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...
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.
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.
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.
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.
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.
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.
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.