UNIT 4: IT IN RETAIL

5.0 Objectives
5.1 Introduction
5.2 Retail IT Landscape
5.3 Retail Management Information System
5.4 Merchandise Management System (MMS)
5.5 Point of Sale (POS)
5.6 Store Execution System
5.7 Customer Relationship Management (CRM) In Retail
5.8 Loyalty and Campaign Management in Retail
5.9 Introduction To Visual Merchandising
5.10 Business Intelligence
5.11 E-Retailing

5.0 OBJECTIVES
After reading this unit, you will be able to:
 discuss the uses of IT in retail business; and
 assess the future of IT in retail.
 discuss the significance of information systems in retail;
 state the various uses of IT in retail businesses;
 analyze the impact of IT in retail businesses
 explain the concept of merchandise management system;
 discuss the benefits of MMS in retail;
 describe the various functions of MMS in retail business;
 describe the applications of MMS in retail business;
 explain the capability of POS;
 discuss various transactions through POS;
5.1 INTRODUCTION
With globalization of commerce, ever changing customer demands seeking for increasing value from
products and services, businesses (including the inherent processes) have become complex to meet the
supply and demand chain. Internet and Latest gadgets (Smart phones, mobile computing) combined have
forced the service providers (includes retailers) to invest in technology that enabled them to meet the
dynamic demand of globalization. Earlier, markets used to have a geographic jurisdiction, which does not
exist today, as the whole world is become the potential market for every service / product provider.
5.2 RETAIL IT LANDSCAPE
IT in Retail Business
In modern retailing, the information technology has become the backbone of the retail industry. It was easy
to manage the traditional and unorganized retail stores due to its size, scope and business nature. However,
the modern retail formats are difficult to manage due to its large size and competitive market environment
without an efficient and reliable IT system. Now retail business cannot be smoothly and successfully run
without the proper usage of IT because present day customer is not just satisfied with product and its price
but he also seeks complete ease, convenience and comfort at and outside retail store to make purchases. By
keeping in mind this point of customers’, retailers are trying to approach customers through various
technologies like POS, RFID, e-payments, online services of purchases etc.
1. Point of Sale (POS): POS is a technology used in retail to ease the sale and purchase at retail stores.
POS consists of hardware and software.
Point of sale hardware: It includes; computer, customer display, weighing machine, electronic cash
register etc. as shown in figure 4.1.

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 Figure 1.4: Point of sale hardware
Point of sale software: Point of sale software performs the basic functions of billing at the checkout
counter and, at the same time, it collects sales and customer data. POS software generally performs
the functions like printing of sales invoices and receipts, calculate discounts and taxes etc. POS
software can also allow for functions such as pre-planned promotional sales, manufacturer coupon
validation, foreign currency handling and multiple payment types.
2. Bar coding system: Bar coding system is used to check and control the inventory at retail store.
Everything you buy from the retailers has a code called UPC (Universal Product Code) printed on it.
UPC symbol has two parts; machine readable bar code and human-readable 12-digit UPC number (as
shown in figure 1.5). UPC contains all the information regarding that product like manufacturer, price,
make etc. These bar codes help manufacturers and retailers to keep track of inventory.

Figure 1.5: Universal Product Code (UPC)

You can see the manufacturer identification number in any standard 12-digit UPC code. The UPC symbol
has two parts:
 The machine-readable bar code

 The human-readable 12-digit UPC number

The manufacturer identification number is the first six digits of the UPC number — 639382 in the image
above. The next five digits —00039 — are the item number.
The last digit of the UPC code is called a check digit. This digit lets the scanner determine if it scanned the
number correctly or not. Each time the scanner scans an item, it performs a calculation. If the check digit it
calculates is different from the check digit it reads, the scanner knows that something went wrong and the
item needs to be rescanned. Figure 1.6 shows a bar code scanner.
3. RFID: Radio Frequency Identification (RIFD) tags are the improvement over bar codes because the tags
have read and write capabilities. Data stored on RFID tags can be changed, updated and locked. RFID
uses a semiconductor (microchip) in a tag or label to store data.
RFID allows retailers to know the exact location of any item. There is real time tracking of any single
item, in stores or in checkout. By implementing RFID readers at the receiving docks and at the point-of-
sale, retailers can know when specific items arrived at the store, and when they are sold. For perishable
products such as food, this allows the reduction of losses due to spoilage. By positioning RFID scanners
within the store, retailers can better understand which products are selling from which locations. Look at
figure 1.7 which shows wireless tags used for RFID purpose.

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 Figure 1.7: Wireless tags used for RFID purpose
Source: sufferstock.com
4. Digital Signage: A digital signage is used to delivered visual content through centrally managed and
controlled network and displayed on a television monitor or screen. Contents in digital signage can be
entertaining video or simple displays of the price of the merchandise, advertisements, directions to reach
certain locations or any new scheme etc.

5. Kiosk: Kiosk is a small electronic physical structure includes a computer and display screen that
displays information for people walking by. It provides the information to user about merchandise, its
price, about its usage etc. people who wish to know about the merchandise visit to kiosk and get the
desired information.

6. Internet and social networking: Now a day’s retailers are largely using internet and social networking
sites to promote their merchandise. You can often see many advertisements while using internet about
the product, its price and offer etc. retailers are also using social networking site to market their product.
It is technology which made retailers to approach customers at their bed also.
7. Electronic payment system: Electronic payment system is the core component to information
technology to serve customer without any time or cash hurdles. Now customers can purchase any
product from their houses, offices etc. by making a simple online payment of the product and get the
product at their desired place. Most of the retailers also establish an electronic payment system at their
retail store to pay the bills of the purchased through debit, credit cards etc. Figure 1.8 shows electronic
payment systems.

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 Figure 1.8: Electronic payment systems
Source: eps-na.com
Future of IT in Retail
Competition in retail sector is very high and every retailer tries to serve their customers in and outside the
store with variety of services which not only includes easing their (customers’) purchase function but also
provide convenience to them to make their purchases.
Information technology also provides the platform to integrate various part of the business such as
Production, Finance, Sales and Marketing. It also provides the platform to remove cultural difference (multi-
location organization) and achieve the common goal of meeting the end customer demand.
5.3 RETAIL MANAGEMENT INFORMATION SYSTEM
Retail management information systems include the use of hardware, software, various networking and
communication technologies and procedures to manage activities such as planning, inventory control, and
finance, information to customers, logistics and point of sale transactions. Retail management information
system connects the distributed stores, which is a huge support. It allows instant exchange of information
that helps store managers to stay in contact with others as shown in figure 2.2.

Store 1 Store 4 Store 6

MIS in
Store 2 Store 7
Retail

Store 3 Store 5 Store 8

Figure 2.2: Retail MIS: Connecting different stores of a retail house

Features of Retail MIS
Features of retail MIS are as follows:
1) Links the stores of retail business
2) Enables immediate exchange of information (data) to all the store managers
3) Supports effective product management
4) Controls profit of the organization
5) A flexible information system helps managers even in pricing their products and services for variable time
period.
6) Helps in basic retail functions such as procurement, storage and delivery.
7) Helps managers in managing inventory, suppliers and product sales.
8) Provides a control to retailer over purchase orders and inventory records.
9) Enables analyzing cash, cheque and credit card transactions to reconcile information.
10) Allows to track purchase orders and update inventory records dynamically.
11) Helps in improve efficiency by examining overage and shortages to disclose trends that can be corrected.
12) Provides detailed analysis of customers’ data, which helps in computing customers’ lifetime value,
designing various customer loyalty programs to retain the valuable customers. It is important to note here
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 that not all the customers of a business are equally valuable. Their buying pattern and choices vary. Retail
MIS plays a very important role in identifying the customers who are highly valuable for their businesses.
Retail MIS includes a mobile user interface to meet the needs of sales and inventory managers. To put it
simple, the basic function of retail MIS is integrating payments, inventory and transactions which improves
operations and reduces costs.
There are various types of retail management information systems. Retail MIS can be customized for each
industry, such as fashion industry, department stores, supermarkets, furniture stores, pharmaceutical stores.
5.4 MERCHANDISE MANAGEMENT SYSTEM (MMS)
Retail merchandising is the process of developing, securing, pricing, supporting and communicating
retailers’ merchandise offering.
Merchandise management in retail is a process which helps retailers to ensure to offer the correct quantity
of the right merchandise in the right place at the right price which in-turn fetches the right profit means.
This enables the companies to meet their financial goals. Look at figure 3.1, which shows components of
merchandise management.

Figure 3.1: Components of Merchandise Management

When retailers begin adding merchandise categories and retail stores, the workload on the retailers increased
extensively. Retailers have very little time and information about the stock position and they allocate retail
merchandise among stores on the basis of approximation which leads to wrong stock in the stores and
chances of lost sales. To overcome these limitations Merchandise Management System (MMS) concept has
come.
Meaning of Merchandise Management System (MMS)
Merchandise Management System is the information system that supports and controls the goods-oriented
planning/execution of tasks (ordering, receiving, transferring, collecting sales data from POS), the
logistical and the billing related tasks of a retailing company using value and quantity related transaction
data for the merchandise. In other words, MMS is a technology enabled information system to keep the
record of the retail inventory (merchandise) in a retail store. In a retail store, numbers of merchandise are
stored, MMS shows the exact quantity of merchandise a retail store has in stock at a particular time. Figure
3.2 shows merchandise management system.

Figure 3.2: Existing merchandise management system

Source: tst.biometrics.com
Merchandise Management System (MMS) is a system that keeps record of the performance of the
merchandise, records good sellers and identifies the poor sellers and enabling retailers to make timely
decisions regarding merchandise. With the help of merchandise management system retailers can
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efficiently analyze, order, and distribute merchandise across the retail stores. Having the right inventory at
the right place at the right time, retailers can effectively promote their merchandise that automatically
increase the sales and reduce the chances of customers’ dissatisfaction and lost sale. MMS enables retailers
to deliver the real time merchandise to the customers. Merchandise management system includes almost all
the functions of a retail store, these are:
a) Merchandise planning
b) Merchandise buying
c) Sale process
d) Merchandise price management
e) Inter-retail store transfer of merchandise
There is various software available for MMS in the market such as JDA’s MMS etc.
Functions of MMS
Retailing Company has four principal Tasks involving merchandise:
a) Procurement
b) Storage
c) Distribution
d) Sales
Following are the various functions/features of Merchandise Management System (MMS) in retailing:
a) Product definition
b) Location hierarchy
c) Merchandise calendar (time zones)
d) Placing the order on the vendor who supplies the relevant Merchandise
e) Tracking order fulfilment
f) Receiving the merchandise in the Distribution Centre (DC)
g) Storing the Merchandise in the DC in such a manner that it is efficient to replenish the merchandise
ordered by the stores
h) Transfer of merchandise between various store/DC locations
i) Return to Vendor defective stocks/Excess stock in the inventory.
j) Analyze Sales and inventory statements for Stores as well as DC.

5.5 POINT OF SALE (POS)

Concept of Point of Sale (POS)
The word POS refers to “Point of Sale” or “Point of Purchase”. In modern retail, the terms “POS” and “POS
Terminal” refer to Computer Hardware(H) and Software(S) which is used for billing the customer for the
purchases made. They are used to track inventory as they show the below mentioned figure. There may be
different H and S used for functioning of sale purchase in a retail store.

Figure 5.1: Functioning of POS in a Retail

Source: Hewlett Packard
Thus, point of sale or POS as it is more commonly abbreviated, refers to the capturing of data and
customer payment information at a physical location when goods or services are bought and sold. The POS
transaction is captured using a variety of devices, which include a computer, a cash drawer, receipt printer,
a monitor, magnetic card readers and an input device such as a keyboard or scanner, or any combination

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of these devices. It is very well depicted from the figure that the POS is a combination of Software and
hardware specifically designed for retail store.
Capability of POS System
In Table 5.2 we would throw a light on different hardware (H/w) which are used in a POS Systems along
with the description and its images.
Table 5.2: Pictorial View of Various POS Systems

M20 is based on embedded system, with high adaptability, security and

intellectual faculties. M20 has been approved by EMVCo, LLC to conform
to EMV 4.0 Specifications (approval number 12105 1007 400 20 BCT). The
pinpad has been confirmed by BACL to be in conformance with FCC, IC,
and VCCI rules and regulations. It has also passed the technology-quality
test made by bankcard examination center, and approved to enter the
financial market. It can be applied to complete financial transactions in
emporium, pub, shop, tax revenue, insurance, medical treatment,
supermarket, recreation and amusement, etc.
BasicCard® is the first smart card programmable in BASIC. It is easy to
use, open to anyone, requires no special training, and competitively priced.
Using the BasicCard® anyone can programme their own smart cards - and
this takes only a few hours of your time.

17" Touch screen display with integrated Magnetic & Smart card readers
80mm Thermal Printer, 10/100 Base-T Ethernet

Touch screen Point of sale system with 15 inch touch screen , Intel Atom
1.6G,80GB HDD,1GB RAM . It is All in one Touch POS System may ,
Touch POS System may be widely used in Retail ,hospitality such as
Restaurant ,Coffee shop, Pizaa etc
Source:
http://sunrisepos.com
Sunrise POS makes buying your first or next Restaurant POS System a
snap! Sunrise POS has been offering simple – pre-configured – turn-key
restaurant POS systems. It is “Ready – Out of the Box” systems that make
self-installation a snap for restaurants of any size or amount of stations or
locations. This product is used by thousands of restaurants all over the world
running on their solutions every day.
Most bankcards no longer rely on a magnetic strip to store customer
account details. Instead, the cards are smart cards. The cards contain a small
amount of computer memory with the account information stored inside.
Smart cards are more secure (since the data is encrypted) and more reliable
Source: than magnetic strip cards.
http://www.igcseict.info/ When a customer wishes to pay for goods in a store, the customer inserts
theory/7_2/retail/index.html the bankcard into a smart card reader, and then types in a PIN to confirm
that they are the true owner of the card. Once the PIN is verified, the
customer can remove the card.
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It tracks inventory, creates accurate pricing, and generates reports in seconds.
Capability of POS Terminal
The POS Terminal is capable of performing many of the following tasks:
1) Scanning the item bought by the customer
2) Preparing the invoice for purchases made by the customer
3) Printing the receipt
4) Accepting the payment in:
 Cash
 Credit card / debit card
 Cheque
 Gift card
 Discount Coupon
 Vouchers / food coupons
 Credit note
5) Recording or redeeming the points earned by the Member of Loyalty Program
6) Print Discount Coupons
7) Weigh the items using weighing scale attached to the POS
8) Display promotional messages and/ or bill value on the customer display
9) Handling customer returns and returning the monies or credit note to the customer
10)Handling exchange of goods
11)Handling promotional schemes such as “buy 1 get 1 free” or more complex deals
12)Track the inventory
Role of POS in Modern Retail
POS had a great impact in various areas and can Support Point of Sales Business in different streams. Look
at Table 5.4 that shows the areas of support be POS.
Table 5.4: Areas Support POS
Departmental Grocery Shops Supermarkets Hypermart Textile
stores
Readymade Footwear’s White Goods Household appliances and Gift shop
Garments consumer electronics
Glass and crockery Hardware- Electrical/ Stationary Liquor Shops Music
Electronics/ Auto parts/ Shops
Building materials
Boutiques Software for food and Fine Dining Food Court Fast Food
beverage industry Restaurant
Quick Service& Auto Spare Parts Luggages and Delivery outlets Mobile
Home Optical bags Showrooms
Showroom

POS Software Application

POS software allows you to create invoices, accept returned merchandise, and order fresh stocks from your
suppliers and even search for inventory across stores and warehouses.
1) Infosys Mobile POS (mPOS) solution (Infosys Patent Pending) is a unique mobility solution
that extends capabilities of POS terminals to anywhere in the store, along with providing
information to store assistants on the fingertip. Infosys Mobile POS solution enables a sales assistant to
carry out end-to-end shopping transactions in a retail store using a handheld device. This solution can be
used by retailers as a key differentiator in their multi-channel retailing strategy.
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 The solution is configured to work on multiple platforms including Apple® iOS, Android™,
Windows® Mobile.

2) Oracle Retail POS Suite Ver. 13.0.2.2

It was implemented as point of sales application in the sales outlets. Topology of this package was
customized to bring the back-office component in centralized data center along with the central office
(instead of physical servers at each outlet). There was 600+ POS terminals across all outlets connected
via WAN to the data center to access back office and central office. In addition to existing peripherals
(ie. Cash drawers, barcode scanners and printers), each POS terminal was integrated with new devices
(eg. a swipe card reader for authentication and EFTPOS machine for credit and debit card transactions
with the bank).

Selection of POS System

Buying a POS system is a big investment decision, and can have a significant impact on the efficiency and
success of the retailer’s business. Hence, it is important to put in efforts in understanding the business
requirements along with a comparative analysis of available features in products under consideration or
while designing a custom application. The POS System consists of two components – Software and
Hardware/Other Components.
Software Components
1) Guidelines for Buying POS Software
a. Resist the temptation to buy hardware before software: The POS software you select will have specific
hardware requirements.
b. Do not delegate: The person who chooses the POS software must have an intimate knowledge of the
inner workings of the business. The POS software selection is a strategic business decision - do not
task low-level employees or computer consultant with the recommendation. Top management and
key personnel must all be involved in the selection process.
c. Ask for recommendations: Ask competitors how their software works for them. Pay particular
attention to their comments about the training and service the software maker provided after the
sale.
d. Request software demos: After putting together a list of three or more potential POS software makers,
one should contact these companies and specifically ask for a 30-day, onsite demonstration of their
system.
e. Understand your business needs versus what the POS software does: Have a good idea of what
business needs are to be meet. Check-out is a given, but do we need inventory and ordering features?
Must the system be able to generate bar coded shelf tags?
f. Replacement of POS System – If you have an existing POS System which needs to be replaced, then
it is important to understand on how the integration will work. Further, comparative analysis of the
features and reports available in the existing software and the proposed software should be done.
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 The proposed system should ensure that migration related issues are taken care of. Based on this an
assessment should be done and a planned phased rollout plan needs to be prepared.
2) Questions to Ask Yourself about POS System Software
Here are some questions about POS software features to consider when evaluating your business’s needs.
These are questions you can ask the POS software supplier before you meet with him:
a) Does the POS system talk to (interface with) our accounting system or replace it? If it interfaces with
the accounting system, how complete is the integration? Does the POS software make general journal
entries or store the data on the accounting system at the transaction level?
b) How easy it to initially configure the system to my business? Once set up, specifically how would I
change prices, add and delete items, track inventory, etc.?
c) Does the POS system allow me to use my current merchant account, or do I have to move to a different
one? Is the card authorization processed by the POS computer, or from outside equipment?
d) Does the POS system allow cheque verification?
e) Does the POS software allow me to continue my current method of discounts and promotions? Does
it offer loyalty programs or gift card transactions? What other special promotional features are offered?
f) Does the POS system automatically submit my orders via EDI? How do I enter a manual order? How
do I process an order that has just been received?
g) What type of reports does the POS system produce? How timely are they? What are they used for? How
can they help me with my business?
h) How many registers can the software support? How many stores? What are the network requirements
to tie everything together? How much does each additional register and work station cost to add?
i) Where is the data stored? If it is not on my equipment, what is the monthly cost of that storage? How
secure is the data? This includes Credit Card data.
The key here is to start getting an idea of the features you need, and to have them in mind when you evaluate
different POS software.
3) What to do before you buy the POS software?
a. Investigate the POS software company: When you purchase POS software, realize that you are not
necessarily buying a product, you are entering a partnership. After the installation, you will have to
rely on the company for technical support and pointers on how to make the most of your purchase.
The POS software company needs to be responsive in fixing bugs and issuing updates that include
new features. They should be a respected and viable “player” in the POS software industry. Here are
some questions to ask and answer before you make your final selection:
o How long has the company been in business?
o Has the company won any awards, been recommended by trade publications, associations or
prestigious businesses?
o How quickly does the company offer updates to “fix bugs”? iv. How does the company handle
installation?
o What data backup features come with the system? Can you make an automatic data backup
schedule?
o What is availability of technical support? What is the monthly cost? What is the “worst case” time
for a call-back? What happens if the system “just won’t work” one day? Are there technical
supports that can come on-site?
o Does the company offer training? What training is recommended? What is the cost?
o What is the financial stability of the company? What happens if the company “goes under”?
(Definitely ask your sales person this question, and gauge their surprise. Salesmen from established
and reputable companies have a ready answer because they’ve been asked this multiple times by
other prospective customers.)
b. Request and Check References - The POS software representative should have a list of customers
that serve as references. Ask for them. Call every one, and ask questions about the value, ease-of-use,
support and their overall satisfaction with the POS system software. Ask if they wish the system
could do anything better.

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 c. Other considerations – Experience, the quality of the initial installation, training and support are
the key to the success of a new POS system implementation. Make sure that you have a “warm”
feeling that the POS software supplier will partner with you to make sure you can make the
transition, minimizing disruption.
Hardware / Other Components
Following points needs to be considered while evaluating Hardware/ Other Components required for a POS
System.
 Computer: It would be easier and faster to setup and get support, if the POS Systems are purchased
from the POS Software Supplier. If you want to purchase PCs on your own, make sure you understand the
requirements of the POS software to avoid compatibility problems. Although most POS software systems
are not very demanding on the computer, make sure you select a reliable hardware supplier. Get the “on-
site” service option in case there are problems.

Figure 6.8: Snap Shot of Apple Computer, Keyboard and Mouse

Source: Apple Inc USA
 Power Supply: Your POS system computers will need a source of “clean” electrical power free of
spikes and dips in voltage and amperage. This is critical for the life of your equipment. Fluctuations in
power can occur from the use of other electrical equipment on the same circuit.

Figure 6.9: Snap Shot of Power Supply

These fluctuations can seriously shorten the life of your computer and attached equipment. There are two
solutions to this problem. First, you can install power filtering equipment at the outlets that the computers
and other POS equipment plug in to. Second, you can wire a separate circuit into the breaker box with an
isolated ground for the POS equipment. Power fluctuations are the biggest cause of computer failure in
POS systems. Have your vendor access the quality of the power supply and recommend any corrective
actions.
 Cash Drawers - This is where the cash and cheques for transactions are stored. It is important to make
sure that you select a cash drawer that has sufficient note and coin slots to meet your needs. Another
popular feature of some cash drawers is a media slot in the front, which allows you to store cheques in the
drawer without opening it.
When selecting a cash drawer, you need to be concerned about the quality and durability of its
construction. Make sure the drawer will fit comfortably in or on your station countering. Brackets for
under counter mounting are available for most models.
 Other Hardware / Components
With regards to other hardware / components, you should ensure the following:
o It is compatible with other components and meets the requirement of the POS Software Supplier
o They meet the security concerns
o They can be upgraded when required
o The supplier can provide support and after-sales support even after the warranty period.

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5.5 STORE EXECUTION SYSTEM
Components of Store Execution System
A typical Store Manager executes more than 100-unit tasks every month. The discipline and perfection in
execution of these tasks makes a store well run or otherwise. Store Execution Systems assist the Operations
Department to manage the store operations across the chain. Figure 7.1 shows the various modules of the
Stores Execution System:

Figure 7.1 Different modules of Store Execution System

Integrated Retail Execution Platform
A Retail Execution platform combines task management, labor scheduling, real-time KPI and compliance
monitoring, learning, and time and attendance functionality, asset management, vendor related and
regulatory compliances. There are different types of components for Integrated Retail Execution Platform.
Let us learn them one by one. These are as follows:
a) Streamline communication: Store Managers now have a single place to access everything they need
through an intuitive, calendar-based interface. No more wasting time sorting through multiple
communication channels for the latest information.
b) Task Management: The tasks are either one time or recurring. The recurring tasks repeat at a frequency
such as Daily, Weekly, Monthly, Quarterly or Yearly. The System creates a calendar of the tasks and
shows the responsibility for the execution of each of the task. Some tasks may demand submission of
evidence as a proof of execution of task. The features of Task Management System are: i) scheduling/re-
scheduling of tasks ii) reminders of due tasks by email/SMS/alert iii) automatic escalation of delayed
tasks iv) score card for the store based on the time and in full compliance with the schedule
v) support for many devices including smart phones and kiosks vi) simple user
interface vii) integration with other tools such as outlook viii) updating of
execution of tasks with evidences ix) reports and dashboards
c) Prioritize tasks and Coordinate planning: Corporate planners now have visibility into all the work that
is being sent to the stores and can prioritize tasks in alignment with the retailer’s goals. If stores are in
danger of being overloaded on a given day, lower priority tasks can be shifted to less busy dates.
d) Monitor KPIs: Key Performance Indicators (KPIs) can now be monitored in real time and respond
proactively. Retailers need not depend on paper-based report to know what is happening right now and
they need to institutionalize best practice response to problems and opportunities. By linking KPIs to
actions, the retailer can monitor key sales and operations trends and respond rapidly using best practices
embedded in the system.

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e) Work Force Management: By integrating task management and labor scheduling, Retail Execution
Platforms enable retailers to factor in all the work that must be done in the stores, from daily operational
tasks to corporate driven work such as new product launches, promotion setup, store re-sets, and so on.
This integrated approach ensures stores have the right mixture of labor to complete sales-driving tasks
while meeting target customer service levels.
f) Self -Service Human Resource Management: Self-service tools enable employees to look up their
available vacation time, switch shifts with other workers (within the rules), and perform other activities
without having to get management involved.
g) Asset Management: Retail Execution Management solutions are designed to manage assets by keeping
record of them, altering maintenance schedules, renewal of Annual Maintenance schedule, altering on
replacement and part replacement.
h) Vendor Management and Inventory Control: With the implementation of Retail Execution Management
system the store manager is in better control of the inventory and the need to replenish. This allows the
store manager to leverage his relationship with vendor to get the best discounts and services. Further, the
vendor is also ensured his payment due to proper tracking.
i) Regulatory Compliances: Regulatory Compliances are also supported in the Retail Execution
Management System. The system provides the store manager with alerts for timely renewal of licenses.
The store manager needs to enter the information once and subsequently follow the alerts provided by
the system.
j) Mobile Retail Execution Management Solution: When regional and store managers can access KPIs
and tasks and manage by exception using handhelds such as BlackBerry smart phones. This frees them
from their desks to spend more time on the sales floor helping customers and providing leadership.
Regional managers do not have to waste time at each store determining where to focus. They already
know what are the key problems and opportunities before they get into their car or airplane to visit the
stores in their region.
k) Web Based Solutions: Today’s Web-based solutions can be implemented much more easily and rapidly
than other enterprise solutions – three or four months instead of years. Software developers have also
spent significant time and money on user interface Research and Development to ensure the solution that
is easy to learn and use.
l) Other Technology Integration: Integration with technologies like RFID brings in better visibility in the
overall Retail Execution System. However, the adaption to this technology is still slow owing to the high-
cost factor.
5.6 CUSTOMER RELATIONSHIP MANAGEMENT (CRM) IN RETAIL
Concept of CRM
CRM (Customer relationship management) is the array of processes that help a company to understand the
preferences or dislikes of individual customers in order to build lasting relationships. It is a business strategy
that enables organizations to get closer with their customers, to better serve their needs, improve customer
service, enhance customer satisfaction and thereby maximize customer loyalty and retention.
The CRM is a set of internal standards and business protocols related to customer service (the type of
service you want or would want to provide for buyers). To focus on their needs and improve customer
relationships, with a view to maximize customer satisfaction. It encompasses the variety of technology
employed to streamline customer interaction to find, acquire and retain customers. For small businesses,
customer relationship management includes:
● CRM processes that help identify and target their best customers, generate quality sales leads, and plan
and implement marketing campaigns with clear goals and objectives;
● CRM processes that help form individualized relationships with customers (to improve customer
satisfaction) and provide the highest level of customer service to the most profitable customers;
● CRM processes that provide employees with the information they need to know their customers’ wants
and needs, and build relationships between the company and its customers.
CRM tools include software and browser-based applications that collect and organize information about
customers. For instance, as part of their CRM strategy, a business might use a database of customer

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information to help construct a customer satisfaction survey, or decide which new product their customers
might be interested in.
Considerations while Implementing a Retail CRM System
Following points need to be considered while implementing a Retail CRM System
● Evaluate the Need: The retailer needs to formulate a deployment strategy based on the needs and target
customers.
● Basic Characteristics of a Retail CRM System: In order to be effective, the Retail CRM system should:

- Have the ability to recognize a customer with unique ID

- Should be integrated with POS System
- May be card based or card less
- Ability to run communication campaign
- Ability to study customer behavior and divide into segments based on various
parameters.
● SaaS Model: Implementing a CRM System can be an expensive proposition. It makes sense to consider
Software-as-a-Service applications where they are typically priced on a monthly basis. The retailer can
discontinue any time if they are not getting a return on their investment (ROI).
● Integrated CRM System: POS applications that include CRM in the suite typically offer inventory control
and sales management functionality that retailers will require anyways.
● Hidden Cost of CRM Implementation: The costs of executing marketing campaigns (postage and mail
supplies, bulk email software, and employee time) can be hidden costs that need to be factored in when
considering the total cost of retail CRM system.
● Integration with other office functions: To truly accomplish the customer experience, along with the CRM
System, the retailer must address the back-office, integrating multiple technologies such as point-of-sale,
accounting, inventory, human resources, and marketing, with mobile and social media, among others.
● Benefits of Implementing a CRM System: A strong CRM system should benefit organizations in various
ways. Most retailers should expect to note the following benefits when properly using a CRM system.
o Efficiency: Good programs will help retailers automate the cumbersome tasks of assembling prospect
lists, sending bulk physical mail or email campaigns, and tracking campaign performance. Systems
can also provide automated reminders for key dates such as birthdays, anniversaries, and holidays.
o Customer retention: Keeping in regular contact with customers enables retailers to build relationships
with customers and keep their repeat business. Systems can also prompt retailers to contact customers
at regular intervals after sales are complete.
o Increased margins: By using CRM systems effectively, retailers should be attuned to customers’
preferences and be able to offer more of what they want, leading to increased sales and fewer
purchases of unsold items. Retailers should find that implementing a CRM system is fairly low-risk.
5.7 LOYALTY AND CAMPAIGN MANAGEMENT IN RETAIL
Features of Retail Loyalty Program
Loyalty can be defined as a customer’s sustained commitment to a company as demonstrated by repeat
purchases, increased wallet share, and positive word-of-mouth referrals. It is an accepted fact that word of
mouth is the strongest form of endorsement for a company’s product, service or brand. A consumer today
interacts with retailers on a daily basis – while shopping for his grocery needs, buying apparels or sipping
his coffee.
Loyalty program worldwide, want to identify and reward their most valuable customer and reward them on
an ongoing basis to ensure repeat purchase. Rewards are calculated & offered with every transaction the
customer makes. The simplest way to do this is through points. Retail is no exception to this. While there
cannot be a loyalty program without point accumulation. This alone does not suffice as a key business
differentiator nor does it create any remarkable value. Look at figure 9.1, which shows the core features of
a successful loyalty program:

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 Figure: 9.1 Core feature of retail loyalty program
The features of retail loyalty program are as follow:
 Customer Profile: Loyalty program is a way for retailers to understand the customer beyond the usual
faceless transactions. If the retailers are to do any type of segmentation, they need to have customer
profile data like contact profile, demographic profile, shopping preferences and past buying behavior.
Look at figure 9.2 which shows the common features of a retail loyalty program.

Figure 9.2: Common features of retail loyalty program

 Cross Channel Member Enrollment and Redemption: Member enrollment should be least cumbersome,
considering the store associate has very limited time to expense towards member enrollment, the
enrollment process should be designed it a way that it doesn’t take much time to enroll a new member.
While offline manual registration seems to be the most preferred means of registration. Retailers are
also trying online self-registration. Members should be able to earn and burn points in any channel.
Look at figure 9.3 which shows Cross Channel Member Enrollment and Redemption. The program
should be flexible enough to provide a consistent experience to the customer irrespective of the channel
that the customer utilizes.

Figure 9.3: Cross channel member enrollment and redemption

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 Perform Extensive Segmentation & Targeted Marketing: To map customer’s true value to a tier/segment,
in order to enhance satisfaction of high-value customers and increase profitability of low value
customer’s extensive segmentation has to be done. Look at figure 9.4 which show value based
segmentation. Retailers use targeted promotions tailored for each customer segment’s needs and desires.
How this is accomplished will vary by type of items sold, the value of each customer, and customer
segments serviced, among other things. The idea is to ensure high response rates for campaign and
increases promotion effectiveness.

 Quick Promotion Creation: Ability to bring in the right promotion at the right time is vital for the success
of the promotion. The program should be agile enough to quickly enable set-up of promotions as desired
by market (e.g., to promote sales of highly seasonal products or customer behaviors on a precise period
of time).
 Flexible Tiers: Groupings of members who share common characteristics or status into a tier. To ensure
tier rules and bonuses closely correspond to customers’ needs or desires and maximize members’
incentives to yield the greatest return for the host company.
 Statement Management: Generate statements via web, email or mail to enrolled members. The statement
should essentially provide the members transaction history along with accrued and expired points.
 Flexible Accrual Rules: Unlike Airlines or Hospitality, retailers have to toy around with low margins and
hence it becomes very vital how they structure their accrual rules. Besides in coalition loyalty programs
different accruals will have to be set for each participating partner. Accrual rules should be defined for
both purchase and non-purchase actions (eg: enrollment into a loyalty program, participating in an in
store demo)

1 1

Figure . : Fle ible Accrual Rules

 ROI Analysis - At minimum the retailer will want to measure the campaign effectiveness, track marketing
expenditure (cost of campaign and cost of loyalty) and identify the most successful member segment.
● Transaction Processing - Exact calculation to be made on basis of the transaction uploaded. The loyalty
engine should calculate points based on the Accrual rules set up in the promotions. The loyalty engine
should be able to calculate both accruals and redemptions. Transactions logs should be available to
determine why a certain transaction was processed while another seemingly eligible transaction was not
processed.
Technological Consideration
The underlying architecture that enables a company to accomplish its loyalty goals should be flexible and
robust enough to support the loyalty programs.

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a. System Costs: Significant investment goes into the technical infrastructure supporting the loyalty program.
While loyalty solution (software licenses) and server infrastructure mainly account for the fixed cost,
annual maintenance and upgrade costs contribute towards the variable costs.
 Fixed Cost
-Software Licenses
-Hardware Licensing (Server)
-Implementation Cost
-Integration with POS, inventory and other partner systems
 Variable Cost
-Annual maintenance
Change request
-Upgrade
Retailers can also look at SAAS models that charge monthly usage fee based.
b. Program Cost: In addition to the system cost, retailers have to bear the program cost (marketing, printing
and communication cost). Unlike airlines where an unsold seat is a perishable commodity, every point
redeemed will be paid by the retailer. Technology as can be seen is a significant capital expenditure and
hence retailers will think twice before investing in Loyalty Management System.
c. Integration with POS and other systems: Loyalty system will have to integrate with the customer master
(database) to fetch and validate customer data. It has to obtain transaction details from core retail system
on a batch or near real-time basis. In addition, loyalty rules generated by the loyalty system have to
available at the POS. Retailers existing web site should seamlessly integrate with the loyalty solution
(capabilities often provided through web services). Catalog or promotion information provided to the
member should be consistent across channel. Lag in communication between retailer’s database and the
website are to be avoided.
d. Flexibility & Time to market: Programs should be flexible and adapt to changing market and competitive
dynamics. The system should allow promotion to be created and deployed within short notices. It should
also be easy to manage tier changes. It is crucial that the marketers get the right promotion at the right
time any delay would have low impact on profitability.
e. Scalability: Retailer create huge volume of transactions, managing this transaction could be quite a
challenge. An average sized retailer generates as much as 200 million transactions in a year. The loyalty
engine should be able to handle process this volume of transaction.
f. Loyalty Analytics: Apart from static reporting, retailer’s require loyalty solution to provide them with real-
time on profitability drivers. Analysis of promotion effectiveness, understanding the product and price
mix most likely to influences member buying behavior and other loyalty drivers should be available in
the analytical solution. The analytical solution should be able to provide decisive data on ROI.
5.8 VISUAL MERCHANDISING
Merchandising involves acquiring the required goods, placing them with due prominence on the designated
shelf, setting price for the goods that helps the retailer in reaching the goal that has been set.. Visual
merchandising includes window displays, signs, interior displays, cosmetic promotions and any other special
sales promotions taking place.
Types of Visual Merchandising Displays
There are various types of Visual Merchandising Displays which are as follow:
a) Window display - Window display essentially has to reflect corporate identity and should be visually
powerful to invite, as” I must possess it”. These are various types of window display.

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- Closed-back window displays- It has a large pan of glass at the front and a solid back wall and two sides

with their hide and door access the window

- Open back window displays- These have side walls but no back wall allowing the interior of the shop
to be seen from the street

- Angled window: It’s much like this right front in that its follows a true line but the monotony is relieved
by angles away from the sidewalk contour.

- Corner window: The window wrapped around the corner list of the placement of stock is important
because it will be visible from both directions.

- Shadow Box Window Display: Shadow boxes are small entities usually found near the entry of a store.
It is perfect display in luxury items like jewellery and watches. Shadow box requires individual
lighting.

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- Windowless: It is wide opening at the friend of this store will bring customers into the shop for
merchandise easily visible to the passer by.

- Island window display: Island window displays can only be seen in the large department and flagship
stores. such a window display request shoes space. retailers use this type of window display to create
a sense of focus on the latest products or promotions.

- Elevated windows: This type of elevated display is used to rise featured products enough to catch the
eye , usually combined with a graphic display or method of displaying the item itself to raise
awareness even further. It can either be closed or open window that is located in a higher level.

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b) Interior display - It should relate to the theme seen in the windows. It effects the movement and traffic of
customers and should lead to a total, effective and ergonomic visual concept of the store aiding a pleasant
experience.
c) The trend away from window - Isolated displays are less frequently in use as too much of time and expense
and far from the merchandise to which they relate. However, as means of non-store visual merchandising,
especially at Airports, leading premium end stores often puts up isolated visual merchandise displays.
d) Point of purchase Display - It refers to a display or merchandise presentation at the point where an act of
purchase happens and the sale is made. The display is designed to promote a particular product or brand
name.
e) Industrial and exhibition visual merchandising- Industrial and exhibition visual merchandising refers to
many formats of visual merchandising. These are given below along with specifics in brackets, further
detailing the visual merchandise displays.
o Permanent exhibits (at museums)
o Temporary exhibits (displayed on exhibition grounds)
o Travelling Displays (mobile promotions)
o Outdoor exhibits (sponsored parks and store maintained public places)
o Industrial Products Visual Merchandising (At factory gates or outlets)
f) Digital Signage - an emerging visual technology trend – Digital signage has emerged as one of the most
novel and versatile of visual merchandising formats and the same is employed either on the net or over a
screen in the store. Varied interfaces are designed for an optimum interface of the consumer with the
visual merchandise (virtual tours etc.).
Signage
Signage is the “silent salesperson” for the retailer and must reflect your image. Handwritten signs are
essentially taboo. Professionalism is everything in your store and the same holds true with your signage.
There are four different types of signs:
● Promotional signs: For off-price events or specials.

● Location signs: For direction to specific departments.

● Institutional signs: For store policies, charitable events.

● Informational signs: For product related features/ benefits/prices.

Following should be kept in mind, while designing a signage campaign:

o Make your signs short and sweet. You have three seconds to tell the customer what you want them to
know.
o Create a consistent look. Color, size, type, style, and layout
o Use feature/benefit/price signs.
o Only post positive signs about your policies. If it is negative, either change it or do not post it.
o Say “Save PhP.1000”, instead of “10% off”. It is usually much more powerful.
RFID Based Smart Visual Merchandising
Smart Visual Merchandising (SVM) based on RFID tags. Passive RFID tags (a small circuit on a paper) are
laid inside shirt or trouser packs. When a potential customer selects a shirt and brings it near an LCD panel,
it displays all features of the shirt be it color name, striped /checked, size, along with other sizes available in
the same color and their prices.
The technology comes handy inside a trial room. A touch on a display unit inside the trial orders a bigger/
smaller size at the counter, and a helper can hand over the same, thus saving time for both customer as well
as the retailer.

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Planogram

The planogram is a visual diagram, or drawing, that provides in detail where every product in a retail store
should be placed. These schematics not only present a flow chart for the particular merchandise departments
within a store layout but also show on which aisle and on what shelf an item is located. A planogram is one
of the best merchandising tools for presenting products to the customer.
Product placement and improved sales are just two very basic reasons a retailer should be implementing
planograms in their shops. Planograms provide many other positive benefits, such as:
o Assigned selling potential to every square foot of space
o Satisfying customers with a better visual appeal
o Tighter inventory control and reduction of out-of-stocks
o Easier product replenishment for staff
o Better related product positioning
o Effective communication tool for staff-produced displays
5.9 BUSINESS INTELLIGENCE
Retail Business Intelligence (BI)
BI systems designed specifically for the retail industry and powered by advanced analytics can help drive
the functional theories of mathematics in retail decision making.
Retail BI applies the principles of product affinity and market basket analysis to point of-sale data. It
reveals concealed relationships between products and discovers customer behavior patterns. Such analysis
provides insights into the types of products customers usually buy. It also provides the information about
the time of year when the sales for a combination of products increase, destination items that attract
customers to the store, and reasons for a sudden boost in the sales of a specific product. The analytical
abilities of retail BI can identify correlations between customer profiles and product purchases and store
visits.
Look at the figure 11.1 which shows the methodology of retail business intelligence.

Figure 11.1: Retail Business Intelligence Methodology

Source: infogain.com
Decisions related to the selection of products on discount, special offers to a particular segment of
customers, gift vouchers on certain products must be based on scientific data in order to derive maximum
value from such initiatives. The trends and patterns that are revealed by retail BI can be used for:

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 o Improving the effectiveness of marketing, sales and merchandising strategies;
o Planning strategic initiatives such as periodic promotions, campaigns, special offers, price changes,
cross-selling, product-pairing;
o Correlating store performance with overall market performance; and
o Planning the store layout for more effective product placement and shelf presentation with appropriate
prominence for impulse purchases, seasonal purchases, destination/anchor products.
5.10 E-RETAILING
Electronic retailing (e-tailing) is a buzzword for any business-to-consumer (B2C) transactions that take place
over the Internet. Business-to-consumer (B2C) transactions refer to transactions that occur between a
business or company (dealing in goods and services) and a consumer. E-tailing refers to the sale of goods
online (Figure 13.1 shows online retailing).

Figure 13.1: E-Retailing

Source: shopee.ph
Components of E-Retailing
Electronic retailing or e-tailing refers to the direct sale of products, information and service through virtual
stores on the web which is designed around an electronic catalogue format and auction sites. There are
thousands of storefronts or e-commerce sites on the Internet that are extensions of existing retailers or start-
ups.
There are certain essential ingredients for an electronic retailing business to be successful. You must
consider these components well in advance before setting up an electronic storefront. Let us learn the
components of E-Retailing. These are as follows:
● Attractive business-to-consumer (B2C) e-commerce portal: The interfaces and navigation should be user
friendly and pleasing. The site should have a strong sense of branding.
● Right revenue model: Revenue model should be accurate and there is transparency in terms of service levels
and pricing.
● Penetration of the Internet: As the e-commerce portal is in addition to the existing brick-and-mortar
infrastructure aimed to bring in customer loyalty. The retailer should keep in mind the local internet
penetration for better success.
● E-Catalogue: It is a database of products with prices and available stock. The retailer can provide value
added service by giving price and feature comparison between products. This would enhance the value
of the e-commerce portal for the customers.
● Shopping Cart: The customers can select the products that they wish to purchase and fill their shopping cart.
The Shopping Cart can be designed in a way that it could allow the customer to store their preference
and previous purchase history for easy selection.
● A payment gateway: Customer makes payments through his/her credit card or ecash. The payment
mechanism must be fully secure.
● Support Services in E-Retailing: The electronic retail business requires support services, as a prerequisite
for successful operations. These services are required to support the business, online or offline,
throughout the complete transaction processing phases. The following are the essential support services:
● Communication backbone

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● Payment mechanism
● Order fulfilment

● Logistics

Essentials of Online Retailing

Look at figure 13.5 which shows building blocks for running a store online.

Figure 13.5: Building blocks for running a store online

There are some very important points which should be kept in mind while deciding to go for online for
retail. Let us discuss the essential points one by one.
a) The Commerce Platform: It is very important to select appropriate platform for digital commerce foray.
The choice a retailer makes at the beginning will have a long-term impact. The choices one needs to make are:
- Service Model vs. Owning the platform
- Using a standard platform vs. building your own platform
- Using Open source vs. proprietary platforms
b) Logistics Partner: It is very important that orders received get executed within the promised time window.
The logistics partner should be able to integrate his systems with retailers’ systems so that orders flow through
uninterrupted and supply chain visibility is available to the customers. In certain payment options such as
Cash-on-Delivery (COD), the partner should be able to collect the payment. Reverse logistics includes
handling customer returns and non-delivered goods.
c) Payment Gateway: Retail store should be able to accept the customer payments using various methods.
Most common include:
- Credit Card and Debit Card Payments
- Net banking
- Using Digital Gift vouchers
- Cash on delivery
- Payment at Store in cash
d) Digital Marketing Agency: In order to drive customer traffic to retail online store, retailer needs to engage
a Digital Marketing Agency. The scope of work for such agency includes:
- Content Creation for catalogue including photographs, videos and detailed product specifications
- Writing reviews, blogs
- Search Engine Optimization to make easier for customers to find retail store and merchandise
- Managing the loyalty program
- Running campaigns on leading portals using advertising networks such as MSN, Google, etc.
- Engaging with customers on social media platforms such as Facebook, Twitter, Google+ etc.
Check your Progress 2.1
Instructions:
1) If you are to propose a POS to be utilized in the IFSU food court, write a story specifying the people,
process, and technology involved in the proposal; the process of how users will provide input to the
system; the process how users will interact or operate the POS; how the POS will process the input; and
how the POS will give output or feedback to the users.
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Check your Progress 2.2
Instructions:
1) Create at least two user interfaces for a certain e-retailing business website.

Laboratory 2.1
Instructions:
1) Investigate on the IT strategy of retail businesses nearby from the university by documenting how they
utilize technology to achieve their goals and objectives.
2) Your documentation can be in any form like a written report, checklist, observations, photographs and the
likes.
Laboratory 2.2
Instructions:
1) Design a signage for visual merchandising of a certain retail business.

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