As you may have twigged, these are stereotypes that don’t necessarily bear relation to reality. But behind this broad characterisation lies a germ of truth, as any consultant familiar with the retail sector, or indeed a retailer, will acknowledge.
Clive Minihan, director of retail strategy consultancy Credo, expresses the issue well. “In general retailers are openly hostile to the very thought that they might be helped by management consultants. Retailers tend to use management consultants in only two circumstances. Firstly, where the management of the retail company are professionally trained executives as opposed to classic ‘barrow boy’ merchants; or, secondly, where the issues involved are either so technical, for example systems development and integration, or so esoteric, like range productivity optimisation, that even the most independent admit they need some help.”
Minihan cites Kingfisher CEO Sir Geoff Mulcahy and former Asda CEO and chairman Archie Norman MP, who has a Harvard MBA and has worked for McKinsey, as paragons of the professional retail executive.
He says: “Mulcahy is probably the best example of a CEO supplementing his own considerable management talents through the selective use of consulting advice. From buying the UK operations of the US FW Woolworth in 1982 for £310m, Sir Geoff has steered the market capitalisation of Kingfisher to £6.8bn today.”
No doubt one of the factors preventing all retail senior management from following Mulcahy’s exemplary lead and embracing the role of consultancy in their plans for growth and profitability is the difficulty of distinguishing between a consultant who really understands their business and is equipped to make a positive difference, and the raft of snake oil salesmen that seem to infest the sector.
There’s also the issue of independence. Kimball Bailey, an executive consultant at Compass Management Consulting, comments: “One of the key issues for a retailer must be to differentiate between those ‘consultants’ whose raison d”etre is to proffer systems integration and product solutions in the guise of independent advice, and those who do offer that genuine independence. Whether we are talking EPOS and other store systems, or new physical technology such as handheld devices for stock evaluation, a critical issue for the client must be to conduct a rigorous selection process that keeps their business in control.”
Bailey says that much responsibility falls to the consultant as well. “The challenge for the consultant must be to retain the integrity and independence to support that selection process and help the client towards an approach – perhaps involving best of breed rather than a single tied product – that can deliver real value to the business from IT.”
As Bailey also observes, the good consultant will be expected not merely to deliver the obvious, but to think out of the box as well to give the client access to new ideas and approaches. “The challenge is to come to grips with the new channels to consumers over and above traditional high street outlets.”
He warns that so-called multi-channel retailing has hidden implications for the consultancy process. “It places increasing demands on the supply chain, and solutions must provide real-time data on stock location and availability from distribution centres to physical stores as much as for virtual channels. Consultants must be aware of and indeed drive the move towards e-business, to recommend business-focused solutions to support customer analysis and to help the client to gain real competitive advantage from the potential offered by these new channels. Critically, the challenge is to ensure that a wish to ‘play with technology’ does not supersede the real needs of the business to understand and maximise the value from its customer base.”
High street specialists
There is of course a distinction between generalist consultancies for which retail is only one line of business, albeit an important one, and specialists in high street lore. Martec is a veteran specialist provider of consultancy to the UK retail industry. Managing director of Martec UK Graham Lunt says: “Because retail is a niche, we need to offer consultancy in most elements of it – all systems, all types of retailer. We need to work for all the vendors as well – IBM, ICL, NCR, Sun, Microsoft. A lot of consultancy practices favour banking and manufacturing, and will do retail where necessary. This may be because not all retailers are equally receptive to consultancy. Supermarkets need to be, because they’ve got economies of scale to deal with that depend on the right systems and the right processes. Most are much happier about changing systems than they are processes, which means we often end up doing half a job, which can be frustrating. It’s harder to fix things than prevent them.”
On the other side of the fence is KPMG, which like all big players has a retail division. Retail specialist Alison Plant comments: “POS technology is all pretty standard stuff – a commodity these days. Where we come in is helping retailers to use the information from POS systems. Some retailers generate up to six terabytes of data a week. That’s a room full of disks.
We have the capability to help them get the meaning of that data in minutes rather than a week. Lots of retailers feel burnt by having invested in technology and not knowing how to get anything out of it. That’s where KPMG comes in. Trouble is, retailers are a secretive bunch, and don’t want people to know they’re using us. It’s frustrating sometimes when they take the credit.”
Perhaps the biggest issue for consultants wanting to make an impression on retail is the breadth of the market. A major supermarket name might superficially be the same type of beast as a localised chain, a string of restaurants or an independent specialist, but of course their business process and technology needs could not be more distinct.
And so broad is the variety of technologies in use, particularly in the larger branches of the nationally distributed chains, that even a large management consultancy like PwC or Accenture can’t hope to employ specialists in every flavour of solution.
To make up for this difficulty, most will act as integrators for a range of technologies, which means working in partnership with numerous third parties specialist in particular areas.
Peter Cox is managing director of ID Data, an end to end solution provider of magnetic stripe and smart card technology. He says: “We’ve worked with lots of the major consultancies over the years, particularly Andersen Consulting, as was. Consultancies are definitely not expert in individual areas, in general.”
Cox describes how, as part of an overall retail technology strategy, smart cards can help to transform the customer relations of a particular retailer. “Our know-how is influencing point of purchase decisions through technology-based loyalty programmes. For retailers, we can make sure that customer decisions are in line with their marketing objectives.”
He cites a particular application that is just beginning to gain ground. “We are starting to see loyalty schemes that combine smart cards with mobile phones. When a customer registers with a loyalty scheme, it can be arranged so that when they walk into the store, their phone tells them ‘These are the offers for you’, and perhaps help them to switch from their normal buying patterns – perhaps buy Nescafe rather than Gold Blend. A smart card can contain all sorts of purchase history information, and together with wireless technologies like Bluetooth could revolutionise how retailers and customers relate in store.”
Cox also foresees a match between digital interactive TV and smart cards, whereby a buyer can choose to respond immediately to an ad on television in order to qualify for a particular special offer, which they can then store on smart card and cash in next time they are in store. He says: “This means Coca Cola knows you have responded to its ad, and that you’ve redeemed the special offer, and Tesco knows it has benefited from the sale.”
Cox cites client Tesco, in particular, as a technology leader. “It leads the way in home shopping with Tesco.com and also with its Clubcard. The company’s highly sophisticated database has helped it go from number two or three in the market a few years ago to a clear number one now. It knows how to drive customers, where to put stores, and what to put in them.”
Lew Gray is managing director of KPOS, a veteran supplier of turnkey systems to a variety of major high street names. He comments: “These days so much is possible with retail technology, so much more than a few years ago. The main role of the consultant is to work out which of all this promising technology is actually available, and figure out how it all fits together. The consultant’s role is to say ‘this is possible, but this isn’t’.”
Gray says that this is where the real value lies in the market, hence the necessity of consultancy. “It’s the cost of implementation, not the cost of hardware, that retailer budgets are going on. Lots of our customers are still using hardware from 10 or more years ago. Look at v.shop for example, a forward looking concept in many respects, but still using the POS hardware from the old Our Price stores they have replaced. They’ve added in lots of new stuff too, like Internet kiosks, so that people are coming in store to make their online purchases.”
He said KPOS is currently reaping the rewards of a gamble it took a few years back. “We decided to support SAP’s retail applications suite, and everyone told us it was a risk because the ERP market was in a bad way, and that SAP had no chance in retail. It’s now clear that SAP is going to make it in retail, and lots of big names are going after it. You only need the one software vendor for so many different applications from customer loyalty to Internet shopping.”
The e-commerce challenge
A retail technology consultant must develop a keen instinct for technology that is jam tomorrow and that which is genuinely applicable today. This is made harder by the fact that different technologies mature at distinctly different rates.
For example, while smart card technology is achieving some sort of breakthrough at last, its benefits have been promised for so long that many retailers and consultants might be forgiven for having given up on it. Of a different hue is web-based retail technology, which has gone from zero to hero to zero again in a little over two years. But as retailers remain as desperate as ever for increased competitiveness, they can’t afford to turn their back on the Internet as a powerful high street alternative.
One of the more lasting successes has been Tesco.com, currently the market leading web-based home shopping operation in the UK. Web consultancy Ivis, a specialist in XML, is one of the main factors behind this success. Ivis CEO Quasi Sarraf says: “When the Tesco.com site went live in 1996, there were four orders during the first night. Last month, it broke the barrier of 2,000 orders in an hour. With 80 to 100 items in an average order, that’s a lot of groceries. Since launch there has been a huge change in the technology behind the site, as you might imagine. Our role has not been web design as such, but providing consultancy on strategy, and choosing the right technology.”
Recently, Ivis has helped Tesco branch into non-food e-commerce through the National Store initiative. Sarraf says: “Tesco has been shifting a lot of CDs, DVDs and books, and now wine and electrical goods.”
Sarraf says that other high street names, like Sainsbury and Iceland, have been playing catch-up, but that Tesco has been able to keep one step ahead, largely through work with consultancy partners like Ivis. “This means Tesco has been able to consider things from more than a technology perspective. It has looked at e-commerce from a business angle as well.
Other retailers invested a huge sum in data warehousing technology, and landed themselves with the hard work of integrating this with other technologies. Successful systems are about more than just finding the right tool, it’s about integration as well.”
Plans for this year, says Sarraf, include working with Tesco to roll out more non-food lines online, including plans to link Tesco’s book selling with a partner supplying information on book availability. “More and more rivals are going to be coming along, so Tesco has to stay ahead by looking at the look and feel and flexibility of its systems. Improving customer stickiness is the constant challenge.”
In general though, retail e-commerce consultancies are experiencing lean times at present. John Cooper covers retail sector consulting and solutions for Northgate Information Solutions, an e-commerce consultancy. He says: “We offer business as well as technical consultancy, from content management to accounts and logistics. We develop applications and solutions as well as project manage and implement web solutions for a number of clients.”
Cooper says the last six months have been a torrid time for all consultants in the web retailing sector. “E-commerce has gone through some bad times recently, shall we say,” he says ruefully. “Dotcom flowers used to grow overnight, watered by venture capital rain, but that rain has stopped now. Lots of e-tail ventures have not got any more funding lined up which is a problem in terms of their spend on consulting. There are quite a few unpaid bills around at the moment.”
He says that Northgate has not been too badly hit thanks to work helping bricks and mortar retailers to adapt to an e-future. “Lots of the old school retailers don’t feel so threatened now that pure Internet e-tailers are struggling. Many have been scaling back their investment until next year. Some bricks and mortar retailers will be buying out their web-only rivals this year, so there will be some consultancy work involved in integrating the two. At least the US was much more down the road of B2C e-commerce infrastructure than Europe, so there’s less mess to clean up over here.
I am sure however that e-commerce is still the future, in spite of the popping of the venture capital-fuelled bubble. In the UK for example, retailers sold three times as much this year over the web as last year.”
The joy of retail is that as one opportunity wanes another waxes to replace it. If last year was finding new customers on the web, maybe this year will be consolidating relationships with existing customers.
Security issues
A relative constant in all this hurly burly is security. After all, if you find your POS growth is stagnant, what better way to preserve margins than to ensure the sales you do make are not fraudulent. This however is a complex business, ripe for timely third party intervention.
Keith Deverill, consultant for retail loss prevention management at ICL, says: “The most recent British Retail Consortium (BRC) crime survey, for 1999, reveals the full impact of fraud on retailers. Customer theft increased by 23% to £740m, while staff theft rose by a huge 43%, reaching over £520m. Reducing even a small part of these losses can significantly improve a retailer’s bottom line.”
Deverill says that currently most retail security departments focus their attentions on the detection and deterrence of shoplifters.
He says: “As the last BRC results indicate, there has recently been a sharp upturn in staff-related theft. The difficulty for security or loss prevention departments has been how to detect the internal thief. Typically this has been achieved through store audits or tip-offs. However it is generally recognised that only a very small proportion of staff theft that is occurring is uncovered. ICL has been working with the key partners to develop a number of solutions to redress this problem. These systems enable security professionals to utilise and interrogate point of sale information in a number of forms and methods, to quickly identify suspect activities involving retailer’s staff, customers and collusion between staff and customers.”
Other areas of consultancy involvement also seem to be immune to fashion, and represent a pretty much constant source of billable work. As Minihan of Credo says: “The greatest technical challenge facing retailers going forward is the conversion of their store-based legacy systems to open architecture systems that can operate in an increasingly multi-channel retail environment, and with supply chains that are both more collaborative and co-operative.” This statement would not look out of place in a white paper of five years ago, and will still sound pertinent in five years’ time, no doubt.
Consolidate to accumulate
So what of the main manufacturers of retail technology solutions, since they are necessarily key allies of the retail consultant?
There was a time when “retail technology” in store, as opposed to in a head office data centre, meant little more than a network of tills that provided rudimentary management reporting. At some point in the mid-’80s, the potential of something a little more intelligent became apparent, and all the big high street names started to pour money into smarter POS solutions that permitted much tighter stock control, and an improved flow of goods at the till. The era of the bar code and the loyalty card was born.
This was the heyday of the retail systems vendor. A number of big names got rich quick, some with a non-high tech retail pedigree, some total newcomers, some veterans from other computing markets. Few survive. What price Hugin Sweda, Cashwise, Riva, Checkout? All have either gone bust, been amalgamated or been reborn with a new identity and focus.
Gray of KPOS has seen it all. ?The market is gradually becoming dominated by IBM. Nixdorf did a management buyout, and is now Wincor Nixdorf, and ICL?s gear is all made by Fujitsu. Anchor, Riva and Omron are all one now. Consolidation is the name of the game.?
Geoff Ward, business development manager for ICL?s retail applications in the UK, says: ?We are one of the few vendors still to offer a full range of hardware, software and services. We offer upfront consultancy too in everything from POS software to CRM, to loss prevention. We also integrate anything that people want. We?re at the forefront of ideas like assisted selling, with notebook PCs on the shop floor as a portable point of sale.?
To be or not to be?in retail
The health of a consulting business is linked inextricably to the health of the markets it addresses. If clients are in the doldrums, they may still be persuaded that partnership with a knowledge leader is the way out, but they will always be inclined to spend more freely if income and profitability are readily forthcoming. So, is retail, and retail technology, healthy?
Grey says: ?2000 was a difficult year for anyone concerned with retail technology, which is a shame because 1999 was an excellent year. For 2001, everyone is hoping the market returns to normal.?
As we have already observed, mutual antipathy between retailer and consultant is never far below the surface of any relationship. But as long as retailers need to be competitive, to seek new channels to market, to integrate old and new systems, and to hold onto valued customers, there will always be a role for the retail technology consultant, in almost any economic climate.
E-tailing: Kingfisher and Northgate
The Kingfisher Group is responsible for a varied stable of retail chains and initiatives. Like most retail operations, it has been figuring out effective ways of making the most of Internet technology to reach new customers over the last year or two. Its key partner in this endeavour has been web consultancy Northgate Information Solutions.
Consultant John Cooper says: ?One of our most interesting jobs for Kingfisher has been Think Natural, a pure play Internet venture that?s a cross between Holland & Barratt and The Body Shop on the web. We built, and are hosting, its web server, and we are providing ongoing applications development. It?s a constant process. We?ve just set up its operation in Germany, for example.?He says Northgate has also worked with the eKingfisher Strategy Group. ?We have provided a consultancy resource to help it design its web architecture,? he explains.
The company has also worked with Superdrug.com, Kingfisher?s online pharmacy venture. ?So far we have put in the technology infrastructure for all of Superdrug?s e-commerce. We?ve been integrating its database and application servers which are based mainly on Sun Solaris and Oracle?s database technology. There?s talk of hosting the service internally, but that hasn?t happened yet.?On the non-web front, Northgate has also worked on in-store POS implementation with Kingfisher subsidiaries from Woolworths to Superdrug.
Intelligent communications:The Printworks and EuroTelecom
EuroTelecom is an AIM-quoted retail systems consultancy whose application linking technology is used to create the communications backbone for so-called intelligent buildings.
It has recently signed a contract to deliver its technology to The Printworks in Manchester, a new retail, hospitality and entertainment development. This first phase is for the design, installation and operation of an intelligent network infrastructure for what is Europe?s largest urban entertainment centre.The development?which opened its doors last year?represents an investment of over £150m and is another major step in the re-development of Manchester city centre. The whole complex, which is on the former site of Europe?s biggest newspaper plant, comprises 350,000 square feet of retail and leisure facilities including a 3D IMAX Cinema and 20 screen UCI cinema complex with tenants such as Holmes Place, Hard Rock Caf‚ and Tiger Tiger.
Sound and images with a global theme are beamed into the complex via a high-tech communications infrastructure, which, courtesy of EuroTelecom, is delivering state-of-the-art fibre optic cable to every part of the building.
Europe?s first ?living ceiling??a 28m by 16m projection onto the surface?can create virtual tropical storms, hot air balloon rides, spaceflights and wild weather patterns. EuroTelecom also delivers CCTV security and is installing online shopping kiosks.
Smart business: Barbox and XN
So called pub portal, Barbox, has joined forces with XN Corporation, formerly known as Checkout and still a hospitality technology and services specialist, to provide publicans and major retail groups with access to leading-edge business tools and intelligence from which to build their future business.
Under this agreement, Barbox will supply XN?s web-enabled hospitality management software, part of XN?s recently announced Knowledge Service Provision (KSP) strategy, which will enable users to make instantaneous decisions based on real-time information.
The joint venture will allow users to exploit XN Corporation?s latest touch-screen technology and strategy, integrated with the Barbox portal e-procurement capabilities, to collect and analyse accurate information on all aspects of their business, from every pint pulled and meal served to stock levels, staffing information and purchasing trends.
?Barbox has been set up to give licensees everything they need to run a bar at the touch of a button,? says David Kassler, Barbox managing director. ?This agreement is the latest step in our work to offer them ?next generation? e-business facilities to help boost profits and save money. This system is truly revolutionary and the ?holy grail? of a paperless supply chain from consumer to brewery will at last become a reality.?
John Bowen, international sales director for XN Corporation, says: ?With Barbox?s e-procurement and XN?s web based offer, licensees will have the power to change the way they do business. Real time business intelligence and instantaneous low cost purchasing will create profit for these companies.?
Transaction fulfilment: Orange and PSInet
Mobile phone operator Orange has launched a swipe card system in its high street stores, to replace existing paper vouchers for pre-pay Just Talk customers. Transactions generated by the new system will be supported by PSINet Transaction Solutions, which will process all transactions and manage settlement and reconciliation services, leveraging its transaction network and switching capabilities.
The new system will enable Orange Just Talk customers to purchase talk-time at Orange shops and approved retail outlets, using existing POS infrastructure, with their own personal swipe card. This eliminates much of the inconvenience that Orange says has existed for both customers and retailers with the current paper vouchers system.
?Pre-pay is unquestionably the fastest growth area in the mobile market,? comments Richard Brennan, UK group director of commercial activities with Orange. ?When we were looking to introduce the new system for our Just Talk pre-pay customers, we were looking for a partner with technical expertise to help us manage the transactions. PSINet Transactions Solutions already has knowledge and experience concerning the transportation and management of financial transactions, so was ideally placed to provide us with the service we needed.?
The new payment service will be available in over 16,000 participating outlets by later this year with rollout throughout the rest of the UK over the next 12 months. Orange Just Talk customers will be able to collect a free account card from participating stores, which can then be registered to their phone with the option of having more than one card available for use with one phone. Customers can have up to five cards registered to their phones, enabling family and friends to top up remotely for them.
Point of sale: M&S and Microsoft
Neil Sanderson is enterprise strategy consultant with Microsoft Consulting Services (MCS). He has recently come to the end of a two and a half year tour of duty with troubled high street giant Marks & Spencer, helping it to roll out a major new point of sale initiative.
He says: ?This new system was designed to be ahead of its time, and is huge. We?re talking 15,000 points of sale and 1,000 servers, the whole network being based on ICL GlobalStore hardware, NT 4.0 and Microsoft SQL Server. The challenge was a system that allowed each store to take money even if the corporate network went down. But since any change that needed to be made had to be replicated 15,000 times, all changes had to be planned with great care.?
Sanderson says none of this would have been possible without a good relationship between the two organisations. ?My role in particular was to work at a business level, and not just treat it as a technology rollout.?
He says the result is a system that delivers near real time sales data from the point of sale to head office, including the content of each basket and method of payment. ?This allows for a sophisticated supply chain. This is close to the heart of their fightback as an organisation. This has necessitated a serious culture change for M&S. It used to enjoy high margins, but not any more, so it needs to work hard at maintaining profitability in each store.?
Transaction fulfilment: Orange and PSInetMobile phone
operator Orange has launched a swipe card system in its high street stores, to replace existing paper vouchers for pre-pay Just Talk customers. Transactions generated by the new system will be supported by PSINet Transaction Solutions, which will process all transactions and manage settlement and reconciliation services, leveraging its transaction network and switching capabilities.
The new system will enable Orange Just Talk customers to purchase talk-time at Orange shops and approved retail outlets, using existing POS infrastructure, with their own personal swipe card. This eliminates much of the inconvenience that Orange says has existed for both customers and retailers with the current paper vouchers system.
Pre-pay is unquestionably the fastest growth area in the mobile market,? comments Richard Brennan, UK group director of commercial activities with Orange. ?When we were looking to introduce the new system for our Just Talk pre-pay customers, we were looking for a partner with technical expertise to help us manage the transactions. PSINet Transactions Solutions already has knowledge and experience concerning the transportation and management of financial transactions, so was ideally placed to provide us with the service we needed.?
The new payment service will be available in over 16,000 participating outlets by later this year with rollout throughout the rest of the UK over the next 12 months. Orange Just Talk customers will be able to collect a free account card from participating stores, which can then be registered to their phone with the option of having more than one card available for use with one phone. Customers can have up to five cards registered to their phones, enabling family and friends to top up remotely for them.