While every retailer may want harness the power of technology and use it to its optimum advantages many factors affect its use. The chief among them are:
The scale and scope of operations
As stated earlier, the size or the scale of operations is the key factor influencing the decision on the type of systems required. In case of a small retailer; the significance is much lower as compared to that for a large chain retailer, who operates at a national or an international level.
The financial resources available to the organization
Many a times, the financial resources available to the firm for investment in technology are a crucial differentiating factor. The retailers in mature markets may invest significantly higher amounts in technology than their Indian counterparts. In India investment in technology varies significantly with the size of operations and the estimated pay back period.
The nature of the business
The industry that the retailer operates in is an important factor affecting the requirement and the use of technology. For example, a retailer who is a part of the fashion industry, needs to track consumer demands and changes in buying patterns at a much faster pace than a retailer operating in the consumer durables industry. While both need technology, the changes in demand are significantly higher in the fashion industry. By analyzing sales data, changes in buying patterns can be tracked. Changes can be made at the production level if this information is passed on to the manufacturer. On the other and an increase in demand for certain products can also be tracked and production can be realigned much earlier to avoid a stock out situation.
Human Resources available
The retailer needs people to build and implement technology solutions. People need to understand the complexities of the business that the retailer operates in and at the same time, the type of technology that will suit business. They not only need to implement the system, but also to train people within the organization on its use and applications. It is for this reason that Information Technology is many a time, termed as the backbone of retail.
Unique needs of technology in retail
The retail business has been an early adapter of information Technology (IT). This is one business where the need to capture accurate information and make it available not only within the store, but send it to warehouses, distributors and manufacturers as soon as it has been acquired, has been an important requirement. The need for making information available in real time emerges out of the need to manage the short shelf life of goods and the need to manage the costs of inventory.
The spread of the Internet has opened up a number of opportunities for using IT innovatively to extend the reach of the retailer into the homes of its customers. While the Internet was expected to revolutionize the retailing business and take it into the virtual world, it has been found to be appropriate only for some categories of goods.
Historically IT has been applied to some of the unique requirements of the retail business such as the need for product identification, the need for quick billing and settlement of bills electronically and specialized logistics applications. The use of information technology in retail includes a wide swathe of technologies covering software, hardware and wire line and wire line and wireless communication. Typically a mature user of IT in retail uses a number of technologies such as POS terminals software for managing inventory and to interact with financial services organizations to complete transactions in addition to the standard applications. The industry uses advanced constructs such as data warehousing mining for trend analysis and customer management and highly specialized solutions for Supply Chain management.
A single customer transaction has implications on a wide range of areas. Let us understand this with the help of an example of a customer who has made a purchase at a retail store for goods worth Rs 1,000. Typically to record this transaction a barcode scanner will be used to scan the items being purchased. The customer may choose to pay cash or may pay by way of credit card. In case the customer chooses to pay by cash, a simple transaction is required which will record the sale. However, in case of a card transaction, the data also needs to be furnished to the bank to ensure that the customer receives payments. The customer may also be a member of a loyalty program offered by the store, hence that is also information that has to be checked and recorded.
Sales would require seeing the consolidated effect of each transaction to understand achievement of targets and take decisions as may be necessary. Merchandising will look at the data in the form of movement of merchandise which has to be replaced and therefore reordered as the case may be. Finance will have to look into the movement of merchandise and the sales in terms of the inflow of cash into the company and payments that have to be made to the suppliers. Marketing may look at the transaction to understand and evaluate new campaigns, sales promotions or spot offers which may be offered.
The development of Mobile Commerce or M Commerce enables businesses and consumers to transact on the go, without having to have access to a wired computer. Mobile devices like handheld PDAs and mobile phones are used for this purpose and it offers the retailers the opportunity to reach out and sell to consumers anytime and more importantly anywhere.