Solving retail challenges

19 Jun 2007

The Irish retail sector is on the crest of the wave, with year-on-year growth currently at 7.5pc, higher than anywhere else in Western Europe. We have seen the market consolidate as mass-merchant retailers have flourished, continuously increasing square footage while diversifying in categories and services offered to their customers.

While the top-level picture is good there is no time for complacency. Views on Irish economic slowdown aside, there are some worrying trends for Irish retailers. The cost base for retailers jumped 6pc in 2006, driven by more expensive utilities, rent and increased labour costs. While price inflation on food in the UK rose by 4.1pc in 2006, equivalent Irish prices were stagnant. Add to this the familiar retailing challenges of demanding and more promiscuous consumers, staff retention, margin pressures and the growing trend towards ethical retailing, the trading environment in Ireland will only get tougher.

A traditional response from retailers to increased trading challenges has been, and continues in part to be, price-based competition. Yet, only 9pc of consumers know the price of a recently purchased grocery item; 25pc of Irish consumers state that Lidl is the cheapest grocer, yet their market share is still in single digits. The successful retailer will not necessarily be the one who offers the cheapest product, but the one who can also offer time discount, complexity discount, an enjoyable shopping experience, stock on shelves, faster checkouts, clean stores, excellent service, value for money – first time, every time.

We believe that technology has a crucial role to play in addressing the above challenges. With the advent of internet protocol (IP), the proliferation of broadband and the continuing convergence of IT and communications, there is a huge opportunity for retailers to exploit technology to improve in-store and back-office performance.

Value to retailer

While eircom has traditionally sold generic products to the market, we have now identified retail as a key market vertical, and have designed specific propositions that are solely based on delivering increased value to the retailer. Our proposition set has been classified into four key areas, aligned with retail’s key business drivers:

1. Reducing cost and simplifying operations

Whilst previously viewed as a back-office expense, the increasing availability of high performance, flexible and secure IP infrastructure to the store has now resulted in the network becoming a strategic asset and one that can be fully leveraged to deliver a wide range of benefits.

In many ways, an agile IP-based infrastructure is now a prerequisite for successful technology deployment in retail. For example, an IP-based network can carry not just critical data traffic, but also all voice and video requirements, negating the need for running separate networks. With many retailers, eircom is now working closely with the point of sale (POS) software provider, stress testing the POS application performance in our labs, tailoring an IP infrastructure and designing a robust service level agreement (SLA) around application performance.

The same network can also assist retailers to control utility costs. We partner with Cisco in deploying telemetry solutions that sit on the edge of the network, monitoring the use of electricity and gas. A similar solution deployed in Canada has already assisted one Tier 1 retailer to reduce its utility bills by 10pc.

The network can also be used to address staff training and retention through the hosting of computer-based training, using audio and videoconferencing to enhance employee relations and delivering multilingual solutions to meet the needs of an increasingly diverse workforce.

2. Growing revenue and market share

Retailers are a key channel to market for eircom products and services that have made it one of Ireland’s leading consumer brands. From Meteor in mobile to broadband solutions packaged with content services (eg Setanta Sports online), eircom has a strong portfolio of cutting-edge consumer products and content services to assist the retailer to increase sales and diversify into new categories.

eircom also provides in-store services such as public internet access kiosks and Wi-Fi networks that improve the overall customer experience, providing an incentive to increase footfall and ultimately gain an increase in share of wallet.

3. Improving the buying experience

An IP network can provide the core platform to deliver a range of new-wave customer-facing tools, from digital signage to shelf-edge labelling, all run from a centralised system. It also has the possibility of carrying electronic funds transfer (EFT) processing to enable speedier transaction times and effective queue management.

eircom can also help retailers ensure that an online shopping presence is consistent with the bricks-and-mortar experience. From designing websites to developing a web strategy, eircom has the experience and expertise to help retailers pursue all the opportunities around multi-channel service integration.

4. Optimising the supply chain

Already the market leader in electronic data interchange (EDI) solutions which continues to significantly control the complexity and costs of supplier management, eircom’s IP networks can also be extended to accommodate key external customers or suppliers, creating a secure digital supply chain that increases efficiency and profitability.

While electronic tagging using RFID solutions is currently limited to back-office supply chain deployment in Ireland, eircom’s capability in this area will deliver transformational benefits to every retailer once the technology is adopted at item level by the mass-merchants, delivering much superior stock control, full supply chain visibility and reduced back-office stock requirements.

Wrapping all of the above, eircom’s Advisory Services division provides a consultative-led capability to engage with retailers to address their ICT requirements. With one of Ireland’s leading electrical retailers, for example, we recently audited its existing ICT services and store operations before developing an ICT road map, re-designing its IP infrastructure and enabling them to transform the in-store customer experience. What this retailer found, and what many other retailers are starting to discover, is that eircom has a comprehensive suite of next-generation propositions for next-generation retail.

By Shane Nolan, sector director in eircom Enterprise Markets