In the retail sector, CIOs control a function capable of delivering significant competitive advantage at the same time as it does efficiencies. And when times are tough, this is quite a pull.
Often among the first to feel the effects of a squeeze in consumer spending, retailers have had a torrid time of late.
As usual, though, it’s not as simple as that. While vast swathes of the retail sector are on their knees, others, such as certain specialist retailers and discount chains, are thriving.
At the same time, the big four or five supermarket chains continue to rumble on.
Data published by the British Retail Consortium (BRC) and analysed by KPMG illustrates this point, with a clear divide being seen between food and non-food retail.
“It remains a tale of two halves,” said Stephen Robertson, director general of the BRC, when the data was revealed late last year. “The food sector has proved more resilient, but non-food retail showed a marked decrease in sales year-on-year.”
Ralf Dreischmeier, senior partner and head of the IT practice, Emea, at Boston Consulting Group, says there are three major issues facing CIOs operating in this complex world.
“One is around organisation and cost, the second is around ERP and similar large IT transformations, and the third is digital,” he says.
Digital, he explains, is a technology that is beginning to creep into the corporate world, with the advent of web 2.0, social media, location-based services and the take up of mobile devices.
Those retail CIOs who don’t embrace these digital technologies will have bigger things to worry about than a few points drop in the company share price warns Dreischmeier.
“You need to innovate in order to survive,” he says. “No matter what your finances are doing, if you don’t innovate and leverage new technologies you will not survive in the market.”
As group CIO of FTSE-250 catalogue and high-street fashion retailer JD Williams, Neil McGowan is acutely aware of this and, as a consequence, has structured his working life so he can commit as much time and budget as possible to value-generating activities.
“We’ve focused on our overhead costs and kept them as tight as possible, but the more strategically important area, where I spend about 80 per cent of my time, is on ensuring new capabilities, and that our websites and mobile propositions are delivering,” he says.
Established more than 150 years ago by James David Williams, the group, which trades on the London Stock Exchange as N Brown Group, has grown into a collection of clothing brands with combined revenues approaching £700m.
“20 or 30 years ago, the systems were built up from a series of bespoke mainframe applications,” explains McGowan. “Those are still there. They run a lot of our backend, but what we’ve done recently is a lot of work to service enable those and put infrastructure layers on top.”
These layers, as McGowan calls them, make it possible for legacy systems to handle web 2.0 functionality, with one of the goals to enable a multi-channel approach to retail.
This includes the traditional in-store experience as well as online, mail order or mobile commerce and, crucially, they all have to work together, if a customer is to enjoy the full experience.
“In the future, we will use it as a way for customers to plan a trip to the store, reserving their size so they can try on [an item of clothing],” he says.
McGowan holds up the example of an Apple store as the type of experience most retailers will be aiming for in the future, where consumers get absorbed in a variety of different media while browsing the physical store.
The products themselves will be available over web browsing terminals, so extra stock can be viewed and product demonstrated.
“We’re seeing a rapid shift away from our more traditional model to multi-channel offerings and all of that drives up demand for technology capability,” says McGowan. “It’s encouraging because we’re seen as a function that is enabling improved business performance.”
This move towards multi-channel is also changing the physical nature of our high streets.
Recent research by PricewaterhouseCoopers shows that in 2008 just 4 per cent of consumers shopped online more than once a week. In 2010, this had more than trebled to 14 per cent.
One impact of this is that traditional retailers no longer have to maintain such a large number of traditional high-street premises in order to have national coverage, as McGowan explains.
“You might say that the high street has gone out of favour, but what I would say is that the size of the high-street network that you need to maintain a UK presence has actually reduced from around 300 stores plus to somewhere in the order of 100 to 200 stores,” he explains. “That makes it much more feasible.”
Boston Consulting Group’s Dreischmeier explains how such a change is impacting the CIO’s world.
“For IT, that means you need straight-through processing capabilities in real-time, for customer article and order information across channels,” he says.
“The majority of retailers are still struggling with [this] because they might have implemented an ERP system, but implemented it not for the real-time, multi-channel or mobile worlds.”
The real-time requirement that Dreischmeier refers to is another challenge facing retail CIOs: how to support executive decisions and marketing promotions that must be made immediately, and which are based on accurate up-to-the-minute information.
“That whole area of affinities and promotions is getting quite interesting,” he says.
SAP, for one, has recognised this and is putting its Hana in-memory technology at the centre of its future strategy.
Capable of processing huge amounts of data in real time, the technology is being used by an increasing number of organisations to analyse everything from sales data to customer trends.
“Calculations that take a day, or two or even three can now be done in minutes, or even quicker,” says Dreischmeier. “When companies implemented ERP in the past, they didn’t have that in mind.”
CIOs in the retail space must keep on top of cost and improve efficiencies of the large ERP systems they are responsible for while, at the same time, fostering a culture of innovation and new technology adoption that will provide competitive advantage.
Dreischmeier explains: “It is a two-speed world, where on the one side, retailers have large IT systems that need to be run efficiently, effectively and need to be maintained. On the other side, you have the new digital development world where small teams are developing apps in a very agile way.
“You have to find an organisational model that actually supports both.”
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