The Story Behind the Shelves

Ambling on that well-stacked and well-glossed aisle on a weekend shopping
trip, little do shoppers know what happens when they pick up a shirt for the
wardrobe or a ketchup bottle for the kitchen. Just by laying hands on that SKU
(Stock Keeping Unit, in the retail parlance), can trigger a technology cascade.
The particular unit, whether it is just being fiddled with for evaluation, or
put into the venerable shopping cart, sets forth a series of IT functions. The
CRM would quickly record the size, color and other nuances to update its insight
on the customer. The inventory system would immediately put in place mechanisms
to replenish that unit and inform various entities in the chain right till the
warehouse accordingly. The supply chain, in turn, would get into action likewise
and so would the employees and PoS (Point Of Sale) entities. To a shopper, it
might be a just another routine, but look around and we can see a full-fledged
24/7 IT backbone and nervous system that runs to ensure a profitable,
customer-delight oriented and efficient retail operation.

Take Megamart for example, the apparel retail chain from the Arvind group
that runs 115 small stores across 41 cities in the country and three large
format stores. Its legacy system, back end SAP system and a front-end sales
information system etc work in tandem, so that all sales data is fed centrally
by midnight and the respective management points can have a consolidated sales
report handy by 10 AM the next day.

The information is diced from all angles, brand wise, category wise and size
wise to serve an automatic replenishment model so that the warehouses can supply
back the particular categories as and when the sales happen. Its supply chain is
further equipped to raise alarms whenever required and add to the dynamic
pricing policy that helps the retailer push a particular product whenever
required.

IT is being used right from the time retail majors like Shopper's Stop look
at potential properties to set up stores, collaborate between external and
internal teams while the stores are coming up, planning merchandise, filling the
store, replenishments management, supply chain, collaborating with vendors, and
doing personalised promotions. In fact as Ranjit Satyanath, GM, Technology
admits that he would be hard pressed to think of an area where the company does
not use technology.

SCM, CRM and RFID

On areas like CRM, Megamart has a legacy system called Voyager that helps in
analyzing customer behavior and buying patterns. It expects to take it further
by tailor-made offerings and loyalty programs based on CRM data that is possible
in a year's time.

The range is wide at chains like Shopper's Stop. From retail ERP
implementation, already deployed are applications for customer loyalty
management, data mining & business intelligence and warehouse automation
applications. "Our CRM currently manages our First Citizen's Club which has a
base of over a million customers. Through this application we are able to track
the preferences of our customers, which helps us offer them the products they
want. Customers also receive promotions tailor made for them e.g. we have a
"Choose your sale day" for our Gold Card members." Ranjit Satyanath, who is
spearheading IT at the retail chain, tells.

Over the last two years there have been technologies deployed for
collaboration, Wi-Fi, advanced payment systems, server virtualisation and
employee self service.

"To further improve the availability of merchandise through the supply chain
we have recently Wi-Fi enabled all our distribution centers (DCs) and equipped
our logistics personnel with applications on handhelds. This initiative has not
only helped our DCs deliver merchandise to the shop floor faster, they can also
do this with close to 100% accuracy." Satyanath adds.

New technologies including open source ones are also finding their share of room
on the shelf space. "While we are open to experimenting with new technologies
and are early adopters of several like JDA implementation, Netezza
implementation, and a B2B portal for vendors, we deploy only ones that are
thoroughly evaluated." Shares Ranjit.

There is another technology in the form of Radio Frequency Identification (RFID)
that finds its applications in controlling and monitoring movement in the retail
industry. Megamart is also deploying it for warehouse management and the new
investment will additionally help in finding the position of stocks at the right
time.

Ready for more

While Megamart is inking aggressive expansion plans for its large format stores
and has plans to set up 25 to 30 such Megamart Outlet Centres in the next four
years, it is also simultaneously investing further in its IT roots.

It recently announced that it will adopt RETEK, an Oracle based application,
which is claimed to be a platform run by seven out of top 10 global retailers
like Tesco, Nordstrom, Sainsbury, Selfridges, Sears, and GAP. The Rs 15 cr.
investment is expected to go live by February next year and would cover the
entire transaction module to start with. Phase two, which would be completed by
the end of 2009 would extend to planning tools while the third phase would touch
the front-end with PoS and 360 degree commerce.

Viewpoint

We talked to the MD of Dynamic Vertical Solutions, Rakhee Nagpal, to get a quick peek into the shape of the retail industry in India and the utility of the company's various offerings. What's the current retail scenario in the country? The retail industry is worth 300 billion dollars now and is expected to reach 427 billion dollars by 2010 and 600 billion dollars by 2015. Organized retail comprises just 4% of the 12 million retail outlets. The industry is growing at 30% y-o-y so, there's a huge opportunity to be tapped out there. Having said that, these are early days for IT within organized retail as 96% of market has not even been tapped from the IT perspective. What were major challenges before the industry when you started operations in 2006? The knowledge of IT as a very important support structure for retail was not there. Industry was being slowly recognized as a serious industry. We worked closely with NASSCOM, CII, FICCI to espouse retailers' cause in India. This actually provided us with a huge opportunity to educate people for IT usage. We have tied up with institutes to impart IT education for retail and hospitality verticals. What are the key issues to keep in mind before designing solutions for customers? The core of our solutions is based on the Microsoft Dynamics ERP suite provided by our international partners. We localize the solution based on the needs of the market. For eg, within the retail industry, the requirements for a mega mall vary from that of a coffee shop, a grocery store and so on. Further customization is done based on the individual needs of a particular business. So, you should strive to provide solutions that enable a retailer to achieve his core business objectives. These could vary from handheld devices, planagrams for fashion, people management software, relationship management modules, and so on. Next, ensure that costs are cut through efficient integration of different processes within a single solution. In retail, data is captured most of the times at PoS. The thought process of retailers and their interaction with customers has to be factored in completely by an IT solution and data should flow across transparently through divisions and be incorporated in the ERP processes. What about customers with legacy ERP apps ? The customer should have a single point of contact for support for different hardware and software solutions bundled within a package. So, for eg, even though a customer has been using an ERP solution from SAP or Oracle or even MS Dynamics, this shouldn't be a hindrance to further technology adoption.

As K.E. Venkatachalapathy, COO, Megamart shares, he is expecting a range of
benefits from this investment. "It will help us in having a tight working
capital management control, availability of right stock at the right time (which
is the clincher in a business like retail), a topline improvement of about 10%
and about 1.5% jump in profits."

At Shopper's Stop, where the revenue IT budget is generally between 0.5 to
0.8%, many new deployments are on their way. It is trying to touch new areas
ahead and is in the final stages of rolling its Oracle Peoplesoft for employee
management. "Employee attrition is a reality in the retail industry and I don't
think this is something we can fight with technology. But what technology can do
is make new employees productive much faster. We do this through our investments
in an online learning framework and e-learning modules. New recruits can now be
trained and made productive much faster and at a much lower cost then instructor
led trainings." Satyanath reasons.

Next bracket of technologies

Meanwhile the next exciting bracket of technologies that are luring CIOs include
collaborative solutions (e.g. EPM), business intelligence, Web 2.0, RFID,
converged communication, NFC (near field communications), E-Commerce and mobile
technologies, open source solutions and social networking.

Arun Gupta, Customer Care Associate and Group CTO, Shopper's Stop Limited
however points out that the promise of some of the new technologies like RFID,
SOA and mobile technologies remain untapped as in the Indian context we have not
yet been able to find a business case with the help of our service providers.
"Future value-adds will come from data mining and business insights that
technology can offer with analytics. These will be spread across inventory
optimization, markdown and pricing management, customer management and supply
chain."

K E Venkatachalapathy, COO, Megamart Non-fulfilment of the right stock at the right time is the biggest challenge, and about 15 to 20% losses in an industry like retail can be on account of non-fulfilment here.

What a CIO needs

Quality of resources allocated to IT projects in India by software companies,
pricing and system integration continue to be issues, especially for retail CIOs.
As Satyanath from Shopper's Stop reveals, "Most of the time I find that an
Indian project is a training ground for their resources before they go off on a
"dollar" project. This is despite the due diligence we do at the time of signing
them on. The good resources one is shown most of the time is withdrawn citing
"internal policy" or some such excuse to be replaced by people of questionable
skill sets."

Pricing, he adds, is seldom discussed with the Indian retail context in mind.
"Due to these two reasons we have often chosen to outsource offshore projects to
vendors outside India, which is frankly ironical given India's reputation on the
international scene."

Venkatachalapathy from Megamart emphasizes the importance of having the right
stock at the right time. "This is the biggest challenge and about 15 to 20%
losses in an industry like this can be on account of non-fulfillment here.

Ditto feels Satyanath from Shopper's Stop. "Everything we have invested in is
ultimately focused to ensuring that single SKU (stock keeping unit) the customer
wants is available to her when and where she wants it."

The ideal scenario is not easy but as nothing can make an IT head happier
than having a supply chain team that is not worrying about culling data and
trying to make some meaning out of it. "They should have it on their fingertips
and not waste precious time in just mining the data." Venkatachalapathy hopes.

The challenges are rising and IT can be more helpful than it has been. For
Shopper's Stop, for instance, the cost pressures have only increased in the last
few weeks. "But we are reasonably confident that we'll be able to rise to the
challenge and make the business much more cost effective. In fact, we've already
made a beginning. We have reduced telephone expenses by more than 40% in some of
our stores through some of the technologies that we have deployed in them."
Satyanath believes.

While retail in India is still at a nascent stage and processes are evolving,
IT heads would like vendors to appreciate this and not try to sell solutions
just because they have worked elsewhere. Partnering and discovering solutions
that could work in India would be the key.

Gupta sums the sentiment quite well. "My biggest expectation from IT vendors
has been that do not sell me a solution to a problem that I do not have. First
understand my pain areas and then help me find a solution to address them.
Indian retailers face a different set of challenges as compared to retailers in
the western world. Most solutions created for the developed markets do not
address the issues faced by us in India. Technologies do not excite me;
innovative solutions to solve existing business problems or create efficiencies
beyond conventional technology usage do."

Pratima Harigunani, CyberMedia News