Retail CIOs aiming to ditch legacy of IT complexity

Retail technology touches our daily lives at almost every turn and that's reflected in the fact that one-fifth of those on the CIO50 list come from that sector. Yet retailers traditionally spend proportionally less on IT than almost any other sector, leaving many companies with ageing and complex proprietary systems. Julian Goldsmith talks to retail CIO veteran and silicon.com editorial board member Ric Francis about about the current tech challenges for the sector...

Retail is by nature fast-moving and fluid, often forced to react to the whims of consumer demand. Competition between retailers is at times cut-throat and players in the industry are constantly investing in ways to pull shoppers in through the door.

All these factors impact heavily on what types of technology retailers choose to invest in or whether they choose to invest in technology at all - often preferring to spend budgets in other areas, such as expanding store portfolio, cutting product prices or buying back shares.

Over the past two years retail IT budgets have started to shift from heavy cost cutting to cost containment. For many there is little left to actually cut. Analyst Forrester also predicts a greater proportion of retail IT spend will be devoted to non-innovating maintenance and operational spend - currently an average of around 80 per cent of the budget.

One of the big challenges to the industry, as it undergoes a period of mergers and acquisitions, is the integration of existing systems.

There has been a raft of mergers and takeovers in the last few years, especially in the convenience store and DIY markets and Professor Joshua Bamfield at the Centre for Retail Research believes that the integration of back-office systems is where much of the IT spend throughout the sector will go.

He says: "When an acquisition happens, it's very exciting but the IT implication is very grim. Often the existing back-end technologies have been in place for so long that the skills needed to integrate them are no longer with the company."

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But this means an opportunity to rationalise and standardise systems. Post Office operations director and former Safeway CIO Ric Francis says there is little business sense in investing in proprietary core systems. He believes that the industry is moving to de facto standard solutions.

He says: "Too many organisations believe they are different. I've long believed that if you can't be vanilla, you will eventually run into difficulty. Why does there need to be 10 different ways of doing something? I think the sector is moving to a more open architecture, using pretty much the same suppliers, which will allow more consolidation."

A prime example of this trend is global retail giant Tesco, which recently unveiled its plan for a standard set of processes and technologies - dubbed 'Tesco in a box' - that it will be able to use at any of its global sites.

But Francis also claims the days of huge transformational projects are over and that retailers are now looking at how they can build on core systems to differentiate themselves.

He says: "There is no more demand for one-function tin boxes. They make it too difficult to keep the hardware estate up and running. We are not looking for suppliers of hardware anymore. We want partners that provide solutions for us."

The 'big ticket' plays - things like enterprise resource planning (ERP) systems - are done. Organisations now want to get some value out of these huge investments, so they are going back and looking at the niche plays.

In terms of new technology in the retail sector, the shop floor rather than the back-end is where the new investment is going, according to Bamfield.

He says: "It is the need to equip people all through the organisation with the devices they need to pull down operational information quickly is more critical. There will be much more emphasis on bringing up-to-date information to the staff who can use it to increase sales and reduce loss."

The in-store strategy at the 14,000 branches of the Post Office being driven by Francis supports this argument, although one of his more innovative ventures is more about giving customers the choice over whether they want to interact with staff at all.

Francis says: "We've been trialling three self-service checkouts, so that customers no longer have to join that queue at lunchtime. In banking, self-service is a given. We expect a 20 per cent move to self-serve checkouts and we've seen double that in the trial. Perception is the deal. Whether it takes less time or not doesn't matter, it's whether the customer perceives self-serve as quicker."

Fundamentally, it is the old retail adage of the customer always being right that underpins how the sector invests in technology. Bamfield argues retailers will do ever more to create an environment where customers are sold products in the way they want.

He says: "There has been a push into the internet and much development in relating the internet side of the business to the physical business. There is a trend for bringing the online and offline shopping experiences in line with each other to satisfy consumers. In both cases consumers want immediate access to the products they are interested in, they want lots of information easily to hand and they want it all fraud-free."

Francis agrees that a better understanding of customer attitudes is a key requirement in the industry and he praised the efforts of Tesco, which he sees as the master in understanding customers, through its Clubcard loyalty scheme and using that knowledge in ranging.

He says: "Some retailers are kicking themselves that they didn't do the same thing five years ago. If they are still not collecting customer data in five years time, they should be shot for missing the same opportunity twice."

Francis also says the barrier between the offline and online shopping experience is being broken down.

He says: "I see development in the department store space. Consumers interact in a different way throughout the store. The selection process shoppers go through there allows different opportunities. For instance, I visited a department store in Tokyo that was doing interesting things with tagged items. There was a full length screen that at first looks like a mirror, but it superimposes the clothes you have chosen onto your image."

But there are some technologies that haven't taken off in the retail sector, such as electronic shelf edge labelling (ESEL) and digital signage. Francis thinks these have foundered because, despite being proven technologies, they didn't offer enough value to warrant the required level of investment against paper.

He says: "ESEL didn't work because it didn't provide enough value. I don't think it was taken far enough. I would have liked to have seen a solution that showed pricing when shoppers are in the store and then switched to stacking information - what product, what size, how much space on the shelf, how many cases in the back of the store - for instance. People haven't thought laterally enough to see what else I can get out of it."

For retailers the current outlook then is about more mundane problems than investing in cool new 'blue-sky' in-store applications and Francis says one of the most pressing requirements is to get rid of the cash register altogether.

He says: "The industry has to solve the cash issue. Dealing with cash is very expensive. Coins are the biggest problem, so the introduction of contactless small payments is bound to be attractive."