1. Impact of Information
Technology in Store
Operations
Submitted by: -
Jigar Mehta
Roll no.21
PGDM-RM 2nd year
2007-2009.
K.J.SOMAIYA INSTITUTE OF MGMT STUDIES AND RESEARCH
(SIMSR)
Vidyavihar (E), Mumbai - 400 077.

2. Impact of Information Technology in
Store Operations
Introduction:
Retailing is a “technology-intensive industry. It is a well-known fact that
the retail industry always works on razor thin margins and the key to survival lies
in optimization of resources both in space and time dimensions as well as
maximization of customer satisfaction. Successful retailers today work closely
with their vendors to predict consumer demand, shorten lead times, reduce
inventory holding and ultimately save cost. Access to timely and even real-time
information to a wide variety of channel and trading partners, sales personnel,
line managers, store managers etc. is the key to achieving this. Over the years
as the consumer demand increased and the retailers geared up to meet this
increase, technology evolved rapidly to support this growth. It is technology that
will help the retailers to score in such fierce competition. There are hardware and
software tools that have now become almost essential for retailing. Consumers
have come to expect more value and higher service levels. As a consequence,
the technology continues to grow and retailers search for ways to measure
technical business value and to balance the effective utilization of the technical
resource. Retailers want to get more value out of technologies and ensure they
are spending their limited resources in ways that improve their overall offer to the
customer. Technology has proven to be a competitive weapon in retail, which is
a dramatic shift from a decade ago. In response, retailers generally need to
become more disciplined in managing the IT function. Completing and delivering
IT projects on time and on budget is overwhelming enough without the project
team considering their project’s interdependencies with other business initiatives
and corporate goals.
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3. Synopsis:
Technology has transformed the buying behaviour of customers everywhere.
Technology in the store is all moving toward integration and more and more
savvy customers. POS is undergoing major changes because of broadband
access, the need and ability for inventory visibility, customers ordering online,
returns and pick-up in the store and also the movement toward an ASP
(application service provider) model. “Better broadband access is incredibly
important and is one of the true disruptive technologies” as said by Greg Buzek
president of IHL consulting. It is broadband that will help to transfer the
information fast and help retailers to serve their customers on time. Technology
offer retailers the potential to know exactly how many customers are in their
stores by department and time of day. The Footfall division of Experience was at
NRF making the case for accurately counting customers to produce valuable
data that influences operational decisions, such as labour scheduling. Findings
proved that a mere 20% of shoppers are actually advocates of retailers, K.
Jotwani. Director, marketing and strategy. Retail Store Solutions, IBM Systems
and Technology Group, which leaves 80% of shoppers who do not advocate, let
alone give their loyalty, to any specific retailers, which shows that there is a room
for improvement to give better customer service with the help of technology. As
today’s world problem of global warming, technological companies have
understood the importance of “Going Green” and are taking green initiatives by
producing environmentally Earth-friendly products and processes to reduce the
burden on the environment. IBM unveiled its Green Retail Store, a portfolio of
technologies and services designed to improve energy and operational efficiency
across a retailer's IT operation. Retailers are finding ways to get communicate
with customer and new ways of marketing and technology has made it easier for
them such as Downtown Locker Room (DTLR) expects to increase store traffic
and sales by targeting shoppers with text message based promotions.
Store-level customer service can be an Achilles’ heel for many chains,
and this has been made easy by technology in near future there would be media
carts which would provide customers a cutting edge shopping experience. Media
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4. carts would provide a screen on the trolley to improve communication with the
customer during the in-store shopping trip. There are easySHOP system by
Stop & Shop, Quincy, Mass., which has self-check out solution for customer with
the help of Motorola MCI7 mobile computer, runs software from Boston based
Modiv Media that supports self scanning, instant price checks and self checkout.
It is a unit which sits on a shopping cart, also delivers targeted promotions
based on users shopping behaviour, redemption history, in-store location
tracking and previously scanned merchandise which would help to keep
customers track and help customer’s to escape standing in the long cue’s for
paying the bills for hours.
Being a “technology-intensive industry, it needs workers who are
technologically savvy. There are technical high schools where students would be
taught basics of retail sales in which they will study loss prevention software,
point-of-sale systems and other technical aspects of retail, along with traditional
topics such as wholesale buying, customer service and marketing.
Objective:
This paper discusses the different technologies that are implemented in
retail stores, and how retail players are applying these technologies to reduce
the operational and technological gap in order to compete in this globally
competing environment.
Hypothesis:
Information technology in store operations will provide a competitive advantage
and improve sales.
Keywords:
Retail Technology, Store operations, Information technology in store,
Expected Results:
Implementation of Information Technology will improve customer retention.
It will increase footfalls and customer conversion rate.
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5. Literature review:
The increasing need to use technology to manage complexities in customer care,
profitability, and operational challenges has precipitated competition among retail
technology vendors. Retailers are remedying this situation by partnering with solution
vendors that have leveraged newer radio frequency identification (RFID), smart card, and
Wi-Fi technologies. This partnership is also helping them to prepare legacy systems for
convergence. Retailers are undergoing accelerated technological innovation in achieving
profitable differentiation.” Retailers that wish to stand out in the crowd are showing great
interest in hand-held terminals that have evolved from its proven supply chain form
factor to the real-time enabled mobile points-of-sale (MPOS), consumer, associate, and
manager productivity form factors.
Technologies that can enable data capture and access for improved decision
making will remain growth drivers in developed and developing economies. POS
replenishment in developed economies is driven by next-generation, forward and
backward integration-capable POS systems, however, self-checkout is likely to form a
part of the POS replenishment budget. In developing economies, POS systems continue
to offer growth opportunities.
The hardware and software tools that have now become almost essential for Store
operations are as follows:
Bar coding and scanners
Point of sale systems use scanners and bar coding to identify an item, use pre-stored data
to calculate the cost and generate the total bill for a client. Tunnel scanning is a new
concept where the consumer pushers the full shopping cart through an electronic gate to
the point of scale. In a matter of seconds, the items in the cart are hit with laser beams
and scanned. All that the consumers have to do is to pay for the goods.
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6. Payment
Payment through credit cards (plastic money) has become quite widespread and this
enables a fast and easy payment process. Electronic cheque conversion, a recent
development in this area, processes a cheque electronically by transmitting transaction
information to the retailer and consumer’s bank. Rather than manually processing a
cheque, the retailer voids it and hands it back to the consumer along with the receipt,
keying digitally captured and stored the image of the cheque, which makes the process
very fast.
ERP system
Various ERP vendors have developed retail-specific systems which help in integrating all
the functions from warehousing to distribution, front and back office store systems and
merchandising. An integrated supply chain helps the retailer in maintaining his stocks,
getting his supplies on time, preventing stock outs and thus reducing his costs, while
servicing the customer better.
CRM systems
The rise of loyalty programs, mail order and Internet has provided retailers with real
access to consumer data. Data warehousing & mining technologies offers retailers the
tools they need to make sense of their consumer data and apply into business. This, along
with the various available CRM systems, allows the retailers to study the purchase
behavior of consumers in detail and grow the value of individual consumers to their
business.
Wi-Fi
As Wi-Fi technology has matured, retailers have begun to see it as a robust, inexpensive
option for in-store connectivity. The concurrent development of handhelds has
dramatically broadened retailers' options for application delivery. With Wi-Fi enabled
handheld devices, applications such as POS, inventory audit, item lookup, pricing and
labor scheduling can be used anywhere on the sales floor. Wi-Fi is quickly becoming a
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7. standard for retail. Chain Store Age's survey found that 19.5% of retailers polled last
summer planned to spend capital-investment funds on Wi-Fi networks.
RFID (Radio Frequency Identification)
There are many uses of RFID. Some of them which are used in-store are as follows:
RFID helps improve inventory management
Inventory control is often a costly, time-consuming process for retailers. By offering real-
time inventory visibility, RFID enables inventory managers to monitor and control
inventory supply at all times. By automating the inventory tracking process, stores can
keep costs down by maintaining optimum inventory levels—avoiding stock-outs and
eliminating unnecessary orders. Tracking capabilities also make it easier to predict
product demand. Store managers can monitor quick-selling items with increased
accuracy, ensuring that their inventory supply is stocked accordingly.
Improving customer service
Satisfied customers mean better business for retailers. By using RFID, your staff can
identify the exact location of any retail item at any time. Customer requests can be
handled quickly and easily by your customer service team through access to a centralized
database. RFID-tagged items offer store-to-store visibility, so items can be located
immediately with the touch of a button. This level of product accessibility results in
shorter wait times for customers and offers a better shopping experience. Improving
overall store efficiencies ultimately results in greater savings to customers.
Boosting customer loyalty
RFID can be the personal shopper of the future. By using RFID technology, retailers can
collect information about their customers' purchasing trends and offer rewards targeted to
those interests. RFID can enable your marketing and customer service teams to identify
customers, call up account histories, and provide value-added services to help create a
personalized shopping experience. For example, one clothing retailer in New York is
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8. using RFID smart labels to store information about each item in the store, such as fabric
content, available sizes and colors, and suggested complementary items or accessories.
RFID readers in the fitting rooms are connected to computer monitors so customers can
view all the information and make decisions—without ever having to leave the fitting
room. And, because privacy is a primary concern, advanced security technology enables
your IT staff to better protect all information. Participation is optional for each customer.
Technology has always made advancements. The difference today is the speed of
introduction of newer replacement technologies. Thirty years ago, a retailer would hold
onto business technologies for 10 to 15 years. Twenty years ago it was reduced to eight
to 12 years. Ten years ago it was again reduced to six to nine years, and today, retailers
replace their technology in only five to seven years. As a result, retailers are capitalizing
their technologies faster than ever before (on average, within three years).
Because technologies are moving so rapidly, some retailers hesitate and lose their
competitive edge. They are afraid newer technologies will come along to make their
investment obsolete. Obsolescence is reached when it costs more to keep a technology
than it saves in time, energy and money. Increasingly, the successful use of technology is
seen as necessary for their own survival in the longer term.
The payback for advancements in retail technologies can most often be quickly realized.
Therefore, one school of thought is that a retailer should replace their technologies faster
because each new technology has a quicker payback. That is a good business strategy
because the purpose of the technology, when it is implemented and managed correctly, is
to continue to drive costs down and move productivity up
Several recent studies within the retail sector have indicated just how important
technologies are today for the retail community. Consider the following survey results:
Nearly 40% of the retailers surveyed claimed they expect to invest in new retail
technologies in order to stay ahead of projected growth. This is up 30% over last year.
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9. Over 60% claimed their budgets for retail technologies, as a percent of sales, have
increased.
It is apparent that retailers are now investing more than ever in technology. They are
demanding technologies to help them adapt to the ever-changing needs of their
marketplace. They are using every kind of technology available to reduce their cost of
doing business, and to make them the low cost provider. And finally, they are requiring a
vast array of applications that will help them to take a proactive approach to their
relationship with retail consumers.
Retailers want to get more value out of IT and ensure they are spending their
limited resources in ways that improve their overall offer to the customer.
Technology has proven to be a competitive weapon in retail, which is a dramatic
shift from a decade ago. In response, retailers generally need to become more
disciplined in managing the IT function. With the increase in globalization of
retailers both in terms of their points-of-sale, as well as their points-of-supply, the
Information Technology (IT) spend in the retail sector has increased considerably
and plays an increasingly important role in managing the complexity of retail
operations.
While retailers take their time embracing technology, the following will
serve as a reality check.
CELL PHONES
Using mobile phones to alert shoppers about complementary items, sales and as
a vehicle for coupons is a very attractive option for retailers. Partially, that's
because it's a lot cheaper than, say, a smart shopping cart. Most shoppers
already have cell phones, so that limits the back-end investment. Third party
companies are also rushing in with solutions.
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10. SMART SHOPPING CARTS
Smart shopping carts have been around in one form or another for about 20
years. The original idea was to include a bar code scanner on the carts so
shoppers could circumvent the checkout line. Then the focus shifted to
marketing. Smart shopping carts sporting book-sized computers that appeared in
two Safeway stores in California in 2002 required a customer to swipe his or her
Safeway card at which point the cart's brain would access the customer's
shopping history. The cart would then display four grocery items at sales prices
available to them exclusively. It also offered a guide to the customer's most
frequently purchased items and, as the on-board computer tracked the cart's
movement down the aisles, radio frequency ID (RFID) chips would prompt the
processor to notify the customer of sale items and appropriate promotions.
PLASMA SCREEN TVs
Since the '70s, select supermarkets have been using in-store TV programming
(usually cooking demonstrations) to move product, but in the past five years or
so, in-store TV networks have popped up at Wal-Mart, Target and Borders,
among other places. It's easy to see the appeal: A captive audience in buying
mode. And new technologies add another element
BI-DIRECTIONAL INFRARED SENSORS
In 2008, many analysts agree, there will likely be some sort of industry standard
metric for in-store media. That's thanks to the efforts of Nielsen Co., in
conjunction with The In-Store Marketing Institute and P.R.I.S.M., a consortium of
retailers, marketers and media agencies, measured store traffic in 160 stores this
year with bi-directional Infrared sensors, which sit on store shelves. The
technology, which has been around since the '70s, measures raw numbers and
is supplemented by old fashioned head counts. So far, it's the best approach.
GPS devices on shopping carts didn't work because consumers tended to
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11. abandon their carts during trips Thermal imaging couldn't distinguish between
babies and turkeys in tests.
ELECTRONIC SHELF LABELING
Despite the inventory-clearing advantages of a store sale, a retailer still takes in
on the chin when it comes to the bottom line. In addition to losing out on potential
revenue, hours of employees' time are taken up painstakingly changing prices on
shelves (prices that usually have to get changed back a few days later). But what
if that store manager could change all the prices in store at once by simply typing
in a keyboard command? That's the major appeal of electronic shelf labelling. Of
course, the convenience comes at a price, too, namely about $4 per LCD label,
which can add up if you're a supermarket that stocks 17,000 or so items.
IT in Retail Store Operations is inherently complex due to four factors:
a) IT cost and performance under pressure owing to the high growth in
annual IT spend in the retail sector (~13%) while revenues have grown much
slower (~2%).
b) Lack of standards in a complex, highly customized IT
environment leading to integration challenges, making changes and new
functionality development cumbersome and expensive.
c) High maintenance costs stemming from the high degree of
customization and fragmentation of point solutions, many of which span different
technology platforms.
d) Poor data integrity, the result of systems fragmentation, point solutions, high
degree of customization and lack of an underlying best practice architecture, because
there is no good practice standard, out-of-the-box solution that spans the full retail space.
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12. IT systems are at the heart of retail operations and hence play a central role in
alleviating pressure points in the retail sector. The converse also holds true—
retailers who do not manage their IT landscape effectively will find that, in time,
the IT systems become part of the problem rather than components of the
solution. This is particularly true for IT systems that can significantly influence
COGS in the retail sector; for example advanced planning and scheduling
systems, inventory management systems and merchandizing systems.
Additional systems that share a crucial role in retail operations are the
promotional and seasonality management systems that, when leveraged
effectively, can increase the top-line revenues for the retailer.
IT has gone from a strategic advantage to a strategic necessity for retail
Operations.
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13. Findings:
Cause:
• Communication with customer’s through media cart and new ways of marketing
and technology such as Text messages.
• Use of RFID, Smart card, self check out, WI-FI technology, Tunnel scanning,
Cell-phones, electronic shelf labeling, bi-directional infrared sensors and Plasma
screens Tv’s.
Effects:
• Increase in sales by targeting shoppers with text message based promotions.
• Delivering targeted promotions based on users shopping behavior, redemption
history, in-store location tracking and previously scanned merchandise which
would help to keep customers track and help customer’s to escape standing in the
long cue’s for paying the bills for hours.
• Access for Improved decision making.
• RFID helps in Inventory management, improve customer service, customer
loyalty.
• Using mobile phones to alert shoppers about complementary items, sales and as a
vehicle for coupons is a very attractive option for retailers.
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14. Recommendation:
It is apparent that retailers are now investing more than ever in technology. They are
demanding technologies to help them adapt to the ever-changing needs of their
marketplace. They are using every kind of technology available to reduce their cost of
doing business, and to make them the low cost provider. And finally, they are requiring a
vast array of applications that will help them to take a proactive approach to their
relationship with retail consumers. Since retail technologies are readily available in
today's marketplace, and most of the products sold by different retailers are virtually
identical, the only true difference between retailers is their ability to use technology to
manage their business and give them the competitive edge. Information Technology in
store operations surely boost up the customer footfalls and sales. As companies begin to
understand the issues and research the right technologies to solve the problem, energy-
efficiency can become an opportunity. So my view is that retailers should also
concentrate on the energy efficiency by ways such as using the technology when needed
as it becomes a major cost to the store.
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15. Scope for further research:
• With the advancement of technology day by day, there could be
further research on how new technologies can be efficient for
retail for increasing the sales and customer experience.
• As technology needs huge amount of energy there could be a
further research on the efficient use of energy by IT in retail
store operations.
Conclusion:
The organized retail sector has recognized that IT can give it an edge over the global
competitors and the neighbourhood kirana store. It took some time for IT vendors to
realize the vast potential in retail; the sector itself had been a little slow in leveraging IT.
Now that the smoke has cleared, vendors are unveiling an entire range of IT products and
solutions for the retail sector. The three dominant trends in the deployment of IT in this
fast growing industry are-the dominance of package solutions, the focus on supply chain
optimization, and the new drive towards IT in store Operations. Wal-Mart employs a
technology that automatically replenishes stock when a purchase is made, resulting in
fewer instances of a product running out. The system, called Retail Link, posts an order
online for the supplier after the item is scanned at the checkout. With the increase in
globalization of retailers both in terms of their points-of-sale, as well as their points-of-
supply, the Information Technology (IT) spend in the retail sector has increased
considerably and plays an increasingly important role in managing the complexity of
retail operations. Thanks to technology advances, new cost effective, integrated in-store
communications and operation solutions exists that can improve the customer experience
and help make the sales associates time more productive. Retail stores can really boost
the footfall of the customers and their conversion by knowing the customer buying
behaviour, their taste and providing better services such as less time for billing, better
customer service and loyalty can be made with the help of information technology in the
store.
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