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
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 CIOs 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
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 isnt 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,
Shoppers Stop. It was also necessary to improve the decision-making skills
of the organisation, manage costs, increase revenue and provide better products
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.
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 wont 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 needsapplications 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
markets 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.