What is the key to success for retailers in 2012
Flexibility and agility in resourcing IT projects is the key to success for retailers in 2012
As retailers face up to another tough year in 2012 we take a look at the particular problems that CIOs in that sector are facing and how they plan to overcome them.
The retail industry has never been for the faint of heart. Traditionally, it is a low-margin business, meaning the difference between success and failure is very small. When, as now, those low margins are coming under greater pressure from increasing costs, reduced spending and competition from online enterprises, it all adds up to the perfect storm that could see many well-known names disappear altogether in 2012.
Some recent statistics from late 2011 underline this. Currently, there are 23,000 less retail jobs in the UK than the same time last year and average sales volumes have seen just 0.6% growth in September 2011 compared with 2.2% in 2010. Meanwhile, the impact of the Internet continues to grow, encouraging consumers to demand greater selection, better service and lower prices in every channel.
Against such a backdrop the use of technology within retail organisations is vital for survival and growth. This requires CIOs to be constantly evaluating new technologies and providing recommendations to the business as to whether these can improve performance and reduce costs.
Success and even survival is dependent on controlling costs while persuading customers to stay loyal. This will depend on the capability of retailers to develop technologies that will please customers in every sales channel they operate.
But, with the ever-expanding scope of technologies how is it possible for organisations charged with doing more with less to skill-up to meet the demands of a new project and ensure the expected ROI is realised?
To understand more fully the detail of these issues we spoke to two organisations that, despite the gloomy outlook, are looking forward to the prospects 2012 will bring.
A year of opportunity for UK’s largest mutual business
Chris Sproston is head of software development for the Trading division of The Co-operative Group. The Co-op is the UK’s largest mutual business, owned by over six million consumers and is the UK’s fifth biggest food retailer, the leading convenience store operator and a major financial services provider, operating The Co-operative Bank, Britannia and The Co-operative Insurance. Among its other businesses are the number one funeral services provider and Britain’s largest farming operation. The Group operates 4,800 retail trading outlets, employs more than 106,000 people and has an annual turnover of more than £13bn.
“2012 will be a year of real opportunity for the Co-op,” said Chris. “We are focusing our efforts in three main areas. Firstly, we will be continuing to develop and offer our in-store EPOS system (InControl) as a commercial application to other retailers. This is a tried and tested solution that we operate in all our retail stores and offers real benefits to any retailer. This is a major opportunity for us as an IT department to actually add revenue to the Group.
“Secondly we will be combining the data of our trading and banking groups to enable us to obtain a unified view of our customers and allow us improve overall satisfaction and help attract new customers as well as identify new opportunities within our existing customer base. Finally, in conjunction with our head office move, we will be introducing Microsoft SharePoint across the organisation as a collaboration tool and platform to encourage flexible working and improve the flow of information across the business.”
Improving online offerings in a division of one of the leading retailers
Attiq Qureshi is the IT director for Tesco Telecoms, part of Tesco Plc, one of the world’s leading retailers. His division offers its own mobile phone network (sharing O2’s), broadband and land lines, international calling cards as well as operating more than 220 phone shops selling mobile phones and accessories within Tesco stores. Tesco Telecoms will be looking to build on its success in 2011 by focusing technology efforts in two key areas in 2012 as Attiq explained. “We are investing in improving our online offering to give a better customer experience and richer functionality. This will not only improve customer satisfaction but also enable us to offer more timely services such as handset insurance.
“We will also be targeting projects that optimise business and process efficiency. This will be in areas like back office and stock picking as well as improving the sales process within our phone shops. The actual selection and purchase of a new handset can take a long time with things like credit checks, so anything we can do to speed up and simplify this process makes for a happier customer.”
Measuring benefits and ensuring ROI
Clearly, any technology investment does not take place in a vacuum and has to work within the constraints that the current economic climate places on every business. “We are heavily focussed on business benefit now,” said Chris. “Every requirement that is put to us is subject to a stringent cost and benefit analysis. We need to know the impact of the changes it will bring about and how this will benefit the business either in direct financial terms, improved customer satisfaction and retention or increased revenue.”
Attiq agrees that this approach is the only way forward. “We are focussing our efforts on projects that have a short ROI and clearly measurable benefits such as reduced costs, improved efficiency and short to medium-term sales improvements. This way we can be sure that every pound we spend will have a direct and positive impact on our bottom line within the current financial year.”
Third parties provides the agility to cope with changing requirements
In such a dynamic environment where every pound has to be accounted for it is vital that the IT department within the organisation is agile and able to cope with new and ad-hoc requirements as they occur. The traditional model of employing all the required skills permanently in-house struggles to cope in such a fast-changing world and so a new approach is required.
“We now have a good and balanced model with a trusted group of partners that we can call on at short notice,” said Attiq. “This helps us cope with peaks and troughs and lets us bring in highly specialised skills at short notice. As we work on a rolling 6 month roadmap we can plan with our partners where we will need supplementary skills and have them on board in time to meet project deadlines. We will also use individual contractors to supplement our existing in-house skills in architecture, design and project management.”
The Co-operative Group follows a similar model. “We have a lean in-house IT team that allows us to leverage our trusted partners’ skills more than ever before. This ensures that we always have the right mix of skills to cope with peak demand. This flexibility works at the other end of the scale as well by ensuring that we never have idle resources waiting for a project to start.
“The project to implement SharePoint was good example of this. Initially, we had no skills internally so we worked with our trusted partner in the planning, governance and strategy for the project. We then used them for skills transfer to bring a requisite knowledge level in-house. As it has become a strategic tool for us we needed to improve our internal skills and this was the ideal way to achieve that. We simply would not have been able to deal with the demands of the project without the flexibility of our partner.
“Similarly, with the InControl project*, we needed expertise quickly to develop, test, package and support the product for when we went to market and the only way we could get this in time was to partner with a trusted third party.”
The blended approach is also followed by Tesco Mobile. “We now use partners for the majority of our development work as well as being able to draw on resources from other Tesco group companies,” said Attiq. “By utilising both internal and third party resources like this it ensures we can adapt quickly to new demands and provide a cost-effective solution. It also means that we can engage different types of expertise such as QA and testing within a short timescale and by working with a select number of tried and trusted partners we know that they understand us and our ways of working. This removes the major drawback of working with a third party at a stroke.”
Dealing with the Internet challenge
Coping with increased online competition is going to be a major driver for many organisations in 2012 as consumers become more Internet savvy and are increasingly comfortable with buying online. At a time when Amazon views its perfect customer as one that doesn’t want to talk to them, how are more traditional retail organisations going to respond.
“We are trying to make the customer experience richer,” said Attiq. We have already launched a Web chat initiative on our site that allows customers to talk to a live operative while they are shopping. Offering this personal touch is a real differentiator over pure online operations and has proved very successful. I believe that it is the way we can add value for the customer.
“We are also introducing self-service elements as we recognise that some processes are better done by the customer themselves in their own time, without the frustration of them having to contact a service centre or help desk.”
The Co-operative Group is following a similar path. “Technology is the enabler for all our improvements in customer interaction,” said Chris. We have already, on the back of the SharePoint project started to implement Microsoft Link for Instant Messaging and Video Conferencing. I believe that this will bring about the biggest change to our business since e-mail and drive through a more efficient way of working and interacting with our customers. This will enable us to offer an improved service across the whole Group and better compete and differentiate us from pure online offerings.”
“We are using technology in innovative ways to differentiate us from pure Internet companies,” added Attiq. “A good example of this is our use of pop-up stores to test the market in selected Tesco outlets. This lets us quickly and cheaply provide a full-service outlet at a fraction of the cost of equipping a full store. It has proved very successful in driving us into new markets.”
Partnering – the way forward
It is clear that despite the troubled economic climate there are still retail organisations looking to grow in 2012. What these retailers share is the ability to respond to the challenges/opportunities that an economic downturn brings by having clearly defined and measurable targets for their technology investment.
This requires a level of flexibility that large in-house IT and development teams simply cannot cope with. Using technology as an enabler to reduce costs, increase the efficiency of processes and improve customer service and retention requires access to an increasing pool of professionals with both product and skills knowledge and experience.
Trying to accommodate this in-house at a time of level or reduced staffing budgets is clearly not the way forward as both the Co-operative Group and Tesco Mobile have discovered. By building relationships’ with trusted partners they know that they can quickly upskill and down skill to meet the peaks and troughs of a project while keeping within a project’s budget – ultimately helping to ensure the anticipated ROI
In evolving areas, such as the Internet and collaboration, keeping up with and even ahead of the competition is vital for success and survival. But, it is in these areas that there is the greatest skills shortage and consequently the highest costs. Additionally, keeping these skills up-to-date requires significant and ongoing investment which can very quickly become redundant if the organisation or technology trends change direction. This is precisely the area where partnering can help to reduce costs while ensuring retailers have access to precisely the right mix of skills exactly when they need them and do not pay for them when the requirement is past.
* For more information on how GodelTech helped the Co-operative Group with their InControl solution please click here.