impact of technology on Indian Retail Stores


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Impact of Information technology on Retail operations

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impact of technology on Indian Retail Stores

  2. 2. Introduction:Retailing is a “technology-intensive industry. It is a well-known fact that theretail industry always works on razor thin margins and the key to survival lies inoptimization of resources both in space and time dimensions as well asmaximization of customer satisfaction. Successful retailers today work closelywith their vendors to predict consumer demand, shorten lead times, reduceinventory holding and ultimately save cost. Access to timely and even real-timeinformation to a wide variety of channel and trading partners, sales personnel,line managers, store managers etc. is the key to achieving this. Over the yearsas the consumer demand increased and the retailers geared up to meet thisincrease, technology evolved rapidly to support this growth. It is technologythat will help the retailers to score in such fierce competition. There arehardware and software tools that have now become almost essential forretailing. Consumers have come to expect more value and higher servicelevels. As a consequence, the technology continues to grow and retailerssearch for ways to measure technical business value and to balance theeffective utilization of the technical resource. Retailers want to get more valueout of technologies and ensure they are spending their limited resources inways that improve their overall offer to the customer. Technology has provento be a competitive weapon in retail, which is a dramatic shift from a decadeago. In response, retailers generally need to become more disciplined inmanaging the IT function. Completing and delivering IT projects on time and onbudget is overwhelming enough without the project team considering theirproject’s interdependencies with other business initiatives and corporategoals. 1
  3. 3. Synopsis:Technology has transformed the buying behaviour of customers everywhere.Technology in the store is all moving toward integration and more and moresavvy customers. POS is undergoing major changes because of broadbandaccess, 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 incrediblyimportant and is one of the true disruptive technologies” as said by Greg Buzekpresident of IHL consulting. It is broadband that will help to transfer theinformation fast and help retailers to serve their customers on time.Technology offer retailers the potential to know exactly how many customersare in their stores by department and time of day. The Footfall division ofExperience was at NRF making the case for accurately counting customers toproduce valuable data that influences operational decisions, such as labourscheduling. Findings proved that a mere 20% of shoppers are actuallyadvocates of retailers, K. Jotwani. Director, marketing and strategy. RetailStore Solutions, IBM Systems and Technology Group, which leaves 80% ofshoppers who do not advocate, let alone give their loyalty, to any specificretailers, which shows that there is a room for improvement to give bettercustomer service with the help of technology. As today’s world problem ofglobal warming, technological companies have understood the importance of“Going Green” and are taking green initiatives by producing environmentallyEarth-friendly products and processes to reduce the burden on theenvironment. IBM unveiled its Green Retail Store, a portfolio of technologiesand services designed to improve energy and operational efficiency across aretailers IT operation. Retailers are finding ways to get communicate with 2
  4. 4. customer and new ways of marketing and technology has made it easier forthem such as Downtown Locker Room (DTLR) expects to increase store trafficand sales by targeting shoppers with text message based promotions. Store-level customer service can be an Achilles’ heel for many chains, and this hasbeen made easy by technology in near future there would be media cartswhich would provide customers a cutting edge shopping experience mediacarts would provide a screen on the trolley to improve communication withthe customer during the in-store shopping trip. There are easy SHOP system byStop & Shop, Quincy, Mass., which has self-check out solution for customerwith the help of Motorola MCI7 mobile computer, runs software from Bostonbased Modiv Media that supports self-scanning, instant price checks and self-checkout. It is a unit which sits on a shopping cart, also delivers targetedpromotions based on users shopping behaviour, redemption history, in-storelocation tracking and previously scanned merchandise which would help tokeep customers track and help customer’s to escape standing in the long cue’sfor paying the bills for hours. Being a “technology-intensive industry, it needsworkers who are technologically savvy. There are technical high schools wherestudents would be taught basics of retail sales in which they will study lossprevention software, point-of-sale systems and other technical aspects ofretail, along with traditional topics such as wholesale buying, customer serviceand marketing. 3
  5. 5. Objective:This paper discusses the different technologies that are implemented in retailstores, and how retail players are applying these technologies to reduce theoperational and technological gap in order to compete in this globallycompeting environment.Hypothesis:Information technology in store operations will provide a competitiveadvantage and improve sales.Keywords:Retail Technology, Store operations, Information technology in store.Expected Results:Implementation of Information Technology will improve customer retentionand it will also increase footfalls and customer conversion rate. 4
  6. 6. Literature Review:The increasing need to use technology to manage complexities in customer care,profitability, and operational challenges has precipitated competition amongretail technology vendors. Retailers are remedying this situation by partneringwith solution vendors that have leveraged newer radio frequency identification(RFID), smart card, and Wi-Fi technologies. This partnership is also helping themto prepare legacy systems for convergence. Retailers are undergoing acceleratedtechnological innovation in achieving profitable differentiation.” Retailers thatwish to stand out in the crowd are showing great interest in hand-held terminalsthat have evolved from its proven supply chain form factor to the real-timeenabled mobile points-of-sale (MPOS), consumer, associate, and managerproductivity form factors. 5
  7. 7. Technologies that can enable data capture and access for improved decisionmaking will remain growth drivers in developed and developing economies. POSreplenishment in developed economies is driven by next-generation, forward andbackward integration-capable POS systems, however, self-checkout is likely toform a part of the POS replenishment budget. In developing economies, POSsystems continue to offer growth opportunities.The hardware and software tools that have now become almost essential forStore operations are as follows:Bar coding and scannersPoint 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. Tunnelscanning is a new concept where the consumer pushers the full shopping cartthrough an electronic gate to the point of scale. In a matter of seconds, theitems in the cart are hit with laser beams and scanned. All that the consumershave to do is to pay for the goods. 6
  8. 8. PaymentPayment through credit cards (plastic money) has become quite widespreadand this enables a fast and easy payment process. Electronic chequeconversion, a recent development in this area, processes a chequeelectronically by transmitting transaction information to the retailer andconsumer’s bank. Rather than manually processing a cheque, the retailer voidsit and hands it back to the consumer along with the receipt, keying digitallycaptured and stored the image of the cheque, which makes the process veryfast.ERP SystemVarious ERP vendors have developed retail-specific systems which help inintegrating all the functions from warehousing to distribution, front and backoffice store systems and merchandising. An integrated supply chain helps theretailer in maintaining his stocks, getting his supplies on time, preventing stockouts and thus reducing his costs, while servicing the customer better. 7
  9. 9. CRM systemsThe rise of loyalty programs, mail order and Internet has provided retailerswith real access to consumer data. Data warehousing & mining technologiesoffers retailers the tools they need to make sense of their consumer data andapply into business. This, along with the various available CRM systems, allowsthe retailers to study the purchase behaviour of consumers in detail and growthe value of individual consumers to their business.Wi-FiAs Wi-Fi technology has matured, retailers have begun to see it as a robust,inexpensive option for in-store connectivity. The concurrent development ofhandhelds has dramatically broadened retailers options for applicationdelivery. With Wi-Fi enabled handheld devices, applications such as POS,inventory audit, item lookup, pricing and labour scheduling can be usedanywhere on the sales floor. Wi-Fi is quickly becoming a standard for retail.Chain Store Ages survey found that 19.5% of retailers polled last summerplanned to spend capital-investment funds on Wi-Fi networks. 8
  10. 10. RFID (Radio Frequency Identification) There are many uses of RFID. Some of them used in-store are as follows:RFID helps improve inventory management: Inventory control is often acostly, time-consuming process for retailers. By offering real- time inventoryvisibility, RFID enables inventory managers to monitor and control inventorysupply at all times. By automating the inventory tracking process, stores cankeep costs down by maintaining optimum inventory levels—avoiding stock-outs and eliminating unnecessary orders. Tracking capabilities also make iteasier to predict product demand. Store managers can monitor quick-sellingitems with increased accuracy, ensuring that their inventory supply is stockedaccordingly.Improving Customer Service: Satisfied customers mean better business forretailers. By using RFID, your staff can identify the exact location of any retailitem at any time. Customer requests can be handled quickly and easily by yourcustomer service team through access to a centralized database. RFID-taggeditems offer store-to-store visibility, so items can be located immediately withthe touch of a button. This level of product accessibility results in shorter waittimes for customers and offers a better shopping experience. Improving overallstore efficiencies ultimately results in greater savings to customers. 9
  11. 11. Boosting customer loyalty : RFID can be the personal shopper of the future. Byusing RFID technology, retailers can collect information about their customerspurchasing trends and offer rewards targeted to those interests. RFID canenable your marketing and customer service teams to identify customers, callup account histories, and provide value-added services to help create apersonalized shopping experience. For example, one clothing retailer in NewYork is using RFID smart labels to store information about each item in thestore, such as fabric content, available sizes and colors, and suggestedcomplementary items or accessories. RFID readers in the fitting rooms areconnected to computer monitors so customers can view all the informationand make decisions—without ever having to leave the fitting room. And,because privacy is a primary concern, advanced security technology enablesyour IT staff to better protect all information. Participation is optional for eachcustomer.Technology has always made advancements. The difference today is the speedof introduction of newer replacement technologies. Thirty years ago, a retailerwould hold onto business technologies for 10 to 15 years. Twenty years ago itwas reduced to eight to 12 years. Ten years ago it was again reduced to six tonine years, and today, retailers replace their technology in only five to sevenyears. As a result, retailers are capitalizing their technologies faster than everbefore (on average, within three years).Because technologies are moving so rapidly, some retailers hesitate and losetheir competitive edge. They are afraid newer technologies will come along tomake their investment obsolete. Obsolescence is reached when it costs moreto keep a technology than it saves in time, energy and money. Increasingly, thesuccessful use of technology is seen as necessary for their own survival in thelonger term. 10
  12. 12. The payback for advancements in retail technologies can most often bequickly realized. Therefore, one school of thought is that a retailer shouldreplace their technologies faster because each new technology has a quickerpayback. That is a good business strategy because the purpose of thetechnology, when it is implemented and managed correctly, is to continue todrive costs down and move productivity up.Several recent studies within the retail sector have indicated just howimportant technologies are today for the retail community. Consider thefollowing survey results:Nearly 40% of the retailers surveyed claimed they expect to invest in new retailtechnologies in order to stay ahead of projected growth. Over 60% claimedtheir 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-changingneeds of their marketplace. They are using every kind of technology availableto reduce their cost of doing business, and to make them the low costprovider. And finally, they are requiring a vast array of applications that willhelp them to take a proactive approach to their relationship with retailconsumers.Retailers want to get more value out of IT and ensure they are spending theirlimited resources in ways that improve their overall offer to the customer.Technology has proven to be a competitive weapon in retail, which is adramatic shift from a decade ago. In response, retailers generally need tobecome more disciplined in managing the IT function. With the increase inglobalization of retailers both in terms of their points-of-sale, as well as their 11
  13. 13. points-of-supply, the Information Technology (IT) spend in the retail sector hasincreased considerably and plays an increasingly important role in managingthe complexity of retail operations.While retailers take their time embracing technology, the following will serveas a reality check.CELL PHONES Using mobile phones to alert shoppers about complementaryitems, sales and as a vehicle for coupons is a very attractive option forretailers. Partially, thats because its a lot cheaper than, say, a smart shoppingcart. Most shoppers already have cell phones, so that limits the back-endinvestment. Third party companies are also rushing in with solutions.SMART SHOPPING CARTS: Smart shopping carts have been around in one formor another for about 20 years. The original idea was to include a bar codescanner on the carts so shoppers could circumvent the checkout line. Then thefocus shifted to marketing. Smart shopping carts sporting book-sizedcomputers that appeared in two Safeway stores in California in 2002 requireda customer to swipe his or her Safeway card at which point the carts brainwould access the customers shopping history. The cart would then displayfour grocery items at sales prices available to them exclusively. It also offered aguide to the customers most frequently purchased items and, as the on-boardcomputer tracked the carts movement down the aisles, radio frequency ID(RFID) chips would prompt the processor to notify the customer of sale itemsand appropriate promotions.PLASMA SCREEN TVs: Since the 70s, select supermarkets have been using in-store TV programming (usually cooking demonstrations) to move product, butin the past five years or so, in-store TV networks have popped up at Wal-Mart, 12
  14. 14. Target and Borders, among other places. Its easy to see the appeal: A captiveaudience in buying mode. And new technologies add another element.BI-DIRECTIONAL INFRARED SENSORS: In 2008, many analysts agree, there willlikely be some sort of industry standard metric for in-store media. Thatsthanks to the efforts of Nielsen Co., in conjunction with The In-Store MarketingInstitute and P.R.I.S.M., a consortium of retailers, marketers and mediaagencies, measured store traffic in 160 stores this year with bi-directionalInfrared sensors, which sit on store shelves. The technology, which has beenaround since the 70s, measures raw numbers and is supplemented by oldfashioned head counts. So far, its the best approach. GPS devices on shoppingcarts didnt work because consumers tended to abandon their carts duringtrips Thermal imaging couldnt distinguish between babies and turkeys in test.ELECTRONIC SHELF LABELING: Despite the inventory-clearing advantages of astore 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 aretaken up painstakingly changing prices on shelves (prices that usually have toget changed back a few days later). But what if that store manager couldchange all the prices in store at once by simply typing in a keyboard command?Thats the major appeal of electronic shelf labelling. Of course, theconvenience comes at a price, too, namely about $4 per LCD label, which canadd up if youre 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 annualIT spend in the retail sector (~13%) while revenues have grown much slower(~2%). 13
  15. 15. b) Lack of standards in a complex, highly customized IT environment leadingto integration challenges, making changes and new functionality developmentcumbersome and expensive.c) High maintenance costs stemming from the high degree of customizationand fragmentation of point solutions, many of which span different technologyplatforms.d) Poor data integrity, the result of systems fragmentation, point solutions,high degree of customization and lack of an underlying best practicearchitecture, because there is no good practice standard, out-of-the-boxsolution that spans the full retail space. IT systems are at the heart of retailoperations and hence play a central role in alleviating pressure points in theretail sector. The converse also holds true— retailers who do not manage theirIT landscape effectively will find that, in time, the IT systems become part ofthe problem rather than components of the solution. This is particularly truefor IT systems that can significantly influence COGS in the retail sector; forexample advanced planning and scheduling systems, inventory managementsystems and merchandizing systems. Additional systems that share a crucialrole in retail operations are the promotional and seasonality managementsystems that, when leveraged effectively, can increase the top-line revenuesfor the retailer. IT has gone from a strategic advantage to a strategic necessityfor retail Operations. 14
  16. 16. Findings:Cause:• Communication with customer’s through media cart and new ways ofmarketing 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 andPlasma screens Tv’s.Effects:• Increase in sales by targeting shoppers with text message based promotions.•Delivering targeted promotions based on users shopping behaviour,redemption history, in-store location tracking and previously scannedmerchandise which would help to keep customers track and help customer’s toescape 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, customerloyalty.• Using mobile phones to alert shoppers about complementary items, salesand as a vehicle for coupons is a very attractive option for retailers. 15
  17. 17. 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-changingneeds of their marketplace. They are using every kind of technology availableto reduce their cost of doing business, and to make them the low costprovider. And finally, they are requiring a vast array of applications that willhelp them to take a proactive approach to their relationship with retailconsumers. Since retail technologies are readily available in todaysmarketplace, and most of the products sold by different retailers are virtuallyidentical, the only true difference between retailers is their ability to usetechnology to manage their business and give them the competitive edge.Information Technology in store operations surely boost up the customerfootfalls and sales. As companies begin to understand the issues and researchthe right technologies to solve the problem, energy- efficiency can become anopportunity. So my view is that retailers should also concentrate on the energyefficiency by ways such as using the technology when needed as it becomes amajor cost to the store.Scope for further research:• With the advancement of technology day by day, there could be furtherresearch on how new technologies can be efficient for retail for increasing thesales and customer experience.• As technology needs huge amount of energy there could be a furtherresearch on the efficient use of energy by IT in retail store operations. 16
  18. 18. Conclusion:The organized retail sector has recognized that IT can give it an edge over theglobal competitors and the neighbourhood kirana store. It took some time forIT vendors to realize the vast potential in retail; the sector itself had been alittle slow in leveraging IT. Now that the smoke has cleared, vendors areunveiling an entire range of IT products and solutions for the retail sector. Thethree dominant trends in the deployment of IT in this fast growing industryare-the dominance of package solutions, the focus on supply chainoptimization, and the new drive towards IT in store Operations. Wal-Martemploys a technology that automatically replenishes stock when a purchase ismade, resulting in fewer instances of a product running out. The system, calledRetail Link, posts an order online for the supplier after the item is scanned atthe checkout. With the increase in globalization of retailers both in terms oftheir points-of-sale, as well as their points-of- supply, the InformationTechnology (IT) spend in the retail sector has increased considerably and playsan increasingly important role in managing the complexity of retail operations.Thanks to technology advances, new cost effective, integrated in-storecommunications and operation solutions exists that can improve the customerexperience and help make the sales associates time more productive. Retailstores can really boost the footfall of the customers and their conversion byknowing the customer buying behaviour, their taste and providing betterservices such as less time for billing, better customer service and loyalty can bemade with the help of information technology in the store. 17