IT engine pulls retail chain

Do you know that buyers of Kingfisher beer and Old Cask rum also buy Nestle's Charge chocolate? And Sundrop cooking oil buyers also buy oil brand Idayam? These are some interesting purchase patterns found at Foodworld's Anna Salai outlet in Chennai. A study of this kind of purchase pattern was carried out by G. Raghuram, a faculty member of the Indian Insitute of Management, Ahmedabad.

Speaking at a seminar sometime back, Prof Raghuram said that fast moving consumer goods, or FMCG, manufacturers and marketers can tap a wealth of information from retailers who have invested in information technology. On the basis of true demand data, FMCG companies can tailor their sales promotions and product pricing, make inter-brand comparisons and even plan their production schedules, he said. In addition, employee productivity and profitability can be measured.

Scanners, computers, printers and other hi-tech gadgets have become familiar in retail stores. "Not just for faster billing. Investment in computer systems has become compulsory for processes such as inventory management and merchandising," comments R. Subramanian, director, Subiksha Trading Services Pvt Ltd, which runs the Subiksha chain.

Compared to running a single shop, managing a retail chain is an entirely different cup of tea. Complexities and imponderables multiply with size. "The business has necessarily to be united by infotech. Tracking 300 suppliers, 4,000 SKUs (or stock keeping unit), 30 stores and year-round operations would go haywire if proper IT were not in place," reasons K. Radhakrishnan, vice president, Foodworld Supermarkets. Just-in-time inventory, which saves tremendously on cost, is also possible through good IT connectivity.

Around 20 per cent of the total outlay for a retail store now goes towards installing an efficient IT system. Shoppers Stop became the first retail chain to opt for an ERP package. The package cost Rs 5 crore. Globus, which started its first store in Indore, followed by another in Bangalore, has invested around Rs 9 crore in a JDA software package. JDA is among the best known for retail-specific software globally.

The south-based Vitan Departmental Stores & Industries Ltd, its chairman V.P. Chockani claims, has spent around Rs 35 crore in developing its operational software. And Vivek & Company has asked TCS to develop software for its stores.

Speaking of the IT plans for Health the & Glow chain, Oscar Braganza, chief executive officer of RPG Guardian Ltd, says, "Currently, inventory is managed on a per store basis. The next stage is to have a virtual warehouse by networking all the stores. We are working with TCS on this." The system would generate and place orders with suppliers, who in turn would deliver to the outlets directly, he adds.

Foodworld (also an RPG group chain in the south), say industry sources, spends around Rs 55 lakh annually on sticking labels, bar coding and other such things, tasks FMCG manufacturers can do themselves without any significant additional cost, the retail industry feels.

Enough retailers have voiced this need, and some manufacturers have started heeding their advice. Industry sources say Shoppers Stop has held talks with Arvind Mills and Coats Viyella (India) Ltd for supplying bar-coded garments, preferably in EAN standards with additional coded information like colour, fabric texture, and other such details.

Talk information technology and you can't ignore the Internet. The retailers are not ignoring it either. While some are debating whether the Indian consumer will buy groceries and consumer durables on the Net, garment sales over the Net have begun.

A study done by Ernst & Young reveals the seriousness with which retailers are viewing business via the Internet. Of the 46 stores surveyed across the country, 24 have their own websites, and nine have Net shopping facilities. Six of these nine are based in the south. Stores such as Rasi Silks, Nalli Silks, Kumaran Stores, Colourplus -- all based in Chennai -- are already doing business on the Net.

IT in retail is bound to get sophisticated fast, specially with the chains, since it provides a lot of advantages in a challenging marketplace. Knowledge of customer buying habits can help better with customisation and proposition, leading to higher retention successes. Better connectivity does provide for better cost management, essential in a business where success is measured in cost per square foot.