Retail technology: Time for retailers to get a grip

Retail technology: Time for retailers to get a grip

I was born in my nan’s house.

It was pretty common back then – you were either born at home or in a specialist maternity hospital.

My nan’s house was a three-bedroom end-of-terrace council house with two decent-sized bedrooms and what was affectionately known as the ‘box room’.

Back in 1930s Britain, smaller bedrooms were designed for storage of trunks, boxes – hence the name. Quite what people kept in these boxes is still a mystery to me, but I do have fond memories of playing in that room as a small child. It had a raised area in the corner above the staircase with a heavy curtain hiding my nan’s odds-and-ends from view.

This is where I set up my shop.

I had a small red cash register complete with fake coins and banknotes. I seem to remember that it somehow printed receipts – although I’m pretty sure it didn’t. I had a selection of tins: peas, carrots, tuna and corned beef. I had a range of fresh fruit and vegetables and a set of weighing scales. Plus, my nan filled jars with real sweets, humbugs and sherbet lemons that I’d both sell to my family members and steal when nobody was looking. Somehow this self-consumed shrinkage never came up on the stock take.

Everybody has played shop at some point in their childhood, whether in your grandparent’s spare bedroom, or at the front of your house trying to catch passing trade. And of course, as Napoleon apocryphally said, Britain is a nation of shopkeepers. We take shops and shopping very seriously indeed. But is running a shop really child’s play?

Modern supply chains are hypercomplex, and if you stop for a moment at a supermarket shelf edge and ask yourself, “What’s really gone on behind the scenes for me to be able to drop this item in my basket?”, we should be dumbfounded that the whole process works as well as it does.

First, there are products. They might be cases, packs or single units, or might have to be broken down in store into individual SKUs that customers can buy, and be managed differently in the distribution warehouse than in the store.

They’d have arrived on a pallet or a roll-cage and would have been specifically picked for that store on that day. The process of cross-docking at the regional distribution center would have already broken down a bulk supplier delivery into individual store orders, combining it with goods from other suppliers on the same truck.

The big question: How much to send, and how often? Well, that depends on the space available on the shelf. Supermarkets and convenience stores don’t have a great deal of storage other than shelf space, so the volume on the shelf is pretty much all that’s available. This means that the replenishment system has to know the volume of space available and the volumetric dimensions of the product being sent.

But which shelf?  Each store has its own planogram – a digital layout of the store detailing what will be placed where, even which items are at eye level or floor level – as this may have been part of a price or promotion deal to enable a supplier to get maximum consumer visibility.

Oh, and then there are outside influences that might affect demand, promotions or social media campaigns, for example “Eat more peas, they’re great!”. Events and weather play a part in forecasting and replenishment algorithms, too. England on TV in the sunshine = burgers and beers, anyone?

And of course, seasonality plays a key role – Easter Eggs, Christmas puddings, winter soups and sun tan lotions.

Then, there’s the magical barcode that tells us the price at the checkout.  Are the prices the same in every store?  Come to think of it, are the products the same in every store – what about demographics like age, proximity to schools, ethnographics?

And those yellow labels, the markdowns where the staff reduce the cost of a product that’s close to its sell-by date. Where do those barcodes come from? And do we order fewer avocados tomorrow because they’re not selling as quickly as we expected in store today..?

Another question is who decides what’s stocked anyway. I remember working at Boots when they implemented SAP and learning that they were planning the range for the following Christmas in November, 13 months ahead of sales. Buyers were already hedging on trends before the current trend had even hit the EPOS system.

And that’s before we get to the minefield of returning products to store, plus refunds, product recalls, promotions and the sheer mind-blowing complexity of, in a typical UK supermarket, dealing with 20,000 to 30,000 different product lines.

Retail really is a complex business, and technology is both helping wrangle the complexity, whilst adding layers of sophistication at the same time.

The humble cash register, invented in the late 1800s, was originally intended to stop staff stealing, and evolved into a way to provide receipts for transactions, then to assist bookkeeping. Human innovation did its thing, leading to EPOS systems, self-checkout and even kiosks replacing people as order and payment takers, with RFID finally coming to fruition.

Metaverse mart mayhem

Recently, I’ve been targeted on Twitter with an ad by Lenovo for a pair of sunglasses that have a built-in monitor.  Way cool, right?

Trouble is, when I follow their paid ad link, I’m not taken to a web page. Instead I’m taken to a VR store, a clone of a make-believe shop where I’m welcomed by a greeter. There are various dots on the floor guiding me around the store. Painfully, I have to visit each virtual location to find the sunglasses I was enticed in by, ultimately giving up because it’s just too hard.

The result? Paid consumer ad > expensive-to-build fake shop > bad consumer experience > lost sale >  wasted ad revenue > Bad News.

Although the marketeers at Lenovo are probably dancing to silent disco music in their virtual cubicles, this is a retail marketing failure. And, while the brand fits out VR versions of real shops in the virtual world, McDonalds are selling carbonated drinks to carbon-form consumers via a kiosk in their physical stores. Yes – we now use ecommerce tools in brick and mortar stores to place our order.

Even if this turn of events isn’t surreal enough, next we’ll be shopping in the metaverse, spending real money on make-believe hats for made-up versions of ourselves, that we’ll wear to impress other made-up people.

…Retailers really need to get a grip.

Creepy Uncle alert

Some are, admittedly. Innovative solutions to food waste problems like Too Good to Go in the UK are excellent ways to optimize the food supply chain and rebalance economics of retail complexity and razor-thin profit margins.

A massive challenge for retail is its relationship with plastic. Real-world toxic plastic is still the Creepy Uncle of most retailers, hanging around in the aisles in the form of food packaging, clothes hangers, drinks cartons and even the crap itself that you find sitting on the shelves.

I remember reading an article in 2018 titled “World’s first plastic-free supermarket aisle opens,” chronicling a cutting-edge outlet in Amsterdam claiming this historic first.

Except it didn’t. After all, every supermarket in the 70s had plastic-free aisles.

A visit to my local Sainsbury’s at the weekend and their ‘bathroom stuff’ aisle was a sea of plastic, which, unironically, will result in a sea of plastic. Not a shampoo bar in sight. I had to virtually lie down to find soap rather than plastic bottled shower gel.

What can ERP do to help?

Real retail is the flywheel of consumerism. The things retailers do and sell are magnified billion-fold by the population that consumes their wares.

Retail runs at such a pace, and at such a scale, that tiny gains can have a huge positive impact on countries, continents and the globe.

If we want to change the world for the better, it all starts with retailers, their buyers, their range, and their balance of profit with doing the right thing.

Tweaking ERP systems to optimize loading or routes of transport, finding ways to reduce carbon in the supply chain, is a positive start.

But the big impact starts with range planning and buying, then viscerally measuring the  profitability of toxic plastic goods vs. ethical products, the kind of deep analytics and consumer insight that enables the flywheel of consumerism to be flipped in the right direction. Hands up if you’d prefer a loyalty card that prioritizes not buying plastic over one that promotes buy-one-get-one free offers?

I’ll admit that my box-room shop at my nan’s house in the 70s did sell plastic bananas, which are all probably in a landfill somewhere by now.

But there again, I only had one customer, a patron who very much enjoyed bribing me with free humbugs.

Stuart Browne is the founder and managing director of Resulting IT, a business-side ERP consultancy and advisory firm based in the UK.