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Of retailers and techies

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CIOL Bureau
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What role does IT play in organized retail? This was the central question

at the Dataquest-SAP CIO Meet in Mumbai. On the panel were Pantaloon India

retail head (application development) Sameer Lodha, Globus deputy GM (IT)

Thomas Panickar, Titan India V-P and CIO N Kailasnathan, BPCL GM

Anand Teltumbde, Crossroads V-P (systems) Sanjay Mallya and SAP’s R

Subramanian
. The discussion was moderated by Foodworld Supermarkets CIO Rajat

Dasgupta
and Dataquest executive editor Rajeev Narayan. Excerpts...

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According to data released by the Confederation of Indian Industry, the

organized retail sector accounts for only 2% of the $180 billion retail market

in India. Large companies have now invested significantly in their retail

partners in the hope that they will be able to meet consumer demands and

aspirations, which retail has not been able to do in the past. According to CII,

retail has been the largest private industry in the world with total sales of

$6.6 trillion, ahead of financial services ($5.1 trillion) and engineering ($3.2

trillion).

Use of technology in the retail industry spans a very wide spectrum from the

store front-end in the form of Point of Sales (PoS) terminals and barcode

readers all the way to the back-end ERP systems. Then there are SCM tools for

constraints-based supply chain planning and forecasting, CRM tools to analyze

customer behavior as well as business intelligence tools to analyze business

performance and productivity from various perspectives.

Following animated debate on the issue of bar-coding, the panel unanimously

called for the unification of bar-code standards and suggested that the

government should take the initiative for enforcing them.

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Use of bar codes



Thomas Panickar (Globus):
We use bar-coding extensively for functions

ranging from warehousing to retail. The benefits are there for us to see. But it

is not picking up because there’s no standardization on coding as such. Also,

we have been using it in isolated systems, and not through ERP. ERP has its own

methodology for coding, which again exposes the lack of standardization. The

process suffers because of lack of initiative.

Rajeev Narayan (Dataquest): The biggest issue is who takes the

initiative to start the process of bar-coding first, manufacturers or retailers.

Bar-coding is looked upon as a cost item, and people, especially managements,

are often skeptical about the value it will bring. Following bar coding

standards involves huge costs, which the retail sector cannot really pursue

given the tight margins they operate on. For bar coding to take off, the

government will have to make it mandatory and subsidize equipment to a large

extent...

Anand Teltumbde (BPCL): We really can’t use bar codes on some of our

main products like petrol and diesel. For us, picking up information is relevant

only in terms of customer data capture for a product like liquefied petroleum

gas (LPG), where all customers have to be registered. We do have the Petro card

for petrol customers. This is basically more of a customer loyalty program.

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Sameer Lodha (Pantaloon): We use barcodes extensively. But cost is a

major hindrance. The other important issue is standardization. We make use of

Alternative Item Code, AIC or the manufacturers’ own codes. We interact

closely with manufacturers to work around any issues regarding this.

N Kailasnathan (Titan): Given that our products have very small

physical dimensions, we have a peculiar problem. We have watches and jewelry

that is so small, that bar code tags often fall off. If that happens, retailers

cannot usually locate these tags, and also run the risk of replacing the

original with a wrong tag.

This is the biggest reason why we don’t use bar codes much. But it is still

used in large stores, for physical inventory handling.

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We have tried using ring-shaped tags, but the larger issue has still not been

resolved.

Vachaspathi Pillutla (Adidas): There’s also a mindset issue. There

are some practical difficulties too, as many retailers from the unorganized

sector may try to swindle customers. Adidas India has stringent policies on

enforcing maximum retail price etc, but it becomes difficult to ensure

implementation at the level of grassroot retailers. Say a retailer in Chandni

Chowk may sell products at above MRP, or just to make others lose their

business, he may sell at a discount. Organized retailing helps, but the overall

mindset needs to change.

Managing information



Rajat Dasgupta (Foodworld):
As retailers, we are in the business of buying,

stocking and selling. Information on what to stock is very important, as our

overheads are high. Stocks need to be turned around faster.

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Titan: We have been managing our information reasonably well. We have

7,000 outlets, 1,500 variants of watches and three manufacturing facilities. How

to align our business model to market is the biggest challenge, as is speed of

delivery. A big issue for us is forecast fidelity. A number of sophisticated

systems–SAP, PoS systems–track that and now the alignment has gone up from

70% to 90%.

Pantaloon: The system that we have developed in-house tracks

inventory, promotions, sales, and customer profile etc. At the end of each day,

data from all outlets is updated at the head office. Therefore, we have

up-to-date reports on sales and inventory at any given point of time. We have an

automatic inventory system, as well as vendor management system, which enables

reports from vendors to be sent to them automatically.

BPCL: For LPG, we make use of front-end data capture, and at the end

of every day, the system enables us to see the stocks of cylinders that each

distributor/ dealer has. We have prompts generated from the plant (running SAP)

that emails to the distributor, if he’d like to order more stocks. It is a

very proactive system.

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Customer experience



Dataquest:
What retailers, and therefore solutions providers, need to focus

on is customer expectations. There’s a gap in IT and customer expectation. The

point of sale should be the central point of focus, as the customer wants

complete service from this point, not just the sale. The PoS can be centrally

integrated and the customer need not run to different counters for different

objectives...

Globus: We make use of bar-coding, which helps in reducing billing

time. The time taken to bill is exactly the same as that required for scanning.

And since prices are controlled centrally, if a tag falls, a similar item can be

checked from the racks and the tag helps in finding relevant and correct

information.

Dataquest: Point of sale scanning ensures that at the time of billing,

all information, even applicable promotions or discounts are visible on the

screen. Going further, retailers can install info-kiosks to enable customers to

browse and choose products, find information on promotions, give feedback...

Make the billing process mobile. Customer service executives an be equipped with

palmtops, scanners and printers and provide on-the-spot billing. IT can show the

way here.

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Data mining



BPCL:
We didn’t have formal IT-based data mining till date; though we do

capture data for millions of our LPG customers. But we have a definitive data

mining strategy; we have just procured and implemented our own data warehouse

system. We want to move further from just oil and gas retailing, to a major

retailing chain, with other goods and services too.

R Subramanian (SAP): SAP has strong warehousing tools. We have a good

OLAP tool. Complex data mining techniques can be used to recognize buying

patterns. But for any meaningful analysis, the requirement is clean, consistent

and integrated data.

Return on investment



SAP: We have special packages for small retailers. More than 50% of our

business comes from SMEs... from cities as small as Kolhapur and Parwanoo.

Retailers even ask for 10-15 licenses, as they want to do something meaningful

with their IT spends, and go beyond mere computerization.

Pantaloon: Whenever we catch shop-lifters, we capture extensive data

on them, to see what products they have taken, their personal profile etc. An

in-house written tool analyzes that data and helps us in predictive analysis

about a certain set of people, who might be given to shoplifting. Some patterns

have come up in certain segments of customers, so we have become alert and can

proactively safeguard against those set of customers. For example, some brands

carry aspirational value and thus, are most likely to be picked up.