Technology in the Retail Industry: Optimize Fundamentals and Extend Frontiers

Written by Suneet Agera, SAP Startup Focus

The Retail industry has come a long way from the days of Mom-n-Pop convenience stores to supermarkets to discount departmental stores (not to forget online stores). The industry has seen various social trends, the latest being the fascination of shoppers to be mobile app enabled, and has adapted remarkably well as can be seen in this report from the Wall Street Journal. Retailers are turning to technology to occupy the mindspace of shoppers and strengthen their loyalty quotient. Despite that, many times retailers are forced to take decisions by gut-feel or at the maximum, look at recent results and deduce the possible cause and effect relationship. In fact, according to an HBR article, an astounding 89% of marketers across industries rely on their gut-feel when making decisions. Decisions based on insights coming out of the data goldmine they sit on can result in increased operating margins of up to 60% as claimed in this study from McKinsey Global Institute; but achieving this is still the Holy Grail for most retailers.

One of the biggest technological challenges that retailers face in “analysis feeding decision”, is the very asset that they have built over decades of operation – humungous amount of data. Processing of the data to glean insights is typically done through complex statistical and predictive algorithms, and a technological barrier of processing power is usually hit when operating on the scale of data that retailers usually have. This has forced their IT departments to explore newer technologies – be it distributed computing, parallel processing, map-reduce computation, open source stacks and/or in-memory computing. Many retailers have shown interest in adopting SAP’s technology platform for in-memory processing, better known as SAP HANA.

However, the real challenge is to be able to use this powerful technology in game-changing business scenarios that can ultimately win over new customers, retain loyal customers, reduce costs, increase sales and win margin wars.

SAP has an ecosystem of developers, partners and startups that are co-innovating with SAP across various industry verticals, building applications that customers can deploy directly on their SAP HANA investments. That there are a large number of scenarios that can use a powerful technology like SAP HANA in the Retail industry is a no brainer, and quite a few startups have come up with solutions ranging from tackling the most fundamental challenges to embracing the most innovative trends in the industry.

Take the case of Retigence Software, a startup based out of Bangalore, India that has come up with two solutions powered by SAP HANA – one for Inventory Optimization and the other for Markdown Planning. The former is a challenge as old as the industry itself and Retigence is addressing the issue by closely coupling inventory supply with customer demand on a daily/weekly basis instead of a quarterly basis. “This is possible because with modern technologies like in-memory computing, the algorithms that run on say 100000 SKUs per store no longer time out as before.” says Srinibas Behera, founder, Retigence Software. The less technology savvy retailers would plan inventory just on gut-feel and still others would be reactive to the demand. Retigence’s other solution is a mobile application that a business user of a Fashion Chain can use to very quickly determine the ideal markdown price of a product based on historical, seasonal and other external parameters. The ideal markdown price can be varied week by week based on the inventory levels and the application prevents the retailer from setting the price too low (and incur heavy losses) or setting the price too high (and incur overstocking as one nears end of season).

At the other end of the spectrum are startups like Kopi, based out of Hong Kong, that are exploring the frontiers of mobile technology (e.g. iBeacons) in order to generate real-time offers and recommendations for customers of the retailers. Kopi believes that the big wave of mobile home automation and indoor location tracking is building up and their solution is perfectly poised to help retailers give their customers location specific personalized service.

Another Bangalore based startup, Discover Dollar Resolve has addressed the retailer-vendor relationship which tends to get deteriorated when retailers have to spend time, money and effort to recover over-payments that occur due to multiple price changes, promotional deals and seasonal discounts. The solution analyses unstructured data like emails, contracts etc. and detects potential overpayment as it happens, thereby saving large amounts spent on post audit recovery.

The above three startups are among the 1300+ startups in the SAP Startup Focus program which is an invitation-only program to help startups in the Big Data, predictive and real-time analytics space develop new applications on SAP HANA and accelerate their market traction. These startups will also be showcasing their solutions at the upcoming Sapphire Orlando event.

With powerful technology, and innovative startups willing to adopt the technology, profitable retailers and their happy customers may no longer be Utopia.

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