The retail industry over the past decade has been seen as the harbinger and an indicator of economic growth and spending power globally. It has transformed itself into global phenomena and has been a scene of constant change and innovation.
This growth has come along with some serious challenges whilst increased competition added by economic slowdown, which has had a negative impact on profit margins. The emergence of internet as a tool for communication and the learnings from Dot Com failure has made the industry more cautious in its spending. Therefore the focus over the last decade has been on increased productivity, cost cutting at the same time having more enhanced focus on customer satisfaction and retention. The latest trends reflect the spending power, lifestyles, tastes, time available, geographies; loyalties etc. apart from these, there have been a lot of initiatives to improve the productivity and efficiency of the supply chain, better vendor management and efficient global operations.
Let us analyse some of the recent trends seen in the industry and what these trends have to offer to businesses and customers.
Integrated Multi Channel Retailing (IMCR)
In-store Operations
CRM Initiatives
Vendor Managed Inventory
Retail Analytics
RFID
CPFR
EDIINT
Integrated Multi Channel Retailing (IMCR)
Integrated Multi Channel Retailing (IMCR), refers to the seamless integration of the various sales and service channels provided by the retailer to the customer. An item ordered through one channel can be received through another channel and returned through a third channel.
The advantages here are manifold, while customer saves on time and gets the flexibility and power to decide and use any channel for any activity, the increase in output for the retailer need not always mean more inventory cost for the products or labor cost as the just in time processes and integrated solutions provide economy og operations, all this while leveraging on the increase in business and customer retention.
Implementation of multi-channel retailing from IT perspective encompasses the following:
Based on the lifestyle of the market segment, have a clear understanding of the various channels customers would be comfortable in using
Analyze the partnership, distribution and franchisee model in use and the likely changes due to new multi-channel requirements
Do a gap analysis on the existing infrastructure and multi-channel needs
Integrate the infrastructure covering the following areas
Product Catalog
Inventory and Merchandise
Pricing
POS
Shipping
After Sales Service
Franchisee/ Distributor Integration
Promotions and Discounts
Some of the technology requirements for IMCR are
Online portal having catalogs and shopping on the Internet
Integration with mobile phones and hand held devices
Secure online payment payments and gateway integration
Supplier B2B messaging hubs and extranets
Integrated inventory management and product search facilities
Usage of messaging standards and protocols like X12, EANCOM, EDIFACT and XML and POS standards like ARTS
In-store operations
The recent trends in the store operations front have been aimed on optimizing the utilization of space and enhancing the overall productivity of the management processes and resources. One technology which is making waves in this area is RFID, which is an automatic data capture technology which enables a retailer to know the exact location of products, the rightful owners and proactive information of the freshness and misplacement.
Some of the applications of RFID in store include:
Just in time replenishment
Automated and in-time product receipts recording and ASN note matching
Automated Proof of delivery
Automated and quick order invoice reconciliation
Expiration and Seasonal alerts
Merchandise Levelling
Misplaced Item Alert
Security Alerts on store exit
Self Checkout
Increased customer interactivity with smart carts
CRM Initiatives
As retailers realize that it is economical to retain an existing customer than to acquire a new one, there has been tremendous focus in this area. Customer relationship management and service has seen a total transition from call center and helpdesk based services to more comprehensive and innovative customer loyalty programs and personalized service management. Usage of smart loyalty cards and intelligent shopping carts are all initiatives to woo customers and enhance loyalty. The new areas emerging here are customer retention management and appreciation management.
CRM in retail space is broadly comprised of
Operational CRM, the various activities and actions taken to meet or exceed the customer expectations for the offered product or service.
Analytical CRM, the analysis basis for customer centric initiatives
Operational CRM
Marketing Campaigns
Reaching to the prospective customer through various promotional media
Devising of launch or promotional packages
Loyalty Programs
Customer Service
Quality focus
Staff Awareness and Personal touch in interactions
Order status on mobile phones and PDAs
User manuals and guides
Warranty and SLAs
Remembering customer preferences and important occasions using smart cards
Assurances and measures on information Privacy and mutual respect
Analytical CRM
Customer segmentation, helps in analyzing
Customer response on new products or promotions
Customer likes and preferences
Market and segment definition
Campaign / Promotion effectiveness analysis
Media channels performance
Response from a geographical location, age group or segments
Cost and benefits of the campaign
Customer loyalty analysis
Reasons for customer attrition
Reasons for customer loyalty
Cross selling
Promoting other products based on the details gathered
Product pricing
Establishing price-sales relationships
Target marketing
Targeting the campaigns and promotions to the specific groups
Market basket analysis to study the affinities between the products
Vendor Managed Inventory (VMI)
Vendor Managed Inventory (VMI)in which the supplier is responsible for maintaining the suppliers inventory levels at customer (distributor or retailer) site.
Vendor Managed Inventory (VMI) is a means of optimizing Supply Chain performance in which the supplier is responsible for maintaining the suppliers inventory levels at customer (distributor or retailer) site. The supplier has access to the suppliers inventory data and is responsible for generating purchase orders based on the movement of goods and reaching of the re-order level.
To further define it, lets look at 2 business models:
Under the typical business model: When a retailer needs product, they place an order against a supplier. The retailer is in total control of the timing and size of the order being placed. The retailer maintains the inventory plan.
Vendor Managed Inventory model: The supplier receives electronic data (usually EDI or via the internet) that tells him the retailer’s sales and stock levels. The supplier can view every item that the retailer carriers as well as true point of sale data. The supplier is responsible for creating and maintaining the inventory plan. Under VMI, the supplier generates the order *, not the retailer
*Note: VMI does not change the "ownership" of inventory. It remains as it did prior to VMI.
Consignment Inventory: When the supplier places inventory at a customer’s location and retains ownership of the inventory. Payment is not made until the item is actually sold.
Our retail solutions cover the entire spectrum of retailing including
Sell Side
Sell side refers to all those activities and functions related to the selection and purchase of products which the customer directly uses.
The following gives a list of the various components on the sell side
Point of Sale (POS) for brick and mortar stores
Catalogs and Product Listing
Search
Content management and data feed integration
Dynamic Pricing and Discounts
Orders
Billing and Consolidation
Shipment and Tracking
Inventory Management
Personalization
Integration with Warehouse/Backoffice, Payment Gateways, Shipment tracking, Market places,search engines.
Buy Side
Buy side refers to all those functions which relate to the procurement of products and business partner integration.
The Buy Side applications include:
Sourcing and Procurement of Products considering
Distribution and Logistics integration
Advanced Planning and Scheduling
Warehouse/Inventory Management
Merchandise and Assortment
Customer Support and Business Development
Costomer support and business development are tools for retaining customer, reinforcement of brand loyalty and growth of business from existing as well as new clientele. The focus is to have timely information and customizability fo support functions.
The various applications on the customer support and businees development include:
After sales service
Customer segmentation and direct sales
Customer Information System
Customer Loyalty
Marketing Management
Product and applications knowledgebase
Data Warehouse
Business Intelligence and Analytics
Data Feed
International Sales
Vendor Marketing
Marketing Web services
. The following are some of the challenges retailers face:
Sell Side
Availability of products on the shelf and no stock outs
Quick checkout process; especially during holiday and festival seasons
Dynamic promotions and discounts
Personalized service and great customer experience
Buy Side
Just in time procurement
Fast and efficient logistics and shipment
Maintenance of optimal inventory
Customer Support and Business Development
Reach, access and efficiency of after sales service
Comprehensiveness, relevance and freshness of customer and transaction data
Effective usage of tools and right analysis
Benefits of VMI
The Benefits of VMI are numerous for both Supplier & Retailer. Here is a partial Listing:
Dual Benefits
Data entry errors are reduced and processing speed improved due to system-to-system communication.
Both parties are interested in giving better service to the end customer. Having the correct item in stock when the end customer needs it, benefits all parties involved.
A true partnership is formed between the Supplier and the Retailer. They work closer together and strengthen their ties.
Stabilize the timing of Purchase Orders - PO's are now generated on a predefined basis.
Retailer’s benefits
The goal is to have an improvement in Fill Rates from the supplier and to the end customer.
Decrease in stock outs and a decrease in inventory levels.
Planning and ordering cost will decrease due to the responsibility being shifted to the Supplier.
The overall service level is improved by having the right product at the right time.
The supplier is more focused than ever in providing great service.
Supplier’s benefits:
Visibility to the Retailers Point of Sale data makes forecasting easier.
Promotions can be more easily incorporated into the inventory plan.
A reduction in Retailer ordering errors (which in the past would probably lead to a return)
Visibility to Stock Levels helps to identify priorities (replenishing for stock or a stockout?).
Before VMI, a supplier has no visibility to the quantity and the products that are ordered. With VMI, the supplier can see the potential need for an item before the item is ordered.
Retail Analytics
Retail analytics is an emerging area which aims at analyzing every aspect of Retail activity right from sales performance, to marketing effectiveness to customer preferences, to loyalty and shift.
From a marketing perspective analytics covers
Customer segmentation and targeting
Campaign management’
Customer / Channel Affinity
From a sales perspective CRM analytics covers
Customer Profitability Analysis
Cross Selling and Up selling
Market Basket Analysis
Product Affinity
From inventory and merchandise point of view
Predict accurately what products should be sold together
Analyse product performance across a category
Shelf Life analytics
Understand how pricing impacts sales volumes
Identify which products produce the largest returns
Which products (by category, feature set, model) generate the most revenue, and profit?
From a customer service perspective, the analytics covers
Customer Satisfaction Analysis
Customer Loyalty Analysis
Radio Frequency IDentification (RFID)
Radio Frequency IDentification (RFID) is an automatic identification technology used to capture details of products as it is done using barcodes although there are a multitude of advantages in RFID than barcode reading.
Technically speaking, using RFID technology, digital data is captured from RFID tags by a reader using radio waves. In simple terms, RFID is similar to bar code technology but uses radio waves to capture data from tags, rather than optically scanning the bar codes on a label.
RFID has been in the headlines due to the directives of major retailers like Walmart, Metro, Tesco, and US Department of Defense asking their major suppliers to attach RFID tags to products before shipping.
RFID tag is a small electronic device that stores and transmits information when asked for. It basically comprises of a microchip (that stores the unique ID number that identifies an individual product) and tag antenna (that enables the microchip to transmit ID information to a reader).
A related initiative to RFID is the Electronic Product Code (EPC) which is a unique identifier of products globally. An EPC is a unique number that corresponds with an individual product unit (or container of products) and stored in RFID tag attached to each product. Unlike the current barcode, EPC identifies a product at an item level. EPCGlobal is the body entrusted with the standardization and adoption of EPCs globally.
The emergence of Radio Frequency Identification (RFID) has important implications for businesses, consumers, as well as policymakers. Companies are turning to RFID to track products, manage warehouse inventory and to stock retail shelves. Consumers are using RFID tags when they travel on highways, purchase gas and groceries, and protect their pets. RFID also has significant potential as a public safety and anti-counterfeiting tool. As the cost of RFID chips declines, new applications of this exciting technology would emerge.
Advantages of RFID over barcodes
The area of RFID application in commercial space overlaps with that of barcode hence the comparison between the two.
The following are some advantages of RFID over barcode:
• RFID does not require line-of-sight to read and write the tag data.
• RF signals are capable of travelling through a wide array of non-metallic materials.
• Can simultaneously capture data from many tags within range of the antenna.
• RFID tags can be encased in hardened plastic coatings making them extremely durable and able to be tracked through harsh production processes.
• RFID tags are able to support read/write operations, enabling real-time information updates as a tagged item moves through the supply chain.
• While a barcode once printed cannot be re-used, the writable RFID tags can be re-used with new data.
Business Benefits of RFID
Business benefits of RFID solutions across supply chain include:
• Optimal inventory and avoidance of over/under stocks
• Phenomenal savings on labor costs
• Real-time visibility and enhanced responsiveness
• Reduces receiving and delivery cycles
• Enhanced customer satisfaction
• Reduction in theft and counterfeit
In addition, RFID tags hold much more data than barcode labels. The tag can be programmed to hold information such as an item’s serial number, colour, size, manufacture date and current price, as well as a list of all distribution points the item touched before arriving at a store.
Although retail giants like Wal-Mart, Metro, Tesco and CPG majors like Unilever, P&G and Gillette are in the news and currently drive the mass implementation in concentrating on the supply chain, RFID has been successfully implemented in a variety of other areas like automotive manufacturing, pharmaceutical, livestock, government and military operations.
Collaborative Planning, Forecasting and Replenishment (CPFR)
CPFR is a methodology in which partners in value chain coordinate plans in order to reduce the variance between supply and demand and share the benefits of a more efficient and effective supply chain.
It operates as a set of business processes in which trading partners agree to mutual business and measures, develop joint sales and operational plans, and electronically collaborate to generate and update sales forecasts and replenishment plans.
Benefits of CPFR
The following are some of the benefits of implementing CPFR
Retailer
Enhanced sales opportunities and recovery of lost sales
Commitment from supplier for maintained service levels
Investment in the right inventory
Long-term price rationalization due to mutual cost cutting
Ability to monitor product in supply chain
Supplier
Enhanced sales opportunities
Commitment from buyer results in more assured order flow
Reduced overproduction and optimal inventory
More effective capacity/asset utilization
Ability to monitor actual consumer demand
Consumer
Consumer satisfaction with right product at right time
Promotional items on hand
Steps in CPFR Implementation
The following are the steps and processes involved in CPFR implementation
Front-end agreement – Planning
Joint business plan – Planning
Create sales forecast – Forecasting
Identify sales exceptions – Forecasting
Resolve sales exceptions – Forecasting
Create order forecast – Forecasting
Identify order exceptions – Forecasting
Resolve order exceptions – Forecasting
Generate order - Replenishment
EDI over the Internet (EDIINT)
EDI traditionally has been used by large organizations that can afford to spend huge amount of money on converters as well as maintaining private point-to-point networks for security and reliability reasons. This was an unthinkable proposition for the small and medium sized enterprises. The advent of Internet has brightened the possibility of doing online transactions by these small and medium enterprises, but with the compromise on security. Ensuring the flow of EDI data transfer over the Internet in a secure manner is the objective of EDIINT. By implementing
EDIINT solution helps to level the playing field for SMEs by providing a solution that allows these companies to do business with larger organizations and, at the same time, enjoy the cost savings, speed and other benefits of e-Commerce.
EDI over the Internet (EDIINT) is a working group of the Internet Engineering Task Force (IETF) that is chartered with creating specifications for transporting EDI or XML documents over the Internet in a secure (digitally signed and encrypted), highly reliable manner.
Benefits of EDIINT
EDIINT “EDI over the Internet” offers the opportunity for large, medium and small enterprises to connect and exchange business documents over a secure public network and significantly reduce communication costs.
The following are some of the benefits
Secure: Addresses the issues of privacy, integrity, authentication and non-repudiation for B2B e-commerce over the open Internet.
Increased Reliability due to the usage of secure protocols, guaranteed delivery, and encryption decryption techniques
Low-cost as compared to the VAN based transactions
Highly accessible as connectivity to Internet is no more a luxury
Supports high bandwidth communications
Technically mature as the specifications are being continually refined based on the feedback from industry usage
EDIINT Standards AS1 and AS2
What are AS1 and AS2?
Applicability Statement 1 (AS1) and Applicability Statement 2 (AS2) are the current specifications developed by EDIINT for transporting data between organizations via the Internet.
How does AS1 work?
AS1 is an EDIINT draft standard defining how applications can securely transport EDI and XML over the Internet using Simple Mail Transfer Protocol (SMTP) (RFC 2821). AS1 provides S/MIME encryption and security over SMTP. S/MIME (Secure/Multipurpose Internet Mail Extensions) secures data with authentication, message integrity, non-repudiation of origin, and privacy features and is the standard means of transporting virtually all Internet email. SMTP (Simple Mail Transfer Protocol) is the protocol used by most email systems for sending email messages between servers.
How does AS2 work?
AS2 is an EDI INT draft standard defining how applications can securely transport EDI and XML over the Internet using Hypertext Transfer Protocol (HTTP) (RFC 2616).
AS2 is an adjustment of AS1, providing S/MIME over HTTP or HTTP/S, instead of SMTP, as the transport protocol. HTTP (Hypertext Transfer Protocol) and its secure form, HTTP/S define how messages are formatted and transmitted and what actions Web servers and browsers should take in response to various commands.
How does AS1 compare with AS2?
Because AS1 uses SMTP it provides asynchronous, “store and forward” data transport, whereas AS2 makes use of HTTP to allow for synchronous, “real time” transmission of data with immediate message delivery notices.
What are the benefits of AS1 and AS2?
Secure electronic transmission of data, especially over the Internet, allows organizations to conduct business much more quickly than with paper. For example, turn-around times of business transactions are decreased when conducted electronically. With AS1, data is transferred swiftly via email. With AS2, data is transferred even faster, almost instantaneously, because it uses direct HTTP transfers. Also, organizations benefit by greatly reducing the cost associated with traditional, Value-added Network (VAN) EDI. The AS1/AS2 specifications use the Internet to exchange data and, therefore, eliminate expensive VAN transaction fees.
In addition, because AS1 and AS2 are the recognized standards for data transport, organizations benefit by greatly reducing the time and cost associated with business data exchange. Using the recognized AS1/AS2 standards provides interoperability between data transmissions; ensuring organizations can read each other’s data.
If you are interested in outsourcing software development or would like to find out more about our services and offerings, please get in touch with us. You might want to send us a mail, or simply contact us at info@binaryspectrum.com. A senior member of our customer engagement team will get in touch with you within 24 hours.
