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Technology to help retailers face FDI

Annie Mathew | Updated on October 11, 2012 Published on October 11, 2012

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As Foreign Direct Investment (FDI) in retail makes its way into the country, a number of interesting scenarios open up. FDI is a sensitive issue in India. The most widely debated subject is around how giant retailers with global footprints will use their sourcing methodologies and access to technology – in addition to the brutal force of their bottomless budgets – to edge out traditional retailers. It may however make sense to pause for a moment and consider a few factors in favour of the small and traditional retailer: ability to be nimble, be near the customer, know the customer and ensure quick service. None of these can be considered the real strengths of retailers that are consolidating brands under roofs covering 50,000 sq feet.

A traditional corner store can change merchandise on shelves by evening – something no large retailer can do. Instead, large retailers rely on sophisticated technology to predict shopping behaviour and off takes using complex algorithms and predictive analytics. For the corner store, the answer lies is in first hand conversations with customers and ensuring that services match expectations.

However, small traders lack access to technology that can make the shopping experience better for small-volume buyers who want to pick up a carton of cereals or just a box of milk with some bread. That’s one of the strengths of a corner store: check out wait time is nil, something that is difficult to achieve in large store formats. It does make shopping simpler. As FDI becomes a reality, traditional retailers will do well to look for affordable, low cost technology to make it simpler for customers to continue shopping with them.

Other small businesses that have been adopting technology hold the key for small retailers. In the UK for example, a small two-man business, JK Cleaning, that does house cleaning and offers janitorial services, needs three distinct capabilities: being a very mobile business, it should be contactable by its customers at all times, it should be able to bill them and collect payment immediately instead of accepting cheques to improve cash flow, and it should be able to document all interactions with customers over email. JK Cleaning opted for a simple smart phone based solution. Now, when its owners take their cleaning gear from door to door, attending to customer calls, they manage to stay in touch with customers over voice and email using their device. In addition, using a mobile payment solution, they connect a small wireless credit card reader to the smartphone at the customer’s location. The mobile smartphone generates the invoice and mails it to the customer. The customer inserts the credit card into the secure handheld credit card device and completes the payment. A receipt is sent to the customer by email. JK Cleaning reports that it is able to improve customer satisfaction because of the easy billing and payment solution. Their cash flow problems have been mitigated as they don’t have to rely on cheques that take days to get credited (or worse, may be rejected by the bank, leading to collection problems).

Can small retailers deploy affordable technology like JK Cleaning? Can they leverage the increasing trend of people opting for credit card payments (note the success of cafes that accept credit card payments for even a single cup of coffee)? There is no real reason why they cannot. In India, where small retailers offer the convenience of home delivery, this is a solution that can help small retailers retain customers, save time (customer does not have to search for change) and ensure safe cashless transactions.

In the coming months, technology will play an even larger role in ensuring that small and traditional retailers manage to retain their customers. One of the technologies that shows considerable promise to do this is Near Field Communication (NFC).

NFC enables contactless data exchange and transactions between two devices within a close range, between 1 and 4 inches. Smart phones that are NFC enabled – there are several models now in the market, including the BlackBerry that come with NFC embedded – can help make credit cards payments. For example, if a phone has its credit card details stored in it, the shopper just needs to tap the phone at the Point of Sale (POS) for the amount to be debited from the card to the retail outlet.

Many have suggested that NFC is disruptive technology or that it is revolutionary. It may well be. But the impression we get when discussions around NFC come up is that it is also a technology for the future. This is misleading. NFC is widely being used in Germany, Austria, Finland, New Zealand, Italy and China. In India, NFC is already being used for box office transactions in additions to applications in travel & tourism, hospitality, financial service, education and retail. We believe that the intuitive nature of NFC technology will help it grow rapidly, ensuring that credit cards move within mobile devices and drive the adoption of NFC infrastructure.

For small retailers the mobile invoicing and credit card payment solution as also the NFC-based solution ensure that their customers are not limited by cash in hand, they get an additional payment option that small retailers did not offer earlier and their expenses are tracked (through the credit card statement). With some imagination and a little technology, we believe that traditional retailers can begin to prepare their response to FDI!

(The write is Director - Alliances, Research In Motion, India)

Published on October 11, 2012
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