Retail slump: can technology stop the slide?

Despite the gloomy economic outlook, the UK’s retailers have been busy innovating. CIO reports that Tesco is carrying out a pilot both online and in eight of its stores of augmented reality technology, enabling shoppers to see 3D images of products before they buy them.

Augmented reality is a technology that allows digital information to be overlaid onto a view of the real world. Tesco’s service, using technology from Kishino, will enable shoppers to hold an image from the Tesco Direct catalogue or a product key in front of large webcams, located throughout the supermarket’s aisles, to generate a life-size 3D image of the product.

“The technology makes it appear as if the customer is holding the product in their hand, and allows them to move and rotate the product to see it from all angles,” the report says.

Tesco CIO Mike McNamara told CIO of the firm’s plans to expand its use of mobile phone technology. It already has 300,000 staff devices connected to its network worldwide, and is offering Wi-Fi to customers in a handful of its stores. “Online sales has made a big impact, but I think mobile is going to make an even bigger one. We are facing a bigger disruption now than we did ten years ago,” McNamara said.

John Lewis would no doubt second that. The firm is partnering with BT OpenZone to offer free Wi-Fi to customers in every store throughout the UK by Christmas, according to CIO. The technology will enable customers to compare ticket prices with competitors, though customers who want to use it will first have to provide their email address. John Lewis believes that 60% of its customers already research product information online before coming into the store, and a spokesperson said that the new service would help customers have all the information they needed before making a purchase.

Marks and Spencer, meanwhile, is overhauling its supply chain, according to Computerworld UK. The firm is implementing four systems from JDA Software to improve efficiency and stock level management for its non-food business.

Andrew Skinner, Marks and Spencer’s merchandising director, said that the new software would provide “the inventory visibility we need to make more profitable decisions, help match our strategic and tactical plans with local customer preferences, and drive overall profitability.”

At the same time, the firm has taken the unusual step of opening a new store in Paris, 10 years after closing its other French stores. According to The Economist, the new store, on the Avenue de Champs-Elysée, will “focus just on women’s clothing, especially underwear, and convenience food, including ready-made Indian meals and sandwiches.” The first day was a roaring success, the paper reports, bolstering the retailer’s decision to open another five stores in the Paris region.

Perhaps the new Paris stores will buck the trend of its UK outlets. Marks and Spencer is one of a number of retailers reporting a decline in profits this year.

CFO World reports that the firm recorded a pre-tax profit of £315.2 million in the six months to October, a 10 percent drop. John Lewis, too, reported a 1.2 per cent fall in sales in the week ending November 26, compared to the same period a year ago, according to the Financial Times.

The paper says that John Lewis’s results are often seen as a “barometer for broader retail spending,” adding that there is evidence of “a further dip in consumer confidence over recent weeks, against a backdrop of unseasonably warm weather and nervousness over the government’s austerity measures.”

In the same vein, the paper reports that several retailers have been squeezing suppliers to help cope with the difficult conditions on the high street.

Both Tesco and J Sainsbury have been negotiating more favourable terms with clothing suppliers, while Marks and Spencer has asked its top suppliers for a £20m contribution to help it refit its stores.

The economic pressure on retailers hasn’t, however, stopped J Sainsbury from spending £682m in the first half of its financial year on building new stores, according to the Financial Times, which reports that some investors and analysts remain nervous about the firm’s “aggressive expansion plans”.

Alliance Boots is taking drastic measures to cope with the economic downturn. Computerworld UK reports that the pharmacy chain, which was bought by private equity firm Kohlberg Kravis Roberts for £11 billion three years ago, is to lose 900 back office jobs as part of a plan to cut £57m from its annual costs.

The job losses will all take place at its head office in Nottingham, hitting IT and other infrastructure and support roles in its Health & Beauty division, the report says.

The firm said that it was planning to make its IT infrastructure more efficient, by moving to “a leaner central support organisation, supported by new systems”.

Supermarket chain Wm Morrison is bucking the general trend. CFO World says that the company “defied the retail gloom” by posting a 2.4 percent third-quarter sales rise “boosted partly by its own-brand range”, and doing better than its main rivals, Tesco, J Sainsbury and Asda.

The company’s chief executive, Dalton Philips, told the Financial Times: “It is going to be a very tough Christmas. Consumer sentiment is the lowest in a generation. People are being very frugal.”

The chain is responding to the new mood of austerity by “cutting prices on single items at the end of the month, and reverting to promotions on big packs of beer or soap powder after payday”, the paper says.

It’s no surprise that, according to the Financial Times, several retailers have been lobbying the government to drop a planned rise in business rates.

Business rates are set to increase by 5.6 per cent in April, based on September’s retail price index rate of inflation. The rise will amount to an additional cost of £350m to UK store groups, according to the British Retail Consortium.

J Sainsbury, one of the biggest retailers, will see its business rates bill rise by tens of millions of pounds, while Wm Morrison, expects a £10m rise, the paper reports.

Pic: Andy Haycc2.0