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The
first Retail Systems roundtable proved to be
a very enjoyable evening with open discussion
from key UK retailers, both high street and
dot com companies, mixed with excellent food
and wine. Attendees included IT directors, finance
directors, chief executives and supply chain
directors. After initial welcomes from myself
on behalf of Retail Systems, and Chris Collins
of the Itim Group, the evenings discussion
topic was introduced by Itims Dan Murphy.
He began the discussion with a warning against
slippers with headlights -
technology which might look like a brilliant
idea but is of little practical use, and a reference
to the space programme in the 1960s, which hasnt
resulted in colonisation of the moon but has
brought about the Teflon frying pan, suggesting
that somewhere in all the hype there is something
of use. The first specific point raised by Dan
was to suggest that although retailers like
to think they are customer focused, they are
much more product focused. Retailers can easily
name their top ten products but have no idea
who their top ten customers are, he suggested,
not for lack of trying but because the systems
that would enble them to do so are not in place.
If retailers were to succeed in multi-channel
retailing, he argued, this model would have
to change.
RE
I think the infrastructure is in place
in some retailers, although not all. Youre
right about the product mentality, all of the
systems are geared to producing product information
first thing on a Monday morning at a merchandising
meeting. They are not geared to produce a list
for the marketing director saying 'here
are your top ten customers what are you going
to do for them? And thats whats
lacking - its the mentality not the
infrastructure.
DM
Customers currently play no part in that
financial model. Perhaps retailers are going
to have fewer and fewer of the traditional assets
that we now recognise in the retail model -
if we just have access through ASP models, if
we outsource all our distribution and so on,
what are we left with? When it comes down to
it were left with customers. Maybe the
whole financial model needs to change?
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JS
There was an interesting programme on
Radio Four recently about retaining customers
and they had a director of the Institute of
Customer Service who was saying it costs ten
times as much to get a customer as it does to
retain them. He gave an example of when he took
his mobile phone in for repair and went back
to pick it up two weeks later, and the guy said
'Oh we fixed that the next day. So he said
'Well why didnt you ring me? And the answer
was 'Oh were too busy with customers to
do that. So he relived them of some of their
problems and took his business elsewhere.
ND
With some of the online banks you send
an email saying youve got a query and
immediately you get one back saying 'We
got your message and were dealing with
it, and then it all goes quiet.
AB
Its a big challenge for the pure
plays. At lastminute once we see a list of emails
that hasnt been replied to within 24 hours,
the whole company from the Managing Director
down has to reply to those emails until we get
the numbers down.
RE
Its all very well with an Internet
company or with a high value item sale where
you have finance schemes to get contact details,
but when youre selling a £5 vest
people dont want to give you that information,
and they dont want to join any loyalty
schemes. So getting to know who your customer
is, and persuading them to provide you with
that information through loyalty discount schemes
is getting tougher and tougher. People dont
want all the cards in their wallet any more.
Theyve done the loyalty scheme thing,
its passé.
Collaboration
for the nation
DM The other zeitgeist thats
going on with CRM at the moment is collaborative
models. We have two main thrusts - the
first is automation, web hubs, EDI, exchange
of information with suppliers and automating
invoices, all on the web and generally seeing
how many people we can fire, because the benefits
case with all of this sits usually with head
count. But if youre setting up SLAs and
sophisticated models of delivery and contracts,
you might end up needing more people because
you need people at each end talk to each other
and agree how theyre going to collaborate.
RE
Ive never seen an IT project that
has actually resulted in head count loss. I
think where the business case for collaboration
will come is in persuading strategic suppliers
who represent a large percentage of your turnover
to retail through you, as opposed to someone
else, because you give them better information,
and in persuading them to provide what you want
as a retailer by providing them with information.
Thats where the argument for collaboration
is going to come, not in head count or automation.
CC
Were trying to move more into consulting
on collaboration. But when you talk to retailers
about it, all theyre really interested
in is screwing down suppliers as much as possible.
RA
It strikes me as a fair weather conversation
- when youre trading well and the
suppliers are trading well its the sort
of thing senior executives talk about. Id
be interested to see that sort of collaboration
going through in really tough times.
MA
I think that to some extent tough times
are when collaboration may be extremely beneficial
both ways. If a really sexy supplier says 'we
can go to Arcadia and they will provide us with
SKU level information of sales by store, square
footage sales etc, and all we get from you is
a top line total transaction cost by store,
then who are they going to? They move away.
Where youve got the dominant relationship
you may say 'well actually we havent
got the time or the money to provide suppliers
with that much information.
CP
Wed agree exactly with that from
a branding point of view. Because they are supplying
a brand, it requires you to be more collaborative
than a typical relationship between supplier
and retailer. Itll probably take a bit
of time to make it work but if you want to keep
key suppliers...
AB
Collaboration with our suppliers is probably
the key to our success. Weve used our
online presence to build a marketplace and our
suppliers basically use us as a yield management
tool, so collaboration on a technical side is
very important because suppliers dont
want to be using faxes to put their products
on our site, they want to use an extranet. And
thats where I see collaboration coming
in and why I think its so key.
CP
My concern with true collaboration is
that it actually takes more time and people
because, unless youve actually got a true
interface at both ends with all your suppliers,
youre very reliant on having someone at
some end updating those critical parts.
Systems or staff?
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MA
One of the issues weve struggled
with over the last three or four years is in
getting the balance right between technology
and people. There was a shift two or three years
ago towards implementing new systems -
EPoS systems and scanners - and actually
forgetting the core base of information, which
is the people. Most of our stores are relatively
small where you have one manager who could tell
you his or her top ten customers. On the supply
side, our key area is with packaging suppliers
because thats the area that changes most
rapidly. We can say whats going to make
the most benefit for them and for us, and work
with that collaboration, and no amount of systems
can actually do that.
RE
I think youre right there. Yes,
theres technology, but its the people
who have the knowledge and I think an awful
lot of retailers arent making the most
of that information. We already have a massive
sunken investment in information sitting in
our systems and were not using it because
the merchandisers are used to looking at things
in product terms. They always get the same reports
every Monday morning and thats how they
do business. Its the mining of that data
that I think a lot of people in our area of
retail are missing.
CP
Our biggest benefit from launching our
CRM loyalty scheme has been gaining an understanding
of how the customer shops and using it for planning
decisions. Weve been able to change our
customer profiling based on the CRM data to
mix it with postcode information to actually
understand our types of customer better, which
we obviously couldnt have done without
the CRM data.
JS
I think companies are waking up to
this data mining - my wife started using
the Tesco Internet shopping, had a few hiccups
with it and gave it up. A few weeks later we
had three £5 vouchers to spend on Internet
shopping, so they are starting to take notice.
RE
I think it depends on the type of retailer.
An online environment lends itself to that kind
of data capture - you have to do it, Id
imagine, when youre driving sales through
emails.
PR
Is it more important to try and contact
somebody who hasnt used their Clubcard
or is it more important to use that data to
make sure we place a store in the right place
when its a £30 million investment?
The question is what order do you put them in,
how do you decide what the priority is and how
to you put a value on that? So many projects
go wrong because people try to cram too much
into them, particularly IT and Internet projects.
JW
Setting priorities is very important but
each business is different. Whenever we look
at an investment project or systems, the first
thing we will do in great detail is to review
the business processes. A lot of the time the
inefficiencies are because of incorrect business
processes. We now have a clear system where
every single investment in a system needs three
different levels of sign-off with a full examination
of existing business processes.
MC
I totally agree with that. IT is a service
business and it ends up being a servile business
because it listens to what the user wants and
thats in the users comfort zone.
Youve got to move into the challenge zone
and ask them why they want it, what theyre
going to do about it and can they consider changing.
Its actually managing that change and
looking at things you can do in bite-sized chunks
over six to nine months that is the secret of
trying to move forward.
JS
The biggest assets weve got are
our staff. Go and talk to your staff and theyll
tell you whats wrong.
MC
I think its exactly that. Its
getting it through to them and actually getting
feedback from them as well on whats happening
in their area, in real time. Its communications
and increasing bandwidth over the next four
or five years thats going to change what
can be done with business processes and will
make applications more network-centric. Theres
a lot of software solution suppliers out there
with solutions looking for problems to tackle,
and unless retailers communications are
right theyre not going to be able to do
it properly.
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MA
Youre right about changing the business
processes. We started putting in a new ERP system
within the company and we finished up changing
the titles of two main board directors and the
structure of the company. We had to go back
and look at how best to use the systems and
it actually proved that the structure of our
organisation was wrong.
JW
Its the only way a business can
try to maximise the investment in a system.
Theres no question that technology is
there to assist you in doing your job effectively.
But without going through all the right processes
to get to the decision to invest, and working
out how to input the technology into your system
in the most efficient way, youre not going
to get the best out of it.
RE
A major part of any large technology project
must be the change management aspect but it
often gets put by the wayside. And it is vital
that it doesnt because so many IT projects
do not deliver the benefits they were intended
to because people get the new piece of software
on their desks and carry on doing their jobs
in the same way.
MA
One of the changes weve also made
is to ban the term IT projects. They are business
projects - IT just helps them to deliver
it.
MC
But surely at the end of the day thats
quite difficult from an IT perspective?
ND
Its a matter of bringing in some
form of collaboration, saying 'you guys
want a new system, lets get someone in
who can talk about products and re-design your
business processes.
DM
Sometimes its very difficult to
challenge somebody saying 'This is how
we want to do it - its very
difficult to say to someone 'well why on
earth are you doing that anyway? And I
think thats another challenge for the
business processes - should we be so internally
looking? This is what ERP does, it just takes
fixed internal predictable processes and pours
concrete around those.
ND
I think it comes back to understanding
what the customer wants. Therell be someone
sitting there looking at their datawarehouse
saying 'Look no-one wants to have delivery
on Saturday. So you can start to believe
some of the CRM stuff and youve almost
got to go back again and check that youve
got valid data.
RE
But quite often it tells you the sort
of thing that people dont want to tell
you. Weve recently put a footfall counter
into one of our stores and had a look at the
visitor/staff ratio and you look at this data
and it isnt cost-efficient to have the
staff in all of time. You need more part time
staff and more flexible working because of the
information thats coming out as hard data.
MC
But thats your headcount issue.
Most people would like 9-5 five days a week.
What you want is total flexibility and thats
a management of change issue.
RE
Absolutely. And the issue is not a technology
one, but the technology is driving the change.
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Processes
of change
DM People have been talking about
customers, staff, the people in the stores.
Is there a move away from technology for 'slippers
with headlights sake?
MC
People are competing for capital with
projects like opening new stores, which is probably
more cost-effective than most so-called IT projects.
Youve got to look for those real returns
on investment. But actually getting that process
in place and making sure that benefits are delivered
is nothing to do with IT, its about business
processes and making sure that goes through
onto the bottom line.
RE
But as an IT director it is very much
my responsibility to make the business aware
of what the technology might do for them. Also
where I see patterns in data which may not be
visible to other people in the business because
they may not have the knowledge to use the data
mining tool in a particular way, then its
my responsibilty to point that out to people
and to say 'Dont bother about new
systems, use what youve got to drive new
business processes.
ND
Which is a great way to bring the business
in on the deal by explaining rather than walking
in and saying 'were all going to
be working in different ways. A lot of
the successes Ive been involved with has
just been about de-mystifying the technology
to people.
CC
Do you find you also have to de-mystify
processes? I often hear 'Well I just want
to automate this - why cant you do
that? Why is IT getting involved in the way
we do business?
CP
Im not always sure people realise
theyre following a process. We actually
take people out of their business environment
and put them on the project and this has changed
their mindset in terms of project management.
JW
If you look at each individual process
line by line before you invest in the system
you stand a much better chance of receiving
the full value of that investment. If you just
go ahead and say 'This is the problem,
the IT director said this is the solution
but without looking into the business processes
underneath giving rise to the problem, that
may not be the most ideal solution.
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RA
We sit round this table and say that general
managers today dont understand IT but
were wrong because most of them do. Most
of them have been there and done it and got
the scars. But when they start to say we need
to change our processes, you think yes, but
where do we start? Where is the process director?
There is no process director who you can go
to and say 'This is your ball.
RE
You start off an IT project by looking
at the business processes with the expectation
that its going to need an IT solution
- it puts that mindset in from the start.
I absolutely agree that what youve got
to do is say 'No, this isnt an IT
project yet.
JW
But the point remains that in order to
maximise my IT investment I need to look at
the business processes first. If you complain
of toothache, the solution is not to take the
tooth out, you find out what the cause of the
problem is. If indeed the cure to the problem
is to take it out then take it out, but there
may be other solutions. Why be so quick to jump
to the conclusion that every problem needs to
be solved by an IT solution? Outsourced
or in-house?
MC
IT has got to become a utility thats
always ready to be switched on, and thats
why it depends on how you use the information.
I think that ASPs are the model-T Fords of the
21st century when they come through, because
people dont want huge IT departments,
they want to plug it in and use it when they
want it.
DM
Fifteen years ago customers were very
stable and predictable. But the customer now
has much more choice, and all these big investments
in fixed assets like IT systems have actually
become a bit of a millstone round retailers
necks, because they cant move as fast
as they need to in order to react to what customers
want. The idea about moving to ASPs and to access
rather than ownership is a very important shift
in retail at the moment.
RE
Im not saying the ASP system is
wrong - it has a lot of advantages, but
part of my worry about ASPs is that it can actually
lead to the removal of flexibility to react
to what customers want.
ND
Youre basically sitting in someone
elses concrete and they have other customers
to worry about as well. If its something
like payroll then definitely, but if its
your core system, then maybe thats the
one you have to have a little more input to.
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JW
Customers these days are more sophisticated
and knowledgeable. And what comes of that is
that they are very much less loyal. Any retailer
that is using a lot of technology to find out
more about its customer is fighting to survive
if their objective is only to respond to what
customers want now. We should use technology
to anticipate what customers will want or desire.
If I can anticipate that correctly then I must
be the leader.
PR
One of the most successful things for
us has actually been previewing the future season
online, which is something you cant do
in-store. If the customers dont like it,
you dont make it. Its as simple
as that.
RE
But when youre talking about things
like fashion its very hard to predict
where its going to go because its
totally out of view. Its like predicting
the weather.
MC
Its interesting really because loyalty
is only the absence of anything better.
Virtual
checkouts?
JS I was talking to someone at the
Retail Solutions show who was saying that in
the future youd have products with security
tags on them, that hold all product information,
and youd take them to an unmanned checkout
and de-tag them, put your credit card in the
system and walk out of the door. Do people think
thats really going to happen?
MA
Safeways has been trying it for a while
and I dont think its worked at all.
Im very basic and I go into Safeways and
say 'You serve me, Im not going to
serve myself.
MC
Albersons and K mart in the States have
these self-checkout terminals and people are
quite happy to go there - theyre
quite happy to use them because they think theyre
moving faster.
PR
I think its the process that will
change, because what will happen is that you
wont spend all that unnecessary time putting
it through the till, youll be able to
make the very necessary time of making the purchase
a more pleasant experience. Most people describe
the worst part of their shopping experience
not as parting with the cash but of the whole
process of putting it all through the till.
So if you can take some of the aggro away without
taking away the whole experience, youll
probably be able to differentiate yourself in
that way.
MC
With food shopping, the biggest complaint
I get from my wife is that they didnt
pack it right. People are quite happy to do
it themselves. I think the self-checkout terminal
will go further in the next five years, possibly
used for a smaller number of items because you
can just whizz them through, but it will be
complementary to the normal checkout procedure.
AB
But will you then be losing one of
the biggest competitive advantages that you
have offline which is a human contact?
DA
The argument might be that if you dont
have all your staff sitting in a little box
by the till then they can be out in the store
being more proactive. But are you going to make
that decision based on the resources youre
going to plough into it or on somehow finding
out what your customers might prefer?
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ND
I think a good comparison to make is with
the banks when they put ATMs in, and now we
all go to ATMs even though theres someone
standing behind the glass, because we dont
want to stand in the queue and have the aggravation.
JS
But our biggest advantage is touching,
feeling and looking. Nobody will ever succeed
in my industry online.
MA
Weve got both online and mail order
and Im amazed by the amount of people
who go online and then ring up to order it because
theyre still not quite sure how it works.
Over time theyll get used to it but not
yet.
MC
I dont think its a zero one
sum. Youve got to trial these things and
get reaction from customers - sometimes
its right and sometimes its not.
I think you have to mix and match - youll
have some manual checkouts and some using the
self-checkout. Chip shop?
JS
Theres been a lot of press recently
about national identity cards. What if the government
were to smart chip them so when you go into
a shop you can just hand over your ID card and
theyll have all your details. Is that
a possibility?
NM
Theres been all sorts of moves towards
PIN at the point of sale recently which is meant
to be introduced in the next four years so customers
would have smart cards with those details on
anyway.
JS
ID cards could replace all our loyalty
cards as well.
DM
But if you buy a car, just think of all
the people you have to give your details to.
If you could say to people Im going to
give you access to my web address or whatever
it is instead, then this whole transaction could
be done in one go rather than me having to go
through the same thing ten times.
AB
Theres a company that already does
that - Microsofts Passport.
RE
All of this is a technologists dream,
but I dont believe Mr Joe Public will
sit for it. It just wont happen. There
will be massive resistance to anything being
on ID cards other than your name, fingerprint
details and possibly your social security number.
So it would be wonderful for it to happen for
us - you could do loads with the information
that comes out of it but I really dont
think it will happen.
Retail
Systems will be holding similar events in the
future. For more
information, please email alison.rawstron@retail-systems.com
Information
on 2002 roundtable
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