Freed from the shackles of Chip and PIN implementations, retailers have spent their budgets on a broad variety of technologies over the past 12 months. Many have invested in staff scheduling, online recruitment, IP-based security surveillance and e-learning systems, in an effort to improve operating efficiencies, increase sales and reduce costs. It is hardly a stampede, but others have tapped into more innovative technology, such as thermal imaging software to reduce queuing times. Last autumn, Tesco chief executive Sir Terry Leahy said that a quarter of a million more customers a week no longer have to queue thanks to its One in Front campaign, which uses thermal imaging cameras.
Easing the checkout pain
Previously, the UK’s largest supermarket chain had to poll checkouts every 15 minutes, but the Irisys cameras tie in with point-of-sale information to automatically detect the number and behaviour of queuing customers at its checkouts. Subsequently, Tesco has extended the use of the cameras at store entrances so that managers can better predict traffic through the tills.
Saucy lingerie and sex toy specialist Ann Summers has also deployed thermal imaging software, which shows customers as a hot blob counted once they cross a line. Other innovation has seen Argos, Woolworths and JJB Sports continue to invest in in-store kiosk technology.
Argos is rolling out additional kiosks in stores after fine-tuning their usage over several years. Last year, Woolworths said it was extending its use of kiosks from 20 to about 100 units, although it is still evaluating their return on investment.
Outsourcing cuts costs
However, such innovative projects only account for a small proportion of retailers’ investment in IT. With one eye on improving operating margins, most retailers place a greater emphasis on using technology to trim costs. Certainly, supermarket chain Somerfield had cost savings in mind, when it signed a seven-year deal with Indian services provider Tata Consultancy Services (TCS) to outsource the management of its entire IT infrastructure late last year. Owned by a private equity consortium, Somerfield expects to cut costs by a third over the duration of the contract, which extended its existing agreements with TCS.
Under the deal, TCS will take responsibility for managing Somerfield’s mainframes, Unix and NT platforms, and delivering IT services to 900 retail outlets and eight distribution depots. The supplier plans to exploit developments in technology to manage user accounts, deploy software upgrades and manage capacity remotely from India. About 115 of the 141 IT jobs at the retailer’s Bristol IT headquarters were transferred to TCS, but Somerfield retained a team of 25 senior executives to manage the strategic direction of the contract. While such large outsourcing deals are rare in retail, most outsource a large chunk of their IT services, of which India swallows a growing proportion.
According to analyst firm IDC, western European retailers expect to allocate at least 60 per cent of their IT budget to external providers this year, up from 50 per cent in the latter part of 2005.
Transactional websites are also an increasingly essential part of a retailer’s technology armoury. This is hardly surprising given that UK consumers spent £7.66 billion online in the 10-week run-up to last Christmas – nearly 50 per cent more than the £4.98bn sales for same period in 2005, according to Interactive Media in Retail Group (IMRG). Figures from IMRG recently revealed that UK online retail sales have topped £100bn in the 12 years that it has been possible to shop on the internet.
“For the year to date we have seen growth of 44.9 per cent compared with the same period last year,” says David Walmsley, head of web selling for John Lewis Direct. Over the past year, Body Shop, IKEA, jewellery chain Ernest Jones and Superdrug have launched e-commerce sites, although many retailers have already progressed beyond their first generation sites. As John Clare, group chief executive of electricals group DSGi, says: “If any major retailer is not in the process of making the transition to e-tail, they’re probably too late.”