By

NAVIN RAJ SAROJ

MBA (MARKETING)

THE GROWING ROLE OF INFORMATION TECHNOLOGY IN RETAILING

A visit to any large store will show that information technology (IT) has become a vital part of retailing. The laser-scanners used in most of the large stores to read product bar codes, check the details on their product file, and provide correct price in fractions of a second are among the most distinctive examples of modern computer technology.

Information Technology (IT) refers to the technology of the production, storage and communication of information using computers and micro electronics.

It requires “Hardware” (the term used for the equipment which handles data, using computer equipment), “Software” (the instructions that control the way hardware accepts data input, and then processes, stores, and communicates that data), and “communications”.

With the increasing globalization of retailing, both in terms of their points-of-sale and their points-of-supply; the information technology (IT) spend in the retail sector has increased significantly. IT plays an increasingly important role in the management of complex retail operations.

Market knowledge, as well as control of data and information, is key to obtaining a competitive advantage in the retail sector. Markets are continuing to grow and become more complex; the simple process of retailing has started to deploy more advanced retail information systems to cope with all the transactions involved.

To increase the company’s ability to respond to the evolving marketplace through enhanced speed and flexibility.

To collect and analyze customer data while enhancing differentiation.

To work effectively; retailers need one system working across stores (or even across national borders) to make sure the most effective use of stock and improve business processes.

Retailers are beginning to notice that technology’s role is one of an enabler. Essentially, information technology can speed up processes and deliver cost saving benefits to the company.

All the retailers uses IT to carry out basic functions including selling items, capturing the sales data by item, stock control, buying, management reports, customer information, and managing the finances of the business.

For IT to provide competitive advantage it needs to cut costs, differentiate the retailer’s service offer, or provide innovation in ways that are prized by the customer.

There have been three main ways in which retailers have used IT, Positioning themselves at the cutting edge of technological development,’ compared with manufacturers. These are: 1. Investment in IT along with the Organizational

changes, improved retail logistics, reducing delivery lead times, resulting in a progressive reduction in retail inventory holdings,

2. Better information about consumer demand supported retail policies in own brand, product development, and the refocusing and redefinition of many of the most successful firms,

3. Cutting labour cost by effective staff scheduling and by using more part – time and casual staff.

• Point Of Sale. The physical location of a transaction but usually refers to any device or system used to record the transaction for the retailer.

• CPOS: A computer-based POS which employs software to implement the POS functionality

8

POS System Cash Register

Inventory Control Yes No

Invoicing and Receiving Yes No

Interfacing with Accounting Yes No

Reports Yes No

Enforced accuracy Yes No

Integrated CC handling Yes Limited

General Ledger Yes No

Accounts Payable Yes No

Accounts Receivable Yes No

Preferred by tax consultants Yes No

9

• Display / Touch screen

• Cash Drawer

• Receipt Printer

• Bar code scanner (fixed, attached, portable)

• Label / Report printer

• Mag stripe reader

• POS Keyboard

• Scales

• PDA

• Pole Display

10

Three Types

• Dot Matrix

• Thermal

• InkJet

Link • Separate unit

• Integrated with other device

11

• LED

• CCD

• Laser

• Fixed

• Attached

• Portable

12

A POS keyboard more closely resembles a cash register key layout and usually has programmable keys. Some have integrated card swipes.

13

• Serial Port I/F to your PC

• POS Calculates total

• Desktop units / Built-in units

14

• Item and price information

• Customer comfort

• Display Advertising

• Serial Port I/F (RS-232)

• Characters per line / number of lines

• LED, Plasma

• Character sets (Chinese?)

15

Cost and Productivity Benefits: Efficiency of the time/transaction speed increases,

Reduced queuing times,

Operating cost reductions, e.g. less ticketing,

Increased accuracy of all aspects of the sales transaction,

Improved administration/invoices,

No new keying required,

Shorter lead times,

Reduction in stock outs and stock holding,

Pricing can be change easily and accurately.

Marketing Benefits Improved Data – effectiveness of promotions, forecasts

of sales, stock records etc., Faster distribution cycle system, Improved trading partner relationships, Ability to incorporate faster responses to changing

market conditions, Consumer benefits from operational efficiencies e.g.

shorter queues, Can lead to the building of loyalty schemes and

databases, Additional selling space owing to reduced stock

holding.

Automating Processes: It enables to speed up customer service, Collecting Data about the customer: Personal Information of

Individual customer can be analyzed, e.g Loyalty card data base, Feedback on Marketing decisions: Data can be analyzed to show

quickly the effects of promotions, prices, new products and packaging changes.

Communications: stores can be communicate with suppliers to send documents such as purchase orders, stock and sales information over third party communications networks.

Tools to plan the business: sophisticated computer software packages may help retailers to plan, budget and forecast, to choose the most successful locations, and to control their business. Data mining tools can analyze information in a database, and networks can see changing patterns in complex data.

Adding value to the Retail Transaction: IT provide assistance for transactional speed, accuracy, and convenience.

Technological enabled shopping: Selling goods over the Internet is likely to become increasingly important. Electronic means of selling include the following:

Products: range of grocery, clothing and footwear, music, books, videos, cameras, computer parts etc.

Services: retail banking, personal insurance, financial service, stock and shares, travel and holidays.

Retail data capture (or data collection) of every sales transaction at the point of sale is one of the most important elements of retail IT, whether data capture occurs through and EPOS (Electronic Point of Sale) device or is directly entered into computer using a keyboard. To know exactly how well or badly the new season’s colours or designs are selling in the first week enables merchandisers and buyers to turn provisional orders into firm orders and to make purchases in the other territory. Data Capture involves three elements on a practical level:- 1. A coding System, 2. A code symbology, 3. The means used to capture the data in a form that can be

fed to the computer.

Coding Systems: The retailer must decide how merchandise will be coded. The code structure adopted must uniquely identify every product line to prevent confusion (and pricing errors).

Code Symbology: How will this code be represented in a machine readable form? Retailers who use EAN (European Article Numbering – 13 digits.

Data Capture: There are several options available to the retailer in capturing sales data. Data can also be captured automatically by using a hand scanner or some other portable scanning device.

Communicating Store Data: Stores and depots transmit EPOS (Electronic Point of Sale) sales data files, financial transactions data, amount deposited in bank, along with a range of other data such as staff hours worked, dispatch information, and stock levels, electronically to head office computers for processing and analysis.

A database is a computer system used to store and analyze large volumes of data. Data relating to item sales, customer information and the range of goods bought by customers can be held on a database and use for marketing purposes. Data Mining involves extracting and analyzing different types of data to direct patterns that are not immediately obvious and might never be discovered using normal reporting systems. It helps to know best customers and their preferences, Price affordability etc. Business Intelligence Manager’s can easily identify the competitors brand choice and it’s negligence through data’s available at retail store.

Why Information

Is Needed

Marketing Environment

Strategic Planning

Customer Needs

Competition

Strategic Planning

Rapid data communication have been an essential element in the application of new IT systems to retailing. Computer files with the data arranged in a specified way are switched between individual retail stores, depots, head offices and suppliers using a range of networks including ordinary public telephone lines dedicated networks and secure public data lines or by satellite link. The most significant involve computerized ordering and messages providing sales or promotional information, which help suppliers to know how and where to keep retailers effectively stocked with merchandise. There are four main types of systems for business communications and exchanging data: 1. E-commerce and EDI (Electronic Data Interchange), 2. Trading exchanges and e-tendering, 3. Extranet, 4. Intranet.

Sending orders to suppliers and to depots electronically saves time and avoids the need to re-key order information. An e-commerce order can be received by a manufacturer, accepted, and immediately passed into the distribution system for order picking in the warehouse and delivery.

EDI (Electronic data interchanges) is a highly structure variant of e-commerce used mainly for order messages between large retailers and their suppliers.

Extranet: To control new product introduction by sending EPOS sale data to suppliers. Higher any agency by permitting to track the progress of their orders by accessing the information over a dedicated extranet. External communications system that uses the Internet and is shared by two or more organizations

Intranet: an intranet is a formal system to permit the electronic exchange of business data within an organization, mostly between managers and senior staff.

Trading exchanges and e-tendering: an electronic trading exchange provides a relatively simple method for retailers to put contracts our to suppliers without the costs and delays of preparing documents.

Electronic retailing to consumers (B2C) was first developed on a large scale in the 1980s. Electronic delivery systems do not necessarily require direct human interaction and, as such, they offer specific advantages. The key underlying reasons behind electronic retailing are; consumer time poverty, consumers wanting to have more control over time and place of transaction, the technology convergence allowing change to take place and growing experience of the benefits of the medium. 1. Passive Systems: These are one way media, where the

retailer can decide upon the content and timing of messages i.e. one way shopping cable networks

2. Interactive Systems: These are two way interaction and includes the Internet or promotional touch screen booths and kiosks for items such as airline or holiday bookings.

The retailers that undertake electronic commerce can be classified in three main ways:

1. Virtual retailers : online shopping website,

2. Two – channel retailers : retail stores and online shopping website

3. Multi – Channel retailers: shops, telephone ordering, Internet, catalogues and TV.

Limitations of the Web Network Limitations: Demographic: Culture: Future Trends IT has already had a tremendous effect on the retail sector. A member of new IT innovation lie in store for shops. Some of the trends predicted for the future of IT innovation in retailing are; Smart Cards, E-cash, Tablets, Multimedia Kiosks, Customer Specific Offers, Electronic Body scanners,