Product, Place, Price: Technology Reshaping Retail

The business of retailing has many faces and is generally perceived as dynamic and ever changing. Indeed, technology has changed the customer facing side of retailing significantly, first with EFTPOS and then with on-line shopping. Chad Gates from Pronto Software has the story…

Technology’s impact on the relationship between retailers and their customers is highly visible and has contributed to the “dynamic” perception. This is of course enhanced by the rapid expansion of large format shopping centres, outlet centres, specialty shopping strips and the revitalisation of category killers. The fundamentals of retailing, however, never change – right product, in the right place for the right price.

So what good is a nice POS system or a nice new website without the smarts to manage the product flow at the back end? About as good as lipstick on the proverbial pig. Thinking about it – the POS front end and the nice website, without their customer service features, are simply links in the overall technology supply chain that is now a requirement of a successful retail operation. A long-time retailer once said to me “margins exist in a vacuum. Any holes in the system and they quickly escape.” I think there’s a great deal of wisdom in this statement. Retailers should be thinking of their technology in terms of stock turn, margin control, heroes, friends and villains. A good, tightly integrated technology solution will bubble these issues to the surface, but it has to be done right. You want stock to move at the optimum speed, markdowns and loss to be controlled, top selling, high margin items (heroes) to be given preference, core range “workhorses” (friends) to be always available in the right quantities and dead or dying stock (villains) to be quit with the least amount of pain. The Point of Sale front end is critical to making this work. We’ve all heard the saying, “garbage in, garbage out.” POS is a great place for garbage to come in. Incorrect scanning is a major culprit in this area, particularly given the voluminous “hard to scan” items such as bolts, washers, custom cut planks of wood, etc which can make for a point of sale operator’s worst nightmare during busy periods. The hidden cost of poor scanning practice is that it trains your staff that ‘close enough’ is good enough. Watch your data integrity plummet and your “margin vacuum” starts to leak. And what if you have 20,000 stock lines which are scanning well but you want to improve your bottom line? Start working on the exceptional events. Assuming you have good relationships with your suppliers (helped by good data), how do you manage and identify areas of concern? How do you maximise the benefits from the things that get done really well. Can you easily identify them when they happen? Traditionally, systems are excellent at capturing large volumes of data. Transactions, stock movements, sales and purchase orders accumulate hour by hour. Exception management is the key – making sure those things that either need to be encouraged (such as the early fulfilment of an order) or need to be fixed (such as non scanning items) can be easily identified. You may have read in previous editions of the Hardware Journal about the use of an EAS (Enterprise Alert System) to notify key participants (staff, suppliers, customers) when something important happens. Retailers stand to benefit enormously from such technology, as they have the most positive upside in terms of improving customer service, avoiding embarrassing situations (such as a customer telling you an order is late) and managing any leaks. It can be more about creating good news rather than identifying bad news. The rule is basically the same: follow the stock, follow the money. That’s what your system should be doing anyway. It’s up to you to make sure that you are leveraging your investment by buying in to the concept that ‘close enough’ is not good enough, and that every dollar you capture that you would have otherwise lost is really worth two – after all, every good retailer knows that add on sales are gold. Focus on these things, train your systems to identify them and reap the benefits.