Retailers brace for Y2K bug as Senate considers liability bill

Discount Store News, May 24, 1999 by Robert Scally

NATIONWIDE DSN REPORT -- You can never be too ready for the unknown.

While this may sound like a line from the "X-Files," it could be retailers' slogan for addressing the Y2K problem.

The so-called "bug" of Year 2000, or Y2K, stems from computer programs that don't recognize the year "00" as being indicative of a new century--instead, they recognize the two digits as the year 1900. These programs are part of numerous items including clocks, VCRs and large computer systems.

It's not known exactly what will happen at the stroke of midnight on Dec. 31 to the thousands of computers and other digital devices around the world that operate on calendars that may not recognize the year 2000. Scenarios resulting from Y2K-related problems range from the total breakdown of all law and order to minor annoyances such as digital clocks that fail to work.

To be prepared for whatever may come, major retailers are still cautiously testing and examining systems, procedures, plants, facilities and vendors, according to industry experts working to help retailers solve technical problems connected with the year 2000.

"1999 is the year of finishing up testing and making sure that all of the fixes actually worked and that all of the software pieces can work with each other," said Cathy Hotka, vp of information technology at the National Retail Federation.

Supplier readiness for Y2K is the main question for many retailers at this stage, said Jonathan Gold, spokesman for the International Mass Retail Association.

"I think they key question is, 'Are the suppliers going to be ready?"' Gold asked.

Retailers are making lists of the suppliers that are most critical to their business. For some companies that list has as few as 10 suppliers of products and services, while other companies have taken the Casey Kasem approach and identified their top 40, Hotka said.

Some retailers are also spending these last few months working out individual store-level responses that fit each location.

"Retailers are spending a lot of time thinking through what could conceivably happen and then working through a response to those potential events in advance," Hotka said.

Fixing and planning for Y2K problems, while expensive, need not amount to a good deal of effort expended on a one-time event. Many of the contingency plans worked up by retailers to deal with Y2K problems can also be applied to other events, such as a natural disaster, that may be beyond control.

In some instances retailers are concerned about the availability of basic services such as electricity and water, Gold said.

"I think everyone has a general feeling that everything is going to be OK," Gold said. "I don't think that there's the fear out there that there was when people first started working on the issue."

A number of Y2K experts for major retailers are reportedly flying around the world to meet directly with suppliers.

"In many cases, large retailers have decided that there isn't a substitute for seeing the whites of their eyes," Hotka said.

As the industry deals with what is essentially a massive technical hassle, human nature is playing a key role in the Y2K saga. While retailers maybe keeping an eye on their suppliers, it is the lawyers who are striking fear into many retailer's hearts when it comes to potential Y2K problems.

"I did a simple Internet search on 'Year 2000 lawyer' and it yielded over 11,000 hits," Information Technology Association of America president Harris Miller said last March during testimony before the Senate judiciary committee. "Believe me, senators, the lawyers are anticipating and trying to help create the momentum for massive litigation, which Lloyds of London estimated could reach $1 trillion," he added.

The industry was generally pleased in mid-May when the House of Representatives passed the Year 2000 Liability Act. The legislation, now on its way to the Senate, would cap punitive damages, limit the liability of corporate officers and make defendants proportionately liable for damages.

"I think our members are more worried about being used than their systems being ready," IMRA's Gold said.

There's little open discussion between retailers about the Y2K problem as the new year draws closer. They are generally reluctant to publicly discuss Y2K readiness, in part out of fear of lawsuits should there be any disruption of business or other problems relating to the date change. Securities and Exchange Commission rules requiring disclosure of material information relating to the Y2K problem also discourage discourse.

On one point most observers agree: There will be some level of problems associated with the start of the new millennium.

"I think there are going to be some disruptions," said Jonathan Ziegler, retail industry analyst with Salomon Smith Barney in San Francisco.

Retailers face the prickly problem of making sure they have enough inventory on hand in the event of problems and not getting caught with too much merchandise if there aren't major problems, Ziegler said.

It's expected that smaller retailers are likely to stiffer more from to the Y2K problem than larger firms.