Retail trends for 2006

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Paul Makin, K3 Landsteinar, discusses retail trends for 2006 and how technology can help retailers to compete.

The big trends in retailing from the larger retailers will be in brand, format and channel extensions, as they look for growth, not so much through new stores which are expensive, time-consuming and often blocked by increasingly draconian planning regulation, but by exploiting their brands. In addition, lifestyle destination stores which feature multiple brands and product types are growing in popularity and attract consumers through massive discounting, as Primark has done successfully in 2005.

Department stores will look to further enhance the shopping experience as a new form of entertainment. Macy's in the US is planning new customer service initiatives ranging from the redesign of the fitting rooms complete with a lounge-like setting and television access to shopping carts for easier transport.

Many pundits are saying that consolidation will continue in 2006, with more retailers being acquired by venture capital companies, The appetite for flotations will remain subdued, which means that the VCs will be working hard on getting their acquisitions into shape prior to a float later in the year or 2007.

Technology will play an important part in this process because core systems can help VCs to sort out businesses that have often come to them in a mess. In fact, a number have VCs have gone public to declare that enterprise technology has often cut the business turnaround cycle by 6-12 months, enabling them to float the business much earlier than planned.

Smaller retailers, in response, will continue to fight for sales through innovation, new products and efficient retail execution, all areas where technology makes an important contribution, particularly where the technology adopted is integrated, enabling retailers to join up all their core processes, from buying and merchandising, through to allocation, stock control, replenishment and forecasting.

With high street spending under pressure, retailers will continue to look for ways to cut costs. For instance, using software that analyses exceptions in EPOS sales transactions, retailers are able to spot instances of staff theft. The investment cost is low and the returns are both high and rapid.

More and more retailers will move from electronic cash registers to PC-based EPOS systems as they can take advantage of additional benefits and act more like the larger retailers they have to compete with: gift cards, loyalty cards and promotions.

Gift cards are only activated at the time of purchase, and the transactions processed in real-time from the Point of Sale. This allows the card to be widely displayed throughout the store and at the paypoint without risk of theft. Each time the customer wishes to use the card, it is simply processed in the same manner as other cards. The transaction details and authorisation request are then passed by the retailer's PoS systems to the payments processor, which can handle all communications with the appropriate e-gift acquirer service. A response is then sent to authorise or decline the transaction, as appropriate.

Advanced sales promotion facilities will often includes buy any amount and get one free (BOGOF), mix or match and dept and supplier or single item barcode sale reductions.

By choosing packaged systems, retailers can start small, with basic sales and stock functions and then move on when they are ready to stock purchasing, customer database, account customer sales ledger and hand-held terminals. Retailers can decide how involved they get with software updates. Some vendors pursue the automatic update model, where all users get updates as soon as they are released, while others simply support whatever version has been sold; the limitations of this last model is that vendors will often stop supporting older versions of their software. One issue to be aware of, that as well as the possibility of your implementation partner going out of business, is that there has been a great deal of take-overs and mergers within the retail IT market. So it is often better to go with a larger, more well-established vendor, and one that can guarantee that the product will be around for many years to come, which now includes Microsoft.

For retailers with more than a single store, EPOS software ensures consistency of systems and data across stores. Head office can maintain a single product or promotional file and send updates to the stores by broadband modem, or download via the retailers web site.

In short, technology now enables small retailers to adopt the same sales and marketing techniques as their larger counterparts; however, core systems must be in place first. The initial investment can never be regarded as cheap but payback is coming earlier and earlier as integrated systems enable retailers to exercise control over every area of their business. From there, they can then start to make better decisions on stocking, replenishment and promotions to boost sales and customer service.

Paul Makin is sales director at K3 Landsteinar. The company is a major provider of the award winning Microsoft Business Solution throughout the UK, and Ireland, covering business sectors including Financials, Retail, Warehousing/Distribution, with the ability to harness the World Wide Web. Through the company's international network of consultants, the company services over 200 clients worldwide.

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