Window shopping for Retail Solutions

With the 20th annual Retail Solutions Show and Conference next week, Christopher Field summarises the main technology concerns...

With the 20th annual Retail Solutions Show and Conference next week, Christopher Field summarises the main technology concerns for retailers and speaks to retail IT directors.

The 300 exhibitors appearing at this year's Retail Solutions exhibition at the NEC in Birmingham will make it the largest ever. But one important IT director who will not be there is Martin Chatwin from supermarket chain, Iceland. "I don't like most shows, they're too technical," he says.

David Hallet, group IT director at Littlewoods, only goes every other year. "The breadth of the show is huge, it's almost impossible to focus on what you are interested in."

He is also concerned about how many decision makers are there. Organiser Emap says there will be 7,000 visitors - a figure that has neither risen nor fallen in the last five years. Hallet says, "I only saw two of my counterparts there last year."

Whilst both men feel that shows of this kind are important, Hallet says, "Retail Solutions is good for new organisations entering the market and reaching out to new customers, and for companies that have something really revolutionary to announce."

But he adds, "I keep in close touch with all my suppliers so I would be surprised to find something new from them at the show."

Other less sceptical retailers send systems people who spend so much time focused on their own systems that they can miss what's happening in the wider world.

Retail Solutions reflects the way technology priorities have changed dramatically in less than 10 years. The old show was dominated by equipment - tills, printers, cash drawers and scanners. Now, apart from the large players like Symbol, IBM, Epson and Siemens, the show is dominated by applications providers. Hallet adds,"Epos is dead, isn't it?"

The big names are Microsoft, IBM and Epson, which are all providing umbrellas over a village of solutions partners, a supply chain solutions section with names like E3, Kewill, Logica, Oracle, Ouromoff, Retek and Xtant. The main interest in the store systems section will most likely be application suppliers including NSB, KPOS and Pennine.

What IT directors often call into doubt is just how well many of these suppliers understand retailing and the problems it faces. It's the perennial complaint, the hype is all about Wap phones and Internet trading exchanges, while the everyday concerns for retailers remain supply chain efficiency and customer service. The key to success is for suppliers and retailers to agree to meet half-way.

Superdrug's IT director John Leventhall lists his main technology concerns as: recruitment, fulfilment through electronic channels; working with suppliers in the area of category management; more flexible till systems that will move beyond loyalty cards and identify individuals; thin clients to reduce the cost of building in-store systems, using the Web for two-way flow of data between head office and stores; cheaper in-store printing and hand-held devices with large screens to make information such as store layout planograms portable.

While this long list can be divided neatly into projects,which will cause suppliers to lick their lips, Leventhall and other IT directors insist that suppliers must first have a clear, realistic idea of what retailers need to achieve.

Leventhall says bluntly, "IT companies are always over-promising."

IT shows can only really help through their conference streams which discuss issues rather than solutions. There is a such a huge overlap of solutions in retailing that the IT director is becoming a more important player not so much at the operational but the strategic level. This overlap is impossible to detect in the exhibition halls where everything is divided by supplier and solution.

At the conference programme, however, there will be presentations from retailers on supply chain management, e-tailing, and modern marketing techniques. The keynote speaker at this year's exhibition is US retail guru Walter Levy, now with consultancy Ernst & Young, who will be speaking about how retailers can build their brands in a multichannel world.

Finally, will IT managers find the workers? Leventhall warns, "People are leaving retailing to either go and work for dotcoms or work in that area."

Employers need to offer an ever-improving package of incentives. It has even been suggested that IT staff are offered options in the same way as dotcoms, but this has yet to be taken up; retailers tend to want their staff to be in for the long term.

Suppliers have their own ideas about the solution to the recruitment crisis, one being application service provision (ASP). Chatwin has a long enough memory to express some scepticism about the value of their approach. "My excitement is containable. First it was bureau, then facilities management, then outsourcing and now ASP; they are all the same. There's nothing new," Chatwin says.

All IT directors welcome independent views to help them to steer a path between what suppliers tell them they need and what they know they need. Chatwin wants someone to apply a practical, business mind to Linux and Windows 2000 and suggest the pros and cons of taking these routes. In this respect, Retail Solutions is probably not the place to go for balance and sober reflection.

But it remains the largest retail IT show in Europe and even Hallet, who will in the US in early June, may have a few of his spies there.

  • The Retail Solutions show is on at the NEC, Birmingham, from 6-8 June. Tel 0870-751 1541 for details

    ERP is dead, long live ERP

    Enterprise resource planning (ERP) hit retailing like a meteor and, for a while, it seemed that the answer to the legacy systems-drag had been found. Three years on, the market is no longer defined by a handful of horizontal sector players such as SAP, Oracle and PeopleSoft.

    The players are more likely to be application suppliers who have been through a bruising period of consolidation and come out the other side having acquired the necessary integrated solutions to handle the core functions of merchandising, Epos and supply chain allocation.

    While these suppliers seek to distance themselves from the ERP pigeonhole, what they have in common is solutions that will enable retailers to build multiple channels to market without simply adding cost and complexity.

    One example of this new breed of company is NSB Retail Solutions, whose founder, Nikki Beckett, recently won a 'Businesswoman of the Year' award. NSB had a merchandising and warehouse system but no EPOS. It then acquired both Unlimited Solutions and RTC, aimed at tier one and tier two retailers respectively. NSB now has almost no competitors and can almost certainly tell a better story than SAP in terms of retail experience and tried and tested solutions.

    Supply chain and logistics used to live in a world of their own and tended to be covered by their own shows such as SoftWorld - which continues to grow. Now, with the advent of multichannel retailing, supply chain issues have come to the fore.

    In fact, the fulfilment of goods through e-channels is possibly the single biggest issue facing retailers for two reasons, they must exploit these new channels if they are not to lose market share to pureplay retailers, and their existing fulfilment systems are geared to bulk orders to a small number of fixed locations where e-fulfilment requires warehouse management systems that can handle large volumes of orders and delivery to multiple destinations. Superdrug's John Leventhall says, "Order creation software is mature, fulfiling it is not."

    This year's Softworld survey reveals that whilst 64% of companies have an e-business strategy and 35% claim to have a Web-enabled supply chain, only 4% actually have an e-supply chain. Furthermore, 62% of respondents do not see the acquisition of e-business technology by their competitors as a threat.

    The main survey findings also revealed that the greatest restriction to optimising e-business capability within the organisation was lack of understanding (29%). Furthermore, 47% of companies are assigning the development, as well as the implementation, of an e-business strategy to the IT function. Only 17% of those responsible for adopting e-business were board-level executives.

    There is clearly a mismatch between what companies are doing and what they want to do. The survey showed that nearly 80% of companies are planning to perform more business over the Web and 83% of respondents agreed that e-business functionality is essential for future software purchases.

    Supply chains not yet Web-enabled

    Supply chain and logistics used to live in a world of their own and tended to be covered by their own shows such as SoftWorld - which continues to grow. Now, with the advent of multichannel retailing, supply chain issues have come to the fore.

    In fact, the fulfilment of goods through e-channels is possibly the single biggest issue facing retailers for two reasons, they must exploit these new channels if they are not to lose market share to pureplay retailers, and their existing fulfilment systems are geared to bulk orders to a small number of fixed locations where e-fulfilment requires warehouse management systems that can handle large volumes of orders and delivery to multiple destinations. Superdrug's John Leventhall says, "Order creation software is mature, fulfiling it is not."

    This year's Softworld survey reveals that whilst 64% of companies have an e-business strategy and 35% claim to have a Web-enabled supply chain, only 4% actually have an e-supply chain. Furthermore, 62% of respondents do not see the acquisition of e-business technology by their competitors as a threat.

    The main survey findings also revealed that the greatest restriction to optimising e-business capability within the organisation was lack of understanding (29%). Furthermore, 47% of companies are assigning the development, as well as the implementation, of an e-business strategy to the IT function. Only 17% of those responsible for adopting e-business were board-level executives.

    There is clearly a mismatch between what companies are doing and what they want to do. The survey showed that nearly 80% of companies are planning to perform more business over the Web and 83% of respondents agreed that e-business functionality is essential for future software purchases.

    Wal-Mart technology brings fear to UK market

    US giant and the world's largest retailer, Wal-Mart, has finally shown its true colours in Europe, and is to rebrand subsidiary Asda's Bristol store Asda Wal-Mart, and expand the non-food offer to cover half the store's 90,000 sq ft, from Asda's normal 70%/30% split.

    The move will bring Wal-Mart into direct competition with electrical chains, Comet and Dixons for cut-price TVs and domestic appliances and the move has already hit Boots' shares which stand at about 500p from a high of 875.5p. Wal-Mart's reputation as an IT innovator will turn the spotlight on rival retailers' own strategies, or in some cases, the lack of them.

    Wal-Mart is expected to win through its rapacious and unceasing investment in technology. Some doubt that it can bring the same efficiencies to the UK where supply chains are among the most effective in Europe, but there is no doubt that the company is an impressive player; it can replenish any of its stores within 24 hours; close competitors take as long as four days. Wal-Mart is also a key member of the Voluntary Interindustry Committee on Commerce standards which pioneers all the leading edge techniques for collaboration between all partners in a supply chain-based on physical processes such as how product should be labelled and tracked, and what data should be shared across networks to improve replenishment, promotions, forecasting and new product introductions.

    Key technologies include the world's largest retail database. It can tell any Wal-Mart manager at any time, exactly how a product, range, store or region is performing. This will assist Wal-Mart to manage a mixed assortment of food and non-food items in a way that will give most UK variety chains a run for their money.

    Retail IT spend improves

    While IT spend in all sectors always rises and never falls, the retail sector continues to spend cautiously, between 1% and 2% of turnover. Computer Weekly's own figures show that IT expenditure in 1999 in retail, wholesale, hotels and catering was £6,272.9m, behind finance and banking sector which spent £7,057m.

    IT spend per employee in 2000 in retail, wholesale, hotels and catering will be only £1,429 compared to an average across all sectors of £2,494. However, IT spending growth in retail, wholesale, hotels and catering in 1999 was 23% and in 2000 it is expected to be 22%, while average growth across all sectors was 18% in 1999 and is expected to be 16% in 2000.

    Innovation by a handful of retailers paints a rosy picture not reflected in the rest of the industry, and the sheer weight of hype over Wap phones, Internet trading exchanges and CRM obscures the fact that most retailers would still rather rely on gut instinct than computer spreadsheets.

    Fortunately, the Internet, the advent of packaged versions of previously unaffordable and inaccessible applications, and the condescension of ERP companies finally forced to find growth in the SME market, is persuading even the market trader to turn to computers.

    Internet retailing: threats and opportunities

    The general belief, only a year ago, was that high-street retailing was under attack from dotcoms. A year later, as so many dotcoms failed to keep their promises over Christmas 1999 because of poor fulfilment systems, landed retailers have seen their chance.

    Gartner's CEO, Michael Fleisher, predicts the dotcom revenue model will eventually collapse, with each market segment undergoing huge consolidation until there are just a handful of key players still in competition.

    "A company's biggest competition could be the dotcom that's leading the field but, in other cases, it might be the traditional bricks and mortar competitor."

    Landed retailers have the advantage of well-known, visible brands, mature fulfilment infrastructures and the chance to take the dotcoms on at their own game. Intelligently, bookseller Waterstone's has integrated its online activities with the stores so that they operate seamlessly and give consumers more choice; books bought on the Internet can be returned to any store, stores have their own URLs, there are kiosks for ordering on the shop floor and in-store events are publicised on the Net.

    Waterstone's has built its multichannel infrastructure using the package Intershop 3.0 Enterprise. However, it needed help from specialist integrators to make it fit and can take credit that what is so simple to customers is in fact complex in IT terms.

    The worry is that there are still not enough workable solutions for multichannel retailing and also a lack of integration between them.

    Fleisher continues, "Among Global 2000 companies, mission-critical applications based solely on the Internet are very much the exception. In fact, less than 1% are based on the Net. More than 80% of mission-critical systems are totally isolated from the Internet."

    But over the next three years, he believes the sheer momentum behind e-business will force the companies to convert their businesses so that, by 2002, 80% of Global 2000 mission-critical applications will be completely interwoven with the Internet, "either through extending legacy applications to the Internet, or creating totally new Net-based applications that tie back into core legacy systems", Fleisher adds.

    Customer relationship management is new focus

    When retailers launched loyalty schemes three years ago, they thought that it would be start of lifetime relationships with their customers that would enable them to increase spend per head. This has not proved to be the case, despite the number of suppliers selling CRM solutions.

    The fact is, that retailers still know very little about individual customers and the tide of Epos data that is threatening to engulf both systems and the capacity of analysts to understand it, is not really helping them.

    Detailed intelligence about an individual consumer's buying habits belongs mainly to third party marketing agencies such as Consodata which retains a database of six million consumers based on detailed and regularly updated questionnaires. From the data, retailers can determine what brands consumers buy, where they buy them from and what type of lifestyles they lead. Twinned with Epos data about what the consumer has already bought, and retailers have a powerful CRM tool.

    Retailers should bear these current limitations in mind when attending Retail Solutions' latest sub-show - The Retail Marketing Show. Exhibitors at the Retail Marketing Show will include the market's leading suppliers of solutions for multichannel retailing, consumer research, in-store marketing and CRM. All of which will come with solutions designed to focus on persuading the consumer to buy through stores or non-store channels.

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