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IT and Retail Strategy

The retail market is complex and peculiar. India is an extremely cost sensitive market. A successful retailer must have not only the right products at the right place and the right time but also the right pricing strategy. In addition, the number of products managed in retail is unusually high. By Dominic K

Some leading retail chains manage around 4,00,000 products.Almost all major retailers, irrespective of their size, aspire to lead in their market niche. To this end, they are all going through aggressive expansion campaigns to achieve the same. Having a comprehensive IT policy helps an organisation put bits of information together and allows decision-makers to get the whole picture. It also helps evaluate all decisions taken so far.

In this regard, retailers have selected SAP as a key technology partner and implemented SAP retail apart from other solutions and products from various other vendors. The idea is to have the best technology available at the front-end retail store. These facilitate faster checkout and there is timely as well as correct recording of client information. For this purpose, barcodes are extensively used. Even credit card magnetic swap readers are in use to capture correct information into the database.

Chinar Deshpande, CIO, PRIL, says, “To support growth, a robust and futuristic IT infrastructure with investments of over Rs 100 crore has been planned for the next three years. Our strategic partnership with SAP is the first step in realising our IT vision.”

While deciding to implement a new technology, the major factors are scalability and user adaptability. This is because the most important thing in retail is to be customer friendly. Ultimately, the business is all about providing service to the end customer. The customer in the store is the prima facie reason why a retail business opts for a particular technology.

The CIO’s role

CIO plays a crucial role in a retail outfit. He is involved in strategic business meetings as well. His main role is to ensure that the existing system is working adequately and smoothly. Continuous development, improvisation and innovation on existing systems come next. The data warehouses created as well as the data collected at the sales counter must be accurate, so that the BI (Business Intelligence) solutions are in a position to provide insights into customer behaviour and buying patterns.

The CIO should also be able to evolve new algorithms to ensure that timely stock replenishments take place helping boost sales. He must also ensure that proper security features are in place to reduce retail shrinkage, which includes shoplifting, supplier fraud and administrative errors. These implementations are critical for profitability because retail business operates on a slender profit margin.

With the dependence of retail business on IT in mind, around one to one and a half percent of overall sales are pumped back into IT.

The ROI factor

Calculating RoI on a retail IT implementation isn’t the easiest thing to measure. That said, it could be judged from the quality of information that is available for decision-making helping improve the bottom-line. It also helps in finding other avenues for expansion and improving profitability.

Shoppers Shop wanted its customers to have a personalised shopping experience, and to this end it wanted to tailor-make promotions and schemes unique to the buying patterns of specific customers. “For this we needed to understand how, when, where and in what combination the customer buys merchandise,” recalls Unnikrishnan TM, Customer Care Associate and CTO, Solutions and Technology, Shopper’s Stop. It was also necessary to improve the decision-making skills of the organisation, manage costs, increase revenue and provide better products to customers.

With the support of good IT systems, it is possible to create proper benchmarks that can measure the efficiency of an IT implementation and systems. The achievements of the benchmarks reflect positively on IT and business processes, and eventually on sales and profitability.

An SOA (Service Oriented Architecture)-based approach can also offer retailers certain benefits. On all fronts, the retailer and manufacturer are required to rethink their operations, from format differentiation and in-store innovation to real-time information facilitation for the customer.

Retail applications

With large corporate houses entering the retail sector and the consequent entry of IT professionals from other industry verticals, awareness levels of IT managers in the retail industry have grown. There is still a need to display the benefits that accrue from implementing ERP and CRM applications in a retail organisation. Oracle Retail is spending considerable time and effort to create awareness about the availability of IT applications and the consequent benefits to retail organisations.

Most IT managers of retail organisations are aware that they will need ERP and CRM applications. As retailers grow, they feel the need for a flexible IT infrastructure to run their business more effectively. They have started to realise that IT is a fundamental aspect of a responsive business, and that this is possible only when their core ERP and CRM applications start to communicate in real-time and receive data as soon as it is captured. This in turn is possible only if they implement a service-based infrastructure.

Like any other vertical, retail also stands to benefit from elaborate IT set-ups. However, this is subject to the scale and size of the organisation, as well as an objective assessment of its requirements. Key challenges faced by retail organisations include the need for accurate merchandising, improved planning, and profitability, enhancing customer experience, strengthening store operations, improving workforce management and the supply chain.

IT alone won’t do

Competency in managing IT is just not enough when it comes to choosing a third party; companies are looking for more. This holds more water for SMBs that, unlike large companies, lack standardised technology platforms. Verticals like discrete manufacturing and retail chains need low-cost, low maintenance applications optimised to their business needs—applications that are not only scalable but which help gain benefits and enhance revenues.

“We took care to ensure that we chose not only the best product from a technological perspective, but also a security partner that understood our business concerns and would be there for us in the long term,” says Meheriar Patel, Deputy General Manager and Head – IT, Globus Stores. Factors such as the market’s opinion of the vendor and the projects completed by the vendor in question should also be given due weight. Initial and operational costs are some critical criteria that CIOs should look at.