IT Strategy for the retail domain

Background

Etymology - Retail comes from the French word retaillier which refers to "cutting off, clip and divide" in terms of tailoring (1365)

Definition - Retailing consists of the sale of goods or merchandise from a fixed location, such as a department store or kiosks, or by post, in small or individual lots for direct consumption by the purchaser

Phase 1 – Homework Business Drivers, Trends and Company Analysis

O VERVIEW O F T HE R ETAIL S EGMENT

Market Share

Source : www.scribd.comcarrefour

Product Offerings

Structured & organized retail

Large range of SKU’s – variety of choice for the consumer

One stop shop for all consumer needs – all under one roof

Multiple formats to suite consumer needs

Hypermarkets

Supermarkets

Speciality stores

Discount Stores

Convenient Stores

Unique Selling Point’s

Lowest price offerings – Everyday low prices as compared to conventional pricing strategies of regular retailers

Promotions & Discounts

Customer Loyalty Programmes

Tracking customer repeat visits

Knowing Customers & designing specific promotions based on preferences

Private Label brands

Retail Business Strategies

Assess segment growth opportunities

Satisfy stakeholders needs

Analyse customer needs & wants

Achieve industry benchmarks in customer service

Marketing

Brand Building/Positioning

Innovate

Think ahead of the competition

Effective cost management

Inventory & Vendor Managements

Business Drivers

New Offerings, New promise

Strong competition

Sophisticated ,Savvy and demanding customers

Price and margin pressures

Organic growth

New Revenue streams

Employee attraction, retention & Productivity

Key Issues

Key Issues faced by Retail Sector

Cost of investment from secure, integrated and scalable IT systems and environments

Fierce price competition in online retailing compared to retail stores

Channel synchronization i.e. ensuring brand, customer experience and customer information consistency across channels while avoiding the 3E trap

Problems in merging and standardising customer data

Difficulties in reducing organisational boundaries and integrating new channels with increased globalization

Inaccuracy in forecasting causes inventory stock outs or inventory clogging

Competitive Dynamics

Competitive actions and responses among leaders and followers

First mover advantage

Multi-point and multi-market competition

Strategic groups

Regional clusters

Core Attributes

Strong brands across all major sub-categories

Ability to innovate and respond to consumer trends

Strong customer relationship across main channels to markets

The infrastructure necessary to produce, market, sell and distribute products

Margins

Key Performance Indicator’s

Critical Success Factors

Some IT players in Retail

Implementers of Retails Solutions

IBM

Accenture

Capgemini

Fujitsu

HP

Cognizant

TCS

Infosys

Wipro

IT Companies in Retail

ERP Solutions

SAP Retail

Microsoft Dynamics

Oracle ERP

Point of Sales Systems

IBM POS Systems

Microsoft

NCR

Logic Controls

HP

Magtec

Retalix

Top Ten ERP Vendors Source : http://www.amrresearch.com/content/View.asp?pmillid=18358

General Considerations for Retail – IT strategies

Best of Breed vs. One stop solution

Alignment of current application portfolio with business needs

Understand business processes related to

Supply chain

Distribution & Logistics

Inventory management

POS Sales

Master Data Management

Profit and Loss etc.. All other modules related to retail

Contd..

Integration between multiple IT systems for seamless & accurate flow of data

Create a common repository of data

Estimate ROI on IT Projects

Comparison of the companies IT cost wrt Industry

Risk analysis & mitigation strategies

Industry Best Practices

General Strategies for Retail

Framework for Business IT Fusion

(Source : www.lakewest.com)

Social Factors affecting Retail

Growing non traditional households

Time constraints

Higher educational attainment

Geographic migration

Convenience requirement

Retailer / supplier alliances

Expanded use of technology

Demand of specialty items

Micromarketing

Current Trends

E- tailing

Lifestyle change : internet dependency

Purchasing goods / services over the net

E business

Cost and time saving

Buyers and sellers come together more efficiently

Revenue management

Business process designed to maximize revenue at all levels of demand.

Current Trends

Open source

Using open source to manage the IT in retail sector

Self Service

RFID

Major technologies / innovations

POS Systems

ERP for Retail

RFID

BI & Data Mining

Vendor Managed Inventory Software

Voice Picking Warehouse order system

Measuring Footfalls

O VERVIEW O F C ARREFOUR

Carrefour - "Choice and quality for everyone"

World’s second-largest retailer and the largest in Europe

The Carrefour group currently has over 12,000 stores, either company-operated or franchises in 30 Countries

Scoring Points over the last year

A Snapshot

N°2 worldwide

N°1 in Europe

4 main store formats

- Hypermarkets - Supermarkets - Hard Discounts Stores - Convenience

102.442 billion euro's sales incl. tax under banners in 2007

37.6 billion euro's of market capitalization on December 31,2007

+ 490,000 employees

Global Footprint - Hypermarkets

Source : Primary Research – Carrefour Singapore

Global Footprint Source : www.scribd.comcarrefour

Global Footprint

Revenues

Organization Structure Source : Primary Research – Carrefour Singapore

Share Price Movement over the past year

Business Model

Predictive & Cash generative business model

Low risk & non-cyclical business

Multiple store formats

Advantage of being market leader – Number 1 in Europe & Number 2 worldwide (after Wal-mart)

Efficient cash flow management – YOY decreasing debts

Business Model

Hypermarkets - > the appeal of the new

Supermarkets -> making life easier

Hard discount -> grocery products at low prices

Cash & carry -> proximity and accessibility for catering professionals

Convenience stores ->

just what you need,

right next door

E-commerce

Source: http://www.carrefour.com/cdc/group/

Business Strategy

Business Strategy Source : www.scribd.comcarrefour

Birds Eye View of Business Model of Carrefour Supplier 1 Supplier 2 Supplier 3 Supplier N DC Store 1 Store N Store 2

Best Practices adopted by Carrefour

Vendor Managed Inventory - Carrefour’s inventory is integrated, controlled and co-managed by key vendors

Singapore Carrefour does not have VMI implementation

Closer relationships with Suppliers – Preferential strategic tie-ups with suppliers

Use of Cross Docking to reduce the number of DC’s

Using Voice picking for better productivity and reduce picking errors

Using RFID technology to track and verify quantities of each logistics unit

E-Commerce

Ooshop: the online grocery store

Ooshop was set up to enable Carrefour to market its food products online.

CarrefourOnline.com: everything you need in non-food, online

DVDs, games, software, music, books, household electrical goods, music downloads

CSFs for Carrefour

KPIs for Carrefour

Average time spent by customers in the store

Conversion rate

Sales compared to budget/target

Average Sale per Customer/Transaction

YOY growth in revenues and profit

Country/City/Store wise sales

Weekend Promotion Sales

Sales per hour

Source: http://www.dmsretail.com/kpi's.htm

KPIs for Carrefour

Gross Margin Analysis

Customer visits

Footfalls

Cashier Performance

SKU Wise Sales

Segment/ SBU wise sales

Inventory Days

Stock-Outs Days

Markdowns

Differentiation– Cost Leadership

Access to the capital needed to invest in technology that will bring costs down.

Very efficient logistics.

A low cost base (labor, materials, facilities), and sustainably cutting costs below those of other competitors.

Source: http://www.mindtools.com/pages/article/newSTR_82.htm

SWOT Analysis

SWOT Contd…

Key Financial Indicators Increasing Cash Flows, decreasing debts Source : www.scribd.comcarrefoursastrategy

Key Financial Ratios Source : www.scribd.comcarrefour

Sources Of Revenue

High volume sales @ retail stores

Low Costs leading to high margins

Other Incomes from Investments and Operations

House Brands

Phase 2 – Candidate Project Identification

LENS 1

IDENTIFICATION OF GLOBAL TRENDS

Global Trends affecting IT projects

Knowledge as a key organizational driver

Customers preferences have started shifting to online transactions

Higher focus on customer relationship management

The World is flat !! Highly globalised world

Increasing concern for environment

Outsourcing non - value adding processes and business functions

Candidate projects based on global trends

Develop applications to foster better knowledge management e.g. K-Wiki, Knowledge repository

Online shopping with ready cart or home delivery

CRM for efficient lead creation, lead management etc.

Data mining and BI to improve sales and customer satisfaction. Using techniques like market basket analysis, clustering etc.

Virtualization to reduce number of data centers as a part of Green IT initiative

Outsourcing support and maintenance of IT systems and non critical applications

LENS 2

CHARACTER OF THE COMPANY

Identify Character of the Company

Business Strategy of Carrefour

Justification of character of company

Carrefour has a business strategy of higher volume business driven by price competitiveness.

Their business model is primarily driven by cost reduction. Hence they would need automation of manual processes to achieve cost efficiency which will in turn help them maintain sustainable margins

Hence Carrefour can be categorized under cost quadrant.

Identify Character of the Company

Candidate projects based on Character of company

Project on Integrating sales and inventory management systems between all hypermarkets, supermarkets and stores in a region for more efficient inventory management

Projects to cater online shopping with facility to pick up ready cart or home delivery

Project on auto-billing systems using RFID which will reduce number of cash counters, staff and increase shop floor space

Project to centralize IT systems for better management

LENS 3

ROLE OF IT IN TRANSFORMATION

Lens 3 – Role of IT in transformation

Lens 3 – Role of IT in transformation cont… Process Current Quadr-ant New Quadr-ant Business Capability IT Capability IT Role Candidate Project Increase Customer satisfaction C Q Customer delight is need of hour Automated billing technique using RFID Y E S Y E S Save customer time C Q Customer time is crucial particularly of working professional Online shopping with ready to pick/ home delivery Y E S Y E S Reduce Supplier dependency C Q Automatic ordering of required inventory Vendor managed inventory Y E S Y E S

Business strategy

Renewed Innovation to achieve business strategy

Renewed Innovation to achieve business strategy cont….

LENS 4

LOOKING AT THE BUSINESS STRATEGY

Lens 4 - Application of Porter’s 5 forces with IT perspective

How IT can create

How IT can change

LENS 5

USER SURVEY

User Survey

LENS 6

COMPETITOR ANALYSIS

Retail - Benchmarks

Competitor Analysis Matrix Ratings Carrefour Tesco Wal-Mart Countries France, Belgium, Spain, South Korea, Singapore, Dubai Britain, Eastern Europe, Thailand, Korea U.S.A. Critical Succes Factors Number of stores 12000+ 2300+ 7000+ 3 PL Logistics efficiency High Medium High Supplier dependancy Medium High Low Effective Transportation High Medium High Storage Space utilisation High Medium High Key Indicators Sales Growth High High High Supply chain costs Low Low Low Profit Margins High Medium High Use of Information Technology RFID usage Partial Yes Yes ERP and CRM in place Yes Yes Yes Use of Business Intelligence Partial Partial No Virtualised / Robust IT Infrastructure Partial Partial Yes EDI usage for procurement Yes Yes Yes Online Shopping Partial Yes Yes

Candidate Projects

Internet market and e-tailing

Full scale Implementation of RFID technology

Integration with WMS, transportation and Inventory management

EDI and internet to develop one to one customer relationships

LENS 7

TECH SCAN

Tech Scan (1/2)

Digital Signage : Branding, RFID, Revenue Generator

Candidate : Deploy digital signages across stores

Centralized & Local Store Data Management : Immediate data availability

Candidate : Deploy local storage mechanisms at each store for faster and efficient operations

Rack Servers : More capacity, less space

Candidate : Use rack servers for cheaper and more efficient operations

Any sufficiently advanced technology is indistinguishable from magic. ~Arthur C. Clarke

Tech Scan (2/2)

Software as a Service (SaaS): Outsourcing desk report creation to a vendor

Candidate : Analyze using third party online vendors for contracting clerical jobs

IP telephony: Unified communications

Candidate : Integrating the data lines and voice lines for more efficient use of internet

Virtualization

Candidate : Virtualization of data centers

Any sufficiently advanced technology is indistinguishable from magic. ~Arthur C. Clarke

Technology Adoption Curve Pioneers Time

LENS 8

IDEA SCAN

Idea Scan (1/2)

Idea Scan (2/2)

LENS 9

VALUE CHAIN ANALYSIS

Value Chain Support Activities Primary Activities Gross Sales Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Services

Candidate Projects

Sales and promotion using mobile phone communication

Digital Signages for branding and revenue generation

BI tools for better forecasting of sales

Data mining for market basket analysis

Pricing strategies supported by forecasting tools

LENS 10

CSFS

Lens 10 - CSFs for Carrefour

Phase 3 - IT Audit

PHASE 3

IT AUDIT

IT Audit

We took an interview of :

Mr.Jega Saundrarajan

IT Manager

Carrefour Singapore

Email : jega_saundrarajan@carrefour.com

Phone : 0065 - 62113201

We got information about the current state of IT in Carrefour from our interview with Mr. Jega

From the information received it appeared that currently IT is not used as a strategic tool in Carrefour but widely used for day to day operations

The total IT spends by Carrefour Singapore is SGD 1.3 million

IT Audit McFarlan model

Currently IT is not used for strategic advantage. It is widely used for operations. Hence Carrefour can be placed in the Factory quadrant.

Carrefour – Factory to Strategic movement in McFarlan Model Carrefour needs to move to the strategic quadrant and hence should take up projects to give them competitive advantage

IT Audit – Inventory Management

Current Degree of Computerization

Carrefour uses a software called ‘Pacific 4’ for managing stock levels and inventory management. Stocks are managed by Carrefour stores

Survival needs

Stock ordering, issue and receipt should have IT involvement to reduce costs and improve efficiency

Planned degree of Computerization

Carrefour may integrate its IT systems with suppliers .

It may implement Transport Management System

IT Audit – Marketing, Sales, CRM

Carrefour uses a software called Microsoft applications for Sales and CRM and Winsor systems for POS

Survival needs

Customer management systems, POS systems enabled with barcode to reduce costs

Using BI and Data mining to leverage IT as a strategic tool

Using IT leveraging RFID technology to measure foot falls and gauging consumer behavior

IT Audit – Internal Business processes

Carrefour uses Unix and Calipso applications for managing their internal business processes

Survival needs

ERP system either integrated suit or stand alone applications as currently practiced is a survival need

Using a single ERP suit with seamlessly integrated data flow within all functions of business

Current projects - Critical

Projects to manage internal business processes (Eg. ERP) through stand alone Unix and Calipso Applications

Microsoft CRM applications support, maintenance and enhancements

POS systems maintenance

Project for maintainance of Inventory management systems of ‘Pacific 4’

Non/ Less Critical Projects

Migration to Oracle database from currently used local database

Recruitment management systems

E-Training module maintenance and support

Phase 4 – Project Consolidation

Project consolidation

Project Consolidation cont…

Phase 5 - PROJECT FUNDING AND JUSTIFICATION

Project Funding and Justification

Project Funding Decisions

Since the customer base comprises of retail customers (B2C), customer convenience, customer satisfaction are key factors for repeat business and customer advocacy to attract new customers.

Carrefour should fund the high ROI and lower TCO and Risk projects.

Projects Funding Decision

Carrefour should fund the following high priority projects first:

Efficient Inventory Management & Enhanced Supply Chain

BI and analytics

Customer convenience & efficient Store management

E-commerce & Communications

Project Funding Decision

Carrefour should fund the following projects after funding high priority projects:

Knowledge dissemination and exchange

Infrastructure Management

Outsourcing of services

IT STRATEGY ROADMAP

FOR A

STARTUP RETAIL COMPANY

Road map

IT Strategy to be devised in a phased approach

Phase 1

Till the company reaches a certain scale, focus should be on bare minimum IT services like

Inventory management

POS

CRM

Road map

Phase 2

Online shopping portal for consumers

ERP implementation to integrate Supply chain, logistics, inventory, point of sales, master data management and other such similar modules to enable seamless flow of data.

This phase should also include applying IT best practices.

Road map

Phase 3 –

Introducing upcoming technologies after the initial IT infrastructure like open source, RFID, vendor managed inventory software and measuring foot falls.

This phase also includes Data warehousing, data mining and other BI tools for advanced analysis

May outsource certain functionalities like call center service and support etc.

References Carrefour’s business strategy (off its own website) http://www.carrefour.com/cdc/group/our-strategy/ http://www.supplychainer.com/50226711/walmart_and_carrefour_in_china_whose_strategy_is_better.php Carrefour’s expansion plans http://www.foodanddrinkeurope.com/Retail/Carrefour-moves-closer-to-customers Sustainability Report http://www.carrefour.com/cdc/responsible-commerce/sustainibility-report/ Best practices http://www.fondation-internationale-carrefour.org/fic/foundation/best-practices/

Carrefour group and its suppliers http://www.carrefour.com/cdc/responsible-commerce/our-social-and-ethical-approach/the-group-and-its-suppliers/ About the retail expansion aimed by Carrefour http://www.highbeam.com/doc/1G1-63581724.html Approach followed by Carrefour http://www.carrefour.com/cdc/responsible-commerce/ Model of delivery of Govt. services online http://www.govtalk.gov.uk/documents/smart_cards_framework_v1-0.rtf Retail IT strategy http://books.google.com.sg/books?id=mu29s06R1GQC&pg=PA271&lpg=PA271&dq=IT+strategy+followed+in+retail+sector&source=web&ots=VtPh0UvxYl&sig=wg1XQJsrpYChAkJQ0-NVs33478Q&hl=en&sa=X&oi=book_result&resnum=5&ct=result#PPA271,M1 References