Changes at the till

28 May 2008

Technology is at the top of the shopping list as retailers check out ways of controlling costs and improving efficiency in the face of increased competition and a slowing economy.

Despite a certain amount of gloom and doom the Irish retail spend continues to rise albeit at a lower rate than seen in the recent past. Slower growth rates have shifted the emphasis from expansion to improving cost control – both in terms of reducing costs and obtaining better value from existing assets. Wise IT spend, combined with other changes such as improved deployment of people, can in many cases yield significant returns on investment.

Having recognised the importance of the retail sector, Eircom established a specialist group to supply the needs of the sector two years ago. Shane Nolan, retail sector director, identifies some key areas in the retail sector that can benefit from the application of IT technology. IT systems have long been identified as enabling cost reduction and the simplification of operational procedures. By virtue of its dispersed nature with multiple supply points for customers, the retail sector requires a robust IP-based infrastructure to transport data. The traditional view of data has long outgrown its roots and now includes voice (ie voice over internet protocol) and video. Training and security are now key applications that make use of IP-based infrastructures. Once a secure IP infrastructure is in place it is relatively simple and cost-effective to layer extra services on top.

The retail landscape has evolved to encompass a greater level of self-service and to provide 24-hour service. This places a greater emphasis on security and the video traffic carried by the IP network. The reduced use of cash with an increased dependence on plastic cards requires more efficient systems to be implemented. The deployment of broadband in place of dial-up services for card verification can generate substantial time savings, good news for both the store operators and their customers.

Monitoring and training
There are several examples where a robust IP infrastructure can play a role in retail. These include monitoring of utilities such as electricity and lighting, as well as in remote staff training. Eircom has partnered with Cisco to deploy telemetry solutions that monitor utility status and consumption. Computer-based training using audio and videoconferencing across the IP network have been extensively used in some organisations.

As growth rates in the retail space slow down, the opportunities for retailers to gain market share are diminishing. Opportunities do exist to provide additional niche services that can be piggy-backed on to existing infrastructure services such as Wi-Fi networks. Anything that generates additional customer visits or prolongs a customer’s time in the retail outlet can generate additional revenue for both existing products and new cross-sell products or services.

In a shrinking market, retaining existing customers and enhancing customer loyalty are essential to ensuring continued successful trading. In-store technology such as improved signage and shelf-edge labelling can all help to improve the customer experience. Out-of-store experience – in the form of online shopping – impacts on the online shopping experience and the customer’s perception of the organisation as a whole. In Ireland online shopping has more than doubled since 2003 reaching €240m for 2007. However, it is still relatively immature here and generally has not been as well developed and marketed as physical shopping experiences or as online experiences in other markets, eg the UK. PCI (Payment Card Industry) regulations have been drawn up by the major players – Visa, MasterCard, American Express and Diners Club – to provide standards for the protection of information and guidelines for security. There are four levels relating to the volume of business and the non-compliant are named, leading to an adverse effect on their reputation. Eircom provides an audit service to retailers to help them keep in line with the regulations.

Microsoft’s Retail Management Services (RMS) is enjoying considerable success through suppliers such as Datapac, according to Gareth Soye, senior retail consultant with the IT provider. RMS is designed for both single and multiple store operations. Currently Microsoft is working on Version 2 that is being built on new technology around .Net. Version 2 will be much more visual and designed along lines similar to the product set in Microsoft Office 2007. RMS has proved popular with system integrators with many add-on products and services having been developed by third parties such as Real Time Integration that is used by multiples like Tesco.

Commenting on trends, Soye says systems are becoming more and more centralised for multiple type stores. Software applications have become more integrated, enabling improved co-operation between modules and significantly reduced administration costs. The move to broadband deployment for credit card verification has reduced the time required from 30 seconds to about five seconds, allowing operatives to be more productive while improving customer service. There is also a saving on phone call costs.

“The new generation of retailers is more computer literate and it sees IT expenditure as a means of generating more money or saving costs rather than a necessary accounting overhead,” says Soye. While the retail market is slowing down there is an acceptance that spending money on IT can help to stem the worst effects of the downturn. Retailers are starting to accept the need to fit their business around systems in order to reap the benefits they can bring to their organisations. New features such as multilingual support are seen as a definite advantage due to the diversity of nationalities currently working in retail shops.

One of Datapac’s big retail successes is Hughes and Hughes, the bookstore chain. RMS is an ideal solution for this organisation with its large central warehouse and centralised control. The company’s web store is currently being revamped and will be integrated into the main RMS system.

A call for security
All areas of business have or should have security concerns, but it is of particular importance in the retail sector as it requires both tight physical security as well as the normal IT business security. Cash tills have evolved into electronic point of sale systems (EPOS), as have telephone handsets morphed into digital voice communication devices – but the high dependence on IT systems brings a mixed bag of benefits and problems, security threats being one of the latter. Security protection for EPOS should be non-intrusive and its footprint in terms of processing overhead should be minimal. Richard Foley, managing director of Eset in Ireland, says his company has had considerable success in this area with companies like Retail Solutions deploying its software.

Foley says the retail channel is now more focused in terms of end-point security. This increased awareness is often heightened by headline stories reporting data theft or recent notebook losses by major financial institutions such as Bank of Ireland. He sees security as something that is continually evolving and says it should be reviewed on an annual basis as part of a formal security audit. Eset provides security products that protect IT systems with a minimum impact on operation overheads by minimising the time needed for updates and amount of processing capacity required.

Zetes focuses on people and goods identification. In the latter area Zetes supplies software and system integration dedicated to the supply chain and is one step removed from the customer in the retail store. Selling products to consumers is only one side of the retail operation and the success of this operation is dependent on ensuring that the supply chain functions at optimum efficiency levels. Barry Long, sales manager with Zetes in Ireland, explains that success is dependent on the supply chain being run as efficiently as possible. New technology integrates voice input, helping to reduce errors and eliminate paper usage. The Henderson Group, the Northern Ireland Spar UK wholesaler, saved more than £40,000 sterling in three months as the result of using a voice-based picking solution supplied by Zetes.

One of the technologies that have been touted for the past 10 years is RFID (radio frequency identification). Long expresses the view that it is “a long way away in the retail level”. He believes it is too expensive and reckons barcode systems can achieve the same objectives. He points out, however, that RFID has a use for high-value goods such as designer clothes and high-tech equipment. According to Long, cost reductions and improved efficiencies are key trends in the retail sector. “Zetes is well positioned to provide integrated solutions that can help achieve these twin objectives,” he says. Mobile stock taking using portable terminals with barcode readers is much more efficient than alternate methods. Stock audits – especially dynamic stock checks – for items with limited shelf life can help to reduce the amount of waste and cost of disposal by reducing prices at the appropriate time. Changes to shelf-edge labelling can be made easily and the integration of systems means that the changes filter down to other systems such as the prices charged at the tills.

By Napier Williams