December 4, 2002 5:42 AM PST

Retailers fire up IT projects

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Several large retail chains this week delivered early holiday presents to technology makers: fat contracts.

Home Depot, Wal-Mart and Benetton all unveiled plans to kick off significant new information technology projects.

Home Depot is investing hundreds of millions of dollars in new customer checkout systems for all of its more than 1,400 hardware stores, the company said Monday. As part of the project, Home Depot has agreed to purchase computer equipment from NCR and software from Microsoft.

Wal-Mart has agreed to license a set of business applications from J.D. Edwards that are designed to automate the management of real estate, construction and other business assets. The agreement, announced Tuesday, is an expansion of an earlier deal. The companies would not discuss the value of either contract.

And Benetton, an Italian clothing maker and retailer, has agreed to purchase a line of manufacturing, accounting and logistics applications from SAP. Benetton expects the new system will help deliver merchandise more frequently and quickly to stores in the right quantities. The value of the contract, announced Tuesday, was not made public.

Such spending on technology is not reflective of the overall retail industry, however. Market researcher IDC recently revised its estimate of how much retailers will spend on IT this year to $23.7 billion, a 1.5 percent decline from last year.

Home Depot spokesman Don Harrison acknowledges his company's move runs counter to the current trend in the business world to spend the bare minimum on computer equipment.

"We're spending money, we're spending a lot of money," he said. "But the applications are practical. They are going to drive sales in the stores and make life easier on our customers."

Home Depot expects its IT project, dubbed FAST--for front-end accuracy and service transformation--to improve cashier productivity, reduce mistakes and speed service at the checkout counter. For instance, the new system should reduce the need for time-consuming price checks, Harrison said.

The first phase of the project is the installation of self-checkout systems in about 800 Home Depot stores, with 300 stores equipped by the end of the year. The company plans to use the state-of-the-art self-checkout lanes, which are more compact than traditional "staffed" systems, in its highest-traffic stores to increase the number of checkout lanes without hiring more cashiers or expanding the store.

Using self-checkout lanes, customers are able to scan, bag and pay for merchandize all without the help of a cashier or other store attendant. The system accepts cash, debit cards and credit cards as payment. Customers can also pay with check with the assistance of a clerk. Home Depot is currently testing self-checkout at stores in or near Atlanta, Boston, Chicago, Las Vegas, San Jose, Calif., Seattle and a number of other U.S. cities.

The company has no plans to lay off any cashiers or other employees as a result of adopting the self-checkout technology, Harrison said.

Self-checkout technology has become increasingly popular with major grocery stores, such as the Northeastern U.S. chain Stop & Shop, said analysts. Home Depot could be the first major non-grocery retail chain to introduce such a system, signaling what may be a broader acceptance of self-checkout in the retail industry, said Christopher Boone, retail technology analyst at IDC. Wal-Mart and Target are testing self-checkout as well, Boone said.

Although self-checkout technology has existed for more than a decade, it is still in early in the adoption curve, according to Boone. That's because payment methods and mechanisms to deter theft were limited in earlier models.

Home Depot was initially concerned about increased shoplifting, Harrison said. But NCR convinced Home Depot that the system can thwart thieves because it weighs each shopping bag or cart after a purchase is complete and can detect any extra baggage if there are more items than customers scanned and purchased.

Boone predicts that in five years, half of all grocery stores in the country will have self-checkout lanes.

In addition to the new checkout systems, Home Depot also recently discussed plans to invest tens of millions of dollars in a new data-mining system, enlisting IBM to provide computers and services. And last month, the company said it agreed to purchase 40,000 desktop computers from Hewlett-Packard for use throughout its stores.

 

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