2004 Jul Issue
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Retail on Demand: Taking retailing beyond operational efficiencies
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Retail on Demand: Taking retailing beyond operational efficiencies

It is new. It is tailor-made. It is proven. IBM's dynamic Retail on Demand initiative is designed to help retailers better understand their customers and respond in a relevant way. Christopher K Wong, director of stragety for Retail on Demand, EBO, based in IBM's global corporate headquarters in Armonk, New York, USA, tells Yoki Wong why it is imperative for retailers in Asia to think beyond improving operational efficiencies in today's uncompromising retail landscape.

IBM has a new IT prescription for retailers and it is not your standard, off-the-counter IT solution. It is IBM’s new and exciting Retail on Demand, which is customised to fit every retailer’s requirements. Part of the investment that IBM Corp has committed to its global on-demand initiative, it is fast becoming the latest buzz word for the IT-savvy.

Exactly what is IBM’s Retail on Demand and how does it serve the retail industry? In a nutshell, Retail on Demand is an IBM Emerging Business Opportunity (EBO), charged with helping retailers to transform the consumer’s shopping experience in retail stores, empower employees to drive greater sales and efficiency, and create a more responsive and flexible store environment through the use of intelligent technologies.

Christopher K Wong, director of strategy for Retail on Demand, EBO, explains it further: “On-demand is IBM’s core strategy to help our clients to become more nimble and responsive. We are helping our clients improve their capability to make transformational changes by simplifying and speeding the deployment of their business processes and supporting technology.”

In industry-specific terms, IBM’s Retail on Demand equips retailers with new capabilities to deal with competitive threats that retailers face today as well as to identify new business opportunities.

“We all recognise that the world of retail is rapidly evolving. Increased competition, demanding consumers and new low-cost technology will transform consumer’s in-store experience more in the next five years than in the past 20 years,” says Wong.

“It’s not just about improving operational efficiency, which is still very important, but it is also about increasing a retailer’s relevance to consumers, improving the shopping experience, increasing loyalty and, ultimately, driving revenue growth via higher same-store sales.”

With Retail on Demand, IBM’s focus is on the store and every aspect of the store operation. “Our scope is to integrate all aspects where retailers, consumers and employees come together, whether that is in the store, on the Web or by other channels,” says Wong.
“This is not simply a project by a division in IBM but rather a cross-company initiative that pools together several different business divisions under the focal point of the Retail on Demand team that I am proud to be part of.”

He is emphatic that Retail on Demand is not just a technology statement. “These offerings are designed to help retailers improve their customer’s shopping experience, enhance their store employee’s productivity and knowledge, and more efficiently manage their in-store merchandise.

“We are also innovating new in-store business processes to help retailers better align their stores with their core business strategies and brand-value proposition, and best leverage the new technology solutions,” he elaborates.

IBM’s goal with Retail on Demand is to equip retailers with the means to better understand their customers and respond in a relevant way. “Retail on Demand is about transforming the retailers and delivering the ‘Next Generation Store’,” says Wong.

IT challenges:

The IT challenges confronting retailers vary not only by geography but also by segment. However, there are some common issues that all retailers face. “Easily the biggest IT challenge for retailers is the requirement to deploy new solutions at an increasingly faster pace. This becomes even more demanding, given the necessity to integrate with existing systems and the emergence of something we refer to as ‘the dilemma of Point Solutions’,” says Wong.

Point Solutions are unique systems that retailers have been delivering, one at a time, and often involve complex integration with other existing systems. The problem is that each new Point Solution itself becomes another node for integration and, soon, every new solution requires integration with myriad other Point Solutions, explains Wong. The result is that each successive new solution becomes a longer and more expensive implementation.
He says: “Clearly, a new approach is needed. To prepare for the next-generation store, retailers will need to begin planning with the end in mind and use a store-infrastructure approach. If done correctly, retailers will be able to deploy differentiating store solutions more quickly and with lower risk.”

Retail CIO survey: increase in IT spending worldwide

Retailers worldwide are looking to increase their (IT) investment, according to the 2003 Retail CIO Survey by IBM Business Consulting Services.

The survey, released last September, showed that retail-IT spending for 2002 had risen from 1.8% of total sales in 2001 to 2.1% in 2002. Key areas that CIOs in retail companies are prioritising include outsourcing, point-of-sale (POS) overhauls, and enterprise reporting and analytics. These investments are being made to improve customer responsiveness, productivity and enterprise flexibility.

With “over 30% of respondents from Asia”, the survey, based on interviews with CIOs and senior IT executives from leading retail companies worldwide, is also representative of the Asian scenario, Christopher K Wong, IBM’s director of strategy for Retail on Demand, tells RETAIL ASIA.

All companies surveyed enjoy annual revenues of more than US$100 million, with approximately half reporting revenues exceeding US$1 billion per year.

Among the most significant predicted shifts in IT spending is a dramatic increase in outsourcing over the next three to five years, say retail CIOs. Nearly 40% of retailers expect to deploy at least 20% or more of their IT budgets on outsourced projects, more than double the current rate. The key objectives cited include reducing operating costs, increasing responsiveness to unexpected events and disruptions, gaining access to key skills and capabilities, and freeing up capital to invest in core businesses.

In terms of in-store IT investments, the majority of retailers expect to deploy IT solutions that solve their most important, recurring business issues:

  • Executive reporting and analytics: The number one corporate priority for 72% of surveyed retailers is to improve executive reporting and analytics, providing an increasingly real-time view of enterprise activity and performance.
  • Upgrading POS systems: Almost all retailers expect to upgrade or overhaul POS systems, the primary drivers, including enabling new customer-facing applications, speeding up customer checkout, reducing total cost of ownership and improving reliability.
  • Systems and business process integration: Retailers are focusing on systems integration, with about 60% acknowledging problems stemming from “disconnects” among business processes and systems.
  • Inventory and merchandise management techniques: As much as 84% of the respondents believe that inventory-management transformation represented the greatest opportunity to cut costs and improve efficiency.

The deployment of Linux as the in-store operating environment is expected to increase five-fold over the next three to five years, reported the survey.

As for radio-frequency identification (RFID), the survey determined that it was not an immediate priority for most retail CIOs, although more than 40% of them expected to deploy some form of RFID solution within the next two years to transform a wide range of key business processes, including item and pallet tagging, security surveillance, RFID-enabled shelf management and smart checkout.

IBM is ‘POS System Company of the Year’

IBM has received the 2004 Frost & Sullivan ‘POS Systems Company of the Year Award’ in recognition of IBM Retail Store Solutions’ outstanding leadership in point-of-sale (POS) systems. The award was presented to IBM at the Excellence in Industrial Technology Awards banquet on 19 May 2004 in Miami, Florida, USA.

IBM maintains leadership in POS systems on a global level with its focus on technological innovation, R&D and vendor penetration. The Retail Store Solutions Division, based in Raleigh, North Carolina, USA, develops, markets and supports the POS portfolio of solutions.

Frost & Sullivan awards are presented to companies that demonstrate excellence in their industry, commending the diligence, commitment and innovative business strategies required to advance in the global marketplace.

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