; General mistrust of supermarkets by consumers i s also an issue. The automated system allows almost instantaneous price changes to be effected; Consumers are concerned that a) the shelf prices may be deliberately d i f f e r e n t from the computer-stored price b) old stock may be sold at new prices. Comparison shopping across supermarkets i s made more d i f f i c u l t because price information i s no longer transported along with the product. More recently, these fears have been manifest i n B.C., Canada: 19 L e g a l l y , " . . . a l l r e t a i l e r s , i n c l u d i n g those i n the food i n d u s t r y , have the r i g h t t o i n c r e a s e the p r i c e of o l d stock as h i g h e r - p r i c e d new stock comes i n ... What's annoying consumers i s the f a c t t h a t the absence o f p r i c e t a g s i n scanner s t o r e s means no p r i c e break on the s h e l v e s where a l l u n p r i c e d items, o l d and new, i n c r e a s e with the t w i d d l e of a computer d i a l . Under the system where goods are i n d i v i d u a l l y price-marked, the procedure of p e e l i n g away o l d tags and s t i c k i n g on new, higher p r i c e s has o f t e n been deemed too time consuming a n d . c o s t l y to bother with" (Parton, August 1978). In a d d i t i o n t o t h i s , e x e c u t i v e s o f B.C. supermarkets expressed the view t h a t consumers are not very p r i c e c o n s c i o u s anyway. They s a i d p r i c e i s seventh or e i g h t h i n consumer shopping p r i o r i t i e s topped by "... the s t o r e ' s g e n e r a l appearance and c l e a n l i n e s s , the a t t i t u d e o f the s t a f f , the proximity and a v a i l a b i l i t y of parking and other convenience c r i t e r i a " (Parton, September 1978) . An I r i s h survey ( I r i s h Business, Nov. 1975) showed t h a t while " p r i c e i s one of the major f a c t o r s t h a t i n f l u e n c e the Dublin housewife when d e c i d i n g where t o shop f o r g r o c e r i e s , i t would appear t h a t a s u b s t a n t i a l number of Dublin housewives are simply not p r i c e p e r c e p t i v e " . T h i s c o n c l u s i o n came as a r e s u l t of 30% of housewives p e r c e i v i n g l a r g e supermarkets as not being cheap p l a c e s to shop.i The r e s u l t occurred d e s p i t e the f a c t t h a t " t h i s p a r t i c u l a r type of grocery o u t l e t emphasizes i t s inexpensive p r i c e s through f r e q u e n t media a d v e r t i s i n g " . Of concern i s the r e s u l t of 1977 Los Angeles survey, which while not c o n c l u s i v e , bears t a k i n g i n t o account: I n t e r v i e w e r s there r e c e n t l y wandered through supermarkets asking customers what they looked f o r most when they were shopping* Nearly t h r e e - q u a r t e r s of them s a i d low p r i c e s and the remainder wanted s h o r t checkout counter l i n e - u p s . 20 "The i n t e r v i e w s were recorded on tape, however, and the tape was l a t e r played through a v o i c e p i t c h a n a l y s i s machine - a type of l i e d e t e c t o r , "The r e s u l t was t h a t 56% were more concerned about checkout counter l i n e - u p s , and o n l y 43% were r e a l l y worried about food p r i c e s " (Evans-Atkinson* June 1977) . Are consumers perhaps not as concerned as they should be? Are they l e s s p e r c e p t i v e than they would l i k e t o b e l i e v e ? I s t h e i r choice of supermarket based on i n f o r m a t i o n t h a t i s easy t o o b t a i n and r e t a i n ? How easy i s i t t o compare supermarkets on the b a s i s of p r i c e ; or does p r i c e comparison r e a l l y only take place once the shopper i s i n the s t o r e ? These c o n s i d e r a t i o n s make the f i n d i n g s of the Michigan study ( H a r r e l l et a l - 1977) of even g r e a t e r importance, m e r i t i n g the concern of consumers and government. I t i s the author's view t h a t a trend toward even l e s s p r i c e awareness c o u l d have s e r i o u s impact on food p r i c e s and u l t i m a t e l y augment g e n e r a l i n f l a t i o n . A survey was c a r r i e d out by Steinberg's L t d . , d i r e c t e d at determining the s e n s i t i v i t y of f a c t o r s t h a t a f f e c t consumers' c h o i c e of supermarket. T h i s formed p a r t of a j o i n t study by IBM and S t e i n b e r g ' s i n 1972-1973 oh the f e a s i b i l i t y of automated checkout i n the supermarket (Dexter and B a r n e t t 1978a, Dexter and B a r n e t t 1978b). See E x h i b i t 2.1. EXHIBIT 2.1 CANADIAN SUPERMARKET SURVEY (PARTIAL RESULTS) F a c t o r s i n a t t r a c t i n g people to shop at a p a r t i c u l a r supermarket. Importance R a t i n g 8 .6 Store L o c a t i o n 8 .0 P r i c i n g P o l i c y 7 . 2 Store P e r s o n n e l 7 .0 Product Assortment 6 . 9 Parking 6 . 8 Speed Through Checkout 6 . 7 Reputation 6 .5 S e r v i c e L e v e l 6 . 1 Car Order Pick-up 5 . 1 I n s t i t u t i o n a l A d v e r t i s i n g 5 .0 Store Design and D e c o r a t i o n 4 . 1 S p e c i a l Sale A d v e r t i s i n g 4 . 1 Cheque-Cashing 3 .4 Non-advertised S p e c i a l s F a c t o r s i n persuading people to buy once they are i n the supermarket. 8.0 P r i c e 7.5 S e r v i c e L e v e l 7.3 Assortment 6.9 ' Brand Name R e c o g n i t i o n 6.4 Store S e r v i c e s 6.3 Shelf Space A l l o c a t i o n 6.2 L o c a t i o n on S h e l f 6.1 Store Layout 6.0 D i s p l a y of Merchandise 5.4 Po i n t of Sale Promotion 5.2 S p e c i a l Sales 5.0 S u b s t i t u t i o n O f f e r e d The Canadian Supermarket r e s u l t s s i t e d are based on a survey (by the supermarket and IBM), which rated the elements on a s c a l e of 1 through 9. The survey q u e s t i o n n a i r e was answered by supermarket managers and s p e c i a l i s t s . R e s u l t s were compared with those of a 22 E X H I B I T 2.1 ( C o n t ' d ) U.S. s t u d y c o n d u c t e d by t h e N a t i o n a l A s s o c i a t i o n o f F o o d C h a i n s , A. C. N i e l s e n Company, and The P r o g r e s s i v e G r o c e r T r a d e M a g a z i n e . C o m p a r i s o n s were f a v o u r a b l e i n mo s t c a s e s . S o u r c e : D o c u m e n t a t i o n on t h e s t u d y p r o v i d e d by S t e i n b e r g ' s f o r u se i n t h e p r e p a r a t i o n o f " S t e i n b e r g ' s L t d . " ( D e x t e r and B a r n e t t 1 9 7 8 B ) . L t d . , 23 2.2.2 Labour's View An e a r l y p r o t a g o n i s t i n the i t e m - p r i c i n g c o n t r o v e r s y was the l a b o u r union movement which was t r y i n g t o prevent the l o s s o f jobs i n supermarkets,. " S t o r e s adopting scanner systems may be a b l e t o c u t jobs 10 to 1535 i f i t e m - p r i c i n g i s dropped, by somewhat l e s s i f i t i s r e t a i n e d " (Assembly O f f i c e of Research 1977). In many of the O i S . s t a t e s the R e t a i l C l e r k s Union j o i n e d f o r c e s with consumer groups t o lobby f o r i t e m - p r i c i n g laws. In f a c t , "Thomas Zaucha, P u b l i c A f f a i r s D i r e c t o r f o r the N a t i o n a l A s s o c i a t i o n of Food Chains i n the U.S. c a l l e d the consumer push f o r l e g i s l a t i o n , l a b o r i n s t i g a t e d " . He a l s o charged t h a t "the l a b o r movement was r e s p o n s i b l e f o r i n i t i a t i n g p r i c e marking l e g i s l a t i o n i n some 30 s t a t e s " (Armstrong 1975). However, more r e c e n t l y , "the R e t a i l C l e r k s Union has abandoned i t s e f f o r t s f o r item p r i c e l e g i s l a t i o n and no other c l e r k s * union, other than the one i n P h i l a d e l p h i a , had seen f i t t o push f o r such a measure (Supermarket News, October 1977). "The R e t a i l C l e r k s I n t e r n a t i o n a l Union, which had f e a r e d scanners would be bad f o r employment, has r e c o n s i d e r e d the evidence on t h a t p o i n t and r e t r e a t e d to a posture o f n e u t r a l i t y . " The Union "dropped i t s o p p o s i t i o n to p r i c e removal when i t came t o r e a l i z e t h a t the new equipment wasn't c o s t i n g i t s members any jo b s " (Coyle 1978). There i s no s t a t i s t i c a l data a v a i l a b l e t o prove or disprove t h i s viewpoint 24 but, l a t e l y i n both the U.S. and Canada, labour unions have had l i t t l e t o say on the i s s u e . 2.2.3 Supermarket B e t a i l e r s ' View "Whatever the immediate f u t u r e may h o l d , there are s e v e r a l reasons f o r b e l i e v i n g t h a t scanning has now reached the t i p p i n g p o i n t where i t w i l l be i n c r e a s i n g l y d i f f i c u l t f o r s t o r e s to r e s i s t the p a y o f f from t h i s investment and i n c r e a s i n g l y dangerous to i g n o r e the t h r e a t of an automated competitor" (Coyle 1978). In 1978 i t appears t h a t , d e s p i t e the u n c e r t a i n t y over p r i c i n g laws t h a t caused a slowdown i n the implementation of UPC systems between 1974 and 1977, r e t a i l e r s are going ahead and u t i l i z i n g the a v a i l a b l e technology; The reasons Coyle g i v e s f o r h i s b e l i e f s t a t e d above are a) "... the grocery i n d u s t r y i s a l r e a d y f u r t h e r i n t o scanning than the number of automated s t o r e s would imply" (Coyle 1978). (In March,' Forbes Magazine reported t h a t o n l y 208 U.S..supermarkets and f i v e Canadian s t o r e s had i n s t a l l e d scanners — whereas McKinsey S Co. foresaw a p o s s i b i l i t y of between 5,000 and 10,000 such s t o r e s by 1975). Coyle suggests t h a t a c o n s i d e r a t i o n of the c h a i n s , r a t h e r than the number of scanner s t o r e s , d r a s t i c a l l y changes the i m p l i c a t i o n of the above facts,; Namely 14 of the top 20 food chains i n the U.S. have at l e a s t one automated s t o r e . These 14 chains account f o r about 30% of a l l U.S, food s t o r e s a l e s (Coyle 1978). A number of stores have automated checkout without scanners i.e,. there ex i s t 50,000 elect r o n i c checkout systems i n U.S. supermarkets which are upgradeable to f u l l scanning . In both Canada and the U.S., a few of the chains have quantified the costs and savings involved i n scanning and i n some cases have made public t h i s informations U.S. findings are presented i n Exhibit 2:2, while the Canadian findings are shown i n Exhibit 2.3. 26 E x h i b i t _.2 (Source: Coyle 1978) A. Giant Food I n c . t y p i c a l s t o r e volume $140,000 per week i n s a l e s Savings areas: Reduced c a s h i e r l a b o u r 625 E l i m i n a t i o n of underrings 227 Others 530 T o t a l $1,382 per week E l i m i n a t i o n of p r i c e marking would save an a d d i t i o n a l $686 a week i n labour c o s t s per s t o r e B. Ralph's Grocery Co. T y p i c a l s t o r e volume $160,000 per week i n s a l e s Savings areas: Shrinkage c o n t r o l ($33,000 per year) $660 per week No other d o l l a r f i g u r e s are a v a i l a b l e f o r Ralph.'s Grocery Co. although -the "impact i s being e s t a b l i s h e d , i n many of the s o f t b e n e f i t areas". -Data based on 80% of , a l l items being source marked. 27 E x h i b i t 2.3. S t e i n b e r g 1 s Ltd.. T y p i c a l s t o r e volume $105,000 per week i n s a l e s . Savings areas due t o use of automated checkout without scanning : Labour (128 Underrings 12 P e r i s h a b l e s 701 T o t a l $841 per week St e i n b e r g ' s a l s o d i s c o v e r e d other areas where sav i n g s c o u l d be achieved, but d i d net s p e c i f i c a l l y g u a n t i f y these s a v i n g s . Source: S t e i n b e r g ' s L t d . (Dexter and Barnett 1978b). 28 E x h i b i t 2.4,. Shows the breakdown of p o t e n t i a l s a v i n g s as d e p i c t e d i n the study by Assembly O f f i c e of Besearch, 1977,. E x h i b i t 2.4. • Savings P o t e n t i a l of the UPC system by Expense Category Checkout and bagging 43% P r i c e marking 23% B e g i s t e r b a l a n c i n g and Onderrings 22% Boutine o r d e r i n g 9% Eguipment replacement 3% T o t a l Savings 100% Source: Assembly O f f i c e of Besearch, C a l i f o r n i a L e g i s l a t u r e , Study of Computerized Checkout Systems i n Food S t o r e s , 1977. 29 The n o n - q u a n t i f i a b l e savings (which w i l l be r e f e r r e d to as " s o f t " b e n e f i t s ) appeared to be f a i r l y e x t e n s i v e a c c o r d i n g to the s t u d i e s c a r r i e d out by the r e t a i l e r s mentioned above. Ralph's Grocery Co.: l i s t e d these as: - proper product mix and s h e l f a l l o c a t i o n ; - p r i v a t e - l a b e l ^ l i n e - e x t e n s i o n and e v a l u a t i o n ; - item i n t r o d u c t i o n and e v a l u a t i o n , standard order development, improved l a b o u r s c h e d u l i n g techniques; - f r o n t - e n d c o n f i g u r a t i o n , a c c u r a t e comparisons of l i k e s t o r e s , and i n v e n t o r y c o n t r o l s . "A key area being addressed by a communicating network of s t o r e s i s the s t o r e cash-accounting system which w i l l p r ovide an a b i l i t y to c o n t r o l and a u d i t s t o r e - l e v e l n e g o t i a b l e a s s e t s such as cash, coupons, and food stamps i n a way t h a t has never been a v a i l a b l e i n a mechanical environment " (Supermarket News, October 17, 1977). S t e i n b e r g ' s study p i n p o i n t e d b e n e f i t s as f o l l o w s : Merchandising - e;g,i b e t t e r new item t r a c k i n g , b e t t e r a n a l y s i s of a d v e r t i s i n g e f f e c t i v e n e s s . Store c o n t r o l - t h i s i n c l u d e d the areas of d i r e c t d e l i v e r y , coupons, b o t t l e d e p o s i t s , and department planning Corporate funds c o n t r o l and r e p o r t i n g - p o t e n t i a l savings f o r the company as a whole amounted to $94,600 per year and i n c l u d e d s u p p l i e s r e l a t e d to o r d e r i n g ($28,600 per year) and the d a i l y c o u r i e r s e r v i c e t o the EDP c e n t r e ($66,000 per year) S e r v i c e l e v e l - i t was determined t h a t with b e t t e r i n v e n t o r y c o n t r o l , percentage sto c k o u t s c o u l d be reduced from the 30 e x i s t i n g 9% i d e a l l e v e l t o a 5% l e v e l (Dexter and Barnett 1978b),. While e s t i m a t e s o f sav i n g s vary, the s t a t i s t i c s quoted above and i n E x h i b i t s 2.2 through 2.4, i n g e n e r a l , bear out the f i n d i n g s of other sources (Moyer and S e i t z 1975, Assembly O f f i c e of Research 1977). The estimated 23% of s a v i n g s being a t t r i b u t e d t o e l i m i n a t i o n of p r i c e -marking i s widely accepted (Coyle 1978), and many chains f e e l scanning i s " i m p r a c t i c a l without p r i c e removal (Supermarket News, August 1, 1977) i Costs of systems vary with i n s t a l l a t i o n . Estimates p l a c e the co n v e r s i o n of a supermarket from manual r e g i s t e r s t o scanners at between $100,000 and $130,000, with some running as high as $300,000 (Forbes 1978, Mahoney 1974). 2.2.4 Manufacturers 9 View The grocery product manufacturers have i n v e s t e d much time and money i n the UPC and view automated scanning as a l o g i c a l next s t e p ; In 1970, the funds f o r the i n i t i a l U.S. study on a standard i n d u s t r y code were put up by the Grocery Manufacturers A s s o c i a t i o n and the Super Market I n s t i t u t e — $50,000 each (Mahoney 1974). By 1977 the grocery i n d u s t r y had i n v e s t e d some $50 m i l l i o n t o develop the concept of the U n i v e r s a l Product Code (Assembly O f f i c e o f Research 1977). The manufacturers w i l l b e n e f i t i f the r e t a i l o u t l e t s employ scanning equipment on a l a r g e s c a l e ; One p o t e n t i a l area f o r hard s a v i n g s i s i n ' the p o l i c i n g of c e n t s - o f f couponing. At present, consumers are 31 a b l e to redeem coupons on goods not a c t u a l l y purchased. T h i s may be done i n a d v e r t a n t l y (e.g. du r i n g peak periods) or knowingly by the c a s h i e r ; B l a i r Besearch r e c e n t l y presented data s u g g e s t i n g t h a t "consumer misredemption alone accounts f o r a t h i r d of a l l coupons cashed i n - f a r high e r than e a r l i e r i n d u s t r y e s t i m a t e s . Misuse of t h i s potent marketing weapon cou l d be c o s t i n g marketers w e l l i n t o the hundreds of m i l l i o n s o f d o l l a r s " (Grey Matter 1977). As coupons could be UPC coded, the t r a n s a c t i o n can be v a l i d a t e d by the computer system; 2:2.4;1 Marketing i n f o r m a t i o n System P o t e n t i a l By being able, t o o b t a i n d e t a i l e d product movement i n f o r m a t i o n , h i t h e r t o a v a i l a b l e only on a broad b a s i s , manufacturers should be a b l e t o r e f i n e t h e i r marketing s t r a t e g i e s . For example, i n f o r m a t i o n c o u l d be o b t a i n e d r e g a r d i n g : - a c t u a l movement at the p o i n t o f s a l e (item by item) - consumer buying behavior, l i t e r a l l y o v e r n i g h t , simply because the data i s always c u r r e n t . The i n f o r m a t i o n may not, of course, be r e q u i r e d on a d a i l y b a s i s ; - new product and other t e s t market experiments ( f a s t , a c c u r a t e feedback) - the e f f e c t s of a d v e r t i s i n g and promotional 32 a c t i v i t y on s a l e s - perhaps even a d o l l a r f o r d o l l a r payout r e l a t i o n s h i p of marketing investments to s a l e s . The scanning systems w i l l make the necessary data a v a i l a b l e and i t w i l l be up to the manufacturers to make use o f the i n f o r m a t i o n . Under present manual systems, promotion assessment e.g. through coupon c o n t r o l , i s almost i m p o s s i b l e , and item t r a c k i n g d i f f i c u l t . "The. speed and e x c e p t i o n a l s e n s i t i v i t y of scanner-spawned data were r e c e n t l y documented by T e l e -Research, I nc. ... f i n d i n g s presented to an American Marketing A s s o c i a t i o n meeting i n mid-June (1977) showed how the i n f o r m a t i o n (on a weekly o r even d a i l y basis) c o u l d be used t o assess a d v e r t i s i n g and marketing e f f e c t s p r e v i o u s l y l o s t because o f long i n t e r v a l s ( u s u a l l y two months) between a u d i t s . I t s TRIM d i v i s i o n (Tele-Research Item Movement) i s able to •monitor the s l i g h t e s t tremors i n s a l e s and share, where others can only pick up the earthquakes** a c c o r d i n g t o Tom Mindrum, v i c e p r e s i d e n t i n charge of the New York o f f i c e " (Grey Matter 1977),. 2.2.5 Computer Manufacturers* View S e v e r a l computer manufacturers were i n v o l v e d i n o r i g i n a l development of the UPC by s u b m i t t i n g p r o p o s a l s f o r i t s format. Among these companies were IBM, NCR, S i n g e r , and RCA who a l l o b v i o u s l y saw the p o t e n t i a l market f o r automated checkout eguipment. The advancement of these systems was f a r slower than a n t i c i p a t e d and today "IBM with 57% of the U .S. market, and 33 NCH with 25% lead a f i e l d of f i v e major manufacturers " (Coyle 1 9 7 8 ) , . This small number of equipment manufacturers i s representative of the Canadian market as well. The manufacturers must indeed be cheered by the renewed a c t i v i t y i n the supermarket areas For example. Giant Food i n the U.S. recently ordered 1 , 5 0 0 e l e c t r o n i c scanner checkstand units from IBM. The manufacturers would l i k e to see t h i s trend continue, for although " l a s t year food r e t a i l e r s spent about $ 2 0 0 m i l l i o n on checkout equipment, less than $ 1 0 m i l l i o n went for scanners" (Forbes 1 9 7 8 ) , ; This key-entry and other simpler point-of-sale equipment "costs only a f r a c t i o n of the price of the scanner" (Forbes 1 9 7 8 ) . 2 . 2 s 6 Government's View While not wanting to interfere unduly i n the supermarkets' operations, governments on l o c a l and federal l e v e l , both i n Canada and the U.S., have been pressured by consumer and labour unions to take action i n the item-pricing controversy. This action* i n the form of l e g i s l a t i o n to force item-pricing in scanning stores had taken place (as previously mentioned) i n many U.S. c i t i e s and states by 1 9 7 5 . L e g i s l a t i o n at a federal l e v e l in both Canada and the U.S. was being considered i n 1 9 7 5 but, to date, there has been no federal stand on the issue. Governments have passed l e g i s l a t i o n to protect consumers where they f e l t that elimination of item prices would lead to unchecked. 3 4 indiscriminate price hikes by supermarket owners; or to protect labour where they f e l t that supermarket employees' jobs were threatened; However, lobbying by both these groups has diminished, i f not the fears (Coyle 1978) . The Canadian government, i n p a r t i c u l a r , would be concerned at a minimum by monitoring any price hikes in the industry. Government agencies have been formed to deal with t h i s p a r t i c u l a r issue, i . e . the A n t i - I n f l a t i o n Board established i n 1975 to control price and income; This body, or i t s "watchdog" replacement, Centre f o r the Study of I n f l a t i o n and Productivity (CSIP), would c e r t a i n l y be concerned i f i t was f e l t that the changes taking place in the supermarkets could possibly lead to unchecked price increases. Both the AIB and the CSIP are presently active as borne out by recent newspaper a r t i c l e s (Mackie 1978, Teasdale 1978). 3 5 CHAPTER III CONSUMER INFORMATION SYSTEMS -One possible alternative to conventional methods of price publication i s to be considered. Presently, consumer information systems, paid f o r d i r e c t l y by consumers, do ex i s t and these must be considered as a basis for further discussion of the s p e c i f i c CIS contemplated herein; Existing systems w i l l be discussed along with new ideas i n the area of telecommunications . This w i l l lead to a description of a CIS i n the supermarket environment, as well as giving ideas pn the future potential of such a system,; 3,1 Use Of Existing Information Services The notion of a consumer information system i n various forms i s hardly new. Nationally, the U.S, Consumers Union and the Canadian Consumer Association endeavour to help consumers with t h e i r buying decisions by supplying yearly publications such as "Consumer Reports". Products are rated on o v e r a l l quality and t h e i r a t t r i b u t e s are discussed, On a l o c a l l e v e l , member-funded organizations ex i s t offering' l o c a l market information (products, services, venders, etc.) i n the form of Consumer guides. Examples of the l a t t e r include "Checkbook", a periodical published quarterly by the Washington Center f o r the Study of Services; and "Vector", published monthly by a privately run concern in San Diego* 3 6 On a national scale, publications must of necessity deal with product data that w i l l not date too quickly, thus rendering the information obsolete before consumers have-had an opportunity to u t i l i z e i t . For example, "suggested r e t a i l " prices are often l i s t e d , and the items being considered w i l l be major purchase a r t i c l e s (e.g. household appliances). Loca l l y , information systems can handle more v o l a t i l e and area-dependent attributes (such as food prices) because printed information can be published more frequently and use can be made of l o c a l mediae For example, consumer groups w i l l use the l o c a l newspapers to publish a "market-basket" of grocery item prices; in Montreal, food price comparisons appear p e r i o d i c a l l y on a public access t e l e v i s i o n channel; i n some U.S. c i t i e s , consumers can have access, f o r a fee, to a private t e l e v i s i o n channel o f f e r i n g a range of topics of l o c a l i n t e r e s t . Even these l o c a l information systems have drawbacks: a) In many cases, the information systems are the product of voluntary associations (acquaintances who pool l o c a l information), or organizations u t i l i z i n g volunteers to c o l l e c t the necessary data (eig. the Consumer Association of Canada). Both re l y on the continuing energy and enthusiasm of these volunteers. b) Even the professional, commercial organization possesses factors l i m i t i n g the quantity of data collected and 37 published, i ; e . f i n a n c i a l resources; time required for c o l l e c t i o n and c o l l a t i o n ; r e s t r i c t i o n s that are a product of the publication media (e-g. physical space a v a i l a b l e , publication deadlines) c) In any system, the information i s only as accurate as the method of data c o l l e c t i o n which i s prone to human error. d) In most cases, the success of these systems has been questioned. The voluntary association tends to f a l t e r "as the dominant enthusiasts f i n a l l y run out of energy and enthusiasm" (Maynes et a l , 1977). The commercial organizations appeal to those peole who are w i l l i n g to pay for the information they require i n decision-making. However, whether such a system i s u t i l i z e d depends on the consumer's marginal net gain c a l c u l a t i o n . Here, the marginal cost i s a function both of search time and any service fee. So, unless charges are minimal and access i s simple, the system w i l l have appeal to a limited range of people* 3.2 Potential On A National Scale The drawbacks of existing nationwide publication of information have already been mentioned. However, developments i n telecommunications o f f e r alternative forms of information dissemination. Using t e l e v i s i o n as a vehicle f o r publication of information on a l o c a l l e v e l i s already i n use (see above)* Implementing t h i s idea on a nationwide scale has begun to appear f e a s i b l e . Canadian Television and Cablevision 38 executives recently took note of developments i n Britain,. Two systems have appeared there, and a description from a newspaper a r t i c l e i s given below: "In i t s simplest terms, the BBC, IBA system i s an information service that uses existing channels on a B r i t i s h t e l e v i s i o n set to make a vast range of printed information available to the viewer; This currently includes news flashes, sports re s u l t s , weather conditions, food prices, an entertainment guide, and transportation information ... To get at i t , a t e l e v i s i o n owner needs a converter fixed to his set and a hand-held d i g i t a l keypack resembling a pocket calculator. With the keypack* the viewer can inte r r r u p t h is regular programs by punching up an index of information available over either networks (BBC, IBA), then request s p e c i f i c d e t a i l s . Within seconds, pages of printed information f l a s h 1 on the screen. & touch of the f i n g e r t i p s switches him back to his program" (Gray 1977). J o i n t l y , these systems are currently i n use i n over 6,000 B r i t i s h homes and o f f i c e s . The author sees these telecommunication developments as the important l i n k between exist i n g limited-scope information publication systems and future e a s i l y accessible, p o t e n t i a l l y powerful Consumer Information Networks,; 3.3 A CIS In The Supermarket Environment The supermarket environment lends i t s e l f to consideration of the development of a CIS since the issue of item pr i c i n g i s t o p i c a l and the existence of the UPC eliminates many design problems. ' 39 3.3.1 Scope Of The System I n i t i a l l y , the system i s envisaged as a rather simple device for the storage, and subsequent publication, of grocery product price information. This data currently e x i s t s within the scanning computer systems of the supermarkets. Because most price changes are i n i t i a t e d from the chain's head o f f i c e (except for instore s p e c i a l s ) , pertinent price information i s stored i n a central l o c a t i o n . In the case where chains have stores with automated checkout, t h i s centralized information system must be automated for communication purposes. Thus, price information i n the supermarket environment i s available for use i n other spheres. (The f e a s i b i l i t y of the statement just made i s discussed i n more d e t a i l below.) I f i t i s possible to store t h i s information on a system in the public domain, then consumers p o t e n t i a l l y have access to price information on a l l products (not just a select set) and the accuracy and currency of the data i s assured. Thus, the e x i s t i n g problem of data c o l l e c t i o n i s eased; however, information dissemination i s s t i l l a d i f f i c u l t y . I t i s suggested that publication of price information be through the following channels: a) l o c a l newspapers (e.g. weekly market-basket price comparison) b) printed l i s t s of product prices and/or product price changes displayed p u b l i c l y e.g. l i b r a r i e s , supermarkets no c) public t e l e v i s i o n channels d) Central Inquiry Centre, i . e . consumers w i l l be able to telephone and enquire about s p e c i f i c prices. At the s t a r t , only price information w i l l be stored, but the potential of t h i s system as a useful and powerful Consumer Information System i s worth considering: Within the supermarket environment alone, there i s a need fo r "better" information. This does not necessarily imply more information* but information i n a form that a s s i s t s the consumer i n making ra t i o n a l decisions. For example: a) unit p r i c i n g i s generally available although i t i s not always consistent (e. g. m i l l i l i t r e s vs. f l u i d ounces); and i t , i s not used by a majority of shoppers. b) n u t r i t i o n a l information i s l i s t e d on most food packages, but the number of items l i s t e d can become overwhelming and therefore useless, i f more than two or three items are being compared. Additives are also l i s t e d , but these chemical compounds are meaningless to most people, and the i r potential harmfulness generally i s not known: An attempt i s being made i n the U.S.A. to make n u t r i t i o n a l information simple to compare by setting up a single r e l a t i v e • n u t r i t i o n a l score' 41 see Exhibit 3.1. Along with t h i s , information on additives i s being made more meaningful with warnings regarding the harmful e f f e c t s of these substances - see Exhibit 3.2. c) consumer ratings of the stores themselves i s not handled in any formal manner at present. Ratings could be based on a subjective measure of cleanliness, s e r v i c e - l e v e l s (i-e,. stockouts, a b i l i t y to handle peak periods) helpfulness of employees, etc. Information i n the future could be obtained by simply selecting a t e l e v i s i o n channel. With the advent of micro-computers i n the home, the consumer of the.future should be able to key i n a shopping l i s t and get a display of supermarkets i n the area and a comparison of t o t a l costs for the items selectedi He/she may also have the option of automatically placing an order with the most convenient store. 42 Exhibit - 3._ 1 Nutrition Scoreboard* The foods are given "Relative N u t r i t i o n a l Values". There i s no perfect score, but higher scores indicate greater n u t r i t i o n a l value than lower scores. Ratings can be added, e.g. two plums have a rating of 18. The chart advises: "A diet must be balanced as well as generous". Examples: Nu t r i t i o n a l Score Protein Foods: beef l i v e r 2 oz 172 chicken l i v e r 2 oz 158 Vegetables: b r o c c o l i (frozen) 3. 3 oz 116 brussel sprouts (frozen) 3. 3 oz 73 Dairy: skim milk 8 oz 39 whole milk 8 oz 39 F r u i t s : strawberries 1. 5 cup 50 plum 1 9 Snacks: oatmeal cookie 1 -4 milk chocolate 1 oz -27 Chuckles candy 1 package -74 i From the book Nutriti o n Scoreboard by Dr; Michael Jacobson. Posters produced by Centre f o r Science in the Public Interest (CSPI) Washington D.Ci,. 1978 43 E x h i b i t - 3 . 2 -Chemical Cuisine* This,chart l i s t s many of the common food additives, i n an attempt to inform consumers as to what the chemicals do, which ones are safe and which are poorly tested or dangerous. Three colours are used on the poster: Green - safe, yellow -caution, and blue - avoid* Examples: Ascorbic Acid (green), nutrient - o i l y foods, cereals, soft drinks, cured meats. Caffeine (blue), stimulant - coffee, tea, cocoa, soft drinks Calcium Propionate (green), preservative - bread, r o l l s , pies, cakes Quinine (blue) flavoring - tonic water, quinine water, b i t t e r lemon Along with the above a short narrative i s provided, l i s t i n g c h a r a c t e r i s t i c s of the chemical and any known or potent i a l hazards i n i t s use. 1 A poster produced by Center f o r Science in the Public Interest, Washington, D.C,:, 1978 Source: Michael Jacobson's Eater's Digest, Anchor Paperback* 44 3.3.2 General F e a s i b i l i t y Of The System The economic f e a s i b i l i t y i s discussed i n Chapter V. However, there are technological and p o l i t i c a l considerations which must be taken into account. 3.3.2.1 Technology Computer hardware and software requirements for s e t t i n g up the i n i t i a l CIS are available at present. The f a c t that the grocery industry has developed the UPC makes computerized storage and r e t r i e v a l of information straightforward. Using the UPC as a record key, consistency of product i d e n t i f i c a t i o n within manufacturers and/or across grocery chains i s assured. Data c o l l e c t i o n i s f a c i l i t a t e d by the use of scanners; data publication can make use of existing telecommunication methods, with a view to more sophisticated techniques (described above; Gray 1977) in the future. 3s3.2.2 P o l i t i c a l Aspects Much has been said about the ease with which a price information system could be constructed because the necessary data i s stored by the supermarkets i n a r e a d i l y usable form. Section 3.3.1 above. However, cooperation must be obtained from the grocers i n order f o r t h i s data to be obtained. Why should the r e t a i l e r s agree to provide price information on a regular basis for use i n the c e n t r a l 45 database? We must c o n s i d e r two important p o i n t s : a) There i s a p o s s i b i l i t y t h a t pressure w i l l be brought t o bear on r e t a i l e r s to r e t a i n item p r i c i n g , e i t h e r i n f o r m a l l y from consumers, or more f o r m a l l y from government l e g i s l a t i o n . b) R e t a i l g r o c e r s , as c o m p e t i t o r s , pay f o r the c o l l e c t i o n of other s t o r e s ' p r i c e i n f o r m a t i o n . They can however, simply be considered i n the r o l e of consumers needing p r i c e i n f o r m a t i o n . I t f o l l o w s from the above t h a t i t i s h i g h l y probable f o r r e t a i l e r s t o view the CIS as advantageous and a v i a b l e a l t e r n a t i v e t o item p r i c i n g : a) R e t a i l e r s have the o p p o r t u n i t y to r e a l i z e f u l l p o t e n t i a l b e n e f i t s from the scanning system, i . e . the s a v i n g s due to i t e m - p r i c e e l i m i n a t i o n . b) R e t a i l e r s , as consumers, w i l l have easy access to c o m p e t i t o r s ' p r i c e i n f o r m a t i o n . c) P u b l i c a t i o n of p r i c e i n f o r m a t i o n can be seen as a form of a d v e r t i s i n g by the r e t a i l e r s . Within the scope of t h i s t h e s i s , o n l y the supermarket environment i s being d i s c u s s e d as p l a y i n g a part i n the formation of a CIS. However, other r e t a i l e r s (department s t o r e s , automobile s a l e s , etc.) have i n s t a l l e d , or have the p o t e n t i a l t o i n s t a l l automated checkout systems. Removal of item p r i c e s has not become an i s s u e as yet (with bulk items &.q. r e f r i g e r a t o r s and stoves, i t probably never w i l l ) , but 46 these r e t a i l e r s must be c o n s i d e r e d f o r the f u t u r e . V a l u a b l e i n f o r m a t i o n i s s t o r e d on t h e i r systems, and expansion o f the CIS i n t o areas beyond the supermarket should take t h i s i n t o account: I t i s l e f t to f u t u r e research to c o n s i d e r the complex p o l i c y a s p e c t s i n v o l v e d i n t h i s endeavour. Herein the scope o f these i s s u e s w i l l be c o n f i n e d t o the grocery i n d u s t r y . The t i m i n g of the CIS development i s a very important p o l i t i c a l c o n s i d e r a t i o n . In Vancouver, the two major c h a i n s , o p e r a t i n g two scanner s t o r e s a p i e c e , view these s t o r e s as t e s t systems. Consumer r e a c t i o n , p a r t i c u l a r l y to p r i c e removal, i s being put to the t e s t as much as any other f e a t u r e . At p r e s e n t , formal complaints have been few, but consumer advocates have suggested consumers co u l d express t h e i r d i s a p p r o v a l by shopping elsehwhere. T h i s l a c k of w r i t t e n o b j e c t i o n , wrongly or r i g h t l y , c o u l d be taken by g r o c e r s as a s i g n a l t o go ahead with a l l s t o r e s and i n t e r p r e t e d by government as a s i g n a l not to i n t e r f e r e v i a l e g i s l a t i o n . Once the majority of s t o r e s have been converted, the e x p r e s s i o n of o b j e c t i o n by b o y c o t t of scanner s t o r e s may be i m p o s s i b l e and voiced o b j e c t i o n may be too l a t e . With scanners f i r m l y entrenched and no item p r i c e s on goods, supermarkets w i l l be l e s s l i k e l y t o cooperate i n the f o r m a t i o n o f a CIS. Government w i l l be l o a t h e to i n t e r f e r e t h i s l a t e i f i t i s f e l t consumers passed up t h e i r o p p o r t u n i t y f o r a c t i o n . 47 CHAPTER IV CONSIDERATIONS IN THE DESIGN OF A CIS In a changing environment, people's a t t i t u d e s and i n f o r m a t i o n p r o c e s s i n g methods may a l s o he r e q u i r e d to change t o meet new c h a l l e n g e s . Chapter IV looks a t the f e a s i b i l i t y of o f f e r i n g consumers an a l t e r n a t i v e method of food p r i c e information-gathering,; As a consequence of the s i t u a t i o n presented i n Chapters I and I I , i t appears t h a t a stalemate over item p r i c i n g s t i l l e x i s t s . Although the t e n s i o n appears t o have les s e n e d r e c e n t l y , consumer f e a r s are s t i l l p r e v a l e n t , and may w e l l be j u s t i f i e d . The f i n d i n g s of the study by H a r r e l , Hutt, and A l l e n ((1976) cannot be ignored even though consumer groups' o b j e c t i o n s may have "quieted down ** perhaps because the consumers they presume to speak f o r have f a l l e n i n l o v e with scanners" (Coyle 1978). In Vancouver, Canada, where two major c h a i n s each have two scanner equipped s t o r e s , o b j e c t i o n s to item p r i c e removal are once again being v o i c e d (Parton 1978a, Parton 1978b). O f f e r i n g an a l t e r n a t i v e t o e x i s t i n g methods of p r i c i n g r e t a i l goods (in p a r t i c u l a r supermarket products) , and maintaining or h e i g h t e n i n g consumer awareness i s thus a major t h r u s t behind the establishment of a CIS. There are a l s o s t u d i e s which support the e x p e c t a t i o n t h a t widened p u b l i c a t i o n of p r i c e i n f o r m a t i o n would reduce both average p r i c e and p r i c e d i s p e r s i o n , and a l s o p r i c e d i s c r e p a n c y between s t o r e s of the 48 same chains & study on drug p r i c e s (Cady 1976) showed t h a t i n areas where a d v e r t i s i n g of p r e s c r i p t i o n drug p r i c e s was u n r e s t r i c t e d , both p r i c e s and p r i c e d i s p e r s i o n were s i g n i f i c a n t l y lower. S t u d i e s by Devine (1976,1978) i n the Ottawa-Hull area supported the hypotheses t h a t p u b l i c d i s s e m i n a t i o n of market i n f o r m a t i o n a) reduced the d i s p e r s i o n of p r i c e s a c r o s s s t o r e s ; b) decreased p r i c e v a r i a t i o n s w i t h i n s t o r e s ; c) lowered the average p r i c e l e v e l i n the market; From the above we are l e f t with the d i s t i n c t impression t h a t p r i c e p u b l i c a t i o n o f f e r s s i g n i f i c a n t advantages t o consumers over and above e x i s t i n g methods of i t e m - p r i c i n g . The need f o r a database of consumer p r i c e i n f o r m a t i o n i n the supermarket environment - a CIS, appears warranted. 4.1 Design Issues The o b j e c t i v e s of t h i s CIS should be made c l e a r at the o u t s e t . Bettman provokes thoughts on the i s s u e , and comments on the o b j e c t i v e s of " d e s i g n i n g Consumer Inf o r m a t i o n Environments" (Bettman 1975) . "A system i s s a i d to be ' p r o c e s s i n g * normative i f i t i s intended only .that consumers should be a i d e d i n p e r c e i v i n g and p r o c e s s i n g the a p p r o p r i a t e i n f o r m a t i o n * but there i s no commitment to how or even i f consumers use such i n f o r m a t i o n . Osage i s a s u b j e c t i v e i n d i v i d u a l consumer d e c i s i o n , and the system does not t r y t o d i r e c t t h a t d e c i s i o n other than by p r o v i d i n g i n f o r m a t i o n i n a f a s h i o n f a c i l i t a t i n g p r o c e s s i n g . A system i s ' p o l i c y * normative i f the i n t e n t , based upon 49 some n o t i o n s of r a t i o n a l b e h a v i o r , i s t h a t i n f o r m a t i o n be used i n a p a r t i c u l a r manner* i f t h e r e i s a p o l i c y or g o a l of •educating' the consumer to make ' b e t t e r ' purchase d e c i s i o n s " . The author agrees with Howson and Dexter (1977) t h a t "In t h i s c ontext the o b j e c t i v e of a consumer i n f o r m a t i o n database i s p r o c e s s i n g normative (however) s p e c i f i c a n a l y s e s and methods of d i s t r i b u t i n g i n f o r m a t i o n e x t r a c t e d , could have e i t h e r p r ocessing or p o l i c y normative o b j e c t i v e s . " T h i s i s not to say that r e s p o n s i b i l i t y f o r the consumer i s being shrugged o f f ; Rather, the point i s made t h a t consumer needs can be s a t i s f i e d whether or not consumers s p e c i f i c a l l y use the i n f o r m a t i o n i n the way i t was intended. I t i s the i n t e n t i o n of the author that the proposed p u b l i c a t i o n methods be ' p o l i c y ' normative i n nature. Thus, the question becomes whether or not the " s p e c i f i c outcome or s e t of outcomes" d e s i r e d (Bettman 1977) w i l l * i n f a c t , s a t i s f y consumer o b j e c t i v e s (or those of consumer advocates p u r p o r t i n g to be one and the same). S e c t i o n 4.2. d i s c u s s e s these o b j e c t i v e s f u r t h e r . The design i s s u e s as they r e l a t e t o the CIS i n the supermarket environment w i l l be c o n s i d e r e d . These i n c l u d e a) Scope of the system; who the prospective, users and i n t e r e s t groups a r e , and t h e i r o b j e c t i v e s with regard to p r i c e i n f o r m a t i o n and the UPC (Section 4.2.),. b) Content and a c c e s s i b i l i t y of the system; i n i t i a l l y o nly p r i c e i n f o r m a t i o n w i l l be s t o r e d ; d i r e c t access by consumers and r e t a i l e r s while d e s i r a b l e , i s not f e a s i b l e i n 50 t h e e a r l y s t a g e s o f o p e r a t i o n ( S e c t i o n 4.4.). c) Economics; an attempt i s made t o a s s e s s c o s t s and s a v i n g s of such a system and a s c e r t a i n where r e s p o n s i b i l i t y f o r m a i n t a i n i n g t h e system s h o u l d l i e . 4.2 O b j e c t i v e s Of The I n t e r e s t Groups The p r o p o s a l o u t l i n e s t h e f e a t u r e s and r e q u i r e m e n t s o f a b a s i c Consumer I n f o r m a t i o n System, i . e . one which meets a t l e a s t a minimum o b j e c t i v e s e t of the v a r i o u s i n t e r e s t g roups. I n o r d e r t o f o r m u l a t e t h i s o b j e c t i v e s e t * t h e o b j e c t i v e s of t h e i n t e r e s t groups ( E x h i b i t 4.1.) a r e c o n s i d e r e d . I n t e r e s t G r o u p s and EXHIBIT 4.1 T h e i r R e p r e s e n t a t i o n i n Canada G r o c e r y M a n u f a c t u r e r s G r o c e r y P r o d u c t s M a n u f a c t u r e r s of Canada R e t a i l e r s R e p r e s e n t e d by i n d i v i d u a l s u p e r m a r k e t c h a i n s and by t h e R e t a i l C o u n c i l o f Canada E q u i p m e n t M a n u f a c t u r e r s 5 m a j o r m a n u f a c t u r e r s l e d by IBM ( 5 7 % o f U.S m a r k e t ) and NCR ( 2 5 % ) ( C o y l e , 1978) G o v e r n m e n t O r g a n i z a t i o n s S t a t i s t i c s Canada D e p a r t m e n t of Consumer and C o r p o r a t e A f f a i r s L a b o u r U n i o n s R e p r e s e n t e d by t h e R e t a i l C l e r k s ' I n t e r n a t i o n a l U n i o n Consume r s R e p r e s e n t e d by c o n s u m e r s i n g e n e r a l , and by t h e Consumer A s s o c i a t i o n of Canada i n p a r t i c u l a r 52 4.2 .1 Grocery Manufacturers The grocery product manufacturers present the most s t r a i g h t f o r w a r d a n a l y s i s . They do not stand to b e n e f i t d i r e c t l y , as do the r e t a i l e r s . However, they have i n v e s t e d c o n s i d e r a b l e money and e f f o r t i n the i n t r o d u c t i o n of the OPC (and the s t a n d a r d i z a t i o n of i n f o r m a t i o n l a b e l l i n g ) , so they view scanning as the next l o g i c a l advance. The h i e r a r c h y of manufacturers o b j e c t i v e s i s presented i n E x h i b i t 4.2. E X H I B I T 4.2 HIERARCHY OF OBJECTIVES G r o c e r y M a n u f a c t u r e r s O b j e c t i v e s Means ( w i t h a u t o m a t e d c h e c k o u t ) I— I m p r o v e d s a l e s ( g r e a t e r m a r k e t i n g e f f i c i e n c y ) I m p r o v e d s a l e s i n f o r m a t i o n P r o d u c t Movement T r a c k i n g New P r o d u c t T r a c k i n g P romo t i o n a 1 S a l e s M e asurement Coupon C o n t r o l CM 54 The supermarket systems allow the manufacturers greater e f f i c i e n c y i n the d i s t r i b u t i o n of t h e i r products as has been mentioned i n section 2.1.3. But t h i s i s only possible i f , in f a c t , scanning i s adopted by a large percentage of the supermarkets. 4.2.2 Retailers Retailers w i l l benefit d i r e c t l y from the use of automated checkout, with f u l l potential being realized once item p r i c i n g i s no longer required* The hierarchy of r e t a i l e r s * objectives i s presented i n Exhibit 4.3. EXHIBIT 4.3 HIERARCHY OF OBJECTIVES Grocery R e t a i l e r s O b j e c t i v e s More p r o f i t a b l e o p e r a t i o n T a n g i b l e savings Means (with automat ed checkout) P r i c i n g of Goods Reduction of E r r o r s Aut omatic Re o r d e r i n g Improved e f f i c i e n c y I Sales A n a l y s i s Ware-Housing F a s t e r Checkout Ordering Ef f i c i e n c y Labour Scheduling 56 4.2.3 Equipment Manufacturers The o b j e c t i v e of the equipment manufacturers i s t o s e l l the automated checkout systems i n q u a n t i t i e s t h a t r e f l e c t the market p o t e n t i a l . Both hardware and software are r e a d i l y a v a i l a b l e and r e p r e s e n t l a r g e investments by these s u p p l i e r s over the past few years. Reaction to the supermarket system may be an i n d i c a t i o n o f the f u t u r e success or f a i l u r e of o t h e r important concepts, e.g. E l e c t r o n i c Funds T r a n s f e r . 4.2.4 Government The government would l i k e to s t i m u l a t e the economy but, a t the same time, a v o i d e x c e s s i v e i n f l a t i o n . They would l i k e t o be sure t h a t competition i s not reduced as a r e s u l t of any change i n the environment, e.g. i n t r o d u c t i o n of scanning equipment and the e l i m i n a t i o n of i t e m i z e d p r i c i n g . What i s r e q u i r e d i s a way of monitoring o p e r a t i o n s without undue inter f e r e n c e , . The AIB C o n t r o l Program e x p i r e d at the end of 1978. I t has been r e p l a c e d by a "watchdog" agency, the Centre f o r the Study of I n f l a t i o n and P r o d u c t i v i t y (CSIP) whose f u n c t i o n i s t o monitor p o s t - c o n t r o l s . "CSIP has a double b a r r e l l e d f u n c t i o n to analyze p r i c e and c o s t developments t h a t appear to t h r e a t e n the country's economic o b j e c t i v e s and to study ways o f improving p r o d u c t i v i t y " (Teasdale 1978). 57 4.2.5 R e t a i l Onions The R e t a i l Clerks International Onion i n the United States has stated t h e i r opposition to the scanning equipment. Their objective i s to avoid lo s s of employment f o r members due to change i n the industry,; (However, as mentioned e a r l i e r , the objections are no longer voiced i n many of the states). 4.2.6 Consumers The consumers are discussed l a s t because they form a very s i g n i f i c a n t and i n t e r e s t i n g , yet complex, group. Both i n Canada and the United States, consumers* needs generally are represented by associations; Locally, therefore, the objectives of the Consumer Association of Canada need to be considered^ (See Exhibit 4.4.). The s u i t a b i l i t y of an alternative to itemized p r i c i n g w i l l be judged by t h i s agency. EXHIBIT 4.4 HIERARCHY OF OBJECTIVES C o n s u m e r s (Consumer A s s o c i a t i o n s ) Obj e c t i v e s P r o t e c t C o n s u m e r s ' I n t e r e s t s H e i g h t e n ( o r a t l e a s t m a i n t a i n ) Consumer A w a r e n e s s I n c r e a s e d Q u a 1 i t y o f I n f o rma t i o n ' P o l i c i n g ' o f S u p e r m a r k e t s r I | I n c r e a s e d I n c r e a s e d Means Q u a n t i t y E a s e of o f I n f orma t i o n I n f orma t i o n S e a r c h Reduce I n t e r s t o r e P r i c e F l u c t u a t i o n s M o n i t o r L e v e l o f Comp e t i t i o n H i g h l y V i s i b l e I n f ormat i o n Reduce I n t e r c h a i n F l u c t u a t i o n s 00 59 4*3 Meeting The Objectives This thesis proposes that the simultaneous implementation of a CIS with the supermarket scanning systems w i l l reasonably meet the objectives of the previously mentioned i n t e r e s t groups: I f the CIS i s indeed a feasible substitute for item p r i c i n g , then, in the short run, we w i l l see an end to the present impasse on t h i s issue, without either side f e e l i n g the imposition of an unfair compromise. In the long run, the CIS makes possible the c o l l e c t i o n and a v a i l a b i l i t y of even more information to consumers and other groups; For example, marketing boards w i l l be assisted i n t h e i r c o l l e c t i o n of information on volumes produced and sold, consumers w i l l have the potential to get n u t r i t i o n a l information on food products, and grocery manufacturers and r e t a i l e r s have the potential to get accurate market-share information. 4 .3 .1 The Grocery Industry's Objectives It i s obvious from the preceding discussion (Sections 4.2 .1. and 4.2.2.) that the grocery manufacturers and r e t a i l e r s ' goals are achieved through the use of supermarket scanning systems to obtain t h e i r information. While t h i s i s not d i r e c t l y attributable to the Consumer Information System, the i n d i r e c t influence i s as follows: Reports on productivity at the front end, movement of products, and buyer p r o f i l e s are of use to both r e t a i l e r s and manufacturers, and were not previously (or easily) attainable using manual systems. With 60 automated checkout for a l l goods being sold, t h i s information i s e a s i l y obtained. Machine-reading the OPC i s the most e f f e c t i v e form of data c o l l e c t i o n . The r e t a i l e r s fear much of thei r marketing information w i l l be incomplete and possibly incorrect i f checkers can key i n the price rather than using the scanner for a l l encoded products. The attaining of t h e i r goals therefore, i s dependent on the s a t i s f y i n g of consumer objectives i n a way other than the maintainence of item p r i c i n g . 4.3.2 The Equipment Manufacturers' Objectives If the r e t a i l e r s purchase supermarket systems, the hardware suppliers increase t h e i r volume of sales. If scanning equipment i s part of the purchase, there i s a further increase in both hardware and software sales. Prices quoted i n Forbes (1978) puts NCE's lowest priced scanner at double the cost of the i r key-entry electronic checkout system. 4.3,;3 Government Objectives There are various governmental agencies who r e a l i z e the potent i a l wealth of information gathered and stored by these supermarket systems. With access to the data generated by the stores* agencies such as S t a t i s t i c s Canada could produce the "Market Basket" information more e f f i c i e n t l y ; watchdog agencies too could save money on the i r monitoring process of the r e t a i l grocery industry. Present manual systems are time 61 consuming and t h e r e f o r e l i m i t e d . For example, Canada's Food P r i c e s Board's "weekly p r i c e survey, s e t up to give s p e e d i e r i n f o r m a t i o n than t h a t o f f e r e d monthly by S t a t i s t i c s Canada's consumer p r i c e index" was l i m i t e d to between 5 and 8 s t o r e s i n 8 c i t i e s (Armstrong 1975). The survey covered 68 foods and 26 • non-foods'. With the CIS, the v a r i o u s government agencies concerned have the o p p o r t u n i t y t o monitor p r i c e s with a minimum of e f f o r t , and without undue interference,. There i s p o t e n t i a l f o r the government to monitor c o s t s v s i p r i c e s i n t h e i r e f f o r t t o impede i n f l a t i o n (e:g. the CSIP, See 4.2.4): T h i s , of course, opens up the area of government/supermarket c o o p e r a t i o n , with the attendant i s s u e s of i n f o r m a t i o n p r i v a c y , and c o n t r o l over data accuracy. The d e t a i l o f these t o p i c s i s beyond the scope of t h i s study. However* the r e l a t e d i s s u e of supermarkets' access to the data w i l l be d i s c u s s e d i n Chapter V, S e c t i o n 5.1. Consumers are d i r e c t l y a f f e c t e d by a CIS. I d e a l l y , to assess how w e l l t h e i r o b j e c t i v e s are s a t i s f i e d , a 'measure' of consumer awareness should be used ( H a r r e l l et a l . , 1976). T h i s measure w l l not be attempted w i t h i n the scope o f t h i s paper. R e a l i s t i c a l l y , i t i s not p o s s i b l e to p r e d i c t a c c u r a t e l y how much ( i f a t a l l ) consumers w i l l use the i n f o r m a t i o n provided by the CIS; And, as mentioned, i t i s the groups r e p r e s e n t i n g the consumer i n t e r e s t who w i l l decide on the e f f e c t i v e n e s s of any a l t e r n a t i v e to item p r i c i n g . To t h i s end, i t i s u s e f u l t o c o n s i d e r s t u d i e s a l r e a d y c a r r i e d out i n 62 the f i e l d . There have not been studies dealing d i r e c t l y with what, i f anything, can replace item-pricing and maintain awareness lev e l s ; However, there have been studies concerned with individuals* methods of processing comparative information for decision-making purposes. The ultimate benefit of changes in the information available to consumers depends on the ind i v i d u a l ' s a b i l i t y to u t i l i z e the information. This i s attributable i n part to the l i m i t s of an i n d i v i d u a l to attend to, r e c a l l , and process unlimited amounts of data. Haines has postulated a p r i n c i p l e of information processing parsimony which maintains that "consumers seek to process as l i t t l e data as i s necessary i n order to make r a t i o n a l decisions" (Haines (1972). Research has shown that r a t i o n a l decisions are f a c i l i t a t e d i f , f o r example, unit price information for di f f e r e n t brands and sizes i s l i s t e d (and c e n t r a l l y displayed) f o r an entire product class (Russo et a l . , 1975). Bettman too, stated that "both on t h e o r e t i c a l and empirical grounds, i t can be argued that f a c i l i t a t i o n of processsing by attributes can help to simplify choice processes" (Bettman 1975). I t would appear then that consumers should be able to make improved decisions of choice i f the presentation of the data i s improved over the current item-pricing method. Kith proper design the CIS w i l l be able to offer t h i s a lternative. It i s suggested that supermarkets l i s t item prices and price changes at a convenient location i n the store; that price l i s t s be published in l o c a l newspapers, public buildings 63 (e.gs l i b r a r i e s ) , and t h a t these l i s t s be made a v a i l a b l e to groups such as the CAC and the consumer advocates. However, i f we assume t h a t consumers' uses of the i n f o r m a t i o n w i l l be no more or l e s s than a t p r e s e n t with item-p r i c i n g , then we must c o n s i d e r whether o b j e c t i v e s (of consumers and consumer groups ) w i l l s t i l l be met. There i s t h e o r e t i c a l ( S t i g l e r 1961) and e m p i r i c a l (Devine 1976,1978) support f o r the e x p e c t a t i o n t h a t improved p r i c e i n f o r m a t i o n p u b l i c a t i o n from the CIS would reduce average p r i c e s and p r i c e d i s p e r s i o n s S t i g l e r argued t h a t the c o s t of search f o r p r i c e i n f o r m a t i o n by both s e l l e r s and buyers i s a s i g n i f i c a n t source o f p r i c e d i s p e r s i o n s More s p e c i f i c a l l y , with lower search c o s t s f o r i n d i v i d u a l products, consumers w i l l engage i n more searches and buying w i l l ; s h i f t to the l o w e r - p r i c e d and, u l t i m a t e l y , more e f f i c i e n t s e l l e r . S t u d i e s by Devine suggest t h a t e x a c t l y the same e f f e c t s experienced i n the p r i c e s of drugs (Cady 1976) can be a n t i c i p a t e d from improved p r i c e i n f o r m a t i o n of food products. To r e i t e r a t e , the r e s u l t s showed that p u b l i c d i s s e m i n a t i o n of market i n f o r m a t i o n ; a) reduced the d i s p e r s i o n of p r i c e s a c r o s s s t o r e s ; b) decreased p r i c e v a r i a t i o n s w i t h i n s t o r e s ; c) lowered the average p r i c e l e v e l i n the market (Devine 1976). R e s u l t s of Devine's experiments were mentioned i n the i n t r o d u c t i o n to Chapter IV above. Devine p o i n t s out t h a t s t o r e comparisons are d i f f i c u l t f o r consumers t o make. "For 64 the most part, consumers must r e l y on t h e i r personal experiences and observations from shopping at alternative stores i n making t h e i r store selection decisions. Commercial or government reports which provide store comparison information are generally not available"; E a r l i e r experiments i n the Edmonton market revealed that "one p a r t i c u l a r firm was a dominant price leader setting the competitive price for a l l regions i n the c i t y " . Price publication caused a substantial change i n the market. The dominant firm announced i t would charge i d e n t i c a l prices in i t s stores throughout the c i t y * various competitors were able to underprice t h i s firm, and there was a general decline in prices for the entire c i t y . . Most importantly, "The University of Alberta began publishing comparative weighted price l e v e l indices each week. There was a positive response from both s e l l e r s and buyers to the increased information. Consumers used the price indices to select stores, and s e l l e r s used the indices as a benchmark for performance evaluation". Devine concludes " I f we assume that a defined minimum of market information i s necessary for 'workable' competition under most contemporary market structures and that a minimum i s not supplied because of the lack of market incentive, the c h a r a c t e r i s t i c s of the product would suggest that r e t a i l price information may be a public good". Thus, widely advertised price comparisons w i l l serve, at a minimum, to 'police' the supermarkets, thereby protecting the consumer i n t e r e s t . For example, supermarkets may be deterred from r a i s i n g prices 6 5 indiscriminately i f they run the r i s k of protest; t h i s r i s k i s higher i f there i s wide publication of information, and i s obviously lower i f consumers are not aware that i t was taking place. The : question e x i s t s as.: to what constitutes 'widely advertised' price data. Some possible means of dissemination: 'Market basket* price l i s t s altered on a d a i l y , or even a weekly basis, could be published i n newspapers; consumer advocates with newspaper columns ( e . g s Nicole Parton, Vancouver Sun) could publish t h e i r own choice of selected items.. The considerations discussed i n t h i s chapter are mentioned again i n Chapter V to the extent that they a f f e c t a s p e c i f i c design - a CIS i n the Vancouver area. 66 CHAPTEE V DESIGN OF A SPECIFIC CIS Taking into account the relevant studies and the design considerations of Chapter IV, a s p e c i f i c design i s contemplated for the area of Vancouver. Section 5.1 looks at the physical location and suggested global system design as well as the database design. Section 5»2 considers the economics of such a data centre, leading to a cost/benefit analysis i n Section 5.3. The design aspects of the system are discussed at a r e l a t i v e l y high technical l e v e l . 5,41 Proposal For A Vancouver Data Centre In order to demonstrate the economic v i a b i l i t y of the CIS proposal, the f e a s i b i l i t y of such a system i s studied. The study examines one potential system,: This s p e c i f i c CIS environment w i l l be defined, and c h a r a c t e r i s t i c s with regard to hardware and software components w i l l be discussed. The i n i t i a l system i s a basic consumer database with the objective of supplying price information to consumers oh a timely and convenient basis, i . e . a replacement for itemized pricings i n order to maintain consumer awareness and/or to control perceived or potential advantage-staking by supermarkets. At a minimum, t h i s requires,a highly v i s i b l e method of data publication. 67 5.1.1 P h y s i c a l L o c a t i o n The area chosen i s Vancouver, with a view t o d e s i g n i n g a p r a c t i c a l CIS f o r t h i s environment. There are aproximately 6 grocery c h a i n s i n the Vancouver r e g i o n (North and West Vancouver have been i n c l u d e d ) . A 'grocery c h a i n ' i s d e f i n e d as having a minimum of 4 member r e t a i l s t o r e s i n the area; the s t o r e s are of the s e l f - s e r v e , m u l t i p l e checkout v a r i e t y and, thus, the 24-hour convenience s t o r e s are excluded. The assumption t h a t 6 c h a i n s are r e p r e s e n t a t i v e o f the market i n Vancouver i s based on the f a c t t h a t " i n western Canada the f o u r l a r g e s t f i r m s account f o r over 90 percent of a l l grocery s t o r e s a l e s (Mallen 1974). Within t h i s d e f i n i t i o n approximately 60 s t o r e s are i n c l u d e d i n the proposed system. Design and economic c a l c u l a t i o n s w i l l be based on •average s t o r e 1 s t a t i s t i c s . These s t a t i s t i c s were d e r i v e d from: a) i n t e r v i e w s with l o c a l grocery r e t a i l e r s ; b) what Safeway terms an • e f f i c i e n t s t o r e ' , (Business Week, March 1977) ; c) S t e i n b e r g ' s Model Store (Dexter and Barnett 1978b). P e r t i n e n t i n f o r m a t i o n o f the t y p i c a l s t o r e i s given i n E x h i b i t 5.1. E X H I B I T 5.1 'AVERAGE STORE' STATISTICS S t o r e s i z e Number o f c h e c k o u t l a n e s W e e k l y s a l e s G r o s s m a r g i n Number of g r o c e r y i t e m s i n s t o r e 22,000 - 27,000 s q u a r e f e e t 8 - 1 0 $100,000 - $140,000 p e r week 20% 6,000 - 10,000 The above e s t i m a t e s were r e a c h e d b a s e d on s t a t i s t i c s f r o m t h e f o l l o w i n g s o u r c e s : Cady, 1 9 7 8 ; D e x t e r & B a r n e t t , 1978b; C o n v e r s a t i o n s w i t h t h e l o c a l h ead o f f i c e s o f S a f e w a y , S u p e r - V a l u , and IGA. ON OO 69 5-1.2 G l o b a l Systems Design The o v e r a l l system flow i s c o n c e p t u a l l y very simple, c o n s i s t i n g of i n p u t data to update the database, p e r i o d i c r e p o r t i n g t o supermarkets and the datacentre c o n t r o l l i n g group, and data p u b l i c a t i o n f o r consumers. (See system flow c h a r t . E x h i b i t 5.2.). E X H I B I T 5.2 D a i l y U p d a t e t a p e s / d i s k e t t e s f r o m S u p e r m a r k e t s 1 L o c a l A c c e s s n t e r a c t i v e r m i n a 1 W e e k l y P r i c e L i s t P u b l i c S e r v i c e TV A v a i l a b l e i n : ( i ) P u b l i c L i b r a r i e s ( i i ) Consumer B u r e a u s ( i i i ) Weekend N e w s p a p e r s ( i v ) L o c a l S u p e r m a r k e t s L i s t s a r e by p r o d u c t w i t h i n t y p e , f o r s u p e r m a r k e t c h a i n s e.g. D a i r y i t e m 1 ,P 1 P2 .... i t e m 2 P l P2 . . . . P r o d u c e i t e m 1 P l A l l o w s f o r ( i ) I n p u t of (a) D a t a Changes (b) " S p e c i a l s " I n f o rma t i o n ( i i ) Q u e r i e s on t h e D a t a b a s e . P2 71 Based on i n f o r m a t i o n gleaned from 3 l o c a l g r o c e r y c h a i n s , the volume of p r i c e changes v a r i e s from 20-40 per day per c h a i n . Chain-wide p r i c e changes are handled on e i t h e r a d a i l y or a weekly b a s i s , implying 100-200 changes per week per c h a i n . The l a r g e spread t h a t can occur i n t h i s f i g u r e i s due t o : a) changes i n meat and produce p r i c e s which are e s p e c i a l l y v o l a t i l e , b) a c r o s s the board p r i c e changes by a grocery manufacturer. The frequency with which the CIS i s updated depends upon the media used to communicate the i n f o r m a t i o n from the g r o c e r s to the CIS d a t a c e n t r e . I n i t i a l l y * magnetic tape o r d i s k e t t e w i l l be the e a s i e s t and most economical form of data entry-P r i c e changes, o r i g i n a t i n g a t a c e n t r a l s i t e , or communicated to the c e n t r a l s i t e by the s t o r e s can be w r i t t e n to magnetic tape or d i s k e t t e and sent to the CIS d a t a c e n t r e . T h i s i s p o s s i b l e on a d a i l y b a s i s , with d i s k e t t e being the s i m p l e s t means o f data t r a n s f e r r a l . On-line communication i s a n a t u r a l f u t u r e c o n s i d e r a t i o n which c o u l d r e s u l t i n instantaneous i n f o r m a t i o n updating. T h i s w i l l be d i s c u s s e d i n Chapter VI. 5.1;3 Database Design 'Database* r a t h e r than ' f i l e ' design i s used here to i n d i c a t e t h a t i t i s the author's b e l i e f t h a t t r a d i t i o n a l f i l e s t r u c t u r e s w i l l not be p r a c t i c a l i n the long run. Maintenance 72 and control of the system envisaged w i l l become increasingly d i f f i c u l t as the size and complexity of the system grows. Also, the present design only considers 60 supermarkets i n a single c i t y - the p o s s i b i l i t y of a country-wide network cannot be ignored; Thus, any design must meet present needs, allow for the contingencies mentioned above, and must also take into account future innovations i n Database Management Systems (DBMS) and distributed processing. Whatever f i l e design i s chosen, provision should be made for: a) increase i n the number of stores and products; b) changes i n , and additions to, price information stored; c) implementation of security control measures (for sensitive data stored); d) access to information on a variety of f i e l d s (keys). Thus, the •basic* system should be along the l i n e s of a formal database - even i f access i s via conventional methods at the start,: The data w i l l be described according to the relationships that exist among the data items because: a) these relationships form the basis i n the design of a database system u t i l i z i n g one of the standard models e.g. network, h i e r a r c h i c a l or r e l a t i o n a l . (Database systems have been described as belonging to one of the three categories mentioned, according to the design of the schema (model). For a more detailed explanation see Date (1977). the r e l a t i o n s shown can be regarded as 'records' i n a ' f i l e * for conventional access methods; s p e c i f i c a l l y t h i s design lends i t s e l f to the use of secondary indexing. E X H I B I T 5.3 LOGICAL STRUCTURE OF THE SUPERMARKET CONSUMER INFORMATION SYSTEM DATABASE ( R e l a t i o n s h i p s b e t w e e n e l e m e n t s a r e d e p i c t e d , as w e l l as k e y s t h a t a r e needed f o r i n f o r m a t i o n l o o k up) S u p e r m a r k e t - P r i c e R e l a t i o n Key i u p e r m a r k e t C h a i n P r o d u c t Code T> R e g u l a r P r i c e S p e c i a l P r i c e I n f o , ( i f i t e x i s t s ) " S p e c i a l s " N o t a t i o n N o t a t i o n r e g a r d i n g e x i s t e n c e of any i n - s t o r e s p e c i a l s . W i l l be l i n k e d t o s p e c i f i c s t o r e ( s ) . B r a n c h - P r i c e R e l a t i o n S u p e r m a r k e t C h a i n B r a n c h P r o d u c t Code I n s t o r e s p e c i a l p r i c e i n f o r m a t i o n E X H I B I T 5.3 ( c o n t 1 d ) S u p e r m a r k e t - B r a n c h R e l a t i o n S u p e r m a r k e t C h a i n L o c a t i o n and L o c a t i o n Codes — B r a n c h * P o s s i b l e f u t u r e f i e l d s e.g. ( a ) Consumer R a t i n g o f s t o r e (b) E x i s t e n c e of o t h e r s e r v i c e s ( i n s t o r e b a k e r y ) I t s h o u l d be n o t e d t h a t t h e d a t a b a s e c o n t a i n i n g t h e i n f o r m a t i o n i s i n no way c o n s i d e r e d c o m p l e t e o r s t a t i c . F o r e x a m p l e o t h e r consumer i n f o r m a t i o n r e l a t i n g t o p r o d u c t s c o u l d be s t o r e d , as shown b e l o w : P r o d u c t R e l a t i o n P r o d u c t Code D e s c r i p t i o n R e l a t i v e q u a l i t y r a t i n g V i t a m i n C c o n t e n t > C a l o r i e s p e r gram r N u t r i t i o n a l I n f o r m a t i o n Needed i n P r e s e n t Sys t em P o s s i b l e f u t u r e e n h a n c e m e n t s ^4 76 The l o g i c a l structure of the database i s shown i n Exhibit 5.3. The apparent redundancy in t h i s design exists diagrammatically, but not necessarily i n the stored record form where l i n k i n g cf records i s possible. Points to note regarding access of the database: a) For daily price updating, access of the database w i l l be by supermarket chain (and branch when required) ; b) For price l i s t s , access w i l l be by product code (or description); c) S p e c i f i c queries on the database w i l l be random, and access w i l l be by supermarket or product code description. Some e f f i c i e n t form of indexing can be used to access the data i n i t i a l l y . Indices w i l l be required on f i e l d s other than just the •primary' at t r i b u t e — which i s the UPC i n t h i s case. Exhibit 5.3 gives the l o g i c a l structure of the 'records', simply showing the attributes we may wish to use as keys to access the database. Information obtained from the database may be i n the form of l i s t s requiring access to a number of records (e.g. by product c l a s s , by supermarket, etc.) or else a single l i n e , requiring access to a s p e c i f i c record (e.g. price of a p a r t i c u l a r item). The following examples of attributes used as index keys demonstrate.potential accessing requirements: a) Index by product code w i l l give direct access to information on the item, (product relation) 77 b) Index by product description e.g. 'beans' w i l l allow access to a l l makes of beans, giving the user the choices by which to specify further. -c) Index by product within manufacturer e.g. 'Campbell's soup, tomato' allows access as in a) above # where UJ?C i s not known, d) Index by location e.g. 'Area 6' (Representing Broadway: MacDonald to Alma) w i l l produce a l i s t of supermarkets i n that area. It w i l l also be useful to l i n k the " f i l e s 8 on c e r t a i n a t t r i b u t e s , e.g. a) product and supermarket-price f i l e s could be linked on 'product code'. This amounts to having pointers to a l l supermarkets (supermarket-price relation) that carry a p a r t i c u l a r product (product r e l a t i o n ) . This type of l i n k i n g saves search time cn product queries. b) branch-price and supermarket-branch f i l e s can be linked on 'branch' (in supermarket-branch r e l a t i o n ) . This w i l l l i n k a l l branches of a p a r t i c u l a r supermarket chain. c) supermarket-price and branch-price f i l e s can be linked on 'product-code*. This w i l l f a c i l i t a t e finding prices of a p a r t i c u l a r product i n the various branches. Note that i n the Product Relation, 'description* i s also a key. The description i s unique when the f u l l t i t l e i s used, e.g. L i b i y * s beans, 16 oz,. can (or some unique shortened version e.g. Lib bns 16 oz.) However, i n order to make s p e c i f i c query possible, there i s a need to have an index that allows 'beans 8 or 'bns' to be entered and immediately produces a l i s t of bean products stored. A particular product can be chosen, or the l i s t printed as given. (Users of t h i s information might be the CAC, i n order to determine a l l types of beans available; i . e . , as the f i r s t step for a price comparison). The user could also specify a subset by qu a l i f y i n g the description e.g. .'string beans*,. This requires two refinements to the method of indexing; allowing f o r phonetic searching i . e . 'bns' = • beans', etc. the at t r i b u t e values i . e . descriptive q u a l i f i c a t i o n s associated with a product (such as outlined above) w i l l need to be stored i n such a way as to be retrieved without having to access the actual records, i . e . i t may be possible to store this information along with the index. For example, when looking i n the index for a pa r t i c u l a r product, the possible q u a l i f y i n g attributes (type, s i z e , etc.) w i l l be 79 simultaneously obtained. Making use of the l o g i c a l design i n ExhiMt 5.3 the system f i l e s t a t i s t i c s were developed (Exhibit 5.4). In order t c produce a viable hardware configuration, the storage s t a t i s t i c s were used to establish d i r e c t access storage requirements. Using the average store s t a t i s t i c s , the d a i l y transaction and pr i n t i n g volumes were calculated. Direction i n producing Exhibit 5.5 was obtained from P h i l Lamb, a l o c a l independent systems analyst. This information. Exhibit 5.5 was given to a few hardware vendors and, based on t h e i r responses, a hardware configuration was established, along with i t s cost estimates. E X H I B I T 5.4 STORAGE STATISTICS ESTIMATES OF BASIC SYSTEM REQUIREMENTS P r o d u c t I n f o r m a t i o n P r o d u c t Code Max 13 c h a r D e s c r i p t i o n Max 30 c h a r A l l o w 50 c h a r / r e c o r d X 15,000 p r o d u c t s * = 750,000 c h a r S u p e r m a r k e t - B r a n c h I n f o r m a t i o n * * C h a i n Name 20 c h a r B r a n c h A d d r e s s D a t a 40 c h a r A l l o w 60 c h a r / r e c o r d X 60 b r a n c h e s = 3,600 c h a r S u p e r m a r k e t - P r i c e I n f o r m a t i o n C h a i n Name 5 c h a r P r o d u c t P r i c e D a t a 20 c h a r K e y s t o B r a n c h e s 25 c h a r A l l o w 50 c h a r / r e c o r d X 15,000 p r o d u c t s X 5 c h a i n s = 3,750,000 c h a r CO o E X H I B I T 5.4 ( c o n t ' d) B r a n c h - P r i c e I n f o r m a t i o n B r a n c h Name 5 c h a r P r o d u c t P r i c e D a t a 20 c h a r A l l o w 25 c h a r / r e c o r d X 8,000 p r o d u c t s * X 60 b r a n c h e s = 12,000,000 c h a r D i r e c t a c c e s s s t o r a g e r e q u i r e m e n t s f o r t h e d a t a s t o r e d , a p p r o x i m a t e l y 16,500,000 c h a r , I n d e x s : I f a c c e s s i s a v a i l a b l e on a l l p e r t i n e n t f i e l d s as i n d i c a t e d i n E x h i b i t 5 t h e n t h e i n d e x s t o r a g e r e q u i r e m e n t s a r e a p p r o x i m a t e l y 5,000,000 c h a r . ( W h i l e t h e amount o f d a t a s t o r e d i n a r e c o r d may i n c r e a s e d r a m a t i c a l l y i n t h e f u t u r e , t h e number of r e c o r d s s t o r e d w i l l n o t , so t h e i n d e x r e q u i r e m e n t s w i l l n o t c h a n g e s i g n i f i c a n t l y . ) S t o r a g e r e q u i r e m e n t s f o r t h e a p p l i c a t i o n 21,500,000 c h a r C o n t i n g e n c y f a c t o r 16% 3,500,000 25,000,000 c h a r * Number of p r o d u c t s c a r r i e d by an a v e r a g e s t o r e i s 8,000 b u t t h e r e t a i l c h a i n c a n o f f e r a v a r i e t y o f 15,000 p r o d u c t s , t h i s b e i n g t h e s e l e c t i o n c a r r i e d by a l a r g e s t o r e ( C a d y , 1978) ** I t i s f e a s i b l e f o r t h e c h a i n name t o be s t o r e d once ( i n one r e l a t i o n ) and an a b b r e v i a t i o n u s e d i n o t h e r r e l a t i o n s ; s i m i l a r l y f o r b r a n c h name. E X H I B I T 5.5 SYSTEM SPECIFICATIONS S t o r a g e ( i ) F r om E x h i b i t 5.4; D i r e c t a c c e s s s t o r a g e r e q u i r e m e n t ( i i ) A l l o w an e x t r a 1 5 % f o r w a s t a g e due t o ; e.g. d e v i c e c h a r a c t e r i s t i c s , s p a c e f r a g m e n t a t i o n , e t c . : T o t a l V o l u m e s ( i ) B a t c h p r o c e s s i n g : I n p u t : D a i l y u p d a t i n g o f f i l e s ; a p p r o x i m a t e l y O u t p u t : D a i l y p r i n t i n g o f p r i c e l i s t s ; P r i c e c h a n g e s 200 X 100' W e e k l y ; M a r k e t b a s k e t 100 X 5 0 J = P r o d u c t g r o u p ( e . g . D a i r y ) 100 X 50 X 10 g r o u p s = - L i s t s w i l l be p r i n t e d d u r i n g an 8-hour s h i f t 21.5 m i l l i o n b y t e s 3.0 m i l l i o n b y t e s 24.5 m i l l i o n b y t e s A p p r o x . 25 m i l l i o n b y t e s 200 t r a n s a c t i o n s 20,000 l i n e s p e r day 5,000 l i n e s 50,000 l i n e s 55,000 l i n e s p e r week P e r i o d i c r e p o r t s w i l l be p r i n t e d on r e q u e s t and c a n be h a n d l e d a t t i m e s o t h e r t h a n t h e p e a k p e r i o d s a b o v e . to EXHIBIT 5.5 ( c o n t ' d ) ( i i ) O n - l i n e P r o c e s s i n g : I n p u t : S p e c i f i c q u e r i e s on t h e d a t a b a s e as d e s c r i b e d i n 4.4.3 750* p e r day A v e r a g e l e n g t h o f t r a n s a c t i o n 30 c h a r O u t p u t : P r i c e on a s p e c i f i c i t e m 1 l i n e max L i s t o f a l l makes o f b e a n s 30 l i n e s max L i s t o f s t o r e s c a r r y i n g an i t e m 60 l i n e s max The r e q u e s t s l i s t e d a b o v e c o u l d r e s u l t i n any one of t h e s e o u t p u t l i s t s b e i n g p r o d u c e d . As t h e v o l u m e o f t r a n s a c t i o n s i s s m a l l t h i s v o lume o f p r i n t i n g i s not e x p e c t e d t o c a u s e a b o t t l e n e c k . A s i m p l e q u e r y l a n g u a g e ( o r some f o r m o f p r o m p t i n g p r o g r a m ) w i l l be r e q u i r e d t o h a n d l e t h e s e o n - l i n e t r a n s a c t i o n s . * T h i s i s t h e maximum number of r e q u e s t s e x p e c t e d t o be h a n d l e d f r o m t h e s i n g l e i n t e r a c t i v e CRT t e r m i n a l . ^ T h e s e s t o r a g e r e q u i r e m e n t s a r e a r e v i s e d e s t i m a t e , ( F e b r u a r y 1 2 ) , and p r o p o s e d c o n f i g u r a t i o n s had a l r e a d y b een o b t a i n e d f r o m some v e n d o r s on a s s u m p t i o n t h a t 45 m i l l i o n b y t e s w o u l d be r e q u i r e d . co EXHIBIT 5.5 ( c o n t ' d ) 2 L i s t s p r i n t e d f o r 60 s u p e r m a r k e t s and 40 o t h e r l o c a t i o n s e.g. l i b r a r i e s , e t c . 3 Assumes t h i s t y p e o f l i s t w i l l be s e n t t o 50 s t r a t e g i c l o c a t i o n s e.g. News M e d i a oo 85 5.2 Economics o f The Datacentre In order to assess the economic f e a s i b i l i t y of the CIS, the costs and potential savings must be considered^. This i s complicated by the f a c t that the users of the present system are not necessarily the direct economic contributors, i . e . the consumers. Any attempt to do a cost-benefit analysis w i l l therefore have l i m i t a t i o n s . The issue of who should pay for the CIS i s discussed i n Chapter VI, but there i s no pretence made at offering the solution, only suggestions. Thus, while the analysis can outline the costs and show to whom the savings (and benefits) accrue, i t would be presumptuous to d i r e c t l y o f f s e t the one against the other. However, the analysis i s extremely pertinent i f the present cost of item pri c i n g i s to be compared with the cost of some alt e r n a t i v e , e.g. a CIS. 5.2.1 Development Ccsts The CIS as outlined above requires the use of a small range computer system with a f a i r l y substantial amount of direct-access storage a v a i l a b l e . on a te s t basis, either time-sharing or the use of an exis t i n g system (e.g. a government run EDP operation) are viable alternatives. However, with an eye to the future, t h i s thesis considers a data centre set up s p e c i f i c a l l y for the Consumer Information System. Following discussions with l o c a l hardware suppliers, the hardware configuration envisaged i s as follows: 86 CPU DASD - Magnetic disk Printer Diskette drives Interactive terminals or other input/output devices - for system control - f o r development and maintenance CRT terminal - for query purposes - a d d i t i o n a l CRTS to be added as need a r i s e s . Details of hardware c h a r a c t e r i s t i c s as supplied by vendors are given i n Appendix I. Configurations suggested by the di f f e r e n t vendors are sim i l a r i n design. The hardware required allowing output to be displayed via t e l e v i s i o n screens i s also a future consideration. Hardware costs have been estimated using, representative industry figures on lease basis and shown under the operational costs. (These costs could alternatvely be considered on a purchase basis). Quotations received are given i n d e t a i l i n Appendix I. Software needed i s divided into two groups: system and application software. The system software which includes operating system/compilers, - database management system (or f i l e handling software), - telecommunications software, w i l l also be accounted f o r under operating costs. (As with hardware, purchase i s an alternative to leasing). The s p e c i f i c application, although 87 unigue i n i t s e l f , i s r e a l l y a file-update information r e t r i e v a l system complicated only by the chaining required between records. For t h i s reason, i t was suggested that a Database Management System be obtained from the vendor or developed (see system software above) to interface with the application software. The development costs then, are based on the estimated time required f o r the design.and programming of the application software. (Estimates were obtained through discussions with systems analysts currently involved in systems development i n industry) . Major applications: a) update the database with data from the tapes/diskettes b) pr i n t daily price l i s t s e) f i l e access for s p e c i f i c on-line queries d) print 'market-basket* and other specialized l i s t s e) management reports, e.g. s t a t i s t i c s of price changes f) f i l e management Major phases: System design Program design, coding, and testing System t e s t i n g and data conversion (A single time estimate i s given because some functions of the dif f e r e n t phases may be carried out concurrently). Man-days required: 400, i . e . four people working 20 days per month each w i l l take about f i v e months to set up the CIS. 88 approximate c o s t s : (These f i g u r e s take average 1978 s a l a r i e s without attempting a breakdown of systems analyst/programmer time.) 5 months a t $1,500 per month x 4 = $30,000 Estimated T o t a l Development C o s t s : $30,000 5.2.2 Operating Costs O p e r a t i o n a l c o s t s are c a l c u l a t e d f o r one year and based on 1978 f i g u r e s . System hardware and software; Lease costs $2,500 p.m. $28,000 p,.a. S u p p l i e s (paper, tapes, e t c ) : $1, 000 p.m. $12,000 p.a. Maintenance: $580 p.m. $7,000 p.a. Data centr e s t a f f : 1 operator programmer $13,000 p.a. 1 c l e r k ( q u e r i e s , l i b r a r y , etc.) $11,000 p.a. Managerial s u p e r v i s i o n (This i s not a f u l l t i m e requirement and c o u l d be under the au s p i c e s of the CAC) $ 6,000 p.a. T o t a l S t a f f Costs: $30,000 p.a. Estimated o p e r a t i n g c o s t s : $77,000 p.a. Note: I t has been assumed t h a t c o s t of p u b l i s h i n g data w i l l be minimal or f r e e ; esgw Newspapers - pu b l i s h e d i n Consumer Advocate's columns such as t h a t of N i c o l e Parton, Vancouver Sun 89 - "Hamilton Spectator" p r i n t s prices on approximately 70 items weekly, along with commentaries on "good buys" etc. Television - some channels, e.g. Channel 10 i n Vancouver display public service messages during c e r t a i n hours - public service channels i n Ontario display food item prices to f u l f i l l the CETC requirements for t h e i r licences (Conversation with Tom Sogers, Saskatchewan Consumer a f f a i r s , Jan, 1979) . 5.2.3 Potential Savings - By Interest Groups For t h i s analyis, "savings" i s defined as a cost reduction that i s a r e s u l t of the introduction of the CIS and i t s potential applications. Within the scope of t h i s d e f i n i t i o n , the CIS i s seen as an alternative to item p r i c i n g . Grocery Manufacturers: With f u l l y automated checkout, the grocery manufacturers can be confident that data capture i s an accurate r e f l e c t i o n of r e a l i t y . However, any derived savings are unquantifiable and highly variable. 90 Grocery Retailers: Savings due to item-price removal varies depending on the source. A minimal saving i s considered to the salary of one person for an average size supermarket , i , e . $16,000 p.a. (Conservative estimate based on data from d i f f e r e n t sources e.g. Coyle 1977, Dexter and Barnett 1978b). Therefore, yearly savings f o r the test area: 60 x $16,000 $960,000 p.a. Note : a) One l o c a l chain stated that saving's due to item price elimination would be $70,000 per store per year (Brown 1978). While i t i s unlikely that the 60 stores i n the area could save $4,200,000 per year i n t o t a l , the indicati o n i s that finding an alternative to item-pricing i s a worthwhile endeavour. b) An important implication to the r e t a i l e r s i s the cost cf any price reduction. Devine (1976, 1978) attempted to quantify the cost to the supermarkets when comparative price information i s published. While re s u l t s are f e l t to be inconclusive, one study showed a reduction of 7% in r e t a i l price index over the f i v e week test period (Ottawa-Hull experiment); and i n a second study the test area showed an average 1.8% greater price reduction than the control area, (prices were generally declining during the six month Saskatchewan Project.) 91 In h i s subsequent analysis Devine used a" price reduction of 5%, a food demand e l a s t i c i t y of -0.2 (based on work by Kulshreshtha and Holub 1973) which r e s u l t s i n a sales revenue decrease of approximately 4%. The average gross margin on groceries rs 20% (Business Week, 1977). I f correct, t h i s loss of revenue would represent a s i g n i f i c a n t reduction i n p r o f i t s f o r supermarkets. However, i t i s not clea r whether Devine takes into consideration i) the breakdown of food dollars between supermarkets and restaurants. The "food service" industry's share of the American food d o l l a r i s about 42% (Business Week, 1977) . There i s no ind i c a t i o n that any change i n t h i s r a t i o , due to price reductions, i s taken into account i n the use of the price e l a s t i c i t y of food i n the analysis. i i ) the p o s s i b i l i t y of a change i n consumers* buying habits i n the long run. In the analysis a drop of 5% i n prices leads to a 1% increase i n demand (guantity), and thus an o v e r a l l 4% decrease i n revenue ( e l a s t i c i t y of demand i s -0.20). The p o s s i b i l i t y that consumer demand may increase over the long term i s not considered, (i. e . consumer spending returns to the i n i t i a l 92 l e v e l i n terms of d o l l a r value.) This implies the eventual return to the o r i g i n a l l e v e l of the revenue. Obviously, t h i s has thus f a r ignored the important variable, gross p r o f i t . (Devine's analysis deals only with revenue, but an opinion of the effect on gross p r o f i t follows i n order to complete the cost/benefit analysis.) Based on i) and i i ) above, an average of 2% reduction i n sales revenue i s used and Devine*s analysis repeated. Sales revenue decrease for average supermarket: $8,000 per month This represents a gross p r o f i t decrease of $1,600 p.m. (based on gross margin of 20%, Exhibit 5.1). For 60 supermarkets gross p r o f i t decrease: $96, 000 p.m. approx 0.4% of present sales. Without the benefit of supportive evidence i t i s hypothesized that the revenue loss dissipates, and that the gross p r o f i t loss i s reduced to a monthly amount of $30,000 on average, approx 0.1% of present sales which i s $360,000 p.a. Equipment Manufacturers: While t h i s group may benefit from the sale of scanners rather than the l e s s expensive key-entry 93 checkout d e v i c e s , there i s no savings as d e f i n e d above. However, as a c o s t comparison, i t should be noted t h a t NCR's e l e c t r o n i c checkout system without scanning " c o s t s only $4,500 vs. $9,600 f o r NCR's lowest p r i c e d scanner - even a f t e r NCR's recent 20% c u t i n scanner p r i c e s " (Forbes 1978). Government and Consumer agencies: Both these bodies are i n v o l v e d i n the c o l l e c t i o n of data which c o u l d e a s i l y be obtained from the CIS. I t i s estimated that surveys and other means o f data c o l l e c t i o n p r e s e n t l y c o s t approximately $20^000 pec year (Rogers 1979). Th e r e f o r e , p o t e n t i a l savings per agency $20,000 p.a. f o r 3 agencies $60,000 p.a. Note : a) Cost f o r the Saskatchewan experiment was $57,275 f o r f i v e months. Of t h i s a l a r g e p o r t i o n was f o r c o n s u l t a n t f e e s and p u b l i c a t i o n of d a t a . On the proposed system data must s t i l l be p u b l i s h e d so any savings to be r e a l i z e d w i l l be i n the area of data c o l l e c t i o n . Based on c o n v e r s a t i o n s with Tom Rogers (Saskatchewan Consumer A f f a i r s ) t h i s amount i s estimated t o be $20,000 f o r any agency d e s i r i n g to c o l l e c t the data a t present. b) Assume th r e e agencies c a r r y i n g out surveys i n the Vancouver area i n any one year 94 i . e . - S t a t i s t i c s Canada - some monitoring body - government sponsored study by the B.C. chapter of the CAC. The Consumers: An "American economist Donald Snyder showed that each shopper would have to pay only $2.27 a year to have a l l groceries marked with the prices" (Pappert 1978). However, the v a r i a b i l i t y of t h i s cost i s t i e d up i n the supermarkets* p r i c i n g policy and consumers w i l l not necessarily save t h i s amount i f supermarkets remove p r i c e s . (The supermarkets have made no offe r to maintain item-pricing at t h i s cost to consumers). Potential savings to consumers w i l l be a portion of the savings that accrue to the supermarkets. I f increased competition and lower prices r e s u l t from the formation of the CIS, then savings w i l l i n f a c t be realized by the consumers. The general benefits of a CIS have been described i n depth throughout Chapters III and IV, (e.g. po l i c i n g of supermarkets' price increases) and j u s t i f i c a t i o n for the idea i t s e l f . Most are intangible but as s i s t i n meeting the objectives of the various i n t e r e s t groups. 95 5.3 A n a l y s i s Of The C o s t s / B e n e f i t s Of The CIS Development Costs Yearly Costs Y e a r l y Savings ( A l l c o s t s based on 1978 f i g u r e s ) 30,000 77,000 360,000 960,000 60,000 t o r e t a i l e r s t o government $30,000 $437,000 $1,020,000 With j u s t 60 supermarkets i n v o l v e d i n the system, the s a v i n g s c l e a r l y outweigh the c o s t s . Of course, t h i s a n a l y s i s i s l i m i t e d because the savings do not accrue to a . s i n g l e user; nor i s a s i n g l e user bearing the co s t s of the system. Furthermore, i t i s not at a l l obvious t h a t the r e t a i l e r s would approve the o f f s e t of t h e i r s a v i n g s a g a i n s t the c o s t s . T h i s i s s u e i s e l u c i d a t e d i n Chapter VI; and no s o l u t i o n i s o f f e r e d . However, recommendations are made with regard t o coping with t h i s complex s i t u a t i o n . Adding other supermarkets i n the g r e a t e r Vancouver area w i l l add l i t t l e t o the c o s t of the o p e r a t i o n of the system as much of the c o s t i s i n c u r r e d i n s e t t i n g up the system i n i t i a l l y . Yet, each supermarket t h a t " j o i n s " the system as an a l t e r n a t i v e to item p r i c i n g adds an a d d i t i o n a l $16,000 per year t o the " c o l l e c t i v e " s a v i n g s . Expansion beyolrd a c e r t a i n " l i m i t w i l l mean t h a t a second system must be s e t up. However, the d e t a i l s of such an occurrence and the p o s s i b i l i t y of development of a network must be l e f t f o r c o n s i d e r a t i o n at a 96 f u t u r e date. Within t h i s a n a l y s i s , other l e s s q u a n t i f i a b l e c o s t s and b e n e f i t s must be considered. P u b l i c a t i o n s of product and p r i c e i n f o r m a t i o n i s c e r t a i n l y a source of a d v e r t i s i n g f o r the r e t a i l e r s with scanners. Not only could t h i s be used to r e p l a c e a p o r t i o n of t h e i r a d v e r t i s i n g budget, but i t would give these supermarkets-a c o m p e t i t i v e advantage over c h a i n s without scanning eguipment. With some c r e a t i v e p l a n n i n g , supermarkets w i l l have the o p p o r t u n i t y to match t h e i r " s p e c i a l s " with the d a i l y "markets-basket". These are b e n e f i t s a t t r i b u t a b l e to the implementation of a CIS, but only have s p e c u l a t i v e v a l u e at t h i s time. In the long run, i f scanner p r i c e s f o l l o w the downward t r e n d cf other computer hardware, even s m a l l independent grocers w i l l have the o p p o r t u n i t y to operate with scanning equipment and, thus, reduce the l a r g e c h a i n s ' c o m p e t i t i v e advantage. I t has been noted (Devine 1976) t h a t a 'marginal' s t o r e (one which has d i f f i c u l t y making a p r o f i t and r e l i e s on v a r i a b l e s other than p r i c e to a t t r a c t customers) may be f o r c e d out o f business when p r i c e c o m p e t i t i o n becomes f i e r c e . The pros and cons of such s i t u a t i o n s are beyond the scope of t h i s t h e s i s , though i t cannot be ignored i n more in-dep t h s t u d i e s . Of foremost concern i n t h i s study i s the consumer, and how, i f at a l l , the CIS w i l l be advantageous. lower food p r i c e s are indeed an advantagel While s t u d i e s d i s c u s s e d h e r e i n were c a r r i e d out i n d i f f e r i n g time frames, and l o n g ' 97 term e f f e c t s are inconclusive, the empirical data suggests the trend w i l l he toward lower prices. 98 CHAPTER VI RESULTS OF THE ANALYSIS AND GENERAL DISCUSSION The purpose of t h i s chapter i s to review the economic and technical analyses and r e s u l t s presented i n the previous chapters; and to discuss some of the issues to be resolved i f the CIS i s to become a r e a l i t y . From d e t a i l presented i n Chapters IV and V, it-appears that the CIS i s f e a s i b l e from an overal l economic point of view especially i f the r e t a i l e r s view i t as - an alternative to maintaining item-pricing and/or - providing "free advertising" and/or - a natural consequence of the age of electronic technology. For the consumer, the CIS may provide (in i t s narrowest d e f i n i t i o n ) , a viable alternative to item p r i c i n g , which i s steadily disappearing despite protest; and ( i f i t ' s potential i s realized) the CIS w i l l enable the consumer to shop conveniently from home,. The creators of the phrase " l e t your fingers do the walking" could bave had no idea of the possible extensions tc i t s meaning! Topics discussed herein include d i v i s i o n of costs of the CIS, and the problems i n the p r a c t i c a l application of the system.. Future extensions to the basic Vancouver Data Centre are suggested. 99 6.1 F e a s i b i l i t y Of The CIS Technical and p o l i t i c a l f e a s i b i l i t y of a CIS have already been discussed in 3.3.2. A major unresolved issue i s the cooperation of the d i f f e r e n t groups, p a r t i c u l a r l y that of the supermarkets releasing price information. Most large supermarket chains have scanners i n s t a l l e d i n some of th e i r stores. They are gauging consumer reaction to the removal of item prices. In Vancouver, vocal objection has taken place through consumer advocates (e.g. Parton 1978a, 1978b). The B.C. government reaction has been to state that consumers have the option to shop elsewhere, and that no o f f i c i a l intervention i s planned (Evans-Atkinson 1978). The important aspects to bear i n mind i n t h i s regard are that a) i f cooperation of the supermarkets i s to be sought i t should be contemplated i n these early days of automation. The reason i s that both sides are s t i l l a c t i v e l y involved in finding a suitable solution, and t h i s w i l l a s s i s t i n reaching a compromise. b) At present, consumers do have the option of alternative stores i n which to shop; though i t should be noted that location convenience i s a high p r i o r i t y when choosing a supermarket. As more stores i n s t a l l scanners and remove item-prices t h i s great freedom of choice w i l l no longer exist, and boycott w i l l no longer be a 100 v i a b l e means of e x p r e s s i n g o p p o s i t i o n . What then, w i l l be the value of Bafe Mair's suggestion "you simply do not have to shop a t a supermarket that uses scanners and doesn't price-rtag i t s items i f you don't want t o ... i n other words, i f the p u b l i c wants p r i c e tags i t should boycott the s t o r e s t h a t don't have them" (Evans-Atkinson 19 78)? I t i s c l e a r from the a n a l y s i s i n s e c t i o n 5.3 t h a t the CIS i s economically f e a s i b l e , i f i t be regarded as an a l t e r n a t i v e to item p r i c i n g , and the c o s t s and sav i n g s be compared d i r e c t l y . Savings and b e n e f i t s outweigh the co s t s to the i n t e r e s t groups taken as a whole. U n f o r t u n a t e l y , these are net the only i s s u e s i n t h i s complex s i t u a t i o n and as mentioned, other aspects must be con s i d e r e d . 6.2 Suggestions F o r D i v i s i o n Of Costs Which groups should be i n c l u d e d i n t h i s d i v i s i o n of c o s t s , and i n what p r o p o r t i o n should they be borne? These groups w i l l b e n e f i t d i r e c t l y as a r e s u l t of the development of a CIS - namely the grocery r e t a i l e r s , government agencies and consumers (see S e c t i o n 5.2). - Consumers: The c o s t t o t h i s group t o have a l l g r o c e r i e s marked with p r i c e s i s estimated to be $2.27 per shopper per year (Pappert 1978). However, consumers probably pay more as the charge i s made i n d i r e c t l y through the supermarkets' pri c i n g p o l i c i e s . Despite item-price removal i t appears unlikely that consumers w i l l reap the benefits in the form of price reductions. This i s a reason why consumers should not be expected to contribute d i r e c t l y to the CIS. Belated to t h i s i s the unlikelihood that r e t a i l e r s w i l l pass a l l savings from item-price removal onto consumers. I f consumers are forced to pay a portion of the CIS costs, then the CIS w i l l not be viewed by consumer advocates as a viable a l t e r a t i v e to item-price information. If consumers pay on a usage basis, then many w i l l be l e s s i n c l i n e d to use the services of the CIS. This could also cause further disenchantment with the scanning systems. Grocery r e t a i l e r s : B e t a i l e r s are i n a position to benefit d i r e c t l y from the implementation of a CIS, and to decide how best to manipulate these savings (Section 5.3). Savings.will be realized even i f they contribute to the operating costs of the CIS. - Government agencies: Use can be' made of the CIS by agencies e.g. i n the role of a price monitoring board (with regard to i n f l a t i o n on consumer a f f a i r s ) . I t would appear that while t h i s information-is important, i t s c o l l e c t i o n costs have always been proh i b i t i v e (see Section 5.2.3). 102 S t a t i s t i c s Canada's data c o l l e c t i o n i s r e s t r i c t e d by costs and the time factor. The CIS w i l l give them the opportunity to c o l l e c t price data at a r e l a t i v e l y lower cost and on a more timely basis than before, so government agencies can be expected to contribute to the costs of the system. 6.3 Suggestions For P r a c t i c a l Application The p r a c t i c a l considerations of the. system w i l l be mentioned i n order to complete the analysis, but the detailed discussion does not f a l l within the scope of the t h e s i s . Maintaining the i n t e g r i t y and security of the data in the CIS are two of the most important p r a c t i c a l considerations. I t i s suggested that the system be operated under the control of the CAC. This group has a vested i n t e r e s t i n making certain that the information does in f a c t r e f l e c t the r e a l and current s i t u a t i o n for consumer use. Consumers requiring s p e c i f i c price information can make use of the CAC, who w i l l then have the necessary data r e a d i l y available (via the CRT). In t h i s regard, government agencies and grocery,retailers take on the role of consumers i n obtaining price information from the CIS. The test system, as described i n Chapter V, has batch updating and l o c a l on-line query c a p a b i l i t y , thus l i m i t i n g access to the system and the. inherent problems of data security. Problems to be considerede i n future research 103 are mentioned i n Section 6.4. The daily price changes which occur w i l l be transmitted via diskette to the data centre for updating of the f i l e s . The physical location of the data centre should not be a problem because a l l systems suggested by vendors (Appendix I) are o f f i c e type machines requiring no s p e c i a l f a c i l i t i e s (e.g. r a i s ed f l o o r , a i r conditioning units, e t c . ) . Updating of the f i l e s and printing of reports requires a minimum amount of supervision and could be handled during the evening. The number of d i f f e r e n t products (15,000) i s very large, and i t has been suggested that a subset be maintained on the CIS, rather than the entire product range. However, with reference to the system s t a t i s t i c s in Exhibits 5.4, 5.5, i t can be seen that t h i s wculd not make an appreciable difference i n storage reguirements. I t would also hardly change the proposed system configuration (Appendix I) and i s c e r t a i n l y not a l i m i t i n g f a c t o r . The amount of information printed and published i s more c r i t i c a l , both from the point of view of media chosen, and impact on the consumers* decision-making process. This i s where volume and variety of products must be c a r e f u l l y considered. Belated to data security i s the question of the supermarket's access to the database. This i s of p a r t i c u l a r concern for the future where on-line updating of the CIS i s a d e f i n i t e p o s s i b i l i t y . There are two main areas of concern: a) Data belonging to a supermarket - supermarkets should have unencumbered read-access, but limited 104 and controlled update-access of their data. For example, supermarkets w i l l net be able to change consumer ratings, and price changes too w i l l need tc be c o n t r o l l e d . • b) Data belonging to competitors - This i s sensitive data and should be protected. A supermarket should have access to competitor's price information enly in the role of a consumer-user of the system, i . e . just as consumers w i l l have access to the data via t e l e v i s i o n channels, say, i n a read-only mode, supermarkets w i l l be able to see the data but be unable to a l t e r i t . The possible impact on 'marginal' stores has been mentioned (Section 5.2); i . e . stores within the system which might be unable to operate competitively on the basis of price, and be forced out of business. A r e l a t e d , and very p r a c t i c a l problem, i s that of grocers excluded from the CIS due to lack of automation of t h e i r checkout systems. The chain may be an e f f e c t i v e competitor on a small scale. Consideration must be given as to how publication of competitors' prices w i l l a f f e c t operations of such small chains. 105 6.4 Future Besearch There are many unanswered q u e s t i o n s t h a t have r e s u l t e d from the re s e a r c h and a n a l y s i s of the preceding c h a p t e r s . Most have been d i s c u s s e d i n some d e t a i l . They are r e i t e r a t e d here i n order t o give d i r e c t i o n t o f u t u r e r e s e a r c h . What i s the long-term e f f e c t of p r i c e p u b l i c a t i o n on p r i c e s , competition, market s t r u c t u r e , and, more imp o r t a n t l y , consumers' use of the in f o r m a t i o n ? How e f f e c t i v e i s p r i c e p u b l i c a t i o n as a form o f ' f r e e ' a d v e r t i s i n g f o r the sup-ermarkets? Does i t o f f s e t the l o s s of s a l e s t h a t supermarkets experience i n the short-run? What e f f e c t on a d v e r t i s i n g and revenue, does the p r i c e p u b l i c a t i o n have i n the long-run? - Who should take the i n i t i a t i v e i n s e t t i n g up the system, and how should the c o s t s be a l l o c a t e d amongst p a r t i c i p a t i n g groups? - What, i n f a c t , w i l l be the r e a c t i o n of supermarket c h a i n s , and what of the sm a l l e r c h a i n s f o r whom automation i s some way o f f ? Should the government pursue a p o l i c y of n o n - i n t e r f e r e n c e ? Data access v i a some form of home 'computer' i s not f a r o f f (Gray 1377, laws 1978) and t h i s type of i n f o r m a t i o n w i l l e v e n t u a l l y be o f f e r e d i n part or whole, f r e e or f o r a p r i c e , by p r i v a t e o r g a n i z a t i o n s , or by the supermarkets themselves. I t appears t h a t many of the p o t e n t i a l p i t f a l l s c o u l d be 106 avoided i f some expedient planning i s done i n advance. A purpose of t h i s thesis has. been to point out the d e s i r a b i l i t y of cooperation so that we, as a society, may take advantage of the electronic revolution i n the r e t a i l ( s p e c i f i c a l l y grocer) industry. I t i s time f o r a l l parties to begin planning i f we are to benefit from these innovations and avoid an interim "dark age" period. 107 REFERENCES Armstrong; J . The Montreal S t a r . December 11, 1975. p.. B-4. Armstrong, J . The Montreal S t a r . October 11, 1975. p. F-3. Assembly O f f i c e o f Research, "Study of Computerized Checkout Systems i n F o o d s t o r e s " , C a l i f o r n i a L e g i s l a t u r e , C a l i f o r n i a , January 1977. p. 88. B a r n e t t , M., A. Dexter, and H. Howson, "Creating a Consumer Information System" Proceedings of the Canadian Computer Conference --CIPS Session '78. May 1978, pp 231-235. Bettman, J . , "Issues i n Designing Consumer Environments", J o u r n a l of Consumer Research. Vol* 2, December 1975. Brown, S., P u b l i c R e l a t i o n s Manager f o r SuperValu Stores i n Vancouver. Comment du r i n g l o c a l CAC meeting, September, 1978. Cady, J.F. " A d v e r t i s i n g r e s t r i c t i o n s and r e t a i l p r i c e s " , J o u r n a l of A d v e r t i s i n g Research, 16, 5, Oct. 1976. pp. 27-30. Cook, G., "How food s t o r e s can save money" San F r a n c i s c o Examiner, January 27, 1977 C o y l e , J . , "Scanning L i g h t s up a Dark World f o r Grocers", Fortune. March 1978, pp. 76-80. Date, C., "An I n t r o d u c t i o n t o Database Systems", Second E d i t i o n , Addison Wesley P u b l i s h i n g Company^ Inc., 1977. Devine, D., "An Examination of the E f f e c t s of P u b l i s h i n g Comparative P r i c e I n f o r m a t i o n on P r i c e D i s p e r s i o n and Consumer S a t i s f a c t i o n " , Unpublished Ph.D. D i s s e r t a t i o n , The Ohio S t a t e U n i v e r s i t y , 1976, Devine, D .., "A Review of the Experimental E f f e c t s of Increased P r i c e Information on the Performance of Canadian R e t a i l Food S t o r e s i n the 1970 ,s", Canadian J o u r n a l of A g r i c u l t u r a l Economics. V o l . 26~(3) , 1978 pp. 24-3 0. 108 D e x t e r , A. and M. B a r n e t t , "Note on t h e E l e c t r o n i c Checkout System i n t h e G r o c e r y I n d u s t r y " , I n t e r c o l l e g i a t e Case C l e a r i n g House, B o s t o n , Mass.,1978a #9-178-651. D e x t e r , A. and M. B a r n e t t , " S t e i n b e r g ' s L i m i t e d " , I n t e r c o l l e g i a t e Case C l e a r i n g House, B o s t o n , Mass. , 1978b #9-178-652. D e x t e r , A. and H. Hoason, "Consumers I n f o r m a t i o n System - ft New Approach t o t h e UPC S t a l e m a t e " , R e s e a r c h P r o p o s a l , J u l y 1977. E v a n s - A t k i n s o n , E., "From Your S i d e " , The Vancouver Sun, September 28, 1978, p. B4. E v a n s - A t k i n s o n , E., "New Grocer Wired f o r S a v i n g s " , The Vancouver Sun, F e b r u a r y 3,,1978. Gray, F., " B r i t i s h TV systems edge c l o s e r t o 1984 prophecy". The Vancouver Sun, December 8, 1977. p. C3. Grey M a t t e r , "Automated Checkout - Boon o r B u s t ? " , V o l . 48, No. 2, 1977. G y l l i n g , M., "A Study o f Consumer A t t i t u d e s Toward the U n i v e r s a l P r o d u c t Code and Computerized Checkout Among a S e l e c t e d Group o f Shoppers a t L u c k y ' s GEMCO i n San Leandro, C a l i f o r n i a " , a t h e s i s p r e s e n t e d t o t h e O f f i c e of Graduate S t u d i e s and R e s e a r c h , San Jose S t a t e U n i v e r s i t y , J a n u a r y , 1976. H a i n e s , G., " P r o c e s s Models o f Consumer D e c i s i o n Making", paper p r e s e n t e d a t the A s s o c i a t i o n f o r Consumer Research Workshop i n I n f o r m a t i o n P r o c e s s i n g , U n i v e r s i t y of C h i c a g o , 1972, ( c i t e d i n J a c o b y e t a l . , 1974). H a r r e l l , G., M. H u t t , and J . A l l e n , " U n i v e r s a l Product Code: P r i c e Removal and Consumer B e h a v i o u r i n Supermarkets", U n i v e r s i t y o f M i c h i g a n ; 1976. I r i s h B u s i n e s s , "Housewives C r i t i c a l of.Supermarket S e r v i c e -A Survey", November 1975, pp. 39-43. Jacoby, J . , D. S p e l l e r , and C. Kohn, "Brand C h o i c e B e h a v i o r as a F u n c t i o n of I N f o r m a t i o n Load", J o u r n a l o f M a r k e t i n g R e s e a r c h , 11, F e b r u a r y , 1974, pp. 63-69. K a n t e r , J . , "Management-oriented Management I n f o r m a t i o n System" Second E d i t i o n , P r e n t i c e - H a l l , I n c . , New J e r s e y , 1977. K u l s h r e s h t h a , S. and V. Holub, "An Aggregate E c o n o m e t r i c Model of Canadian A g r i c u l t u r e " , Dept. of A g r i c u l t u r a l 1 09 Economics, U n i v e r s i t y of Saskatchewan, T e c h n i c a l B u l l e t i n , October, 1973. r ~ Mackie, V., "AIB f a d i n g on T h i r d B i r t h d a y " , The Vancouver Sun, October 14, 1978, p. BIO. McKinsay and Co. Phase I . Report f o r the Grocery I n d u s t r y ' s Ad Hoc Committee, USA., November 1971. Mahoney, T. , "Revolution at the Checkout Counter", The  American Legion Magazine, November, 1974,. Maynes, E., J. Morgan, W. V i v i a n , and G. Duncan, "The L o c a l Consumer Information System: An I n s t i t u t i o n - t o - b e ? " , The J o u r n a l of Consumer A f f a i r s , Vol. 11, No. 1, Summer 1977, pp. 17-33. Moyer, M. and B. S e i t z , "The Marketing I m p l i c a t i o n s of Automated Store Checkouts", The Business Q u a r t e r l y , Spring 1975, pp. 68-77. Pappert, M., " U n i v e r s a l Product Code: Computers i n the Marketplace", Canadian Consumer , February 1978, pp,. 15-16. Parton, N., "Rate's Raiders Scan Shelves", The P r o v i n c e , Septembers, 1978(b), p. 33. Pa r t o n , N., "Scanners E l i m i n a t e Savings", The Province, August 19, 1978 (a) , p. 31. Paso f f , S., "Supermarket Scanning at S t e i n b e r g ' s " , The Canadian I n f o r m a t i o n P r o c e s s i n g S o c i e t y , August 1977, p. 12. Russo, J . , G. K r i e s e r , and S. Myashita, "An E f f e c t i v e D i s p l a y o f U n i t P r i c e I n f o r m a t i o n " , J o u r n a l of Marketing, A p r i l 1975 pp. 11-19 ( c i t e d i n Howson and Dexter, 1977). S o b r i a n , A., " S t e i n b e r g ' s P o i n t of Sale Experience", The Canadian Information P r o c e s s i n g S o c i e t y - Canadian Computer Show, Toronto, October 1975,. S t e i n b e r g , A., quoted i n " E l e c t r o n i c Checkouts: A Report as of December, 197 2", a b u l l e t i n of the Grocery Products Manufacturers of Canada, p. 9. S t i g l e r , G., "The economics of i n f o r m a t i o n " , J o u r n a l of P o l i t i c a l Economy, 69, 3, 1961, pp. 213-225. Supermarket News, " P h i l a . Item P r i c e B i l l Debated by Food I n d u s t r y , C i t y C o u n c i l " October 1, 1077, p. 22. 110 Supermarket News, "Eeport by E. Zwiebach, August 1, 1977, ~p. 2. Teasdale, P., ''Here Come the P r i c e Monitors", The Post,. Oct. 3, 1978. Wise, P.,- "Penny Wise", The Vancouver Sun, January 30, 1976. Yaunatta, E., c i t e d i n Study of Computerized Checkout Systems i n Foodstores; statement on b e h a l f of F i g h t I n f l a t i o n Together b e f o r e a h e a r i n g of the C a l i f o r n i a Assembly Committee on Finance, Insurance and Commerce, Sacremento, February 24, 1975. APPENDIX I SYSTEMS CONFIGURATIONS AND VENDOR QUOTATIONS 112 BURROUGHS BUSINESS MACHINES LTD. A p r i l 10, 1979 SYSTEM CONFIGURATION HARDWARE B u r r o u g h s B810 M i n i C o m p u t e r B811 - 1 MHz P r o c e s s o r (C.P.U.) - 96 KB MOS Memory - 160 L.P.M. L i n e P r i n t e r - DDE C o n s o l e SPO - 1 MB B.I.M.D. ( I n b u i l t ) - 37.6 MB F i x e d D i s k - D a t a C O M P r o c e s s o r DCPP 10 MHz - 2 TD831 T e r m i n a l 1920 C h a r a c t e r P u r c h a s e P r i c e . . . $ 80, 965 . 00 B u r r o u g h s One Y e a r L e a s e $ 2,116.00/ M a i n t e n a n c e $ 480/mo. a b o v e s y s t e m i n c l u d e s s y s t e m s o f t w a r e CM800-MCP CM800-UTL i n c l u d e s i n s t a l l a t i o n d e l i v e r y p e r i o d 4 - 6 months d e l i v e r y p r i c e $500.00 113 BURROUGHS BUSINESS MACHINES LTD B810 C o n f i g u r a t i o n B810 1 MHZ f i e l d u p g r a d e t o 2 MHZ $ 4,940.00 B810 37.6 MB F i x e d D i s k P a c k a g e ' t o 65. MB D i s k P a c k P u r c h a s e P r i c e $80,965.00 now w o u l d be $88,000.00 D a t a Comm P r o c e s s o r (DCPP) 10 MHZ $ 3,100.00 37.6 MB F i x e d D i s k $25,975.00 I n b u i l t B u r r o u g h s S u p e r M i n i (1 MB) , $ 4,100.00 160 LPM L i n e P r i n t e r $ 9,110.00 L i n e P r i n t e r C o n t r o l $ 2,195.00 8 KB MOS Memory $ 1,000.00 TD 831 D i s p l a y T e r m i n a l $ 5,460.00 114 COMPUTE WELL SERVICES LTD. December 1, 1978 SYSTEM CONFIGURATION D e s c r i p t i o n P r i c e Dec D a t a s y s t e m 538 w i t h : $ 115,000.00 PDP 11/34 CPU 256KB MOS Memory D E C w r i t e r C o n s o l e T e r m i n a l 2 28MB r e m o v a b l e C a r t r i d g e D i s k D r i v e s 4 VT100 V i s u a l D i s p l a y U n i t s 300 LPM L i n e P r i n t e r CTS500 O p e r a t i n g S y s t e m , i n c l u d i n g RSTS/E, RMS-11K ( R e c o r d Management S y s t e m w i t h M u l t i - k e y A c c e s s ) , DATATRIEVE (Date R e t r i e v a l ) , B A S I C - P L U S - 2 . I n s t a l l a t i o n and 90 d a y s o n - s i t e w a r r a n t y 5% P r o v i n c i a l S a l e s Tax 5,750.00 T o t a l $120,750.00 (1) P r i c e s q u o t e d a r e FOB K a n a t a , O t t a w a , FST & D u t y i n c l u d e d , f r e i g h t and i n s u r a n c e e x t r a . N o t e : 115 COMPUTE WELL SERVICES LTD. December 1, 1978 D e s c r i p t i o n P r i c e (1) C o m p u t e - W e l l D i s t r i b u t i o n P a c k a g e s $21,000.00 i n c l u d i n g A/R, A/P, G/L, O r d e r E n t r y and I n v e n t o r y C o n t r o l . A l l f i l e , s c r e e n , r e p o r t and o t h e r 1-0 a r e d r i v e n by p a r a m e t e r s f o r e a s y m o d i f i c a t i o n . P a c k a g e s c a r r i e s one y e a r w a r r a n t y . (2) M o d i f i c a t i o n o f p a c k a g e s and new s o f t w a r e a r e c h a r g e a b l e a t $200 p e r man-day. 116 CYBERNETICS COMPUTER SYSTEMS November 8, 1978 SYSTEM CONFIGURATION: (1) Texas Instruments DS990 Model 6 70,785 990/10 Minicomputer (13 s l o t c h a s s i s ) 128 KB E r r o r c o r r e c t i n g memory 2 model DS25 Disk D r i v e s (50 MB t o t a l ) 2 model 911 Video D i s p l a y Terminals S i n g l e Bay Cabinet DX10 Multiprogramming Time Shares o p e r a t i n g system Model FD800 Dual D i s k e t t e D r i v e (2) C e n t r o n i c s Model 6000, 600 l i n e per 11,000 minute p r i n t e r (3) Sort/merge 3,385 (4) Data base management system 2,705 87,875 Monthly cost on 5 year lease @ 2.3% 2,021 Maintenance (per month) 584 2 , 605 117 CYBERNETICS COMPUTER SYSTEMS L i s t o f O p t i o n a l o r S u b s t i t u t e I t e m s T e x a s I n s t r u m e n t s M o d e l 810 P r i n t e r (150 CPS) 3,715 T e x a s I n s t r u m e n t s M o d e l 2230 P r i n t e r (300 LPM) 18,265 T e x a s I n s t r u m e n t s M o d e l 2260 P r i n t e r (600 LPM) 24,695 T e x a s I n s t r u m e n t s M o d e l DS25 Add-on D i s k D r i v e 13,935 G e n e r a l E l e c t r i c T e r m i n e t 340 P r i n t e r (340 LPM) 7,500 T e x a s I n s t r u m e n t s M o d e l 911 VDT Add-on 2,300 T e x a s I n s t r u m e n t s M o d e l 743 H a r d Copy T e r m i n a l 1,795 T e x a s I n s t r u m e n t s M o d e l 979A Tape D r i v e (800 B.PI) 14,850 T e x a s I n s t r u m e n t s M o d e l 979A Tape D r i v e (1600 B P I ) 17,075 T e x a s I n s t r u m e n t s M o d e l 771 D i s k e t t e D a t a E n t r y 10,000 T e r m i n a l Add' on Memory I n c r e m e n t s - 16 KB 1,485 32 KB 2,970 48 KB 4,455 118 SPERRY UNIVAC COMPUTER SYSTEMS November 20, 1978 SYSTEM CONFIGURATION: V a r i a n S y s t e m : 128 K B y t e s CPU 67 MB D i s k 165 c h a r / s e c p r i n t e r (90 l i n e / m i n ) 2 CRT t e r m i n a l s I n c l u d e s o p e r a t i n g s y s t e m , c o m p i l e r s , d a t a c o m m u n i c a t i o n c a p a b i l i t y . 1 d i s k e t t e u n i t ( $ 6 , 0 0 0 ) T o t a l p u r c h a s e p r i c e L e a s e c o s t s $73,700 $ 1,695/month 

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