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Technology Adoption in Retail and Its Benefits To SMEs
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The Retail Market is in a state of exponential growth. One needs to see the mushrooming of malls and shopping complexes in the metros and small towns in India to grasp the enormity of this growth. With the opening up of the Indian economy, availability of internationally recognized brands and the increase in the disposable incomes of people has created a retail explosion.
For many years the retail industry in India has been disorganized and consisted mostly of single- store outlets, a few retail chains and a large number of the friendly-neighborhood “Kirana” shops. These outlets had pre-historic supply chains, inefficient inventory management; very few were customer focused and most were in the small to medium category. The sudden spurt in demand and a greater awareness amongst buyers for quality products and services, created a vacuum that could only be met by an organized retail sector, with fine-tuned supply chains, efficient inventory management and a totally customer focused view that was alien to India.
One of the key factors in achieving an organised and efficient retail operation is the use of technology as an enabler. IT is the key enabler to improving customer satisfaction, operational efficiencies and by extension profitability. A typical pan-national retail operation would have multiple regional warehouses, offices and retail outlets. In such an operation how does the headquarters know the daily turnover at each of its outlets, how does it know which products are selling the most in which region at which outlet, how does one store know if a stock-out item in its own inventory is available at another store location for whom it is slow moving item. Most of these issues can be solved by the appropriate use of technology. The ability to have current information on a real time basis and analyzing that data for better forecasting are some of the payback provided by technology.
Retailers all across the country believe that shrinkage due to inventory recording, handling and administrative errors costs retailers millions. In an intensely competitive, cost-conscious industry, decisions about IT and telecommunications infrastructure can make a vast difference. The right solution can result in improved productivity and major cost savings through key advantages such as more accurate supply chain forecasting and better inventory management. For example, given a situation where a retailer wants to increase its loyalty customer base, an organization with relevant IT systems in place, has a ready customer database which is updated at every purchase that can be used to send mailers or promotional catalogues. Another example where IT can be beneficial is a store management system that alerts out-of-place or stock-out items. The in-store system uses magnetic strips or barcodes or RFID to monitor actual versus intended product location on the floor or in the stockroom. By using RFID-encoded shelf edge labels with embedded shelf readers, a grid could be set up for verifying planogram compliance for standard shelving and promotional displays, with a corresponding alert for misplaced items sent to store personnel. Big payoffs could be realized for frequently moved and misplaced items, such as apparel, shoes, CDs and DVDs.
Retailers need to understand that technology is not a sunk cost but rather an investment to reduce heavy long term costs. It is an investment to maintain competitive advantage for long term growth.
Retail Solutions
There are many retail solutions available in the market from both internationally reputed software companies as well as locally developed small or home-grown systems that fill a niche market for smaller retailers. It must be kept in mind that many of these solutions are often developed with a very narrow focus, without proper documentation and little regard to architecture or quality; as a result scalability and configurability suffer. Very few solutions can be categorised as ‘end-to-end retail solution’ covering everything from POS to back office and head office. Solutions can range from a single store with one POS to a complex, multi-store environment that integrates with your overall business operation. Some of the better known solutions like LS Retail, SAP, Oracle Retail, JDA and Landsteiner offer comprehensive end-to-end solutions. They are scalable, work in geographically distributed environments and are modular enough to suit most retail requirements with minor customisation.
Technology coupled with retail dynamics is definitely a win-win situation for retailers. With the coming of international retail players, it has become imperative for SMEs to take a step towards technology adoption to reap optimum benefits from their business.
As an example the LS Retail Suite of solutions, provide support for smaller stores as well as large multi-store, multi-location setup and has been localized for the Indian Industry. It provides flexibility, scalability and granularity that helps in reducing the total cost of ownership, improve profitability and prepare one for changes in both, business and customer behaviour. LS Retail provides the ability to make up-to-the minute decisions with fewer mistakes. LS Retail can recognize current consumer trends and reduce the total cost of inventory.
Author: Atanu Ghose (atanu.ghose@dynamicverticals.com), Head Technology, Dynamic Vertical Software Pvt. Ltd.
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Updated on:
16 Oct, 2006
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