For the first time in several years there is widespread optimism among IT groups serving SA's retail sector. "The more time we put between Y2K and ourselves, the better things get," says John Bright, CEO of UCS, an IT group that focuses on retail solutions and outsourcing services.
In the run-up to 2000, a voracious appetite for any new IT system was spurred on by frenetic preparations to become compliant. But Y2K proved to be a watershed for the IT sector. The 21st century brought with it a harsh business environment as budgets were slashed and return on investment became the key factor determining IT spending.
"Some people believed that many retail IT systems installed in the pre-Y2K scramble would one day be completely replaced," says Jessica Knight, director at Affinity Logic, a UCS subsidiary. This is unlikely to happen, she says.
"There is now a more careful approach to investment in new projects. The projects must produce tangible benefits," says Knight.
"There is also a more modular approach in which a system's redundant components are replaced by more appropriate software."
"Retailers' business models are built on the concept of sweating assets and they are reluctant to replace entire IT systems," says Microsoft SA retail solutions manager Mike Cathie. "Today it's about extracting maximum return from existing assets."
Fortunately, the past two years of booming consumer demand is persuading retailers to dig deeper into their pockets. "It feels as through things will improve this year," says Datatec RangeGate SA MD Mark Lije.
"Retailers are over the shocks of the past and appear to be braced for a change in their approach to technology spending. Retailers are calling us again." With record profits being recorded in their sector, retailers are able to increase their IT spend, he says.
"There is an increase in demand. We have our strongest order book since 1999," says Bright.
"Trading conditions are good," says Cathie.
Many retailers want to invest in systems that will improve efficiency levels and prepare themselves for the next downturn in the retail cycle, says Lije. "Removing inefficiencies from the supply chain has also become a primary objective of many retailers. And there is plenty of scope to do just that."
Consumers may not notice the increasing use of IT in the retail environment. But retailers are using enterprise technology to cut costs. "This encompasses their supply chain, with the aim of becoming more customer focused, optimising stock levels, cutting out human error and getting the most out of employee activities," says SAP retail solutions manager Brandon Shaban.
Business-to-business (B2B) applications optimise the supply chain. "About five years ago, there was a lot of talk about the potential of B2B integration. It is finally becoming a reality," says Knight. Integrating supplier and retailer has big cost benefits.
One benefit, she says, is the elimination of paper work, particularly invoices and credit notes, with tangible benefits being demonstrated by Checkers, which has established an electronic supply link with Rainbow Chickens and I&J using a Vector Logistics system.
"Credit notes in respect of disputes have fallen from 5 000/month to 500/month. Given that the cost of a disputed claim can be between R35 and R100, the savings are considerable," says Knight.
Cathie believes customer relationship management (CRM) is also about to deliver on its promise. "CRM is about to go through its second wave of importance," he says. "It's about the correct implementation and already, even in SA, there have been some incredible successes."
Lower costs are also helping to increase retailers' spending.
"There has been a significant fall in the prices of software and hardware," says Edcon chief information officer Henri Slabbert.
This has been caused by a combination of falling international hardware and software prices and the rand's improvement against the dollar.
"Fees charged by IT service providers have also fallen and, wherever feasible, we outsource IT functions at what are competitive prices."
Systems that will propel retailers into the future should have local input. "Large-scale systems are specific to each retailer's needs. A 100% off-the-shelf system is seldom appropriate," says Bright.
"Systems tailored to the retail industry, even after extensive customisation, impose limits on how the enterprise operates and is managed."
The uniqueness of the SA retail environment also provides local retail systems developers with a competitive advantage.
Retail outlets are widely dispersed and sometimes in remote areas, where systems that are not dependent on network connectivity are required. "Foreign systems will not work under these conditions," says Bright.
SA's networking infrastructure does not meet First-World standards, says Bright. It would be prohibitively expensive for a retailer to achieve network connectivity for every store. "It can sometimes be a hindrance, but for us it has been a blessing.
Had it not been for the unique nature of the SA market, we would never have achieved such a strong market position," says Bright.
