The Story Behind the Shelves

Retail is leveraging IT and its prowess in all possible dimensions, be it breadth, depth or the stature that technology is increasingly commanding in the shopping aisles. Here's a glimpse

Saturday, November 01, 2008

Print

Comment

Email

Digg

Del.icio.us

Reddit

Twitter

Ambling on that well-stacked and well-glossed aisle on a weekend shopping trip, little do shoppers know what happens when they pick up a shirt for the wardrobe or a ketchup bottle for the kitchen. Just by laying hands on that SKU (Stock Keeping Unit, in the retail parlance), can trigger a technology cascade. The particular unit, whether it is just being fiddled with for evaluation, or put into the venerable shopping cart, sets forth a series of IT functions. The CRM would quickly record the size, color and other nuances to update its insight on the customer. The inventory system would immediately put in place mechanisms to replenish that unit and inform various entities in the chain right till the warehouse accordingly. The supply chain, in turn, would get into action likewise and so would the employees and PoS (Point Of Sale) entities. To a shopper, it might be a just another routine, but look around and we can see a full-fledged 24/7 IT backbone and nervous system that runs to ensure a profitable, customer-delight oriented and efficient retail operation.

Take Megamart for example, the apparel retail chain from the Arvind group that runs 115 small stores across 41 cities in the country and three large format stores. Its legacy system, back end SAP system and a front-end sales information system etc work in tandem, so that all sales data is fed centrally by midnight and the respective management points can have a consolidated sales report handy by 10 AM the next day.

The information is diced from all angles, brand wise, category wise and size wise to serve an automatic replenishment model so that the warehouses can supply back the particular categories as and when the sales happen. Its supply chain is further equipped to raise alarms whenever required and add to the dynamic pricing policy that helps the retailer push a particular product whenever required.

IT is being used right from the time retail majors like Shopper's Stop look at potential properties to set up stores, collaborate between external and internal teams while the stores are coming up, planning merchandise, filling the store, replenishments management, supply chain, collaborating with vendors, and doing personalised promotions. In fact as Ranjit Satyanath, GM, Technology admits that he would be hard pressed to think of an area where the company does not use technology.

SCM, CRM and RFID
On areas like CRM, Megamart has a legacy system called Voyager that helps in analyzing customer behavior and buying patterns. It expects to take it further by tailor-made offerings and loyalty programs based on CRM data that is possible in a year's time.

The range is wide at chains like Shopper's Stop. From retail ERP implementation, already deployed are applications for customer loyalty management, data mining & business intelligence and warehouse automation applications. "Our CRM currently manages our First Citizen's Club which has a base of over a million customers. Through this application we are able to track the preferences of our customers, which helps us offer them the products they want. Customers also receive promotions tailor made for them e.g. we have a "Choose your sale day" for our Gold Card members." Ranjit Satyanath, who is spearheading IT at the retail chain, tells.

Over the last two years there have been technologies deployed for collaboration, Wi-Fi, advanced payment systems, server virtualisation and employee self service.

"To further improve the availability of merchandise through the supply chain we have recently Wi-Fi enabled all our distribution centers (DCs) and equipped our logistics personnel with applications on handhelds. This initiative has not only helped our DCs deliver merchandise to the shop floor faster, they can also do this with close to 100% accuracy." Satyanath adds.
New technologies including open source ones are also finding their share of room on the shelf space. "While we are open to experimenting with new technologies and are early adopters of several like JDA implementation, Netezza implementation, and a B2B portal for vendors, we deploy only ones that are thoroughly evaluated." Shares Ranjit.

There is another technology in the form of Radio Frequency Identification (RFID) that finds its applications in controlling and monitoring movement in the retail industry. Megamart is also deploying it for warehouse management and the new investment will additionally help in finding the position of stocks at the right time.

Ready for more
While Megamart is inking aggressive expansion plans for its large format stores and has plans to set up 25 to 30 such Megamart Outlet Centres in the next four years, it is also simultaneously investing further in its IT roots.

It recently announced that it will adopt RETEK, an Oracle based application, which is claimed to be a platform run by seven out of top 10 global retailers like Tesco, Nordstrom, Sainsbury, Selfridges, Sears, and GAP. The Rs 15 cr. investment is expected to go live by February next year and would cover the entire transaction module to start with. Phase two, which would be completed by the end of 2009 would extend to planning tools while the third phase would touch the front-end with PoS and 360 degree commerce.

Viewpoint

We talked to the MD of Dynamic Vertical Solutions, Rakhee Nagpal, to get a quick peek into the shape of the retail industry in India and the utility of the company's various offerings. What's the current retail scenario in the country? The retail industry is worth 300 billion dollars now and is expected to reach 427 billion dollars by 2010 and 600 billion dollars by 2015. Organized retail comprises just 4% of the 12 million retail outlets. The industry is growing at 30% y-o-y so, there's a huge opportunity to be tapped out there. Having said that, these are early days for IT within organized retail as 96% of market has not even been tapped from the IT perspective. What were major challenges before the industry when you started operations in 2006? The knowledge of IT as a very important support structure for retail was not there. Industry was being slowly recognized as a serious industry. We worked closely with NASSCOM, CII, FICCI to espouse retailers' cause in India. This actually provided us with a huge opportunity to educate people for IT usage. We have tied up with institutes to impart IT education for retail and hospitality verticals. What are the key issues to keep in mind before designing solutions for customers? The core of our solutions is based on the Microsoft Dynamics ERP suite provided by our international partners. We localize the solution based on the needs of the market. For eg, within the retail industry, the requirements for a mega mall vary from that of a coffee shop, a grocery store and so on. Further customization is done based on the individual needs of a particular business. So, you should strive to provide solutions that enable a retailer to achieve his core business objectives. These could vary from handheld devices, planagrams for fashion, people management software, relationship management modules, and so on. Next, ensure that costs are cut through efficient integration of different processes within a single solution. In retail, data is captured most of the times at PoS. The thought process of retailers and their interaction with customers has to be factored in completely by an IT solution and data should flow across transparently through divisions and be incorporated in the ERP processes. What about customers with legacy ERP apps ? The customer should have a single point of contact for support for different hardware and software solutions bundled within a package. So, for eg, even though a customer has been using an ERP solution from SAP or Oracle or even MS Dynamics, this shouldn't be a hindrance to further technology adoption.

As K.E. Venkatachalapathy, COO, Megamart shares, he is expecting a range of benefits from this investment. "It will help us in having a tight working capital management control, availability of right stock at the right time (which is the clincher in a business like retail), a topline improvement of about 10% and about 1.5% jump in profits."

At Shopper's Stop, where the revenue IT budget is generally between 0.5 to 0.8%, many new deployments are on their way. It is trying to touch new areas ahead and is in the final stages of rolling its Oracle Peoplesoft for employee management. "Employee attrition is a reality in the retail industry and I don't think this is something we can fight with technology. But what technology can do is make new employees productive much faster. We do this through our investments in an online learning framework and e-learning modules. New recruits can now be trained and made productive much faster and at a much lower cost then instructor led trainings." Satyanath reasons.

Next bracket of technologies
Meanwhile the next exciting bracket of technologies that are luring CIOs include collaborative solutions (e.g. EPM), business intelligence, Web 2.0, RFID, converged communication, NFC (near field communications), E-Commerce and mobile technologies, open source solutions and social networking.

Arun Gupta, Customer Care Associate and Group CTO, Shopper's Stop Limited however points out that the promise of some of the new technologies like RFID, SOA and mobile technologies remain untapped as in the Indian context we have not yet been able to find a business case with the help of our service providers. "Future value-adds will come from data mining and business insights that technology can offer with analytics. These will be spread across inventory optimization, markdown and pricing management, customer management and supply chain."

K E Venkatachalapathy, COO, Megamart Non-fulfilment of the right stock at the right time is the biggest challenge, and about 15 to 20% losses in an industry like retail can be on account of non-fulfilment here.

What a CIO needs
Quality of resources allocated to IT projects in India by software companies, pricing and system integration continue to be issues, especially for retail CIOs. As Satyanath from Shopper's Stop reveals, "Most of the time I find that an Indian project is a training ground for their resources before they go off on a "dollar" project. This is despite the due diligence we do at the time of signing them on. The good resources one is shown most of the time is withdrawn citing "internal policy" or some such excuse to be replaced by people of questionable skill sets."

Pricing, he adds, is seldom discussed with the Indian retail context in mind. "Due to these two reasons we have often chosen to outsource offshore projects to vendors outside India, which is frankly ironical given India's reputation on the international scene."

Venkatachalapathy from Megamart emphasizes the importance of having the right stock at the right time. "This is the biggest challenge and about 15 to 20% losses in an industry like this can be on account of non-fulfillment here.

Ditto feels Satyanath from Shopper's Stop. "Everything we have invested in is ultimately focused to ensuring that single SKU (stock keeping unit) the customer wants is available to her when and where she wants it."

The ideal scenario is not easy but as nothing can make an IT head happier than having a supply chain team that is not worrying about culling data and trying to make some meaning out of it. "They should have it on their fingertips and not waste precious time in just mining the data." Venkatachalapathy hopes.

The challenges are rising and IT can be more helpful than it has been. For Shopper's Stop, for instance, the cost pressures have only increased in the last few weeks. "But we are reasonably confident that we'll be able to rise to the challenge and make the business much more cost effective. In fact, we've already made a beginning. We have reduced telephone expenses by more than 40% in some of our stores through some of the technologies that we have deployed in them." Satyanath believes.

While retail in India is still at a nascent stage and processes are evolving, IT heads would like vendors to appreciate this and not try to sell solutions just because they have worked elsewhere. Partnering and discovering solutions that could work in India would be the key.

Gupta sums the sentiment quite well. "My biggest expectation from IT vendors has been that do not sell me a solution to a problem that I do not have. First understand my pain areas and then help me find a solution to address them. Indian retailers face a different set of challenges as compared to retailers in the western world. Most solutions created for the developed markets do not address the issues faced by us in India. Technologies do not excite me; innovative solutions to solve existing business problems or create efficiencies beyond conventional technology usage do."

Pratima Harigunani, CyberMedia News

Page(s)   1