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Impact of Information
 Technology in Store
     Operations




                   Submitted by: -
                     Jig...
Impact of Information Technology in
                          Store Operations

Introduction:
       Retailing is a “techn...
Synopsis:
Technology has transformed the buying behaviour of customers everywhere.
Technology in the store is all moving t...
carts would provide a screen on the trolley to improve communication with the
customer during the in-store shopping trip. ...
Literature review:
       The increasing need to use technology to manage complexities in customer care,
profitability, an...
Payment
Payment through credit cards (plastic money) has become quite widespread and this
enables a fast and easy payment ...
standard for retail. Chain Store Age's survey found that 19.5% of retailers polled last
summer planned to spend capital-in...
using RFID smart labels to store information about each item in the store, such as fabric
content, available sizes and col...
Over 60% claimed their budgets for retail technologies, as a percent of sales, have
increased.

It is apparent that retail...
SMART SHOPPING CARTS

Smart shopping carts have been around in one form or another for about 20
years. The original idea w...
abandon their carts during trips Thermal imaging couldn't distinguish between
babies and turkeys in tests.


ELECTRONIC SH...
IT systems are at the heart of retail operations and hence play a central role in
alleviating pressure points in the retai...
Findings:


Cause:


   •   Communication with customer’s through media cart and new ways of marketing
       and technolo...
Recommendation:

It is apparent that retailers are now investing more than ever in technology. They are
demanding technolo...
Scope for further research:
                •   With the advancement of technology day by day, there could be
            ...
References

  1. DTLR launches mobile marketing,
  Retail technology, Chain Store Age, May 2008.
  2. Innovation Builds Co...
13.Retail-technology leader re-invents itself.
By: Yudkowsky, Chaim. Business Journal (Central New York), 12/5/2003, Vol. ...
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It Used In Store Operations

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Transcript of "It Used In Store Operations"

  1. 1. Impact of Information Technology in Store Operations Submitted by: - Jigar Mehta Roll no.21 PGDM-RM 2nd year 2007-2009. K.J.SOMAIYA INSTITUTE OF MGMT STUDIES AND RESEARCH (SIMSR) Vidyavihar (E), Mumbai - 400 077.
  2. 2. Impact of Information Technology in Store Operations Introduction: Retailing is a “technology-intensive industry. It is a well-known fact that the retail industry always works on razor thin margins and the key to survival lies in optimization of resources both in space and time dimensions as well as maximization of customer satisfaction. Successful retailers today work closely with their vendors to predict consumer demand, shorten lead times, reduce inventory holding and ultimately save cost. Access to timely and even real-time information to a wide variety of channel and trading partners, sales personnel, line managers, store managers etc. is the key to achieving this. Over the years as the consumer demand increased and the retailers geared up to meet this increase, technology evolved rapidly to support this growth. It is technology that will help the retailers to score in such fierce competition. There are hardware and software tools that have now become almost essential for retailing. Consumers have come to expect more value and higher service levels. As a consequence, the technology continues to grow and retailers search for ways to measure technical business value and to balance the effective utilization of the technical resource. Retailers want to get more value out of technologies and ensure they are spending their limited resources in ways that improve their overall offer to the customer. Technology has proven to be a competitive weapon in retail, which is a dramatic shift from a decade ago. In response, retailers generally need to become more disciplined in managing the IT function. Completing and delivering IT projects on time and on budget is overwhelming enough without the project team considering their project’s interdependencies with other business initiatives and corporate goals. 2
  3. 3. Synopsis: Technology has transformed the buying behaviour of customers everywhere. Technology in the store is all moving toward integration and more and more savvy customers. POS is undergoing major changes because of broadband access, the need and ability for inventory visibility, customers ordering online, returns and pick-up in the store and also the movement toward an ASP (application service provider) model. “Better broadband access is incredibly important and is one of the true disruptive technologies” as said by Greg Buzek president of IHL consulting. It is broadband that will help to transfer the information fast and help retailers to serve their customers on time. Technology offer retailers the potential to know exactly how many customers are in their stores by department and time of day. The Footfall division of Experience was at NRF making the case for accurately counting customers to produce valuable data that influences operational decisions, such as labour scheduling. Findings proved that a mere 20% of shoppers are actually advocates of retailers, K. Jotwani. Director, marketing and strategy. Retail Store Solutions, IBM Systems and Technology Group, which leaves 80% of shoppers who do not advocate, let alone give their loyalty, to any specific retailers, which shows that there is a room for improvement to give better customer service with the help of technology. As today’s world problem of global warming, technological companies have understood the importance of “Going Green” and are taking green initiatives by producing environmentally Earth-friendly products and processes to reduce the burden on the environment. IBM unveiled its Green Retail Store, a portfolio of technologies and services designed to improve energy and operational efficiency across a retailer's IT operation. Retailers are finding ways to get communicate with customer and new ways of marketing and technology has made it easier for them such as Downtown Locker Room (DTLR) expects to increase store traffic and sales by targeting shoppers with text message based promotions. Store-level customer service can be an Achilles’ heel for many chains, and this has been made easy by technology in near future there would be media carts which would provide customers a cutting edge shopping experience. Media 3
  4. 4. carts would provide a screen on the trolley to improve communication with the customer during the in-store shopping trip. There are easySHOP system by Stop & Shop, Quincy, Mass., which has self-check out solution for customer with the help of Motorola MCI7 mobile computer, runs software from Boston based Modiv Media that supports self scanning, instant price checks and self checkout. It is a unit which sits on a shopping cart, also delivers targeted promotions based on users shopping behaviour, redemption history, in-store location tracking and previously scanned merchandise which would help to keep customers track and help customer’s to escape standing in the long cue’s for paying the bills for hours. Being a “technology-intensive industry, it needs workers who are technologically savvy. There are technical high schools where students would be taught basics of retail sales in which they will study loss prevention software, point-of-sale systems and other technical aspects of retail, along with traditional topics such as wholesale buying, customer service and marketing. Objective: This paper discusses the different technologies that are implemented in retail stores, and how retail players are applying these technologies to reduce the operational and technological gap in order to compete in this globally competing environment. Hypothesis: Information technology in store operations will provide a competitive advantage and improve sales. Keywords: Retail Technology, Store operations, Information technology in store, Expected Results: Implementation of Information Technology will improve customer retention. It will increase footfalls and customer conversion rate. 4
  5. 5. Literature review: The increasing need to use technology to manage complexities in customer care, profitability, and operational challenges has precipitated competition among retail technology vendors. Retailers are remedying this situation by partnering with solution vendors that have leveraged newer radio frequency identification (RFID), smart card, and Wi-Fi technologies. This partnership is also helping them to prepare legacy systems for convergence. Retailers are undergoing accelerated technological innovation in achieving profitable differentiation.” Retailers that wish to stand out in the crowd are showing great interest in hand-held terminals that have evolved from its proven supply chain form factor to the real-time enabled mobile points-of-sale (MPOS), consumer, associate, and manager productivity form factors. Technologies that can enable data capture and access for improved decision making will remain growth drivers in developed and developing economies. POS replenishment in developed economies is driven by next-generation, forward and backward integration-capable POS systems, however, self-checkout is likely to form a part of the POS replenishment budget. In developing economies, POS systems continue to offer growth opportunities. The hardware and software tools that have now become almost essential for Store operations are as follows: Bar coding and scanners Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client. Tunnel scanning is a new concept where the consumer pushers the full shopping cart through an electronic gate to the point of scale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All that the consumers have to do is to pay for the goods. 5
  6. 6. Payment Payment through credit cards (plastic money) has become quite widespread and this enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer’s bank. Rather than manually processing a cheque, the retailer voids it and hands it back to the consumer along with the receipt, keying digitally captured and stored the image of the cheque, which makes the process very fast. ERP system Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock outs and thus reducing his costs, while servicing the customer better. CRM systems The rise of loyalty programs, mail order and Internet has provided retailers with real access to consumer data. Data warehousing & mining technologies offers retailers the tools they need to make sense of their consumer data and apply into business. This, along with the various available CRM systems, allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their business. Wi-Fi As Wi-Fi technology has matured, retailers have begun to see it as a robust, inexpensive option for in-store connectivity. The concurrent development of handhelds has dramatically broadened retailers' options for application delivery. With Wi-Fi enabled handheld devices, applications such as POS, inventory audit, item lookup, pricing and labor scheduling can be used anywhere on the sales floor. Wi-Fi is quickly becoming a 6
  7. 7. standard for retail. Chain Store Age's survey found that 19.5% of retailers polled last summer planned to spend capital-investment funds on Wi-Fi networks. RFID (Radio Frequency Identification) There are many uses of RFID. Some of them which are used in-store are as follows: RFID helps improve inventory management Inventory control is often a costly, time-consuming process for retailers. By offering real- time inventory visibility, RFID enables inventory managers to monitor and control inventory supply at all times. By automating the inventory tracking process, stores can keep costs down by maintaining optimum inventory levels—avoiding stock-outs and eliminating unnecessary orders. Tracking capabilities also make it easier to predict product demand. Store managers can monitor quick-selling items with increased accuracy, ensuring that their inventory supply is stocked accordingly. Improving customer service Satisfied customers mean better business for retailers. By using RFID, your staff can identify the exact location of any retail item at any time. Customer requests can be handled quickly and easily by your customer service team through access to a centralized database. RFID-tagged items offer store-to-store visibility, so items can be located immediately with the touch of a button. This level of product accessibility results in shorter wait times for customers and offers a better shopping experience. Improving overall store efficiencies ultimately results in greater savings to customers. Boosting customer loyalty RFID can be the personal shopper of the future. By using RFID technology, retailers can collect information about their customers' purchasing trends and offer rewards targeted to those interests. RFID can enable your marketing and customer service teams to identify customers, call up account histories, and provide value-added services to help create a personalized shopping experience. For example, one clothing retailer in New York is 7
  8. 8. using RFID smart labels to store information about each item in the store, such as fabric content, available sizes and colors, and suggested complementary items or accessories. RFID readers in the fitting rooms are connected to computer monitors so customers can view all the information and make decisions—without ever having to leave the fitting room. And, because privacy is a primary concern, advanced security technology enables your IT staff to better protect all information. Participation is optional for each customer. Technology has always made advancements. The difference today is the speed of introduction of newer replacement technologies. Thirty years ago, a retailer would hold onto business technologies for 10 to 15 years. Twenty years ago it was reduced to eight to 12 years. Ten years ago it was again reduced to six to nine years, and today, retailers replace their technology in only five to seven years. As a result, retailers are capitalizing their technologies faster than ever before (on average, within three years). Because technologies are moving so rapidly, some retailers hesitate and lose their competitive edge. They are afraid newer technologies will come along to make their investment obsolete. Obsolescence is reached when it costs more to keep a technology than it saves in time, energy and money. Increasingly, the successful use of technology is seen as necessary for their own survival in the longer term. The payback for advancements in retail technologies can most often be quickly realized. Therefore, one school of thought is that a retailer should replace their technologies faster because each new technology has a quicker payback. That is a good business strategy because the purpose of the technology, when it is implemented and managed correctly, is to continue to drive costs down and move productivity up Several recent studies within the retail sector have indicated just how important technologies are today for the retail community. Consider the following survey results: Nearly 40% of the retailers surveyed claimed they expect to invest in new retail technologies in order to stay ahead of projected growth. This is up 30% over last year. 8
  9. 9. Over 60% claimed their budgets for retail technologies, as a percent of sales, have increased. It is apparent that retailers are now investing more than ever in technology. They are demanding technologies to help them adapt to the ever-changing needs of their marketplace. They are using every kind of technology available to reduce their cost of doing business, and to make them the low cost provider. And finally, they are requiring a vast array of applications that will help them to take a proactive approach to their relationship with retail consumers. Retailers want to get more value out of IT and ensure they are spending their limited resources in ways that improve their overall offer to the customer. Technology has proven to be a competitive weapon in retail, which is a dramatic shift from a decade ago. In response, retailers generally need to become more disciplined in managing the IT function. With the increase in globalization of retailers both in terms of their points-of-sale, as well as their points-of-supply, the Information Technology (IT) spend in the retail sector has increased considerably and plays an increasingly important role in managing the complexity of retail operations. While retailers take their time embracing technology, the following will serve as a reality check. CELL PHONES Using mobile phones to alert shoppers about complementary items, sales and as a vehicle for coupons is a very attractive option for retailers. Partially, that's because it's a lot cheaper than, say, a smart shopping cart. Most shoppers already have cell phones, so that limits the back-end investment. Third party companies are also rushing in with solutions. 9
  10. 10. SMART SHOPPING CARTS Smart shopping carts have been around in one form or another for about 20 years. The original idea was to include a bar code scanner on the carts so shoppers could circumvent the checkout line. Then the focus shifted to marketing. Smart shopping carts sporting book-sized computers that appeared in two Safeway stores in California in 2002 required a customer to swipe his or her Safeway card at which point the cart's brain would access the customer's shopping history. The cart would then display four grocery items at sales prices available to them exclusively. It also offered a guide to the customer's most frequently purchased items and, as the on-board computer tracked the cart's movement down the aisles, radio frequency ID (RFID) chips would prompt the processor to notify the customer of sale items and appropriate promotions. PLASMA SCREEN TVs Since the '70s, select supermarkets have been using in-store TV programming (usually cooking demonstrations) to move product, but in the past five years or so, in-store TV networks have popped up at Wal-Mart, Target and Borders, among other places. It's easy to see the appeal: A captive audience in buying mode. And new technologies add another element BI-DIRECTIONAL INFRARED SENSORS In 2008, many analysts agree, there will likely be some sort of industry standard metric for in-store media. That's thanks to the efforts of Nielsen Co., in conjunction with The In-Store Marketing Institute and P.R.I.S.M., a consortium of retailers, marketers and media agencies, measured store traffic in 160 stores this year with bi-directional Infrared sensors, which sit on store shelves. The technology, which has been around since the '70s, measures raw numbers and is supplemented by old fashioned head counts. So far, it's the best approach. GPS devices on shopping carts didn't work because consumers tended to 10
  11. 11. abandon their carts during trips Thermal imaging couldn't distinguish between babies and turkeys in tests. ELECTRONIC SHELF LABELING Despite the inventory-clearing advantages of a store sale, a retailer still takes in on the chin when it comes to the bottom line. In addition to losing out on potential revenue, hours of employees' time are taken up painstakingly changing prices on shelves (prices that usually have to get changed back a few days later). But what if that store manager could change all the prices in store at once by simply typing in a keyboard command? That's the major appeal of electronic shelf labelling. Of course, the convenience comes at a price, too, namely about $4 per LCD label, which can add up if you're a supermarket that stocks 17,000 or so items. IT in Retail Store Operations is inherently complex due to four factors: a) IT cost and performance under pressure owing to the high growth in annual IT spend in the retail sector (~13%) while revenues have grown much slower (~2%). b) Lack of standards in a complex, highly customized IT environment leading to integration challenges, making changes and new functionality development cumbersome and expensive. c) High maintenance costs stemming from the high degree of customization and fragmentation of point solutions, many of which span different technology platforms. d) Poor data integrity, the result of systems fragmentation, point solutions, high degree of customization and lack of an underlying best practice architecture, because there is no good practice standard, out-of-the-box solution that spans the full retail space. 11
  12. 12. IT systems are at the heart of retail operations and hence play a central role in alleviating pressure points in the retail sector. The converse also holds true— retailers who do not manage their IT landscape effectively will find that, in time, the IT systems become part of the problem rather than components of the solution. This is particularly true for IT systems that can significantly influence COGS in the retail sector; for example advanced planning and scheduling systems, inventory management systems and merchandizing systems. Additional systems that share a crucial role in retail operations are the promotional and seasonality management systems that, when leveraged effectively, can increase the top-line revenues for the retailer. IT has gone from a strategic advantage to a strategic necessity for retail Operations. 12
  13. 13. Findings: Cause: • Communication with customer’s through media cart and new ways of marketing and technology such as Text messages. • Use of RFID, Smart card, self check out, WI-FI technology, Tunnel scanning, Cell-phones, electronic shelf labeling, bi-directional infrared sensors and Plasma screens Tv’s. Effects: • Increase in sales by targeting shoppers with text message based promotions. • Delivering targeted promotions based on users shopping behavior, redemption history, in-store location tracking and previously scanned merchandise which would help to keep customers track and help customer’s to escape standing in the long cue’s for paying the bills for hours. • Access for Improved decision making. • RFID helps in Inventory management, improve customer service, customer loyalty. • Using mobile phones to alert shoppers about complementary items, sales and as a vehicle for coupons is a very attractive option for retailers. 13
  14. 14. Recommendation: It is apparent that retailers are now investing more than ever in technology. They are demanding technologies to help them adapt to the ever-changing needs of their marketplace. They are using every kind of technology available to reduce their cost of doing business, and to make them the low cost provider. And finally, they are requiring a vast array of applications that will help them to take a proactive approach to their relationship with retail consumers. Since retail technologies are readily available in today's marketplace, and most of the products sold by different retailers are virtually identical, the only true difference between retailers is their ability to use technology to manage their business and give them the competitive edge. Information Technology in store operations surely boost up the customer footfalls and sales. As companies begin to understand the issues and research the right technologies to solve the problem, energy- efficiency can become an opportunity. So my view is that retailers should also concentrate on the energy efficiency by ways such as using the technology when needed as it becomes a major cost to the store. 14
  15. 15. Scope for further research: • With the advancement of technology day by day, there could be further research on how new technologies can be efficient for retail for increasing the sales and customer experience. • As technology needs huge amount of energy there could be a further research on the efficient use of energy by IT in retail store operations. Conclusion: The organized retail sector has recognized that IT can give it an edge over the global competitors and the neighbourhood kirana store. It took some time for IT vendors to realize the vast potential in retail; the sector itself had been a little slow in leveraging IT. Now that the smoke has cleared, vendors are unveiling an entire range of IT products and solutions for the retail sector. The three dominant trends in the deployment of IT in this fast growing industry are-the dominance of package solutions, the focus on supply chain optimization, and the new drive towards IT in store Operations. Wal-Mart employs a technology that automatically replenishes stock when a purchase is made, resulting in fewer instances of a product running out. The system, called Retail Link, posts an order online for the supplier after the item is scanned at the checkout. With the increase in globalization of retailers both in terms of their points-of-sale, as well as their points-of- supply, the Information Technology (IT) spend in the retail sector has increased considerably and plays an increasingly important role in managing the complexity of retail operations. Thanks to technology advances, new cost effective, integrated in-store communications and operation solutions exists that can improve the customer experience and help make the sales associates time more productive. Retail stores can really boost the footfall of the customers and their conversion by knowing the customer buying behaviour, their taste and providing better services such as less time for billing, better customer service and loyalty can be made with the help of information technology in the store. 15
  16. 16. References 1. DTLR launches mobile marketing, Retail technology, Chain Store Age, May 2008. 2. Innovation Builds Consumer Advocacy, Retail technology, Chain Store Age, March 2008. 3. Tech school will teach basic of retail sales, Newsclips, The News Journal (DE), June 16, 2007 4. Tomorrow's technology draws retailers to NRF in search of the next 'killer app', Retailing today, Feb 2008. 5. What will retail technology look like in 2015, Retail technology, Chain store age, Dec 2008. 6. Technologies that can Enable Data Capture and Access for Improved Decision Making will Remain Growth Drivers in the Retail Systems Market. M2PressWIRE, 05/23/2007; (AN 16PU2117714249) 7. Technology Advances Aim To Help Retailers At Store Level By: Traiman, Steve. Billboard, 04/07/2001, Vol. 113 Issue 14, p76, 0p, 1 bw; (AN 4273202) 8. Competing with retail technologies. By: Conforto, Dennis A.. Chain Store Age, Nov95, Vol. 71 Issue 11, p120, 1p, 1 bw; (AN 9511262539) 9. Strategies for survival - Retail Technology A special advertising report Australian, The, 07/27/2004; (AN 200407271T12388611) 10. High Points of Retail Technology. By: Scheraga, Dan. Chain Store Age, Aug2005, Vol. 81 Issue 8, p26A-27A, 2p, 2 color; (AN 18443008) 11.Technology gives retail a rev-up. NZ Business, Feb2006, Vol. 20 Issue 1, p6-6, 0p; (AN 19550995) 12.Retail 2.0 By: Wasserman, Todd. Brandweek, 12/17/2007, Vol. 48 Issue 46, p23-25, 3p; (AN 28000620) 16
  17. 17. 13.Retail-technology leader re-invents itself. By: Yudkowsky, Chaim. Business Journal (Central New York), 12/5/2003, Vol. 17 Issue 49, p16-17, 2p, 1 bw; (AN 12263386) 14.Technology Gains Respect As a Performance Driver. By: Scheraga, Dan. Chain Store Age, Sep2004, Vol. 80 Issue 9, p82-82, 2/3p; (AN 14380588) 15.INFORMATION TECHNOLOGY INVESTMENT AND FIRM PERFORMANCE IN US RETAIL TRADE. By: Doms, Mark E.; Jarmin, Ron S.; Klimek, Shawn D.. Economics of Innovation & New Technology, Oct2004, Vol. 13 Issue 7, p595-613, 19p, 9 charts; DOI: 10.1080/1043859042000201911; (AN 14352949) 16. Retail technology makes holiday shopping easier By: Erin Conroy. St. Charles County Business Record (MO), 12/01/2003; (AN L5478021SCBR) 17.New wave retail. By: DeBlasio, Agnes L.. Long Island Business News, 12/01/2000, Vol. 47 Issue 48, p1A, 3p, 1 color; (AN 3894178) 18. Applying evolutionary models to the retail sector. By: Davies, Keri. International Review of Retail, Distribution & Consumer Research, Apr98, Vol. 8 Issue 2, p165, 17p; (AN 9131922) 19. Retailers Turn to Green Power. Chain Store Age, Dec2006, Vol. 82 Issue 13, p126-134, 3p; (AN 23567406) 20. Solving Data-Center Dilemmas. By: Amato-McCoy, Deena M.. Chain Store Age, Oct2007, Vol. 83 Issue 10, p59-60, 2p; (AN 27072883) 17

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