IT front and center: the changing role of retail information technology

When it comes to sparking a revolution in retail business practices, the usual suspects to ignite the flame aren’t typically the techie crowd. But in the age of multi-channel retail, social commerce, and mobile applications, well…these times, they are a-changin’.

IT departments across the country are now seeing their position within corporate change from one of data management and reporting to a front-of-mind role including daily analytics briefings, mobile application development, inventory optimization or in some cases – providing insight into the best way to reach customers through emerging technology.

You heard me right. Information technology is taking a lead role when it comes to reaching customers at each touchpoint. As online and mobile retailing grow (and they’re only going to keep growing), some customers may even prefer the technology-based channels to shop. Is your IT department in on those channel decisions? According to Raja Ray, Senior Vice President and Business Unit Head of Retail and Transportation at Syntel, Inc., they certainly should be. In a recent Q&A, Ray shares the strategic value IT can provide to retail management, which emerging technologies will level the playing field for mid-sized retailers, and his view on the mobile revolution.

Raja Ray

What do you think are the biggest challenges facing the retail community right now?

The biggest challenge is competition for shrinking customer wallets now that the economy is no longer expanding and consumers have tightened their spending. Add to that the fact that retailers have limited ammunition because of tight credit markets, and you’ve got a real challenge on your hands.

We’re already seeing value retailers succeeding better in this economy, but how niche retailers maintain their relevance over the next few years is one of the biggest questions we need to answer.

From a retail IT perspective, what three emerging technologies have the most potential – and why?

How we define potential is much different in today’s environment than it would be in an economy that is expanding.

Potential today must help drive growth without capital expenditure like store expansion (also, the economy doesn’t favor store expansion). So it’s critical for analytical and optimization solutions to arrive at a more compelling price or value proposition that is relevant to the target customer segment, or to execute more efficiently. Given the pressure to cut costs, multichannel integration and social commerce provide an effective way to reach out to a huge consumer base with limited capital investments. Lastly, cloud technologies and SaaS solutions will bring advanced IT solutions within the reach of mid-sized retailers, making the playing field more competitive.

Visa has recently said they think merchants are required to store more consumer payment information on hand than needed, which supports what NRF has been saying for years. In what ways do you think a reduction in the amount of sensitive information retailers store would impact store operations?

I strongly agree that we need to reduce the amount of sensitive payment information stored by retailers. Right now we are able to get deep customer insights through aggregate level customer analytics and focused loyalty programs. In the case of a non-loyalty customer, however, the card-based transaction data provides granular information on customer behavior within and outside the store, which you couldn’t otherwise obtain.

The non-availability of this information can impact the tailored assortments and pricing strategies at store level to a certain extent. However, the ethical and financial price of a breach is far too high, as is the risk of protecting payment information across millions of POS systems across the globe.

At next week’s NRFtech, Walgreens SVP and CIO Tim Theriault will discuss the role IT has played in reinventing the company’s in-store shopping experience for customers. In what ways do you think technologies are changing the traditional role of company IT departments?

Traditionally, IT was seen as a management reporting or a supporting service. It takes some time before IT is considered a strategic initiative that can generate competitive advantage, and over the last 4 to 5 years retailers have been seeing that value. Solutions like customer analytics, price optimization and inventory optimization, consumer mobility and social commerce are empowering retail operations in multiple dimensions and making them more competitive.

With Syntel’s experience in supply chain consulting, what’s the number one way retailers can reduce overhead costs in the supply chain?

At Syntel, we have employed a number of supply chain solutions to help our clients reduce costs, including planning, global supply chain design and transportation management, vendor collaboration, warehouse automation, and supply chain intelligence.

Of all these, I would consider better planning and collaborative solutions as the two top ways to reduce supply chain costs – by making supply chains more responsive to market changes. The ultimate goal is to make decisions as close to your sales cycle as possible, and reduce the lead time from planning to the sale.

What would you consider your biggest retail client success story?

Well, there is no single solution that stands out. At Syntel, we gauge our success by how well we enable our clients to meet their goals, so it varies from customer to customer.

We have delivered huge transformational IT projects for leading retailers, migrating multiple operating platforms and operating divisions into a common system. We were equally successful with many other retailers in multiple dimensions. Recently, Syntel executed an end–to-end apps outsourcing project for a specialty retailer, which reduced SG&A and made their costs more predictable. We also increased customer reach and cross channel sales for a pharmacy retailer through a social commerce initiative. In another case, we increased a department store’s top line with minimal investments by enabling drop shipments, and we improved quality and cut the testing effort by 60% for a hypermarket retailer.

Wherever we are able to make IT relevant to the success of the retail business, we consider that a big success.

What role should IT leaders play as companies try to become more environmentally friendly and reach for more sustainable business practices?

IT has a big role to play in making businesses green, which can have an impact in two distinct areas – sustainability tracking and reduced resource consumption. First, IT can help track sustainability by deploying systems that measure performance against sustainability goals, pinpoint deficiencies and recommend efficient alternatives. The second area is a direct reduction in the consumption of resources by deploying best practices like data center consolidation, virtualization, digital communications, next generation collaboration tools, energy-efficient devices, and sourcing from suppliers with good environmental track records.

To assist our clients in meeting these two goals, Syntel currently offers a Green Retail solution that helps Chief Environmental Officers manage sustainability across the enterprise, as well as a Green IT solution that manages and reduces IT resource consumption.

Mobile payment for goods or services is expected to reach $170 billion this year and will reach almost $630 billion by 2014. A recent survey by Shop.org found that the average investment by retail companies on mobile was about $170,000 for 2010. Do you think retail companies should be spending more in this area? Where do you think companies should allocate their resources when investing in mobile to get the most bang for their buck?

Like with any new technology, it’s easier to train associates than it is to train consumers. So while consumer mobility technology is on the rise, end-to-end mobile transactions still appear to be a few years away.

Right now, retailers can see the biggest ROI in the more mature one-way transaction segment – for example, putting location-based promotions and coupons into the hands of consumers to influence a sale.

Should they spend more? That’s a question with as many answers as there are retailers – it depends on customer demographics, products or services offered, and much more. As consumer adoption and use of mobile payments matures, we will start to see more end–to-end transactions.

Mobile payment systems are pretty hot right now…but what’s next? What do you see as the next big thing in mobile?

Consumer mobility is here to stay and in the end could be much more impactful than eCommerce. eCommerce did wonders in allowing consumers to search and compare goods, but stores always had an advantage because you can touch and feel the products.

Mobility has the potential to bridge this gap – allowing consumers to try products in the store while still using their phone to scan products to compare or read reviews, get product recommendations, locate items and even checkout! Everything is completely personalized as well, since the phone is also their loyalty identifier. It may sound too good to be true, but it’s going to be a huge technology leap in closing the gap between the search and buy!

In your opinion, what’s the quickest way information technology can save retail companies money?

Collaborative planning and optimization solutions definitely cut down supply chain costs. Process outsourcing, technology outsourcing and testing automation also bring a significant and predictable savings in operations, but no solution fits every company.

For example, Syntel recently re-architected the POS for a furniture retailer, cutting down the time it takes to complete each sale and thereby reducing store costs. Look at your processes, look for best practices and IT solutions that will improve every step in the way you do business – little drops do make an ocean!

Which mobile app could you not live without?

Ha! You mean besides the squirrelizer? Seriously, it really depends who you’re talking to.

If I’m a store associate, I couldn’t live without my clienteling solution. If were a district manager, I couldn’t live without dashboards. If I were a Gen Y, maybe it’s Facebook. But at the risk of being called a dinosaur, I still think Voice is the single most important mobile app!