Automated Retail

The Middle East’s retail industry is booming as both the number of tourists and long-term residents increase. As a result, the sector is also beoming more competitive. To ensure that they get more than their fair share of this business, and in some cases stay afloat, many retailers are turning to information technology.

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By  Maddy Reddy Published  October 2, 2004

|~|intermec_colin-summers11.jpg|~|Colin Summers, regional manager of Intermec Middle East.|~|A number of Middle East countries are pinning their post oil futures on the tourism industry. Aside from sandy beaches and blue sea, the other attraction being offered is shopping. Within Dubai, for example, retail space is expected to increase 400% by 2010 and occupy a massive 20 million square feet as more than 7000 retail chains do business within the Emirate. According to Ole Milan, managing director for retail software vendor Landsteinar GCC, this growth is perpetuating the development of other industries, such as construction and tourism, which are both feeding consumers back into the retail space. “The expansion of retail space in Dubai is going to have a positive impact on the Emirate’s overall economy. In the short-term, construction and design companies will benefit from the boost in building activity. In the future, companies specialising in everything from mannequins to cleaning firms and interior decorators will also benefit from the trickle-down affect,” says Milan. All this growth means the local retail industry is booming and competition is becoming fierce. Colin Summers, regional manager of Intermec Middle East, believes this may eventually lead to consolidation in the industry. “Some of the large global retailers could be coming into the region. There is already a lot of consolidation going on in the retail sector and you will see lot of supermarkets moving into the hypermarket space as they open new outlets. They are looking at taking away market share from the small [groceries]. What’s happening here in the Middle East is interesting,” he says. While consolidation may be someway off, one thing that is definitely happening now is that many retailers are turning to technology and deploying solutions that not only streamline their supply chains but also enhance customer facing technologies such as point-of-sale (POS). “Over the past few years there has been a huge increase in IT spending. Until 1997 most retailers only had cash registers. By 2000 most had moved on to using electronic point-of-sale (POS) through which they could scan an item and give the customer a [printed] bill,” says Sunil Kumar, business development manager at Head Start, the local subsidiary of UK retail consulting firm Retail Realm.“Also, as retailers were faced with inventory problems, they started scaling up and changing their back office set ups,” he adds. One local retailer that has led this foray into the IT world is Jacky’s Gulf. With operations across seven countries and a staff of 400, the Dubai-based firm was facing strong competition from other retailers that wanted a slice of Dubai’s US$4.1 billion electronics market. To help it overcome inventory and operational issues and sharpen its competitive edge, Jacky’s decided to overhaul its entire IT infrastructure. Since that decision was made, the retailer has made a seven-figure investment in its IT department, purchased new hardware and deployed solutions such ICICI Infotech’s Orion enterprise resource planning (ERP) application. “We had manual invoicing in the front end and batch posting in the backend and the process created huge amounts of backlogs... With over 200 active suppliers the accounts payable data was huge and we had daily purchases, multiple supply and delivery schedules to contend with. Keeping track of all the information was hard,” says Ashish Panjabi, chief operating officer at Jacky’s Gulf. “Also, all the products we deal with have now become digital, which means that the product life cycle has become shorter and price volatility has increased. This meant we needed to know everything about our stock,” he adds. Today, Jacky’s operational data is processed by EPOS, while the financial and administrative functions are handled by its online ERP system. This allows the firm to effectively keep track of its stock, daily teller sheets, transactions, goods received, stock location transfers, delivery notes and profomas. “All this information is provided to us in realtime. We can generate reports, stock and brand wise, across different sales locations. We are also able to do our inventory planning with our suppliers ahead of time,” says Panjabi. Another benefit of the system is that Jacky’s is now better prepared for price volatility, as it can quickly move stock should a particular product become dated due to technology trends. “We are now prepared for price drops and can react by liquidating stock faster through promotions and tracking the response and not be with stuck with obsolete stocks,” says Panjabi. “We now not only know the sales figures but also the margins. Looking back, we wonder how did we manage without all these systems in place — its become second nature now,” he adds. ||**|||~|jpnambiar_jumbo11.jpg|~|JP Nambiar, general manager of Jumbo Retail.|~|Jumbo Electronics is another retailer that is paying renewed attention to its IT infrastructure. After running it business on legacy systems for 28 years, the US$381 million retailer has overhauled its supply chain system. The electronics giant has migrated its systems to PeopleSoft Enterprise One, which runs on IBM’s i-Series AS/400. Jumbo has also linked its 25 stores and 10 service centres using an integrated services digital networks (ISDN) line. It now uses a business intelligence tool called GMROI (gross margin return on inventory investment) to communicate with its 30 global suppliers. “We are in an industry that is operating on wafer thin margins, so everything we do [needs to] fulfil demand in realtime. Tools such as GMROI are one way for us to optimise our sales and create timely analysis. It gives us an insight into understanding our customers and their sales patterns,” says JP Nambiar, general manager of Jumbo Retail. The need for realtime data has also played a part in EMKE Group’s IT investments, which have recently seen the retailer implement a solution that creates a realtime wireless supply chain. The company, which owns the Lulu supermarket chain, has also moved away from traditional DOS-based mobile computers to the latest PDT 8100 handhelds that are powered by Microsoft’s Pocket PC platform. Staff can now perform online requisition of goods from the company’s retail outlets to its central warehouse, thus ensuring faster replenishment of goods. “We needed to upgrade to wireless LAN so that we could have realtime updates. Realtime updates gives us the much needed competitive edge,” says Madhava Rao, IT director for EMKE. “The new system has been up and running since the beginning of the year and we are quite happy with its performance. We are now planning to implement a similar WLAN solutions at our outlets in Kuwait and Oman,” he adds. While retailers such as Jumbo, Jacky’s and EMKE have taken steps to implement the technology they need to streamline their back office operations and develop a competitive edge, the signs are that such organisation will have to continue to invest in IT as others follow suit and the market becomes more cut throat. In particular, retail IT specialist Multi Sell believes organisations will have to pay more attention to front end solutions that grab customers’ attention. As such, it believes there will be a sizable market for its MultiPoint solution, which uses video stereoscopy and advanced micro cameras to facilitate digital interaction between a retailer and its customers. “Using MultiPoint, customers can interact and browse even when the store is shut. It’s safe because it is installed behind the window and it is protected. By integrating the dynamic media into their shopping windows, retailers are increasing the effect and visibility of their products,” says Mohamed El Omari, vice president sales & marketing, Multi Sell Middle East. Another aspect of their business that local retailers need to work on, according to retail solutions provider Prodco Tech, is understanding customers better, as this allows companies to develop more specific product plans and earn greater purchasing loyalty. In particular, the vendor believes the Middle East’s retailers need to upgrade their customer facing solutions once again and deploy software that effectively tracks a customer’s behaviour. Ajit Nair, senior manager for software solutions at the Jumbo IT Group agrees: “If a retailer cannot differentiate a high value regular customer that purchases in one of its outlets it will lose that customer. The order of the day is to secure both big and small customers. In order to do this, retailers need to collect critical data of their customers,” he says. Prodco believes its Retail Traffic Counter (RTC) can deliver the information local retailers need. The product includes beam sensors and thermal imaging sensors and is mounted 52 inches above the floor. The unit counts adults and teenagers who typically influence purchase decisions and disregards shopping carts and young children. It captures customers walking across entrances and in specified access areas in both directions. The readings are relayed instantaneously to the RTC data capture unit and stored in pre-selected increments. The RTC integrates with POS and in-store servers via a TCP/IP Ethernet connection. Traffic data is polled automatically and transferred to a specified location via an end of day batch routine, from where it can be analysed and customer behaviour better understood. “We track the number of shoppers that enter a store and then we interpolate it with the sales generated and transactions. This adds another dimension to the analysis process and gives a clear traffic patterns. [Even] if the sales staff can use this data and convince 5% more customers, then the sales go up automatically,” says Chandan Chowdhury, regional manager at Prodco Tech, Middle East. “Retailers still shy away from such traffic systems, but once they invest in it they will realise its value because it sheds so much light on customer information. It will eventually become a key tool for retail outlets and for malls most importantly as their success is determined by the number of people it can [attract],” he adds. Another method being used by retailers to garner all important customer information and build long-term relationships with clients is loyalty programmes. For example, ADB and Telecom Plus have developed a turnkey smart card based loyalty programme for the Saudi-based Al Haseelah. The company has installed 1000 mobile computers equipped with smart card writers and readers across its 1000 commercial outlets in Jeddah. Cashiers type the customer’s total purchase amount onto the handhelds touch screen, which can then be converted into loyalty points. Twice a day, the handheld dials into a central back-end and upload the point information. This serves not only as an incentive to customers but allows Al Haseelah to track and analyse customer-spending patterns. Although Al Haseelah expects to win the loyalty of up to 100,000 customers and 10,000 retail outlets across the Kingdom with its loyalty programme, establishing such schemes can be an expensive and difficult affair. Not only do loyalty programmes need to be created and managed, but also to work effectively they often need to be endorsed by a number of retail outlets, many of which are not overly keen on sharing customer information. Rather than pursue the loyalty programme route, Al Madani Group (AMG) has found it easier to understand its customers by concentrating on just one segment of the market. The retailer, which sells Dockers, Levi’s, Hang Ten and Gas clothing from 34 stores in the GCC region, has used Microsoft’s retail management suite (RMS) and Great Plains 7 to improve its knowledge in terms of customer trends and preferences through tighter control of its supply chain and inventory. “We used to have a lot of inventory problems in our stores. When we received the goods, we didn’t have a system that can handle the goods efficiently and it took a long time entering them into the system and generating before we could dispatch it to our stores on time — this was a major issue affecting our retail business,” says Mohammed Ahamdi, IT manager at AMG. “Since we couldn’t get the exact figure of our stocks and sales we didn’t always know which items are needed by our customer or have an exact picture of our customers or sales — we needed a system that gives us consolidated information. When you have a good system, you will know exactly what the customer wants,” he adds. ||**||

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