Retail IT: Transforming while performing

The highly competitive, cut-throat nature of the retail industry has meant that companies in general have less money to invest in IT. But IT can give retail a competitive advantage, says Krishna Nagashwaran of Cognizant

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Beyond essential infrastructure to get stock onto shop shelves and to take money from customers effectively, IT spending has traditionally remained low as retailers, up against an increasing number of rivals for customers, focus on other areas such as reducing prices or opening further branches.

For IT projects that are implemented, from supply chain management solutions such as barcoding and stock replenishment systems, to electronic point-of-sale (EPoS) systems, the primary driver is efficiency - driving down costs while creating a better customer experience.

However, in recent years IT’s potential to offer more to the retail industry has grown, presenting strategic opportunities that are increasingly important to attract and retain customers and stay ahead of the competition.

The value of these opportunities doesn’t necessarily lie in cutting costs, but in generating customer loyalty, taking advantage of new sales channels and preparing infrastructure for the future. The challenge is to exploit and make the most of these opportunities when IT spend is relatively limited. Under such severe pressure for budget, selecting an IT partner who can deliver cost-effective but transformational technology is crucial.

From cost-cutting to business transformation

Supply chain management and stock replenishment are examples of existing, core IT functions where modern technology can revolutionise existing processes. Radio frequency identification (RFID) is one such area, with the potential to replace barcoding systems as a more efficient alternative.

An application of RFID in the retail sector could allow shop floor employees to quickly and exactly identify the number of items on shelves. This may sound fairly simple, but when counting, for example, the number of particular sizes of identical looking products such as suits or shirts, a lot of time can be saved. The aim would be to achieve 100% stock accuracy with increased employee productivity and supply chain efficiency.

Of increasing importance though are functions tied to customer experience and loyalty. As high street competition becomes fiercer and online shopping continues to squeeze margins, IT that can help differentiate retailers from one another and connect meaningfully with customers is imperative.

On a basic level loyalty cards give customers a financial incentive to return, but now advanced cards designed to store more detailed personal information can specifically target certain demographics with tailored offers or deals. For example, a customer could swipe his card in a specially designed in-store kiosk, and then using the data on their purchase history and demographic, be offered deals specific to his interests. More detailed customer knowledge used in this way can shape future strategic decisions, including what products are purchased, which customer group has most growth potential, and even the in-store layout.

Opportunities also present themselves in the online environment. The multi-channel retail world we now live in offers consumers more choice than ever, but also means retailers have to work hard to ensure consistency across all channels.

In customers’ eyes, the in-store and online functions need to be seen as one and the same. For smaller companies using the same stock for both in-store and online portals, this can come in the form of back-office software that can update stock levels in real-time. This would mean that if an in-store customer purchases the last item of a specific product, the online store would automatically update its status to show it is currently out of stock, avoiding any unfulfilled orders.

For larger companies, IT managers should consider integrating the two approaches so that if a product is out of stock, in-store customers can make an online order at the till there and then, leaving only delivery.

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