Retailers expect real benefits from technology

13 Jul 2005

In these days of e-tailing it may seem ironic but traditional bricks and mortar retailers are investing heavily in technology to streamline the running of their business. That’s not just to combat the threat from online competitors but also because increasingly they have to fight for their customers in a market that is significantly down from the boom days of the Celtic tiger.

“These days people aren’t simply looking for you to install a system,” says David Burke, retail consultant, which sells the Top to Toe stock management and point-of-sale (PoS) system. “They are looking for the benefit you can provide to their business. They want you to assist them in how to use it, not just training on the software, but how they can turn over their stock better, how they can spots trends and drill down into the customer spending a bit more.”

Software giant SAP, which provides a specialist retail module as an add-on to its core enterprise resource planning (ERP) software, talks about focusing on customers rather than products.

“Retailers need to be able to see who their most profitable customers are and how they can attract more like them,” says John Morrissy, head of pre sales with SAP Ireland.

Given its strengths in enterprise issues such as ERP and supply chain management (SCM) it is no surprise that SAP’s focus is on the major multiple retailers — it counts 13 of the top 25 retailers globally and 28 out of the top 50 Europeans amongst its 1,400 worldwide retail customers.

Morrissy identifies four key pressures that retailers are facing up to. They need to get closer to their customers so they give them a reason to come to their store in an increasingly competitive environment. They need to fine tune their merchandise in order to meet customer expectations but in a profitable way. Revenue needs to be managed so they grow in key product areas while also managing the price perception by customers. And the key to making this happen efficiently is SCM so they can closely integrate with their suppliers. In particular this supports the move towards vendor-managed inventory where the supplier rather than the retailer manages categorisation, placement and replenishment.

Regardless of the scale of the retailer, a key feature these days is having information available on the till at the PoS so staff can immediately see things such as stock levels and availability.

Providers of technology to the ICT sector need to be a one-stop shop for their customers. As such Datapac’s Top to Toe spans the back office to PoS and has an optional optical gun that scans the barcodes on products to automate the stocktaking process. Although Teresa Maguire, business partner sales manager with Sage, says Sage’s Paypoint retail software is “backend independent” it is designed to integrate easily with its accounting products such as Line 50, Sage MMS and Line 500.

“Providing software that is used at the PoS also provides its own challenge because it has to be rock solid,” says Maguire. “If it crashes they won’t be able to sell to customers.”

She says for retailers at the very low end, perhaps a single corner shop, “non-integration can be seen as a benefit as they want to separate the front and back office in terms of cash”. Clearly, though, retailers value integrated systems where every receipt becomes an invoice, stock management is improved and there are no issues around double entry of information.

“One of our customers with nine shops managed to cut its stock by €30,000 in year one,” says Maguire. “If they didn’t sell a barbeque set by the end of the year they could see it was not going to sell so they could put it on sale. It reduced what they were writing off, but an integrated system also means you have better ordering in the first place.”

SAP for retail adds an extra layer of management, according to Morrissy, adding retail-specific features such as merchandising, category management and store management to the core SAP suite.

“There’s a misconception that SAP is purely about the back office,” says Morrissy. “We don’t do PoS but we have a PoS integration tool and a data warehouse for data collected at the till. That allows customer to spot trends. The profile of a customer on a Tuesday afternoon who is probably buying for a family will be very different to those on a Friday night after work who probably have a higher disposable income. Retailers need to be aware of those different types of customers and what they expect.”

While large chains such as Tesco or Superquinn can afford to offer loyalty programmes where customers are rewarded for the amount they buy, this is not always the case for small retailers where margins may be tight. According to Burke, these retailers are now actively implementing gift card schemes where they are still able to capture the data on individual customer purchases but without the cost of a loyalty programme. Gift cards replace vouchers and can usually be topped up by the recipient once they have spent the initial value. Surveys in the US have found gift sales to increase by up to 60pc after switching from paper-based vouchers.

A technology that is expected to have a major impact on retail is RFID. It stands for radio frequency identification and is based around inserting small tags into products that can broadcast their position — allowing retailers to see what they have in stock right down to the shop shelf.

Morrissy says retailers in the US and Europe have embarked on RFID projects but the take-up here to date has been slow. “RFID provides significant benefits particularly for things such as proof of delivery that is key in retail,” he explains. “With RFID you don’t need to open and check boxes to see what’s in a consignment. However at the moment the cost per label is prohibitive so you won’t see it on every product but probably at the pallet or package level.”

By John Collins