Table Of Content•
in
Retailing
Application of Information Technology
and Corporate Models in Retailing
APPLIED INFORMATION TECHNOLOGY REPORTS
Editor Robert Lewis
KOGAN
PAGE
© Unicorn Seminars Limited 1989
Softcover reprint of the hardcover 1st edition 1989
All rights reserved. No reproduction, copy or transmission
of this publication may be made without written permission.
No paragraph of this publication may be reproduced, copied
or transmitted save with written permission or in accordance
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or under the terms of any licence permitting limited copying
issued by the Copyright Licensing Agency, 7 Ridgmount
Street, London WClE 7AE.
Any person who does any unauthorised act in relation to this
publication may be liable to criminal prosecution and civil
claims for damages.
First published in Great Britain in 1989 by
Kogan Page Limited, 120 Pentonville Road, London N1 9JN
in association with Unicorn Seminars Limited
British Library Cataloguing in Publication Data
I. T. in retailing.
1. Retailing. Management. Information Systems.
Applications of data processing systems.
I. Lewis, Robert II. Series
658.8'7'00285
ISBN 978-94-011-6407-8 ISBN 978-94-011-6405-4 (eBook)
DOI 10.1007/978-94-011-6405-4
Billings & Sons, Worcester
CONTENTS
Preface 1
R L Lewis
1 Overview of retailing: the future 3
Clare Walker
2 Direct product profitability 10
Alison Pinnock
3 Towards an integrated retail management information
W
~~m
Prof. J R Beaumont
4 Planning profitable strategies 36
Michel Khan
5 Simulating the retail environment for planning,
assessment and training 43
Roy Stainton
PROBLEMS SPECIFICALLY OF THE SMALL AND MEDIUM
RETAILER
6 A decision support system for medium sized retailers
using low cost local area networks 50
Richard Wenley
7 Technology for the small independent grocer 60
John Brisco
ELECTRONIC POINT OF SALES
8 Retailing is communicating 70
Bernard Cain
9 Using point of sales 79
Len Fletcher
10 Technology for the independent retailer 88
Mike Bielinski
11 Hand held systems in the retail industry 96
Irwin Joffe
SPECIALISED ASPECTS OF RETAILING
12 Lessons for the future from out of the past 103
Richard Preece
13 Design and implementation of forecasting and inventory
control in the retail industry 118
John Murdoch
14 Utilising private data networks to manage 127
David Brookfield
15 Enhancing retail profitability using computer-aided
design 134
John Watts
16 Advertising tracking for retailers 140
Peter Carter
17 Intreractive media - gimmick or real productivity tool? 152
Piers Lea
THE FUTURE - LAND OF PROMISE?
18 Making EFTPoS work 161
Gerald Hawkins
19 Smart cards in retailing 168
Roy Bright
20 EFTPoS the consumer viewpoint 175
Jeremy Mitchell
PREFACE
Retailing today is one of the largest, most buoyant and most competitive
market sectors. The large, medium and small retailers, providers ofs ystems are
the major players in this market.
The exploitation of information technology and the use of quantitative
corporate models are emerging as key factors in determining the strength and
effectiveness of marketing plans and support logistics. Many major retailers
have developed considerable in-house expertise in this area and many hard
ware manufacturers and systems houses have created special divisions to
provide turn-key installations, products and services in order to exploit these
opportunities.
However, in the research leading up to the seminar on which this book is
based, a number of important gaps in retailer useage of systems were noted.
While many retailers, including the large multiples, had very sophisticated
electronic point of sales devices, the information that was available was not
being used to plan effective marketing and selling strategies, nor yet to plan for
growth. In the medium and smaller companies there was still concern whether
electronic point of sales were cost effective for them or whether being without
such aids put them at a grave disadvantage vis-a-vis their larger competitors.
LW hile retailers used the electronic point of sales to pinpoint shelf
shortages and to replenish stocks, there were many who were not using the
information to build up a scientific stock control system for fast moving, slow
moving, seasonal and new lines. Hence the situation still remains that fast
moving items are too often out of stock, while slow movers remain on the
shelves too long. Only a few retailers had looked to the future with regard to
electronic fund transfer point of sales devices and the use of smart cards, and
had thought how these would affect their working relationShips with the banks,
their cash flows and their whole working environment. On a more peripheral
note, store security is becoming ever more important.)
This book looks at all these aspects of retailing and while it cannot answer
everyone's questions it does highlight the problems and suggest some answers
which will be useful to both large and small retailers and indicate further areas
of research for those who recognise the highly competitive nature of their
business and realise that without the use of better information, their days could
be numbered? Oare Walker, formerly editor and now publisher of Super
Marketing sets the scene by presenting an "Overview of Retailing". The first
2 IT in Retailing
main section of the book covers important aspects of achieving greater
profitability from a global look at retailing and is covered by Alison Pinnock,
Professor John Beaumont, Michel Khan and Roy Stanton, who considers
Management Training and Assessment.
A great deal of emphasis has been placed on the larger retailer, but the
next section of the book looks specifically at the problems faced by the small
and medium sized retailer. Richard Wenley is Managing Director of a medium
sized department store and John Brisco, through the John Henderson Group,
services a myriad of small retail outlets and shows how they can use systems
to make themselves more competitive. Many people are now using electronic
point of sales, but are they doing so effectively? Bernard Cain, Len Fletcher,
Mike Bielinski and Irwin Joffe look at these problems and suggest some ways
forward.
The fourth section of the book considers some specialised aspects of
retailing. Richard Preece looks at security taken from his experience outside
the retail industry: John Murdoch emphasises the need for scientific forecast
ing and stock control -this important topic will be the subject of an in-depth
Unicorn seminar in 1989. David Brookfield investigates the way in which
management can control retail building services while. John Watts shows how
computer aided design can be of great assistance both with new store building
and with improving the layout of existing stores. On to the mystic art of
advertising in which everyone indulges, but from which results are often
difficult to quantify. Peter Carter's paper gives some help to retailers on how
to assess retailing performance. Finally, in this section Piers Lea looks slightly
into the future and shows how interactive videos will make it easier for the
shopper to obtain information about commodities and then to make his or her
purchase.
The last section of the book moves a further step into the future with
Gerald Hawkins and Roy Bright studying the likely progress ofe lectronic fund
point of sale and smart cards, while Jeremy Mitchell sees how all this glowing
future will affect the consumer.
The authors all hope you will have a good read!
RL LEWIS
October 1988
Chapter 1
Overview of retailing:
the future
CWALKER
1.1 INTRODUCTION
As editor and now publisher of Super Marketing, the weekly business
newspaper for retailers of food, I have watched the many technological
developments which have taken place in grocery retailing in the relatively short
time I've been involved with this fast changing trade.
I believe the invitation to me to give a paper acknowledges the fact that
those involved in retailing of food are way ahead of their colleagues in other
sectors of retailing when it comes to the implementation of information
technology and the use they make of the data it provides.
My colleagues on Computer Weekly, another title in our company, Reed
Business Publishing, confirm this to be true. My first prediction is therefore
rather an obvious one: other retailers, on seeing the increased efficiency and
profitability of their counterparts in the food trade will begin to experiment
with systems such as Electronics at Point of Sale, Direct Product Profitability
and Space Management.
But why has the food trade taken this lead? To answer this question, now
is probably the best time to do a little scene setting.
1.2 BACKGROUND
Self-service was first tried out in tltis country during the war owing to
labour shortages. By the beginning of the 1950s the first supermarkets were
opening - and Super Marketing's forerunner was launched in 1951 as Self
Service and Super Market (please note the singular -denoting, it seems, how
rare the latter still were!). Twenty years later the supermarket industry was well
established and the weekly Super Marketing was born to cater for their
information needs.
4 IT in Retailing
But as the supemuuKets and then superstores grew, the pattern of the
market began to change dramatically. The independent sector has been
declining at an alanning speed while the major chains' grip on the market has
grown in an equally disquieting way. Since 1971 when Super Marketing made
its first appearance as a weekly paper the number of grocery outlets has fallen
by more than a half.
Today only five companies account for more than 50 per cent of the
market -Sainsbury's, Tesco, the Dee Corporation, trading as Gateway and Fine
Fare, Argyll represented by Presto and Safeway, and Asda. No wonder the
tenn "retail concentration" pops up continuously.
But the trend will not be confined to food retailing. It is already visible
in the DIY market and one look at any High Street anywhere in Britian will
show you other retail areas where the growth of the multiples is beginning to
dominate a particular sector. And it is no longer how many supennarkets you
operate which counts. The name oft he game is how efficient and profitable you
are. Not so long ago Tesco had some 800 stores in its portfolio. As the chain
moved almost exclusively into superstore development that number was
initially halved, but the group's market share continued to climb until it
overtook arch rival Sainsbury's in market share.
The Co-operative movement still runs more than 3,000 stores in Britain,
but its market share is only 12 per cent and still falling. Out of a total 47 ,800
grocery outlets, there are nearly 40,000 independent shops, including symbol
groups, but their numbers only bring them a 16 per cent market share.
In sharp contrast, Sainsbury's, which last week overtook Marks &
Spencer as the country's highest turnover retailer with sales of5 billion pounds,
accounts for 13.5 per cent of the market with only 279 supennarkets trading.
Sainsbury's also boasts the trade's highest net profit margins at 6.6 per
cent To put that into perspective, UK food retailers are envied for their high
net profit margins by the rest of the world, especially the Americans, the
founders of the supennarket concept In the States, the average net profit
margin is one per cent The shining examples of success are producing two per
cent Ask an American retailer about to visit the UK. what he would most like
to see on his trip and he'll tell you: How to produce the same net profit margins
as Sainsbury's and Tesco. The story in France and elsewhere is no different
So here, in this background, we can find the reasons why food retailers
have led the way in adopting and using infonnation technology.
1.3 ANALYSIS
First. the market is increasingly -and fiercely -competitive. The top five
are fighting for a bigger share of a cake which has remained virtually static in
Overview 5
size or at best is growing about one to one and a halfper cent. Growth in market
share, therefore, has to be either at the expense of one's rivals or by acquisition
of the smaller players such as Tesco's takeover of Hillards, Presto's of
Safeway, Gateway's of Fine Fare.
The tools they have employed to gain those valuable extra percentage
points of market share have been pricing (now no longer considered as
important as the days of "pile it high sell it cheap"); product range and variety;
quality; ambience and decor; car parking facilities; customer service; and
efficiency. Of all those factors two standout as being ofp aramount importance
today. Efficiency and information technology ranks high in this equation; and
the direct opposite of technology -the human touch or service.
It is not surprising, therefore, that considerable investment is being
ploughed into these areas. The future can only see such investment grow
Second, food retailers have become expert at squeezing the best possible deal
from their suppliers. But there is a limit to how much they can extract further
pnce cUts flom those suppliers without affecting the quality oft he product -and
remember quality is one of the important aspects of a successful retail business
today. Or without restricting the suppliers ability to invest in reseatch and
development so necessary to achieve another important goal: to provide the
customer with the variety and range of products now being demanded.
, So if retailer power, born from retailer concentration and competitive
ness, is approaching its limits, how else can the major players become more
profitable? That brings us back to efficiency and information tecluiology.
Early experiences with buying scanning equipment showed food retailers that
"look before you leap" was the best policy. But now that experimentation
with different systems has resulted in major decisions being made by leading
retailers, the installation of Electronic Point of Sale (EPOS) equipment is pro
ceeding apace. Sainsbury's, for example, prefering to wait and watch, was one
of the last major food retailers to enter the field. Butoncestarted,itquicklytook
the lead and soon passed the magic total of 100 stores scanning more than a
third of its outlets.
The UK retailer had also noticed that across the Atlantic, his American
counterpart had rushed into scanning many years earlier, but he was appalled
to note that EPOS was being used purely as a service to customers who liked
the detailed printout on their receipts. The vast amount of data being thrown
up from the system was, with but a few exceptions, being filed in the
wastepaper basket.
I have taken two parties of UK. retailers on study tours to the States and
on each occasion, the groups were amazed at the poor use being made of
sCanning information. And finally, food retailers have been quick to adopt
information technology because it provides the wherewithall to order goods
"Just in Time". J1T, as it is known, is the answer to reducing the amount of
