Small Retailers & Technology
The fact is, the retail industry is at an inflection point � and whether an organization thrives, survives or dies depends largely on the strategic use of technology.
One Size Fits None: The Future of Technology for Small Retailers
by Harvey Braun
The retail industry today is a far cry from that of 50 years ago. And 20 years from now, it will bear little resemblance to today. The fact is, the retail industry is at an inflection point � and whether an organization thrives, survives or dies depends largely on the strategic use of technology.
This is particularly true for small and medium-sized retailers, which have neither the financial nor human resources of their larger counterparts. As a result, they are more vulnerable to today�s rapidly changing market conditions. For these retailers, judicious investments in technology can mean the difference between a successful future and no future at all.
THE PAST CATCHES UP
To fully understand the future of retail technology, it�s important to understand its past. Modern retailing emerged from the post-World War II boom that swept the United States. As millions of returning soldiers attended college on the GI bill, low interest rates made home ownership a reality for rapidly growing families. The end result was a large, educated middle class with greater assets and more spending power than ever before.
As these growing families moved into the suburbs, regional shopping malls took center stage. In the 1960s and 1970s, a plethora of new chains were launched to fill the malls. During this expansion, retailers developed computer systems and operational processes built on a �one size fits all� mentality, a holdover from the post-war boom. Despite their limitations, these systems saw retailers through decades of expansion as the growing economic power of the baby boomers created ever-increasing demand for consumables.
By the early 1990s, the industry was over-stored, over-homogenized and technologically under-powered. However, unprecedented economic prosperity and strong consumer spending disguised the industry�s flaws. All that changed in the late 1990s, when the collapsing economy, combined with the advent of online shopping, exposed the frailties of an industry built on a 1960 business model and 1970s technology.
THE FUTURE CLOSES IN
Even today, retailers are struggling to manage the complexities of multi-channel selling in an environment where the population is growing increasingly diverse, and where consumers have myriad shopping options, literally at their fingertips.
And this pressure will only increase. In the next 20 years, population growth will be driven primarily by descendants of recent immigrants, particularly in the southern and western states. The population as a whole will continue to grow older, as baby boomers become senior citizens. Meanwhile, disposable income is expected to remain relatively flat for most segments of the population.
The end result will be an older, more diverse population with less money to spend and more ways to spend it. These factors mean retailers will be more challenged than ever to break free of the �one size fits all� mentality, and instead reshape their organizations to meet individual demands.
TECHNOLOGY: THE STRATEGY FOR SUCCESS
Given the tremendous amount of change in the industry and the complexities of modern retailing, successful retailers will be those that:
* Make fewer mistakes than the competition,
* Improve control from conception to consumption,
* Accurately time and price goods,
* Integrate multi-channel touch points,
* Remove unnecessary costs, and
* Develop an understanding of customers as individuals.
Clearly, meeting these challenges depends on technology. Retailers today need to augment comprehensive back-office functions and a powerful communications network with real-time business intelligence on consumer behavior and changing attitudes. They need to seamlessly integrate storefront, Internet, catalog, kiosk and other distribution channels. In short, they need to deliver products on the customer�s terms while minimizing costs.
To accomplish this, large retailers have begun to abandon their home-grown, legacy systems in favor of third-party, enterprise-level systems that cost millions of dollars and up to five years to implement. But what about smaller retailers? How can they reap the benefits of technology when they can�t afford the multi-million dollar price tag?
In recent years, a new class of technology solutions designed for smaller retailers has emerged. These solutions offer much of the functionality of enterprise-level systems, but require a fraction of the time and cost to implement. The best systems are:
* Built on integrated, modular architecture. Small retailers implement the most valuable applications first. Then, as they grow, they simply add the functionality they need.
* Scalable. From one to five thousand stores, the system grows with the retailer.
* Comprehensive. Modules include all key functions, ranging from POS and merchandising to consumer attitudes, weather impacts and business intelligence.
* Multi-channel. Internet, catalog, kiosk, storefront and other channels are fully supported.
* Innovative. Best-of-breed solutions are seamlessly integrated into the core offering.
* Easy-to-use. Implementing and running the system is simple and straightforward. For maximum simplification, an ASP model allows retailers to outsource the software, hardware and network infrastructure.
* Proven. The solution is time-tested, and backed by a company with a strong track record.
In short, smaller retailers need to choose a retail system that can be customized to meet their specific technology needs both now and in the future. After all, today�s consumers are rejecting a one-size-fits-all approach. Small and medium-sized retailers need to do the same.
Harvey Braun is chairman and CEO of Island Pacific, Irvine, Calif., a provider of retail enterprise solutions
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Posted by Craig at January 12, 2004 02:28 PM