The Hindu Business Line : Getting IT right

Your child has been saving up money for that Harry Potter edition for a long time. On D-Day she goes into the neighbourhood bookstore only to discover all copies have been sold. If this was the late '90s, you would be consoling her and hoping more copies of the book would arrive soon.

Not today. Retail companies such as Landmark will take your order and make the delivery in a few days. In fact, you can track your order through booking, dispatch and delivery, says Jai Subramaniam of Landmark, books, music and gifts retailer. Landmark has a sophisticated customer link system through which one can track one's order. The company went online (adopted IT) in 1997 and has fine-tuned its IT-based systems since then.

As organised retailers such as Landmark evolve, they are increasingly turning to IT support. Though major retailers have been using a considerable amount of IT for front-end and back-end processes, they are now looking to use IT support in specific areas such as customer relationship management (CRM).

Books, stationery, music and gifts retailer Odyssey plans to build on its CRM implementation this year. "We will use our customer database for direct marketing exercises and creating store-wise customer profiles. This will help get a better mix of products in the stores, thereby increasing sales," says T. S. Ashwin, Managing Director of the company. The company also plans to strengthen its sourcing and merchandising functions.

Discount retailer Subhiksha too plans to use IT to enhance the customer's shopping experience. Connecting with customers through SMS and Internet is the first step in this direction. "Eventually we want to use SMS to remind customers to re-order their medicines or favourite brands," says R. Subramaniam, Managing Director, Subhiksha. On the storefront, the company is looking at using IT to change price tags on all shelves. This is expected to improve staff productivity and reduce stock wastage.

Tesco Hindustan Service Centre (Tesco-HSC), the IT support arm of UK-based retail major Tesco, has developed specific solutions for different stakeholders. For instance, a portal for suppliers gives direct access to store-level sales data as well as information on wastage, margin and stock availability. It also gives standard and customised reports about each supplier's products at Tesco's UK stores.

Tesco stores also use technology for better customer service and reduced delays. Thermal sensors are installed in stores to pick up the heat generated by customers walking in and out. This is used to calculate how many customers are likely to hit the billing counter and when. Based on this information, alerts are sent to the store manager's handheld device indicating whether he must open or close billing counters.

This system not only ensures manageable queues but also frees staff to help customers with their shopping, says Sridhar Rathnam, Head - IT Services, Tesco-HSC. He says the company is looking at the next level of productivity enhancers - RFID (Radio Frequency Identification) technology and electronic shelf edge labels.

All these activities are expected to increase IT spends by retailers. Until recently, the IT budget of retailers was about 2 per cent of their sales. Not anymore. Subhiksha is spending almost 22 per cent of its capital expenditure on IT infrastructure and software and expects this to increase 25 per cent year-on-year.

According to an AMR study on `Retail Industry Market Analysis', retailers across the globe would spend about $7.4 billion on retail application software this year, up from $6.6 billion last year. This is expected to reach $9.3 billion in 2009.

Technopak Advisors Pvt Ltd estimates the Indian retail IT market at about $200 million. However, all of this may not translate into easy revenues (from traditional services) for IT companies. "Indian IT companies lack domain expertise in areas like category management, supply chain optimisation (from retail industry perspective), forecasting and replenishment," says Atul Ahuja, Principal Consultant, Technopak Advisors. To reap benefits of the retail boom, IT companies will have to build expertise in these areas so that they can develop low-cost, open source software to compete internationally, he says. Apart from domain expertise, building up support infrastructure for stores across locations will also be a challenge for IT companies.

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