IBM Buys Retail Forecasting And Merchandising Software Company

IBM has made a major purchase today in the commerce and retail world—DemandTec, a retail marketing and merchandising software company. IBM is acquiring DemandTec (which listed on the Nasdaq) in an all cash transaction at a price of $13.20 per share, or approximately $440 million.

DemandTec provides retailers and e-commerce companies with tools to transact, interact, and collaborate on core merchandising and marketing activities. DemandTec’s cloud-based analytics software allows businesses to examine different customer buying scenarios, both online and in-store, so retailers can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

For example, retailers can predict how consumers will respond to a price change before making the change. Or a merchant and supplier can work together to understand how one shopper segment differs from another to create a targeted merchandise plan.

DemandTec’s use of cloud-based price, promotion and other merchandising and marketing analytics helps companies better define the best price points and product mix based on customer buying trends. Essentially, DemandTec uses data analysis and forecasting to make the retail world smarter.

DemandTec customers include Best Buy, ConAgra Foods, Delhaize America, General Mills, H-E-B Grocery Co., The Home Depot, Hormel Foods, Monoprix, PETCO, Safeway, Sara Lee, Target, Walmart, and WH Smith. DemandTec also has a portfolio of 31 patents in the areas of pricing, response analysis, and promotion analysis.

For IBM, the acquisition is all about its smarter commerce initiative. IBM estimates the market opportunity for Smarter Commerce at $20 billion in software alone.

IBM’s recent acquisitions include Algorithmics, and Tririga.

The brains behind retail revolution

More than 5 billion bar codes are scanned in shops worldwide every day

Alan Haberman, who died on June 12 aged 81, was largely responsible for standardizing the bar code’s design and introducing it into the world’s supermarkets, a development that has revolutionized retailing and countless other activities.

Bar codes, also known as universal price codes, were invented in 1949 by Norman Woodland and Bernard Silver, who had the idea of vertically extending the dots and dashes of Morse code and using it to encode product data. They secured a patent in 1952, but because scanning technology was in its infancy, their invention went largely unused.

Over the next 20 years, some manufacturers and retailers introduced their own product coding systems, but there was no standardization and, as a result, grocery manufacturers such as Kellogg’s and General Mills feared that they would be forced to produce different packaging for each supermarket chain.

In the early 1970s Haberman, who was executive vice-president of First National Stores in Boston, convened a committee to choose a standard symbol that could be used across America. By this time the original patent had lapsed, and the committee examined submissions from several companies including colourcoded, dots and dashes and bull’s-eye designs. Although many technology experts favoured the “bull’s eye,” which could be easily read by a scanner, Haberman came out firmly in favour of cheaper black-and-white vertical bars, created by George Laurer of IBM.

On June 26, 1974 a supermarket cashier in Troy, Ohio, became the first person to swipe a bar code (on a 67-cent pack of Wrigley’s chewing gum) across a scanner, but the new system took some time to catch on. Early scanners cost $10,000 and tended to be unreliable; in 1976 Business Week ran an article with the headline “The Supermarket Scanner That Failed.” By the early 1980s, despite Haberman’s best efforts, fewer than 30 per cent of supermarkets in America were using his universal price code design. The breakthrough came when the “pile-’em-high-sell-’em-cheap” retailers got in on the act. In 1984 Walmart, Kmart and Bullocks decided to introduce the bar code and other chains soon followed suit. As the system developed, it enabled retailers to keep track of inventory with unparalleled accuracy, making possible the introduction of “just-in-time” ordering, minimizing the need for storage and waste, and providing a huge range of sales data which allowed greater responsiveness to customer demands.

Despite resistance from conspiracy theorists, who considered bar codes to be intrusive surveillance technology, and from some Christians who thought the codes hid the number 666, more than five billion of the codes are now scanned in shops worldwide every day; the technology has yielded savings running into the trillions of dollars.

Bar codes have also spread into many other fields, from allowing airlines to locate lost luggage to helping beekeepers to monitor the movements of honeybees, via tiny bar codes attached to their backs.

Haberman compared the development of the bar code with the Biblical story of creation: “Go back to Genesis,” he advised an interviewer in 2004. “God says I will call the night ‘night,’ I will call the heavens ‘heaven’. Naming was important. Then the Tower of Babel came along and messed everything up. In effect, the (bar code) has put everything back into one language, a kind of Esperanto, that works for everyone.”

Alan Lloyd Haberman was born in Worcester, Mass., on July 27, 1929. After taking a degree in American History and Literature at Harvard, he took an MBA from Harvard Business School. He worked briefly on Wall Street before joining Hills Supermarkets as executive vice-president.

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