Retail IT Mantra Gets Real: Think Beyond US Model

New Delhi: | Updated: Aug 26 2002, 05:30am hrs
The investment in information technology is a major retailing challenge and calls for a high degree of technological understanding and a sharper focus on processes and people. The Indian experience in the last couple of years has been mixed: Retailers like Shoppers Stop undertook ambitious and expensive ERP packages, which many analysts felt was much ahead of the time, others like Westside opted for conservative IT packages, believing more in process discipline.

Shorter Shelf Life Makes Food Different

Chennai: Food retailing is different from the rest. For one, the number of items per bill is much higher, the number of transactions more and concentration of shopping in peak hours is widely prevalent. Result: The billing speed decides the volume that a store can trade during the peak hours. Add to it the fact that items in a food store are of a perishable nature with a much shorter shelf life than other products. All in all, the requirement in food retailing is highly complex, necessitating an efficient system.
No wonder then that food retailing is all about IT. Foodworld, a leading South-based supermarket chain is a case in point. Foodworlds transaction numbers are huge: 1.5 million bills per month, an average of 10 items per bill, transacted across 81 stores, in nine cities.
For customers, IT applications in the store translate into greater value in terms of faster checkout, low/no stock outs of the favourite brand, and greater responsiveness to the customers evolving assortment needs, says Mr Oscar Braganza, president, Foodworld Supermarkets Ltd. Right from a robust front-end billing system to the automatic purchase order system, IT is critical to the retail chains operations. An MMS (merchandising management system) has been developed inhouse in collaboration with Pune-based Zensar Techno-logy. The stores generate an indent based on their stock and the sales data of the previous 56 weeks from its data marts. The warehouse automatically pools these indents.
Other applications include decision support systems on pricing, promotion, analysis of trends by category/region/ time /bill cluster, etc. Besides, there are custom-designed financial packages. And the results are known. (See the story IT Mantra Gets Real). Beyond all this, theres something new in Foodworld, in terms of IT. Reverse auction, which helps the chain drive down costs and deliver better value to its consumers, is one example, while B2B interface with its key vendors is another.

In retail, property and IT are long-term investments, says Futurescape Netcom Ltd managing director Namrata Rana. What retailers need to do first is to integrate and manage people and processes and backend operations through an integrated IT platform with data warehousing capability, which needs to be further enhanced with CRM to ensure a smooth consistent customer experience. Futurescape provides CRM services and technology-driven solutions to retailers in alliance with Navision (a Microsoft company).

Sharing his perspective on IT investments, Trent (that manages Westside) managing director Noel N Tata said: In India, you dont need to borrow the IT models from the West where IT substitutes for expensive manpower. Westside has spent a fraction of what other major retailers may have invested in their IT platform.

Ms Rana sees Indian retailers allocating around 5-10 per cent of their revenues towards IT, especially in the sphere of supply chain, inventory management and financial management.

From last year onwards investments in IT and retail have gone up three times, points out Ms Rana. Retailers are fast realising that scaling up operations needs a robust infrastructure that goes beyond the point of sales systems.

Based on the projected growth strategies, IT investments vary: Shoppers Stop has spent over Rs 20 crore; north India-based lifestyle store Ebony over Rs 3 crore, and the Chennai-based Food World Rs 6 crore.

Says Ebony Retail Holdings managing director B S Narula: Around 20 per cent of the total outlay for a retail store now goes towards installing an efficient IT system.

The investments are projected to rise as reluctant retailers discover home-grown retailing solutions and see some merit in investing in IT. Says Ms Rana, It will be interesting to note that Walmart outsources a huge amount from their IT operations in India.

Mr Narula feels that the Indian retailing is fast moving towards global trends. International retailing meanwhile is seeing investments in the area of retail and category optimisation.

Ebony, which opted for Retail Pro package, says that IT has resulted in the smooth running of operations across its chain of seven stores. Retail Pro seems to have found acceptance: even Westside has adopted this platform.

Says Trent head of information technology K V S Seshasai: The objective behind implementing RetailPro was to manage the complexity of ordering, replenishing and to know the details about all the varieties and the movement of goods as currently we have around 25,000 to 30,000 stock keeping units in our stores.

Retail Pro, a programme for point of sales, merchandising and inventory control for speciality retailers, is proven in more than 22,000 stores in 62 countries.

For Chennai-based Foodworld, which transacts 1.5 million bills per month, an average of 10 items per bill through 81 stores in nine cities, the need for IT is critical. IT has helped the Chennai-based Foodworld bring down its inventory by a week to 20 days in the last year.

Says Foodworld Supermarkets Ltd president Oscar Braganza: Our IT strategy is to ensure that the operational wheels of our business work robustly, with predictability and consistency, at optimal efficiency.

(With additional reporting by Mona Mehta in Mumbai & Padmaja Shastri in Chennai)