Johannesburg, 29 Oct 2007
In the wake of the latest interest rate hike, retailers will be bracing themselves for a further cutback in consumer spending as consumers reduce their borrowing levels.
This will put pressure on retailers to cut their operating costs and find ways of enhancing profitability. In such an environment, the use of technology will be crucial as they look to grow market share, improve customer service, and drive up productivity.
This is according to Phil Savides, regional chief executive of Business Connexion`s Western Cape regional office.
"Technology is going to be a key differentiating area for retailers trying to stay ahead of the pack and can greatly assist in managing costs while leveraging selling opportunities," he says.
Savides identifies three areas in which technology can have an appreciable effect on business: efficiency, analytics and service. These business imperatives are best enabled by IT initiatives such as supply chain collaboration, RFID and business intelligence.
"Supply chain collaboration improves efficiency by allowing retailers to share up-to-the-minute information about stock levels on retail shelves with other players in the supply chain, such as logistics firms, manufacturers and distributors.
"Retailers are thus able to source goods from their suppliers as they need them, and manufacturers can ensure they do not produce too many or too few products in line with demand from retailers and the public," Savides says.
Technology can also offer invaluable insights into customer behaviour, which becomes more discerning as interest rates and inflation rise. "Most South African retailers have basic business intelligence systems, such as data warehouses, in place, but can be expected to adopt more sophisticated analytics tools in the future," Savides says.
He adds that the retail customer base is growing evermore diverse as the emerging middle class grows. "Coupled with this, consumer tastes are becoming increasingly fickle and there are variations in the needs of customers in different cities and even suburbs. Retailers need accurate information about shopping patterns to ensure they have the right products on the shelves in the right branches at the right time, as this will cut costs and increase sales."
Technology also supports better customer service, with techniques such as `queue-busting` streamlining the customer retail experience. According to Savides, infrared technologies are particularly relevant in this sphere. "The point of sale is now also the point of service, and there is a lot of interest in how to get people passing through pay points as quickly and painlessly as possible," he says.
Savides further predicts that South African retailers will increasingly turn towards IT outsourcing as a strategy to access world-class IT services and systems while containing and managing costs.
"Retailers and IT firms can work together to create true business value. Retailers stand to benefit from IT outsourcing by moving capex off their balance sheets and turning it into a predictable operational cost. But IT firms can also provide the technology and IT skills retailers need to deliver on business requirements such as enabling new channels to market, streamlining business processes or building closer relationships with supply chain partners."
A primary function of IT is to enable the business. Outsourcing allows the retailers` IT executives and staff to focus on the business objectives, leaving the day-to-day running of their technologies to experts in this field. The need for "on-demand" services, processing power and capacity is far more easily handled by IT outsourcing companies," he concludes.
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