According to a new report by IHL Consulting, retailers are investing around USD 120 B this year in IT and communications technologies worldwide.

Retailers are heavily investing in IT and communications technologies worldwide, to the tune of over $120 billion this year, according to Retail WorldView, a new IT Sizing service offered by IHL Consulting Group. "Retailers individually spend well below other industries, about one-third of the amount per revenue dollar compared to financial services and insurance, said Greg Buzek, president of IHL Consulting Group. "However, what retailers lack in spending percentage of revenue they clearly make up in sheer volume, due to their high revenues."

IHL Consulting says retail is a huge market for IT, one that is growing just over 9% per year. North America represents about 45% ($54 Billion) of the overall total in technology spend in retail, with Europe/Middle East/Africa representing another 28% of the market. While the Asia/Pacific market represents only 15% of the worldwide IT spend, the region’s collective retail IT spend is increasing at a rate of over 20% annually and is expected to do so for the next 3 years.

According to a new study published in Economic times, Indian consumers are still visiting local kirana stores (mom n' pop stores in India) while they still love the shopping experience of malls.

Besides, the bulk shopping that they do at these modern retails stores, there are the weekly top-ups to do at the local grocery, and the perishables that have to be bought daily.

A survey commissioned by SundayET to global market research company Synovate, has found that a sizeable 63% of the total respondents prefer to straddle both worlds: that of the mall as well as the local grocer. Only 26% talked about a marked preference for the mall alone, while there’s still another 11% that’s completely unmoved by modern retail and prefer their good ol’ mom and pop store.

Another trend that has been discovered is, the entry of retail chain stores in India has changed the way Indians are spending their weekends.

According to the survey, the entry of the modern retail chain seems to have even changed the way weekends are spent: 53% of the people interviewed said their weekend shopping behaviour had changed. What’s more, a whopping 69% agree that shopping at malls were treated as weekend outings for the family.

More than a year back I pointed to a news story and wrote a blog post on Kishore Biyani being Sam Walton of India. This appears to be so true. IndiaRetailBiz is reporting on how Pepsi’s ‘Lay’ has lost out to ITC’s ‘Bingo’ in Future ‘Bazaar’ chains. Future Group is owned by Biyani.

Wal-Mart is known to place extraordinary pricing demands on its partners. The same thing is being seen in India now. Kishore Biyani owned retail stores have stopped stocking PepsiCo owned Frito Lay’s wafers and other snack products, on account of margin disputes and have replaced it with their own product line and ITC's Bingo snack products.

As reported earlier, the problem appears to have arisen on account of regular discount offers on Lay products given by the retailer, which was not taken kindly by small kirana merchants, who account for bulk of brand’s revenues. Frito Lay is also said to be not inclined to increase the margins of the Future group, to compensate for discounts given on their products.

Bingo, according to knowledgeable sources, has become the brand of choice as PepsiCo is believed to have asked for a reduction of 5% in margin from 25% to 20%.

In order to garner a decent share of the wafers market, which is dominated by the MNC brand, apart from a high voltage advertising campaign, ITC is offering about 5% higher margin than Frito Lay.

Future Group with it's large presence throughout India can use some muscle with bigger companies like PepsiCo to pass pass cheaper prices onto customers while taking good margins by itself.

via Retailwire (Free registration required)

At a session from this week's UConnect Conference in Orlando, FL, a few retail tech bigwigs shared war stories on data synchronization and their efforts in pushing their organizations to get to one version of the truth. Are the goals of data synchronization realistic? Can there be a single version of the truth that applies universally? Is there a way to meet the spirit of data synchronization while accommodating the vagaries of the real world?

While IT departments of retailers are facing challenges managing internal technology issues, e-retailers are increasingly turning to outsourcing partners to manage web sites and keep them on the cutting edge of technological innovation. From the Internet Retailer article:

“E-retailing is moving out of the era where retailers have to be engrossed in technology to successfully run the site,” says Jeffrey Max, CEO of outsourcing e-commerce platform provider Venda Inc.

The chief advantages of outsourcing are that the retailer doesn’t have to make technology investments upfront and at the same time achieves a system that can grow as the business grows. In the case of the former, retail managers can implement merchandising and marketing changes to the site without having to enlist their I.T. department for every alteration. In the case of the latter, e-retailers are spared the cost of adding servers that remain underutilized except during peak periods when site traffic and orders jump.

Always updating

“About 20% of the technology used to build an e-retail web site is going to change every two years, which means retailers are in a never-ending cycle of updating the functionality of their sites,” says Curtis Hampshire, general manager of e-commerce platform provider USi eBusiness. “Having an outsourcing partner that can implement and guide them through these changes is more important than ever, because I.T. departments don’t move with the same speed as the web. That’s why they are a cost center, not a profit center.”

Indeed, outsourcing firms which provide software as a service, widely known by the acronym SaaS, are better positioned to help e-retailers navigate changes in web site technology because they work with multiple clients that have similar needs. In contrast, many I.T. departments operate in a vacuum, which limits their view of the e-retailing infrastructure, making them reactive instead of proactive when it comes to implementing web site technology.

This news article caught my eyes today, Ace Hardware Hits the Nail on the Head Using Planalytics Business Weather Intelligence. It talks of Ace Hardware Corp selecting the Planalytics Business Weather Intelligence platform to measure and manage weather-driven demand influences throughout the chain. So many times we've heard, warm weather hurts sales or cold weather drives retail sales etc. From the news article,

"The weather has a significant impact on our business and it's vital that we are able to anticipate and plan for these events. Proactively managing weather means that we can mitigate upcoming risks and take full advantage of capitalizing on opportunities that we would not otherwise have been prepared for. The intelligence from Planalytics can be used throughout our supply chain to support more effective strategic plans, improved seasonal inventory management and better targeted marketing and promotional programs based upon weather-driven changes in customer behavior..."

Apart from the benefits mentioned above, there could be many more like better Workforce management, pricing changes etc. Another area which gets addressed is risks management in view of weather changes.

Retailers have started realizing the power of Web 2.0 and have started making Web 2.0 work for their online presence. A case being Tesco. IT week reports how Tesco is utilizing Web 2.0 features to drive more sales.

By exploiting new capabilities such as social networking, interactive feedback and user-generated content, Tesco.com hopes to retain its position as the second most popular UK retail site and steal a march on traditional rivals.

So far the site has simply been a way to sell goods, but Web 2.0 technologies could recreate some of the community aspects of a real shop, says Tesco.com IT director Jon Higgins.

Related links:

Should Retailers Use Web 2.0 Technologies to Drive Online Sales?

Can Web 2.0 Help Retailers Win Price Wars?

Internet Retailer is reporting on how retailers are trying to differentiate the buy online/pick up in store programs to stay ahead of the competition. Started in 1999 by Circuit City, the buy online/pickup in store program was quickly caught on by other retailers. Almost all big US retailers have this program today in one way or another.  The strategies adopted by different retailers differ, while some are providing guarantee that the order will be ready for pick-up in less than 30 minutes, others have created strategies/campaigns to target consumers during holidays when time is of great essence to their customers. But all this differentiation is paying, as per CompUSA, "customers who buy online and pick up in store spend 35% more than customers who shop only in stores".  

Circuit City stores offer one or both conveniences. Individual stores are provided the choice because Circuit City figures they play a key role in making the program work, Mendelsohn says. The retailer guarantees an item ordered online will be ready for pick-up at a designated store in 24 minutes. If not, the customer receives a $24 Circuit City gift card....

As competitors such as Circuit City enhanced their programs by guaranteeing fulfillment in a specified window, CompUSA began working to achieve fulfillment in 15 minutes. The benchmark was based on customer feedback and store data.

After stores demonstrated they could achieve at least a 95% success rate for fulfilling orders in the prescribed time, CompUSA launched its 15-minute guarantee in November 2006. Shoppers also have the option of picking up an online order later the same day or the following day. “We wanted to differentiate our program. The time guarantee and other pick-up options are a way to do that,” Hurlebaus says.

Fulfilling 95% of online orders in 15 minutes requires each store to integrate its inventory management system with that of the e-commerce site. Shoppers then can identify online items in stock at their local store. To improve customer satisfaction, CompUSA allows customers to search the inventory of stores within a 50-mile radius of a designated ZIP code to provide greater availability of products if a customer’s preferred store is out of stock. CompUSA uses an in-house order management system to link store and web site inventories......

“Offering in-store pick-up in most major categories, reserved parking spots, designated pick-up lines in stores, and in-store signage directing consumers to the pick-up area are points of differentiation from our competitors,” a Best Buy spokeswoman says. While competitors such as Circuit City and CompUSA offer some of these services, they do not offer all of them, she adds.

While providing extra service to online shoppers, in-store pick-up also leads to increased purchases, retailers say. CompUSA says customers who buy online and pick up in store spend 35% more than customers who shop only in stores. To encourage cross-channel shopping, CompUSA’s store associates suggest add-on items after a customer purchases something online and arrives for in-store pick-up; the retailer also prints in-store offers on pick-up receipts. “We have been very pleased with the results,” Hurlebaus says.

According to a latest report released by ForeSee Results titled Top 100 Online Retail Satisfaction Index (downloadable after registering), online retailers Netflix Inc., QVC Inc. and Amazon.com Inc. are doing a good job of satisfying visitors to their Web sites.

With strong customer satisfaction scores of 85, Netflix.com and QVC.com lead the list of Top 100 retailers. Rounding out the top five in terms of providing a satisfying online experience are Amazon.com (83), Barnes & Noble’s BN.com (82) and Drs.FosterSmith.com (81). Scores in the 80s on the ACSI’s 100-point scale are almost universally considered superior.

Some key findings from the report:

• Satisfaction leads to loyalty and future purchase. There’s a tight link between online customer satisfaction and consumers’ propensity to choose a particular retailer above all others the next time they buy similar merchandise. Led by Amazon.com with a score of 84, four of the top five retailers from a satisfaction perspective also have the highest “likelihood to purchase next time” scores. QVC.com scored 82, while both BN.com and Netflix.com had “likelihood to purchase next time” scores of 81. Companies that satisfy their customers will be repaid with repeat visits and  purchases.
• Surprise! It’s not all about price. While people typically rate price the lowest of all the drivers of online satisfaction, it’s rarely the aspect of the shopping experience with the greatest potential to increase satisfaction, purchase and loyalty. In fact, improving satisfaction with price would have the greatest influence on increasing overall satisfaction for only 5% of the Top 100 sites. What does this mean? Price is only one part of the value equation. For many shopping sites, improvements to the site experience and the brand would have more influence on desired behaviors than  lowering prices.
• Online satisfaction drives positive word of mouth recommendations. Satisfied customers are also more likely to recommend the retailer to their family, friends and colleagues. Netflix.com, QVC.com and Amazon.com, which had the three highest satisfaction scores, also had the highest “likelihood to recommend” score. Netflix.com excelled with a score of 85, followed closely by Amazon.com and QVC.com at 84.
• Web satisfaction improves shoppers’ satisfaction with the company overall: Online shoppers of the top-performing sites are 15% more satisfied with the retailer overall than are customers of the lower-scoring sites (retailer satisfaction score of 83 vs. 72). Improving satisfaction with the online shopping experience has a halo effect on the entire company.

More Links:

PC World - Top E-Retailers Named

Got to read about Futurebazaar.com plan to sell some stake to private equity funds Sequoia and Carlyle. Futurebazaar.com is 100% owned by Pantaloon Retail (Kishore Biyani) and it is reportedly selling 10-15% to Sequoia and Carlyle.

Kishore Biyani may be just a mouse click away from raising big money for his online shopping portal.
His business of the future, Futurebazaar.com is in talks to rope in private equity funds Sequoia and Carlyle.
Sources have told NDTV that Pantaloon retail, which owns 100 per cent in Futurebazaar.com will sell 10 –15 per cent stake in the portal.
The valuation for the portal has been pegged between Rs 700 – 800 crore and Biyani is likely to raise Rs 80- 120 crore through stake sale.
While the company management is tightlipped about the private placement in Future Bazaar, Biyani had earlier told NDTV that the group has lined up big fund raising plans.
"We are at various stages of fund raising and have completed QIP placements and we are looking at various other opportunities as we go along," said Kishore Biyani, CEO, Future Group.
Futurebazaar.com that was started a year back, does business of about Rs 10,00,000 per day, getting around 3,50,000 hits daily.

Now interesting part of this news is, while the web site makes only Rs 1 Million (~USD 25000) per day (~ USD 9 Million per year), the valuations look highly stretched (Rs 700 - 800 crore). They are talking of stake sale of around USD 20-30 Million which again looks stretched. E-Commerce has really not picked up in India and may take another 3-4 years to reach a critical mass but there is good interest by private equity funds like Sequoia according to the same article has already invested in online portal like Indiatimes.com, Travelguru.com, shaadi.com and Mauj.com. I guess these PEF's are seeing something that I can't.