ARTICLES
ARTICLES:
1. National Retail Forum 2005 (Australia) -
Conference summary report
2. NRF 2005 - Highlights of New York's primary retail technology event
3. RETAIL TECHNOLOGY....What do retailers really want
4. Better processes beat better processors
5.
WORKGUIDE - Buying a new system for your business
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By Julian Josem, NRF
Chairman and independent retail technology consultant.
The search to
overcome difficulties facing Australian retailers is driving creativity in
retailing in many directions.
According to Duncan
Shaw, NSW Executive Director for the Australian Retailers Association, who
opened this year’s National Retail Forum, Retailers are battling high
occupancy costs, an aging population, ever-increasing petrol prices, and the
fact that a large amount of spending continues to be sucked into electronic
gaming machines.
The 2005 National
Retail Forum was held in Darling Harbour in Sydney July 20 to 22, and covered an
extraordinary depth and breadth of retailing topics, providing delegates with an
opportunity to explore ways to improve their operations with other retailers and
world-wide experts.
350 delegates heard from selected local and international speakers covering major areas of focus for retail managers:
Futurist and social
commentator Richard Neville opened this year’s forum to speak about the dual
trends of globalisation and the importance of local area marketing for
retailers, and referred to them together as “glocalisation”.
He identified the trend of “customer made” - retailers that are
tailoring their offerings to specific customer need are doing well.
On the technology
front, Richard Neville identified the trend towards robots.
He cited examples in Japan where robots are performing the tedious tasks
for an aging Japanese population, and predicts that retailing will benefit from
robotics in the future.
He also made the
observation that less retailers are taking advantage of the green movement than
might be expected given the increasing numbers of environmentally aware
consumers. He advises that
retailers think about appealing to the “ethical chic”.
On the technology
front, Fujitsu USA’s Vernon Slack, spoke about the introduction of intelligent
shopping carts, and how increasing the number of customer touch points
correlates to an increasing customer loyalty and spend.
Also on the
technology front, Jim Greene presented on Microsoft’s strategies to assist
small to medium retailers. Jim is
the man responsible for Microsoft’s international strategy in the retail
sector. Clearly, Microsoft’s
approach is one of integration, starting at the operating system level with
Windows Embedded, and integrating functionality from all corners with its Retail
Management Solution (RMS) product.
Lori Schafer,
President of MarketMax, SAS Institute’s retail division, spoke about how the
predictive technologies developed by the company are being used by some of their
retail customers. She presented
case study data showing the enormous opportunity retailers have to improve
profitability with the use of such tools.
GS1 (formerly EAN
Australia) General Manager for Standards Development, Fiona Wilson, presented on
the international and local activity with Radio Frequency Identification (RFID).
She outlined the pros and cons of the technology, and the Australian
position with regards to standards adoption.
The National Demonstrator project is underway with participating firms
including Metcash, Visy Industries, Linfox, Chep, Proctor & Gamble, and
Gillette. The project is
progressing, and will provide a body of local practical experience for those
companies considering implementing RFID within their supply chain.
The conference
delegates heard from the Australian Centre for Retail Studies (ACRS) Executive
Director, Amanda Young, and Geraldine Kennett, IAG’s Victorian Member Strategy
manager on the subject of Employee Retention.
Research from around the world has identified the difficulties associated
with attracting people to the retail industry as a career.
ACRS is conducting research into all aspects of attracting and retaining
staff within the retail space. Amanda
Young told delegates that the key was to develop a strong culture within an
organisation. Initiatives that are working for leading Australian retailers
such as Bunnings are:
Quantified results of
ACRS research was backed up by Professor Richard Hollinger from University of
Florida, who presented the results of the USA 2004 National Retail Security
Survey. His research showed that
one of the most consistent predictors of inventory shrinkage was a retail
firm’s level of annual employee turnover.
The Florida research showed an increase of employee theft of 30% in
stores that experienced high management staff turnover.
Dean Newlan, KPMG
Forensic’s Executive Director, said that the USA research correlates strongly
with Australian figures. Both
Newlan and Hollinger quoted average retail shrinkage figures of around 1.5%,
made up by a mixture of customer theft, employee theft, and paperwork errors.
Research shows that employee theft was the highest area – 47% of
shrinkage, with shoplifting accounting for 34%, and paperwork and vendor fraud
together 19%. Worst performing was
specialty and apparel retailing with an average loss of 2.93%.
Local retailers
Harvey Norman and General Pants presented on their loss prevention strategies.
Wayne Plant, Harvey Norman’s Loss Prevention manager, provided examples
of signage and company policies with regards to bag checks for both customers
and staff. Both he and Ron
Robinson, National Loss Prevention manager for 50-store retailer General Pants,
provided delegates with many tips on how to minimise losses.
A key strategy advocated by both is to establish clear policies that
employees sign when beginning their tenure with the company.
Great interest was
shown from NRF delegates in the changing makeup of the Australian population.
Chris Cormack of Senioragency Australia showed examples of good and bad
advertising with respect to the significant baby boomer demographic.
He said that many retailers forget the fact that grandparents buy from
them for their grandchildren. He
highlighted that the most powerful consumer is the 58 year-old woman because she
is a four-generation influencer – she influences her children, her
grand-children, her partner, and more than likely, one or both of her parents.
Retailers alienate this person at their peril.
Chris Cormack quoted
some startling statistics about the baby boomer generation (born 1946 to 1964):
Chris Cormack said
that Bunnings’ employment policies of employing mature staff is one of the
factors making them the most respected retailer in Australia.
ACRS Program
Director, Steve Ogden-Barnes, recently returned from an international retailer
study tour taking in Europe, UK, North America, and Japan. He presented on the hot retailing concepts, and commented on
the strategies that are growing retail. He
said that the “Good, Better, Best” strategy is widely adopted, and is
underpinning growth amongst retailers.
Steve backed up the
statements of technology speakers on the growth of predictive technologies for
retailers. He gave details of an
example with McDonalds where, based on the length and makeup of queues of
vehicles in the drive-thru line, roof-top cameras and database analysis systems
were alerting staff to the likely menu items that will be sold to customers in
those vehicles. Results showed that
wastage was reduced by 50%, and customer wait times were reduced by 25 to 40
seconds.
ING Real Estate
Managing Director, Mark Broomfield, presented an array of visual images taken of
retailers and shopping precincts from around the world.
He provided examples of the many ways shopping centres and retailers were
engaging consumers by making retailing more entertaining.
He quoted research indicating a worldwide trend suggesting that shopping
forms the main component of people’s available leisure time, and so the
emphasis of combining entertainment and retailing is crucial.
Two retail store
design experts, Neil Arrowsmith and Jason Laity, presented the science
underlying visual marketing techniques. Delegates
were shown many examples of ways retailers could make effective use of floor
space, and the importance to have customers get close to the products on offer.
Neil Arrowsmith, Managing Director of Angley & Arrowsmith Retail
Designers quoted lifts of sales between 20% and 100% for their designs.
Louise Sidgreaves,
Principal Designer and Director of the Sidgreaves Group, provided delegates with
tips and techniques of implementing designs within a fitout budget.
As she says, “Every budget is a tight budget, only some are more
realistic than others”.
Another emerging
trend is the use of digital technology for in-store media. Bob Pritchard, an acclaimed marketing specialist having
worked for both News Corporation and PBL in key marketing and sales roles,
highlighted that much of a retailer’s media advertising dollar was missing the
mark, and this problem will escalate with traditional forms of advertising with
the advent of digital video recorders that strip out the advertising content
from recorded programs. Pritchard
advocates Point-of-Presence (POP) advertising because it is present at the time
consumers make their purchasing decisions.
He highlighted that
the development of the technology has meant that messages can be managed across
all stores very effectively, and with a lower cost of implementation.
The Australian
Retailers Association, the peak body for the retail industry, regarded the
annual event as a resounding success, ensuring its continuity.
The 2006 NRF will be held in Melbourne.
By Julian Josem
The National Retailers Federation of USA put on its biggest retail show yet with some 6,500 visitors attending the annual New York event.
350 booths on the
expo floor demonstrated the latest technologies being employed by retailers
together with a four-day conference addressing a wide cross-section of issues
retailers face.
Held January 16
through 19 at the Jacob K. Javits Conference Centre in New York, visitors to the
expo saw and heard first hand from the leading technology vendors, whilst
conference delegates heard the experiences from many leading US retailers.
Wal-Mart CIO, Linda
Dillman, told conference delegates that the company successfully met its
self-imposed deadline announced in June 2003 of having its top 100 suppliers
utilise RFID pallet tags for its shipments to 3 Distribution Centres by January
1, 2005.
In the first
two weeks of January this year, the company claims to have received 210,390
tagged cases, within 7,181 pallets from 57 suppliers.
That’s some 1.5 million EPC reads.
The company has
installed over 14,000 pieces of equipment, with some 230 miles of cable.
Ms Dillman said that
the company was experiencing greater than 99% successful reads with pallet tags.
She expected difficulties in reading the tags attached to cases on fully
laden pallets – success rates are averaging 66% in the first two weeks which
is better than expected.
The company is
already benefiting from improved stock visibility, as are Wal-Mart’s suppliers
having access to stock movements within stores inside 30 minutes.
Many technology firms
demonstrated their RFID products and services as experience with the new
technology begins to take hold within the retail industry, somewhat driven by
Wal-Mart’s initiatives, although many other retailers have also implemented
pilot RFID programs.
Colin Cobain, Group
CIO for Tesco, disclosed that RFID implementations are being installed in 1,400
stores within the group in order to reduce costs, and improve customer service.
A focus for the expo
was the show’s X05 initiative where a series of vendors co-operated to
demonstrate a series of futuristic store applications.
RFID labelling,
Digitised voice transmission over wireless IP networks, Digital Signage, Stored
digitised music, Interactive kiosks, computerised telephone handsets, and
hand-held PDAs were amongst some of the technologies visitors experienced at the
X05 display.
A sizeable Australian
contingent attended the event with delegates from leading Australian retailers,
vendors, and consultants.
Software technology
was also prominent at the expo. An
area getting much attention is personalisation marketing – various retailers
spoke about their efforts to understand the personal needs of customers, and how
their systems are using the technology on the shop floor by way of Portable
Digital Assistants (PDAs) to allow sales associates to view information about
specific customer information, and matching needs with products and
availability.
Various retailers
spoke about their experiences with price optimisation software, and how the
technology is successfully lifting overall margins, and working with the
management of product life cycles.
Bearing Point
(Formerly KPMG) presented its 2004 benchmark and 2005 forecast, which ranked
Merchandising and Inventory Management as the highest Information Systems
priority in 2004 (ranked fourth in 2003).
Point of Sale system
replacement was ranked as the second priority in the survey, followed by cost
reduction and/or containment, and Customer Relationship Management ranked
fourth.
Other technologies generating interest are:
For a full report on
the conference, contact Julian Josem.
**** RETAIL TECHNOLOGY **** WHAT DO RETAILERS REALLY WANT
by Julian Josem. July, 2004
Asking a solution provider what retailers really want is a
bit like asking a man what women really want.
If vendors only knew what retailers were thinking… they’d be looking
for another industry.
As the Mel Gibson movie goes, a sharp electric shock might
do the trick.
But ask retailers about their top retail management
issues, and you can be sure to find retail technology playing a prominent part.
The brave staff at the Australian Centre for Retail
Studies regularly surveys Australia’s top 400 retailers. The survey reported in 2002 that the top 10 retail issues
faced were:
Retail technology will go a long
way to either directly resolve issues in these areas, or at least play an
important role in identifying, measuring, and improving results.
The Information Technology (IT) industry is currently
embroiled in a debate within its ranks as to whether or not IT can deliver
sustainable competitive advantage to its user businesses.
Nicholas G. Carr’s Harvard Business Review article of May
2003 contends that “as IT’s core functions have become cheaper, more
standardised, and more easily replicated, their ability to serve as the basis
for competitive advantage has steadily eroded.”
For retailers, this means that your competitors can quickly
copy any benefit that IT can generate, and therefore the high investments
required to implement ground breaking technologies no longer justify their cost.
In fact, Carr says “it would be wise to manage IT as a commodity input,
seeking to achieve competitively necessary levels of IT capability at the lowest
possible cost and risk.”
Right now within retail, there is a great diversity and
breadth of current IT developmental activity, so each business is well advised
to keep abreast of what technology can offer, and the implications to each
investment decision.
Retailers must decide on how to best leverage the use of
technology within their business. It’s
what you do with the technology that leads to benefits, not the technology
itself.
But the reverse can also be true; ignoring new technology
can build in cost and overhead that your competitors avoid.
Fundamentals of retail technology unfortunately remain top
of mind for many Australian retailers. Small
to medium sized retailers in particular would be delighted if their retail
technology simply lived up to expectation.
It’s an area where the Australian Retailers Association has received
significant complaint.
In direct response, the ARA has formed a sub-committee to
assist retailers improve the value derived from investments in retail
technology. New IT Governance
standards have been released, spelling out the responsibilities an organisation
has in dealing with IT systems. It provides retailers with a list of questions that managers need to have
answered about their systems approach.
Rather than get the electric chair out for the vendors if
expectations are not met, it’s about empowering the retailer to better
understand his own needs and limitations in undertaking the serious process of
IT system acquisition. The ARA
suggests vendors and retailers sign up to an agreed process minimising the risk
of project failures.
The basic service delivered by successful system
implementations tells retailers what stock they have in each location.
They will identify what’s selling where, to whom, and when, and at what
price and at what margin. Systems will also measure overheads, cash flow, and
profitability. From the information
produced, retailers will have the information to decide about price changes,
marketing promotions, and product ordering.
It sounds easy when you lay it down in a single paragraph,
but everyone knows that good disciplines are necessary to make it achievable.
Improvements in the provision of fundamental retail
technology are occurring on a daily basis; more accurate scanning systems, less
expensive networking options, more effective loss prevention techniques, easier
to use POS systems and more useful integrated retail management systems.
Once the fundamentals are in place, retailers are faced
with the constant task of evaluating their systems, directing changes and
improvements to identified areas, and monitoring of the results.
It’s during the review cycles that retailers will employ new
technologies to help refine business processes in order to realise potential
gains.
Conversion rates are often overlooked – keeping an eye on
the ratio of sales transactions to potential sales transactions.
This means installing people counters within stores.
Every retailer should use their IT systems to track this statistic
because trends gives you a health check as to the performance of various aspects
of the business. Monitoring
conversion rates tell you if you need to improve selling skills, whether your
staffing levels are right, or how well your product and promotions mix is
working.
Retailers are beginning to report significant gains by
utilising price optimisation technology – that’s where the system gives you
guidance as to the timing and quantity of markups and markdowns – resulting in
a reduction of the workload in determining pricing, and maximising profit and
cash flow by making sure that you’re not left with piles of stock to quit at
the end of a season.
Retailers have to keep looking at their supply chain
processes to ensure that they are eliminating unnecessary costs.
Collaboration with suppliers, whilst not simply a technology issue, is
delivering great benefits to many retailers because suppliers are sharing the
costs of holding stock and meeting the demand of retail stores.
Improving the planning and forecasting tools can
substantially raise bottom line performance.
Technology vendors are providing secure and shared access to retail POS
data for suppliers to replenish stock directly to stores, thereby minimising
lost store sales and at the same time, reducing investments in inventory.
New tools are also available for the smaller retailers.
The ARA is providing a low cost ($400) stock and financial planning tool
called Strata-G to help retailers implement and manage an Open-To-Buy program
and to track various financial benchmarks.
With the availability of this tool, all Australian retailers can manage
their stock purchases in accordance with their business plan.
The tool also helps implement business strategies that drive up financial
performance.
It’s a bit like learning to play golf – the benchmarks
keep your eye on the overall flight of the business, and at the same time allow
you to see the effects of potential changes to micro strategies.
Improving communications and relations with customers is an
ever-increasing role of retail technology.
Products and tools are emerging to deliver promotions and newsletters via
email and SMS, driving sales via the web site or enticing customers into the
store again.
New electronic products and services provide alternatives
to hard copy catalogue printing and distribution, and integrate customer loyalty
and giveaways into the deal. They
even keep track of each web page a customer views so that you can direct your
promotional material to areas of the customer’s demonstrated interest.
This is where the retailer begins to learn what customers really want!
There are new areas of technology where retailers are
making increasing investments in order to learn about the potential benefits and
costs in supporting the introduction of the new technology.
A lot of activity is centering on the use of kiosks and
hand-held devices to facilitate delivery of relevant information to
customer-facing knowledge workers. For
example, Portable Digital Assistants (PDAs) are being used to give the sales
assistant more in depth product information to help customers sort out which
product is most suitable.
PDA’s also have the ability to identify customers,
display their past shopping activity, and even finalise the sales transaction
including payment capture. And on the road, PDA’s are extending the reach of
retailer systems via private networks.
RFID (Radio Frequency Identification) is another area where
retailers at this time are investing in the technology mainly to learn about the
potential benefits and implications. It
is an area where the technology has the potential to dramatically alter the way
retailers operates.
The step right now for most retailers is to allocate
responsibility to a staff member to learn about the technology and look for
business processes that might benefit from the introduction of RFID at a future
time.
In the short term, retailers will most likely benefit from
streamlined goods inwards processing. In
the not too distant future, other in-store processes will be streamlined,
resulting in greater visibility of stock held within stores and ultimately
within fixtures from head office.
Clearly, before these applications can be put in place,
systems must be able to cope with the vast increases in data volumes that RFID
will generate. Retailers need to be
mindful of the need to work within industry standards.
An interesting area that is emerging is experiential
retailing. When linked with
business systems, retailers bring to bear the power of highly focused market
data with specific selling technology. In
this way, for example, a customer who expresses interest by picking up a
football in a sports department can trigger an in-store technology reaction to
spotlight the football department, trigger the relay that spurts the smell of
liniment into the air, and in the Sydney store, plays the Sydney Swans team song
and video.
Experiential retailing is all about using technology to
create the emotional link between stores and customers for their brand.
Good IT governance will ensure that a retail business can react to market factors, making sure that the business successfully rides out the bumps, and takes advantage of the opportunities they present. It means that solution providers and retailers alike will have less up front guesswork.
By Julian Josem
Technology promises so much for all
industries; whether you’re a manufacturer, service provider, wholesaler,
retailer, or just plain consumer.
Shoppers receive great benefit from
technological advance, yet are mostly unaware of it. In fact, we consumers expect to receive a level of service
that can only be delivered if all the technology up and down the supply chain
works correctly all of the time.
Customer satisfaction is achieved
when the right product is available at the time they want it, at the place they
want it, and at a price they are willing to pay.
Customers are unhappy if any one of
these needs cannot be fulfilled. Do
this too often, and the customer will be lost.
Consequently, it is fundamental to
the success of any business operation that the technology within the business
must be aligned to fulfil these basic needs of customers.
When a retailer offers a product for
sale, and it is not available to the shopper when demanded, the business fails
to deliver on the promise to the customer.
Do this often enough, and the customer becomes an ex-customer.
This rule applies right through the
value chain – from supplying raw materials, to manufacturing,
to distribution, to retailing.
It is a crucial but often overlooked
factor to the success of any business to get its technology and business
processes aligned to deliver against these fundamental needs.
Most businesses evolve their business
process steps over a long period of time. They develop processes that become entrenched in the way the
firm conducts its business.
These processes are not necessarily
right or wrong since there are many ways to achieve the same objective.
In fact, the business process is often the very thing that gives the
business its competitive edge.
When questioned as to why they do
things a certain way, the response is often “that’s the way we’ve always
done it.”
When selecting a new business system,
it is the processes that are unique to that business that have evolved over time
that often prevent the business from achieving seamless integration of the
chosen system into the business.
If the new system fails to work
effectively with the pre-existing processes of the business, a business can
reduce rather than increase customer satisfaction and consequently business
profits.
In other words, if the selection of a
business system is completed without due consideration to the
business processes, no matter how good the chosen system, the customer
experience will deteriorate.
It is these situations where you find
the systems vendor blaming the business, and the business blaming the vendor or
the system itself. Nobody is the
wiser as to what went wrong.
A mismatch of business systems to
business processes often results in inefficiencies of operation, increased cost
of doing business, and disappointment of customers.
Business systems these days are
mostly packaged solutions, and the implementation of the system is a critical
success factor.
The first step towards successful
implementation is defining what “successful” means. Defining the vision for the new systems and business
processes. Then, the best way to
avoid the pitfalls of poorly matched business systems yet deliver the promise of
the technology, is to write down each and every existing business process step,
thereby creating a business process map.
Business process map in hand, run a
workshop with your management team to refine and simplify the processes.
Look for ways of reducing the number of non value-added steps, and the
number of handovers between people and departments.
Assessing the value added step by
step highlights the areas where you can focus efforts to bring about
improvements. Look for areas where
there are many steps conducted for little gain.
Having it down on paper ensures that
the focus of the discussion is on the processes rather than on personalities.
We at ATS use industry benchmarks to understand how competitive a
client’s processes rate within their industry; a useful measure for our
fundamentals.
It’s rare that managers are able to look at the broader picture and
able to improve processes on the fly. Taking
the time to critically examine your own business processes will not only allow
you to better match a vendor’s system to your operation, but will also allow
you to improve your business.
When evaluating systems, walk the
potential system through your business processes to give you an understanding of
the match between the system and your unique business by using the business
process map like a script.
By doing this properly, you will find
that the vendors will be able to give you a better idea of how well their system
will suit your business. Although
they want the sale, they don’t want a bad installation either.
Keep your promises to your customers by making sure that the business systems you deploy suits the way you run your operation – Only then will you be able to increase your return on the investment in your technology.
Buying
a new system for your business?
Want
to know how to maximise VALUE?
Want to AVOID going backwards?
Whether you’re a small, medium, or large retailer, making sure your system matches your business is the first priority to your success.
We‘ve written an easy to follow, step-by-step, fill in the blanks, guide to help you introduce a new system to your business. It steps you through:
· The whole selection process
· Questions to ask before you buy
· Getting your staff on board
· Setting and rating your evaluation criteria
· Reference questions to ask other retailers
· What to include in the contract – don’t overpay!
· Transition from contract to successful installation
Written especially for Australian retailers by Julian Josem, Principal Consultant, Affable Technology Services (ATS).
If
you’re buying a new system, then this guide will be your best investment.
Call
or email ATS to order.