But what you really wanted was a bottle of your favorite orange juice and it's not in stock. You turn away from the fancy flashing displays and head for the nearest convenience store, grab a bottle of Mr Juicy and slap your Octopus card against the touch-processor. Gau deem.
The three basic needs
With more technologies available in the market designed to enhance customer experience, more retailers are testing and introducing these new and fancy technologies. However none of these advanced technologies and customer-intimate services matter, if they don't address customers' basic needs, according to a January 2006 Gartner report: "Let your customers help design your technology-enabled store of the future".
The report said that customers have only three basic needs: having the product available, having the product easy to find and making checkout fast and easy. If these basic needs are not addressed, even advanced technologies "allow retailers to cut cost or to enhance productivity, they will fall short," said the report.
"This is why we believe that these fundamental promises are what should guide retail store technology investments," the report stated. "Sophisticated new technologies should not be focused on delivering sophisticated store experiences, but on meeting customers' most-basic needs."
Hong Kong-based retail food company Fairwood has, in the past few years, established new business and IT strategies to meet the first two major customer needs: ensuring products are available and making checkout faster and easier.
"Fairwood established a new business focus three years ago, to be become the preferred fast food chain in Hong Kong," said Jackson Tse, senior manager, management information system. "To align with this business objective, IT has had to make changes accordingly."
The new IT roadmap includes four different stages, starting from enhancing its point of sales (POS) system to capture data for market analysis, followed by upgrading network infrastructure, then an ERP revamp, and lastly, developments in human resource management systems.
Making checkout faster and easier
One of the new major roles of IT in Fairwood is to enhance the front-end experience for customers during payment.
"We [deployed the] Octopus [payment system] a few years ago, making payment much easier and faster, which is essential for the fast food business," said Tse.
According to Gartner's report, contactless payment like Octopus has a moderate effect on ROI. But the stored-value card has also demonstrated a positive effect on the overall customer experience, as well as productivity by speeding up transactions. The system also builds a foundation for the company to collect market information to develop loyalty programs.
Fairwood has also expanded its business in party catering, which is a seasonally-based service. To capture business during the peak seasons, the company set up an IP-based unified communication system from Cisco to replace its traditional PBX fixed-line system.
The deployment of the IP-based communication system has enhanced its customer catering hotline services significantly during the recent festive seasons of Christmas and Chinese New Year, said CK Ng, executive director of Fairwood.
"The company's revenue in catering services during the festive season increased by 40 percent in 2006, as compared to 2005," he said.
The growth was partly due to faster response in its catering hotline service. Ng said the traditional PBX system required extra charges for additional hotlines to cope with the festive season. The company also needed to rely on the service provider to set up the system. The IP-based system allows Fairwood to set up a catering hotline easily and to retain customers from reducing missed calls, he said.
Making products available
Another basic retail customer need is to have products in stock. Making products available and keeping them fresh is challenging for fast food chains like Fairwood, where menus change frequently and customer demand for products varies.
"To make an accurate forecast on the consumption of perishable products in order to keep our food supply available [while also maintaining] a minimal inventory level is one big challenge for us," said Tse.
He noted Fairwood manages its inventory control and purchase orders based on menus. Monitoring of the inventory is based the number of meals sold and purchase orders are made according to menu plans, as well as predictions on the number of meals to be sold.
While each outlet has the flexibility to place orders that fit their needs, the company centralized the procurement process. The data are stored at a central warehouse which is run by a third-party logistic provider.
"Transparency is particularly critical in the procurement process," said Tse. "Every month we made a variety of purchases, from meat and poultry to drinks and condiments. Apart from having a system that keeps track of transactions from multiple suppliers, the system also monitors our inventory."
The system is also required to support certain strategic alignments with the suppliers. These alignments include special orders, contract arrangements or delivery arrangements.
Currently these processes are handled by silos of applications. As Fairwood is completing stage three of its IT roadmap with a new ERP, which is expected to go live later this year, a much closer integration between these business services is expected.
"We'll then be able to better support the procurement units in making these special arrangements," said Tse. "But the ultimate goal is to establish a system that provides sophisticated sales forecasts on our procurement requirements and inventory status, to ensure our products are available."
Turning information into intelligence
Moreover, the new ERP also expects to provide more information on Fairwood's multiple suppliers, through tracking each vendor's performance-like accuracy in delivery orders and schedule as well as the number of orders. Fairwood can then better manage their relationships with their suppliers.
Apart from its suppliers, the ERP revamp is expected to also better meet customer's changing demands.
"Customers are more demanding from fast food chains, in terms of both food and service quality," said Tse. "They want higher food quality with more variety and options."
The ERP system can help meet the frequent changing needs among fast food customers by giving the front-end staff more information. Tse said a revamp of Fairwood's POS allow them to capture detailed customer preference instantly.
"Our POS can capture data right from the origin, allowing us to obtain very specific information, like the number of coffee orders," he said. "We can also compare these data for market information, like tracking the percentage of 'meal-A' orders who chose coffee."
Through aligning the information obtained at the POS with the ERP system, Fairwood can better analyze customer preference and make changes in menu design accordingly.
Future retail tec
The technology used to obtain market intelligence from historical data, according to Gartner's report, is quite challenging, but quite effective to raise customer experience. The market research firm expects the technology will take two to five years before mainstream adoption.
"Retailers are experimenting with dashboards as the next evolution in their business intelligence (BI) strategies," said the report. "Basic reporting and distribution of reports are maturing, but early-adopter retailers are in the progress of implementing advanced analytics and dashboard concepts, which are harder to adopt but can potentially drive more direct benefits."
While IT plays a significant role in daily operations, Tse said that IT also plays a critical role in handling sudden market changes.
For example, when the avian flu hit Hong Kong years ago, the import of poultry was suspended. Fairwood needed to respond quickly with a new menu and in obtaining replacement products. "IT helped to compare the impact on procurement cost as well as logistic cost with various replacements," said Tse.
The system also prepared Fairwood to handle other unexpected changes, like recalling products, Tse added. In this process, IT allows Fairwood to keep track on the number of the recalled product in each outlet, as well as tracing details of a specific purchase order, like the ordering date, the supplier and country of origin.
"IT is definitely useful in handling change management," he said. "It also helps us to find out the bottom line and the available options to deal with unexpected business changes."
The changing role of IT within retail
Retail is a business with a lot of tedious orders and process. Therefore business executives tend to rely on industry practice or business processes to reduce error and bring efficiency.
"Retailers are quite hesitate to re-engineer business processes and adopt new technologies," said Tse. "But the fierce competition won't give us much time to keep doing the same thing."
"IT's role within the company has significantly changed in the past few years to become much closer to business strategies and objectives, which is essential for us to better align with customer needs," he concluded.