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Hyperstores to Hi-Tech Stores: It's a Long Way to Go

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PCQ Bureau
New Update

Atleast there is someone who wishes that you had more and more money. It

would be mere repetition, of what is more often said and heard, to say that the

retail sector is booming. It is the backbone of a country's economy. Despite all

that is happening, organized retailing in India is only 3% of the total retail.

Also according to a study by KPMG, speciality retail (where a retail outlet

sells goods that belong to one particular category than being a general store

that sells everything) is one area that interests as many as 45% of the total

consumers as more and more people become interested in specialty stores. For

countries like India, it is disorganized retail that has its roots embedded

across all sectors of society be it urban or rural. But the picture is changing

with both Indian as well as foreign companies getting into the game of organized

retail. These include the likes of Reliance, ITC, Tesco, Walmart, Carrefour and

more.

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Hyperstores, supermarkets, malls and retail stores are seeing sporadic

increase in numbers, but only in big markets and large metros that have more

liquid money. Most of the big companies in India are going for company owned,

company-operated retail outlets. A few examples are ITC's Chaupal Sagar in rural

retailing, the recently opened Fortis Healthworld chain that sells healthcare

products, Godrej's Adhar chain and HotSpot Retail chain that sells cellphones

and other related products like after-sales services, games, accessories, etc.

Some aim at bringing people to where they are, while others believe in the

neighborhood-market format. While there is a noted change in the retail

scenario, how far are stores on our land from being hi-tech? How far has IT

penetrated the retail industry? How tech savvy has it become? These are the

questions we explore to understand the needs, requirements, and whether or not

they are being fulfilled by IT.

Tech in retail-dream or reality?



The door to your favorite hyperstore opens on its own when you are a yard or two
away from it. You enter your dream store, to buy all you wanted for yourself,

your spouse and kids. You reach out your hand and shelves automatically get

reorganized into what you are about to pick up. The next shelf knows you might

take that jar of cheese balls next to the ketchup you picked up first. But

strange, you cannot locate your favorite basil, and you move to that adjacent

kiosk, which tells you the exact location of what you want-the basil leaves. You

gather all you wanted, put them into the bag/shopping cart and while you are

putting things one by one into the cart, it is adding it to your bill amount.

After you have all that you wanted to buy, you move to another kiosk that

appears just like the ATM machine with a platform to place the cart in front of

it. Your cart automatically tells the kiosk what all it has, and you get a

message on screen asking you whether you want to pay cash, e-cash or m-cash. You

choose and pay, and that's it. It checks you out of the store. And if you think

you can steal something away in your pocket or by not keeping it into the

trolley, well you are wrong. The surveillance cameras are intelligent enough to

start off alarm.

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All this is a reality atleast decades away from now. While a few digitized

solutions are available even today, it would take some more time to be able to

come up with a completely digitized superstore in your vicinity. But we are not

very far away from that. Say, half a decade ago, technology was limited to point

of sales solutions, generating reports and raising invoices. To put it in other

words, the computer had only replaced the typewriter and bill books.

For the rest, the world was the same, you still had to rely on your man power

to be able to understand and keep a watch over the inventory, stock movement as

well the actual sales and consumers. Today things are different. There are more

accurate and faster solutions available to do all this for you.

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Worldwide, there are various technologies that are being used by retailers.

These include biometrics, RFID tags, SCM, POS solutions, e-payment, etc. The

Indian market is also adapting very fast to the market dynamics and deploys the

best-of-breed solutions. While we are doing that, it will take some time before

our retail industry goes completely hi-tech. The reason is cost. All other

obstacles of availability of products/ solutions and skilled manpower have long

been overcome, but some of the world-class solutions like RFIDs, intelligent

shelves and kiosks, still remain out of reach for Indian market because of their

high cost.

For instance, today putting an RFID tag on a product might cost you more than

the product itself. As result, the use of such solutions becomes limited to

niche product categories. In such a case, RFIDs can be used only with goods that

have high value in terms of cost (say fashion apparel and jewelry). It would,

therefore, require the cost of implementation to come down drastically before it

can be implemented.

Behind the scenes



From a distance it may appear that the technology is really making waves and a
lot of it is being used in the mushrooming supermarkets/hypermarkets.

Unfortunately, it is not so. The case is crystal clear. A major chunk of the

Indian retail market still consists of fresh start-ups. As a result, the CIOs

are working towards getting the basics right first, and in some cases going

beyond what they need right now. That is, the need of the hour is to get the

basic systems such as logistics, inventory management, supply chain management,

stock keeping, sale purchase management, invoice generation and bar-code reading

in place. Further than this, some retailers have gone beyond this to the extent

of integrating their systems through various cities, so that the duplication of

work, say, report generation can be avoided.

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It will not be wrong if we say that in both organized and disorganized

retailing, IT serves as a mere enabler for business but only to the extent of

being a support function. There are not many organizations today that take the

pain of implementing IT for any revolutionary or innovative purpose. Each retail

outlet today takes complete care to use solutions that would make sale purchase

and service delivery easier for the customer. This means using more efficient

and updated PoS and stock/inventory management solutions. This not only gives

the consumer a better experience with fewer delays, but also helps a store

manager to manage data more efficiently. And each time a new store opens across

the country, it is made use that it runs same solutions, integrated with the

central data warehouse and real-time data is available to each location readily.

Mind game-Read it, rule it



The customers mind! A great attempt on retailers part would be to read it, and
rule it. The companies still rely mainly on the top of mind recall of the store

manager, sales staff, actual sales of commodities, etc to make a rough sketch of

the buyer patterns.

Beyond that, going by the trend of having franchise retailers, how many of

the shop managers and the CEOs of those multi-crore stores are actually

interested in getting to know why some people did not buy a product they

recently launched. All they do is, take the product, that did not sell, off the

shelves. But for the big players who have launched the product- the

manufacturers-this is a net loss for they invested in almost a new assembly line

to get that thing out in the market. They cannot afford the stocks back into

their warehouse for a product like they worked for months together. So, they

need to know the customers, their buying habits, get answers of the questions

like

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  • How many people even think of buying a new item in the store?

  • How many go ahead and really buy it?

  • Is there a pattern in clubbed sales, that is, what items are bought

    together?

  • Which goods grab the attention of the customers?

Is it because of its placement or necessity?

That is, the industry needs to do is to get into the minds of the consumer to

deliver what they are going to think of buying next. While technology is no

hinderance to doing this, there are already many solutions available that one

can make use of. All that needs to be done is taking that extra step and deploy

them in an innovative manner. Data mining as a process can be of major help to

begin with. The data generated by the retailers can also be analyzed for getting

more information about the consumers and their buying habits, and getting the

answers for the questions posed a while ago.

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Avoiding retail shrinkage



Talk of security and it appears that a shoppers' paradise is also shoplifters'
paradise. That's because even the most secure retail outlets in the country rely

on CCTVs surveillance cameras for security when it comes to using technology.

But even this is a secondary support after the trained security staff who check

you in and out of a store.

Mr Rajat Das Gupta, Head IT, Spencers Retail told, “about 1% of shrinkage is

a worldwide phenomenon and most of that is internal in most cases. It is a

matter of how much control you want to exercise. While you make the processes

more rigid and ask for checks at each stage, you also have to keep in mind that

nothing should hamper the customer experience while he is at the store.” Despite

all this, shrinkage can be minimized with the more efficient use of technology.

For instance, you could use smart tags that would generate alarms if someone

tries to take them out without the bill. But again, cost is a major factor that

has limited the use of technology in this area.

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Lessons to be learnt



As we have mentioned earlier also, organized retail in India is in infancy. So
as and when the retail vertical stabilizes and retailers are able to get the

goods directly from the producers removing the middlemen from the loop, the

profit margins for the retail sector will definitely increase, in turn bringing

the prices down. That would be the time that CIOs will be able to concentrate on

making their IT implementations state-ofthe- art as today they are hard pressed

to meet the exponential growth this sector is witnessing. They can then look at

specialized solutions for warehouse management, project management, merchandise

management, DW and related sales/customer analytics.

The need of the hour, thus, is to use IT innovatively to make more sense out

of the data generated. This would not only take the retailers closer to the way

customers think, but also bring more tangible business benefits.

Future group

Pantaloon Retail is a flagship fashion retail chain under the Future group

umbrella. Future group owns other brands like Central, Big Bazaar and Future

Bazaar. The group is currently undergoing brand integrity programme, which will

establish all their brands as a part of the Future brand. They prefer to call

their IT department as the 'Business Solutions Group' as it offers solutions to

all business needs. We talked to their CIO to get a detailed insight of how they

make use of IT.

Chinar Deshpande, CIO,

Pantaloon Retail

Tell us something about your organization and the kind of IT

infrastructure you have in place.



We are thinking of moving beyond just being a retail store to being a

consumption player. With this vision, we intend to give the customer a never

before experience, bringing him to a place that provides everything he needs

under one umbrella. Since we are a multi-business foray, we have a very strong

technology-business architecture in place. We are using the financial and cost

accounting modules of SAP-SAP FI/CO for all our systems. All our stores are

connected over VPN (about 85% of them on Sify backbone) and real-time data is

available to work with across all locations. The last mile connectivity is on

wireless.

For the 3000 users and crores of purchase orders we generate, we have SAP

that runs at the core while actual billing and peripheral apps (like loyalty

management, etc) is out of SAP.

What's your future focus?



While we are focusing on the growth right now, making ourselves available to all
kinds of consumers, we'll soon have visual connect between our stores and

office. This would give us a much closer look into the consumers' minds, their

paying capacities and their buying habits. As people at the store are closest to

the customer, we have plans to provide store managers with a dashboard that will

give him all information like A/V from surveillance cameras, alerts, sales as

they take place, real-time data as well as the target sales, over one solution.

We need a technology platform where all transaction- related decisions are

driven by actual data. It would also enable automatic stock replenishment and

cross talking. This way, the stocks can be delivered straight to the stores from

the merchandise and the warehouse would be used for the minimum time for docking

purposes. As a result, the need to have more storage space will decrease.

I must confess that we do not have much of intelligent technology and

analytics in place. But, we have been thinking about inducting pattern

recognition and demand forecasting tools in the BI system for our needs in due

course of time. Right now we trust the store managers and their analyzing skills

for understanding our customers. For instance, we have noticed a pattern that

men who shop for themselves also pick up something for their kids. Such patterns

are taken into account to decide product placement.

Have you integrated tools like loyalty cards and similar schemes into your

system?




Currently, our loyalty card system is operational in Pantaloon stores only, but
it is extremely high on priority so that we can centralize the data and analyze

it. We are working on the concept of 'Future Wallet' or 'Future Money' which

will provide a single identity for a customer that uses any of our services or

visits any of our stores within the Future brand. This will not only give us the

ability to get a bigger data warehouse but also help in mining the data to help

serve customers better.

What challenges are you facing in getting relevant technology and solution

for your needs?



Technology is no bottleneck, just that the implementations needs to happen.

Our focus today is to expand our reach in all areas be it investments, consumer

goods, services, financials, capital market or any other thing. We have,

therefore, been focusing on setting up an IT infrastructure across all our

stores that would serve our basic needs like inventory management, stock keeping

and replenishment, SCM and PoS. As the priority today is to grow 'Bigger' in

terms of the services and products we provide, we cannot be experimenting with

new technology and implementation. It will take some time before we will make

use of technology in an innovative manner, in order to analyze the data and use

business intelligence to enable decision making.

Spencers Retail

Spencers Retail, one of the oldest retail chains in India, opened Spencers

Hyper in NCR on 8th March 2007. The same day we caught them right there rolling

out SAP in their Books store called Books and Beyond. At the launch of their

'Hyper' store, we met the IT head and his team responsible for this roll out.

Here are some excerpts from that interaction with Mr Debashish Roy, Vice

President, Systems, Rajat Das Gupta, Head IT, ERP Project Cell and Mr Indranil

Guha, Sr Manager-Technical.

Debashis Roy



VP Systems, Spencers Retail

Tell us something about your IT infrastructure and your recent SAP

rollout.



We are pioneers in organized retailing, and now with the group (we're a part

of the RPG group) is focusing more on making it a pan India initiative, our

scale of operations is going to increase manifold. To manage this kind of

growth, it was necessary to move out of legacy systems, as they didn't provide

the scalability that was needed. Plus, some of our stores are currently working

on as many as four different legacy systems, managing which was very difficult.

We needed a solution to manage everything under one umbrella. So we engaged a

team of experts to evaluate various solutions in the market. We found that SAP

came closest to fulfilling our needs. Project Shakti has been operating for the

last one year out of Chennai and we have already gone live in two states-

-Andhra Pradesh (Vizag since 17 November 2006) and Haryana (Gurgaon, since March

08, 2007). We are using the latest MySAP ERP ISRetail ECC 6.0 for our operations

in Books and Beyond, and are gradually migrating the rest to SAP.

With ERP, high-availability is a challenge as the network over which the data

travels from, say, a datacenter to the store is not within our control and

belongs to an external agency. Our ERP datacenter is based out of Kolkata along

with the business warehousing servers. For data processing, we have 'staging

servers'. These are intermediary servers to store data temporarily before moving

it to the SAP Production server. Eventually, all stores and warehouses across

all locations will be integrated with our datacenter and shall be working on a

real-time basis, except for the PoS billing system. At the end of each working

day, the data is sent to the parent datacenter for processing and analytics.

What solutions have you deployed for analyzing customer needs, buying

patterns, buyer behavior and instincts?




In our legacy systems, we have deployed solutions like SAS and SAPZone. We use
them to do bill-value and time analysis. We are also going to use MySAP Business

Warehousing BW 7.0 for analytics. While our aggregated sales data goes to the

SAP production server, the non-aggregated data goes to the business ware housing

server for analytics at Kolkata. The latter helps us analyze customer buying

patterns. The former data helps us manage inventory, stock keeping, etc. While

some basic infrastructure is in place already, we are definitely going to

implement business intelligence into our system in due course.

What challenges did you face in moving to the new system?



An important pillar of retail business is ERP, which has three elements-People,
Process and Technology. People part is most difficult to manage as you need to

recruit, train and motivate people constantly, generate awareness and do change

management. This makes our task more challenging, as we need to manage

deployments in such dynamic environment keeping pace with the company's

exponential growth plans.

TCS

TCS has long been serving the retail industry by providing various solutions

their clients ask for. But what are the needs and requirements of a retailer

when they approach a solution provider for a solution? We talked to the man who

heads the Retail Practice at TCS.

What are the business objectives of deploying IT in retail?



The business objectives for a retail solution depend on the size of the

retail venture. In my opinion, smaller retailers (who own 1 to 5 stores) look at

computerizing their financial accounting, inventory, purchase and store sales.

Mid-Market retailers, (6 to 15 stores) look at the same as small retailers, but

also envisage having solutions for maintaining warehouse operations. They would

also look at some basic merchandise planning solutions. The large retailers (>15

stores) look at the complete retail business functionality covering planning

(Merchandise and Assortment Planning), buy (Merchandise Mgmt, Purchase and

Inventory Status), move (Merchandise Receipts and Issues, Inventory Management

at warehouse and stores), sell (Store operations and store sales) and analyze

(complete MIS and analytics) along with financial accounting and HR mgmt.

This depends on the size of the retailers. Midsized retailers go for smaller

IT systems, which cover the business process defined above while larger

retailers go in for Retail ERP solutions available in the Indian market. Cost of

ownership also plays an important role in selecting an IT solution. Some large

retailers would look at a best of breed solutions where basic systems of Buy and

Sell are covered by a Retail ERP and PoS while planning and warehousing

operations could be managed by specialized niche solutions.

Vivek K Mehta Heads Retail

Practice at TCS

What are the challenges that you as a retail solution provider face in

leveraging IT?



The challenges relate to defining the business requirements. Indian retail

is currently characterized with a large number of start-up operations and

getting the skilled personnel in that organization is a challenge.

Are your clients concerned about customer buying habits and analyzing

sales data for the same? How useful is data analytics in sales?



Yes. Retailers are concerned about understanding customers and, hence, they

are go for loyalty programs for retail chains and also analysis of sales data.

Sales Analytics looks at the nature of sales, the SKUs and category and

sub-category of sales. Analysis is also done of customers using their loyalty

cards. In the future, apart from sales analytics, retailers would need to go in

for Price Optimization, an IT solution which would forecast the price points at

which the item should be sold for maximizing the margins and returns. Such

solutions are already in the market and are being used by retailers in the US

and Europe but it will be a few years before these solutions would get

implemented in India.

Vivek K Mehta Heads Retail Practice at TCS

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