Retail Weekly Roundup 5

by Deepak Sharma on Sunday, December 30, 2007

1. Why we should get retail right

Productivity in the retail sector is critical for understanding the relative success rates of national economies.

For example, India’s antiquated retail sector has yielded bizarre market distortions. “In India, the price of ready-made shirts from domestic manufacturers is about 35% higher than the price of a tailor-made shirt,” Lewis says. “The manufacturing cost of the shirt is about the same as the tailor-made price. However, the manufactured shirt has to get to the consumer. In India, that’s a huge problem because of the undeveloped retail sector.”

Lewis points out that productivity gains in retailing have dynamic effects throughout a nation’s economy. For example, when most Americans and others think of the drivers of the US economic performance, they immediately think of successful tech firms such as Microsoft and Intel, or innovative financial services players such as Goldman Sachs. However, it is efficiency gains in the retailing sector that powered much of America’s economic performance in recent years.

“Evolving to a more productive retail format mix,” Lewis says, “has large spillover effects in improving the productivity of consumer goods manufacturing and wholesaling.” The effect is enormous. Improvement in US retailing “was the single largest contribution to productivity acceleration in the US economy in the late 1990s,” he says. It trumped that of even the much-heralded Silicon Valley.

How is this possible? Lewis points out that “large-scale retailers improve their efficiency in part by buying in bulk from efficient, large-scale manufacturers. Thus, world-class British supermarkets, Carrefour and Wal-Mart have worked with suppliers in many countries to increase their scale of operations…” These efforts have “improved productivity significantly in the manufacturing sector itself”. What’s more, Lewis continues, “world-class retailers have reached a scale that allows them to bypass the wholesale sector and buy directly from manufacturers. This...has put enormous pressure on wholesaling to improve its performance.” Thus, greater efficiency in retail yields greater efficiency and productivity in sectors such as manufacturing and wholesaling. These beneficial spillover effects can be further found in transportation, agriculture, textiles and more.

2. Holiday Online Receipts Are Strong, but Reflect a Decline in Rate of Growth

The latest mixed-bag of news for retailers hails from cyberspace: holiday e-commerce sales were robust, but showed their slowest-ever growth, industry analysts projected.

The sales growth of 19 percent, while enviable for traditional retailers, was down sharply from the 25 percent to 30 percent growth rates of recent years. Retail industry analysts said the deceleration underscored a tight economy, but also reflected changing consumer and retailing habits.

And it is consistent with a broader slowdown in the growth rates for Internet retailing — making the holidays of 2007 a vivid example of the changing growth curve for online sales.

When the receipts are tallied from this holiday, American consumers will have spent around $29.5 billion at Internet shops, according to projections published by comScore, a market research firm. “The growth rates for previous years were clearly much higher,” said Andrew Lipsman, spokesman for comScore. The research firm did not have growth rates before 2003, but Mr. Lipsman suspected that they were 25 percent or more.

3. RFID poised for the big time in 2008

Next year will witness the spread of RFID applications into familiar, everyday settings, while consumer electronics, wireless technologies and security requirements will continue to benefit from the integration of RFID.

4. How Wal-Mart stole Christmas

After years of being trumped by Target on holiday sales, giant retailer is poised to come out on top. Analysts point to more effective marketing and pricing.

Reliance Retail's RFID Plans

by Deepak Sharma on Wednesday, December 26, 2007

RFID Journal is reporting on Reliance Retail's RFID Plans.

Reliance Retail, one of India's largest retailers, has been testing RFID technology and is preparing applications for use at a large number of its hypermarkets and supermarkets, as well as its electronics and convenience stores. The company has already equipped these stores with data ports and wireless computer networks able to support RFID systems.


Reliance Retail has drawn up plans for using RFID to support its operations. The company has developed five RFID-deployment scenarios, including the tracking of reusable crates of fresh food; item- and case-level tracking of high-value goods; and pallet and case tagging of various goods.

Reliance has performed proof-of-concept tests using passive EPC Gen 2 UHF RFID tags to track crates of fresh foods and cases of high-value goods. The company managed to achieve above 90 percent read rates and found that RFID helped it reduce shipping and receiving errors while increasing productivity. For the test to track individual items and cases of high-value goods, Reliance Retail has recently conducted a pilot between one distribution center and one Reliance Digital store. This pilot is still under evaluation. Reliance is now working with various RFID hardware and tag suppliers to obtain improved read rates for the tracking of fresh-food crates, as well as planning a permanent rollout of other scenarios upon successful completion of the pilots.

With Reliance Retail's plans to have their own supply chains, Reliance could very well be the first retailer in India to implement RFID across stores and it's supply chain.

Technology helping Retailers

by Deepak Sharma on Tuesday, December 25, 2007

IHT has a great article on how Technology is helping retailers better customer service and thus in turn increase sales. It also touches on the delicate subject of Technology replacing jobs. Productivity in retail sector has increased faster than in any other industry.

An Associated Press analysis of Bureau of Labor Statistics' employment data found that department stores have slashed 247,100 jobs since June 2001, when employment in that sector peaked. The number of jobs at food and beverage stores has fallen by 118,800 since April 2000.

Technology that allows companies to produce more goods or provide service to their customers with fewer workers or with their current staff is a factor in some job losses, economists say. A second is consolidation when a company buys out a rival or merges with a competitor.


Productivity — the amount a worker produces for every hour on the job — has grown at a faster rate in the retail industry than in all industries across the economy. Had this not occurred, there now would be nearly 4.5 million more jobs in retailing, according to Mark Zandi, chief economist at Moody's "Arguably it has been hard on workers," Zandi says.

Yet companies say a reduced work force is not the main goal of technological innovations.

The article touches on some math involving Self-service checkouts:

The retail industry spent $380 million on installing new self-service checkout units in 2006 and is expected to rise to $457 million (€318 million) this year, says Greg Buzek, president of IHL Consulting Group, a research and consulting company that specializes in technology for the retail and hospitality industries.

Making the investment in self-checkouts may not necessarily yield a big payoff for the retailer.

The average self-service checkout machine costs $21,000 (€14,600) and has a typical life of five years, Buzek estimates.

In contrast, a regular cash register costs on average $4,000 (€2,800) and has a longer life — typically nine years, Buzek says. Often, the self-service checkout machines are clustered in a group of four at stores, with one store clerk designated to oversee the self-checkout squad, he says.

The average wage of a grocery store cashier is $19,060 (€13,250) a year, according to the Labor Department.

Tale of two Retailers

by Deepak Sharma

Weak economy spurred by Subprime crisis has a different meaning for Target and Wal-Mart. While Target is struggling with slipping sales, Wal-Mart has readjusted itself with it's even more discounted merchandise and has seen sales increase. In what is being dubbed as the "trading down within the store", customers are buying lower priced items with more discount.

Rosa Setkiewicz, 50, stopped at the Target in Jersey City, New Jersey, recently to stock up on Arm & Hammer baking soda, Clorox bleach and Downy laundry detergent — "things that are cheap," she said as she loaded the trunk of her Toyota Corolla. "I have cut back a lot on clothing and things that are not necessary."

Bill Dreher, an analyst at Deutsche Bank Securities, dubbed this phenomenon "trading down within the store."

Target executives acknowledge there is some truth to the theory. But the bigger issue, in their view, is that the number of customers walking into Target's stores has dropped. They see that as a sign not of any tactical failure on Target's part, but of rising doubts among consumers about the economy.

"I think people are being more conservative in an environment where they are uncertain," said Susan Kahn, vice president of communications at Target.

Wal-Mart also had not made things easier for Target.

Target also faces a tough adversary this year in Wal-Mart, which has staked its holiday season on heavily promoted discounts. The chain held early-morning, door-buster sales every weekend in November in an effort to steal the thunder from its rivals, which generally waited until the day after Thanksgiving to stage such sales.

Target countered with a display of merchandise priced at $1 in the lobbies of its stores, sending a strong low-price message as consumers walked in.

Nevertheless, Todd Slater, a retail analyst at Lazard, said that "Wal-Mart may be better positioned for an economic downturn than Target, because it is the price leader." He added that "Target is more the fashion leader; it's more upscale."


Target Says December Sales May Fall, Missing Forecast

Last-Minute Buyers Give Retailers Relief

Indian Retail - RFID Offerings from HP

by Deepak Sharma on Saturday, December 22, 2007

The growth of Organized Retail sector in India is bringing new focus from global technology companies. Sometime back I had blogged about IBM's launch of customized Store Integration Framework (SIF) solution for Indian retailers. HP is now in the news for launching it's RFID offerings for Indian Retail.

Hewlett-Packard has launched radio frequency identification (RFID) products for the Indian retail market. Built on its internal RFID expertise (28 sites fully operational with RFID worldwide), HP has extended the RFID services to Indian customers as part of their TSG portfolio.
The new offerings designed specifically for the supply chain would assist retailers in reducing stock outages, asset shrinkage and enhancing supply chain visibility. Through RFID, retailers can experience improved supply chain efficiencies leading to greater accuracy of inventory tracking, faster through-put and reduced demands for labour-intensive stock checks.
RFID has matured in sophistication and is now increasingly used across a wide range of industries and applications as a critical technology tool to enhance business efficiency. RFID smart tags provide real-time data from the supply chain, into the stock room and out to the selling floor. Over the next few years, HP expects its usage to be even more pervasive as consumers increasingly recognise the value and convenience enabled by RFID, it will become a mainstream feature of tomorrow’s retail world.

I believe Indian Organized Retail Sector is a goldmine yet to be explored fully by global Retail Technology companies. We should be seeing more such news coming in the next few months.

"Check Out", The Wal-Mart Blog

by Deepak Sharma on Tuesday, December 18, 2007

Wow, Wal-Mart has started a new blog called Check Out. The blog is authored by Wal-Mart employees blogging on the topics of Gadgets,Games, Lawn & Garden, Movies and sustainability - almost as varied as the content of your shopping trolley. So far it looks to be a very decent effort. RSS Subscribed.

Recession?? Probably, Not yet.

by Deepak Sharma on Monday, December 17, 2007

With all the gloomy Sales forecasts/news and falling consumer confidence, you would tend to feel that Recession is around. But hopefully this will bring some cheer to you all. Bloomberg has a piece on Retail industry executives buying their companies shares (Insider trading).

Limited Brands Inc. Chief Executive Officer Leslie Wexner and eight other executives bought a record amount of stock last month after prices fell to a four-year low. Dillard's Inc. director Warren Stephens made the biggest insider purchase ever as shares of the Little Rock, Arkansas-based department store chain headed for the steepest decline since at least 1980.

Cambiar Investors LLC, Royce & Associates LLC and Becker Capital Management Inc. say insider buying foreshadows a rebound. The last four times executives added to their holdings, the Standard & Poor's Supercomposite Retailing Index rose an average 9.9 percent in the next three months, topping a 6.2 percent average rise in the S&P 500 Index. Retail company officials increased their investments by $346.4 million since the start of November, according to data compiled by Bloomberg and


"Our insider sentiment reading in retail is the most bullish we've seen,'' said Ben Silverman, 32, the Princeton, New Jersey-based director of research at InsiderScore, which tracks insider transactions for more than 350 institutional investors. ``The signal that we're seeing from retail insiders is that we're not on the brink of that recession and maybe they really believe that spending by consumers will pick up.''

My take, the retail stocks have taken some beating in recent time and with current low prices, there will be some upside to them. So, in a way, there is value to the Retail stocks.

Small Stores: Smallness is their biggest strength

by Deepak Sharma

Small shops are using their smallness to gain business over big guys like Wal-Mart. NYTimes has a story (free registration reqd) on how small retail shops are using new marketing tactics like internet presence, advertising in newer mediums etc with a whole lot more focus on Customer service to gain customers.

Small retailers around the country are using a host of marketing tactics, from the usual extra emphasis on customer service to putting out free cider and cookies. But their most important step may be that they are trying to make the most of their inherent advantages over larger competitors.


In addition, store owners say they often hear directly from their customers about new products and then quickly see how the items sell. A year ago, Mr. Choron said, customers began telling him how much they liked an electronic dice game called LCR. So, he started stocking it. A week later, it sold out. He reordered, and it sold out again in a week. Now, he said, he keeps a steady supply of the game by the cash register. “You’ve got to pay attention to the feedback,” he said.

Small retailers also have an advantage over bigger competitors in other areas, particularly customer service. This year, said Mandy Putnam, vice president of TNS Retail Forward, a retail market research firm in Columbus, Ohio, “Stores are upping the ante with more personalized customer service, particularly if they’ve depended on that for sales in the past.”

And who wins amongst all this competition, customers. :)

Reliance Retail Formats

by Deepak Sharma on Thursday, December 13, 2007

How many formats should a Retailer have? While in the west, retailers have not more than 4-5 formats, organized retail players in India like Reliance Retail  have 8 and still growing. Reliance already had the following formats:

Reliance Fresh - Grocery (focue on Fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products)

Reliance Mart - HyperMarket

Reliance Footprint - Footware and handbag store

Reliance Digital - Consumer Electronics

Reliance Trendz - Apparel

Reliance Wellness - Wellness products

Reliance Jewel - Jewellery Store

Now Reliance has launched a specialty store called Reliance TimeOut which will stock books, music, stationery, toys and gifts. Apparently there are plans for major restructuring across these various Reliance retail formats.

It has been a year since Reliance Industries' retail plans were made public. It started with the Reliance Fresh stores in Hyderabad in November last year. Now, Reliance Industries is looking to restructure its retail business. We hear that there will be 26 distinct subsidiaries, going forward. Reliance Fresh is already being spun off into the independent firm Ranger Farm, and may be shifting its focus slowly but surely from fresh fruits and vegetables.

12 months after Reliance Retail unveiled its first store-Reliance Fresh in Hyderabad, the company is now looking at some heavy duty restructuring. While RIL officials refused to comment, CNBC-TV18 learns thatReliance Retail is gearing up to split its business into 26 independent subsidiaries, within the next 90 days. These subsidiaries will be identified on the basis of formats, services or product categories.

Each company will operate with a separate profit and loss account with an independent board. Sources say that there will be more than 10 CEOs, each heading between 1-4 entities.

I would throw this question to all of you. How many formats should a retailer have? What kind of strategy applies best in such a case?

Indian Organized Retail's Supply Chain problems

by Deepak Sharma on Wednesday, December 12, 2007

While the organised retail market in India will more than double in the next three years to touch 30 billion dollars from 14 billion dollars at present, the Indian Retailers are struggling with less than optimized Supply Chains. The supply chain in India is underdeveloped, so says the report titled, "Winning with Intelligent Supply Chains" by FICCI and Ernst & Young.

According to the report, which was released by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Ernst & Young, “the most significant challenge that impedes the development of an efficient and modern retail sector is an underdeveloped supply chain”. Commenting on traditional supply chain networks, it says that the chain, a partially informed push/ pipeline model with a unidirectional flow, is expected to transform into a fully informed network model with bi-directional flow of information.

The report also points out to the huge shortage of experts in this area, coupled with the fact that only 64 per cent of organisations have a full fledged independent department to manage the supply chain.


The report calls for informational and technological intervention to tackle the current bottlenecks by using supply chain technologies like Radio Frequency Identification, barcode scanners, Point Of Sales terminals, handheld devices and software packages. It reveals that 85 per cent companies use IT to capture and analyse real-time information for effective decision making.

The other challenges that the Retail Industry in India faces include:

- Inadequacies in infrastructure such as lack of high quality road networks, power shortages and insufficient storage spaces

- With availability of retail space serving as a key enabler, the current rise in property prices and rentals may render a few retail business models unviable

- The retail industry loses to the tune of US$120 to US$130 million every year in frauds, thefts and employee pilferage, shop lifting, vendor frauds or inaccurate supervision despite using standard and modern security features

- Multiple taxes at the federal and state level

- Lack of clear policies (especially on the entry of foreign retailers)

- The industry also faces a huge shortage of experts in areas such as supply chain and store management

- The most significant challenge that impedes the development of an efficient and modern retail sector is an underdeveloped supply chain

Best Retail Software Vendors in 2007

by Deepak Sharma on Tuesday, December 11, 2007

RIS News has released 2007 RIS Software LeaderBoard ranking of the top 45 application firms in retail. SAP, Oracle and Microsoft find themselves in the top ten with other software firms such as Tomax, Micros Retail and NCR.

SAP and Oracle finished in a virtual tie at the top of the overall LeaderBoard, which ranks application firms based on a satisfaction survey by retailers. The remaining firms in the top 10 are: Celerant, Micros Retail, ECRS, NCR, NSB, Microsoft, Epicor|CRS and Tomax.

New to the LeaderBoard this year are cross-tab breakouts that separate end-to-end providers from point solutions and billion-dollar giants from million-dollar specialists. It also separates voters by such segments as mid-tier, tier one, grocery, apparel/footwear and specialty retailing.

Heading the tier-one voter list are Oracle, SAP and Micros Retail. Among mid-tier voters, the top three are SAP, Oracle and Celerant.

In the broad-suite category, the top three are SAP, Oracle and Celerant, and in the targeted-solution category the top three are Reflexis, Cornell-Mayo and DemandTec.

Among specialty retail voters, Oracle and SAP are tied at the top, with Micros Retail coming in next. Grocery voters put SAP at the top followed by Oracle and Microsoft. Apparel/footwear voters selected SAP, Celerant and Oracle as the top three.

Since retailers seek application suites now more than ever, the Retail Concentration category is a breakout list of rising importance because it rewards broad-suite vendors by giving them one point for each module they offer in the retail vertical. Oracle and SAP topped this list in a tie. They were followed by Micros Retail and Tomax.

New Interesting Retail Blogs

by Deepak Sharma on Saturday, December 08, 2007

Sometime back I had pointed out few good retail blogs I came across. In this post I will point out few more interesting Retail blogs. There is so much learning to do by reading these blogs. I hope you all agree with me:

1. Retail, in the eyes of everyday customer

2. The Power of Retail - Blog by Shalini Bahadur, a retail analyst and researcher based out of India.

3. Retail Bridge - Blog with top news from the retail sector including the latest sales strategies, installation tools and methods, plus top training tips.

Hot 100 Retail Web Sites

by Deepak Sharma on Thursday, December 06, 2007

Internet Retailer has a feature article on Hot 100 Retail websites. The websites were rated using Gomez performance testing methodology on metrics such as Response Time, Availability and Consistency. Measurements were calculated 24 hours a day from October 29, 2007, through November 6, 2007.

Here`s the bottom line about being a market leader: It`s not just about the bottom line.Market leaders in e-commerce stand out in the crowd because, among other things, they are innovative and engaging, create striking and effective site designs, do something critical such as site search better than the rest, take risks on new concepts and technologies such as social networking and Ajax, set trends such as m-commerce rather than wait and see, and know their customers extraordinarily well, exceeding their desires and needs. These are among the qualities, which ultimately can lead to a healthy bottom line, that vaulted e-retailers into the Hot 100.

One good thing you can see out of this study is what technology/vendors are these Retailers using. For e.g. Ace Hardware uses GSI Commerce's Order Management software, Home Depot uses Escalate Inc's, and JCrew uses Art Technology Group Inc etc.

Retail Weekly Roundup 4

by Deepak Sharma on Sunday, December 02, 2007

1. This Software Makes Sure The Price Is Right

A central challenge for any seller is whether to boost profit by raising prices, or to make up for low prices with increased sales volumes.

Technology's bid to help with this challenge has created demand optimization software. Such programs help retailers and consumer goods makers set optimal prices for products. Such software also is used to calculate markdown prices to clear out older wares.

DemandTec DMAN of San Carlos, Calif., is among the companies showing growth in this rising niche.

2. One in five Australian retailers plan IT infrastructure overhaul

IT spending in Australia's retail industry will top AUD$1.54 billion by the end of 2007 with the market continuing to grow at a cumulative growth rate of nine per cent per annum through to 2010.

Springboard Research A/NZ country manager, Phil Hassey, said the market will reach AUD$1.96 billion by 2010.

Hassey said that after focusing on driving customer satisfaction, increasing retention, and expanding business, IT is the highest investment area for most large and medium-sized retailers. "Our data also shows that one in five Australian retail companies are on the verge of an IT infrastructure overhaul, and are in the process of replacing legacy systems with more modern and cutting-edge technology," he said.

3. Finding a job in retail may not be so simple

It's harder than you think to get hired these days.

This isn't about fancy jobs that require an advanced degree and offer solid benefits. Think of entry-level jobs at Whole Foods, Home Depot or Best Buy.

Ask Alex Frankel, 37, a Brown University graduate. Those three retail chains turned him down.

As surprising and demoralizing as that was, it was great fodder for his book Punching In: The Unauthorized Adventures of a Front-Line Employee.

Frankel went undercover to report on the corporate culture of some of the county's leading retailers. He picked jobs at places known for their highly controlled workplaces.

Virtual World & Retailer's Strategy

by Deepak Sharma

Real-lfe retailers are setting up virtual stores on 3D virtual worlds such as Second Life. Retailers like Amercian Apparel, Sears, Circuit City are already there. With around 11 million residents as of date and about 40000 users online at any given time, Second Life provides Retailers a platfrom to engage with their customers in a unique way.

According to a recent report by Gartner titled, "Predicts 2008: How Shoppers and Technology Will Change Retail", 20% of the world's largest retailers will launch a presence in virtual worlds or online games by 2010. This they will do to study, learn and anticipate the impact of virtual worlds on the retailers' overall businesses.

Commerce is not much of a factor so far but something that will evolve over time and provide multi-channeling options for retailers.

Companies like Brookstone have opened 3D stores (outside Second Life) and are selling real mechandise customers can buy.

The virtual store replicates the look and layout of a real store. Customers can move through the aisles and browse and zoom on products using a mouse and keyboard. Detailed information is available by stopping in front of an item.

See these videos to experience navigating through the Virtual stores.

Related Articles:

Awaiting Real Sales From Virtual Shoppers

Second Life for retail chains

Second Life Lessons