With cost prices rising, it's time to trust in technology, says Dave Visick

For most straight-talking convenience retailers, the world of information technology is a mysterious planet from which sharp-suited salesmen promise to "utilise technology to deliver outstanding customer experience"
or "synchronise IT processes to ensure a collaborative retailing relationship". As a rule, c-store owners don't appreciate either the language or the concept behind it.
No wonder the sector has dragged its heels over the decision to join the rest of the retail industry in the electronic age. But the excuses for not investing in IT - "I don't understand the benefits of epos", or "I can't afford the technology" - are beginning to sound rather absurd.
What really blows such reservations away is the current economic situation - we're experiencing the worst downturn in recent memory, and it's in part a result of spiralling prices in the supply chain. Between January and May 2008, the combined cost of 100 grocery items tracked by Verdict Research increased by 5.8%. Fresh fruit and vegetables led the way with a staggering 16% rise, with dairy, pasta, canned goods and condiments, and meat and fish, all showing above average increases. The British Retail Consortium says that prices have risen at the fastest rate for 16 years, as many wholesalers and retailers passed on growing energy, food and raw material costs to their customers.
To be confident you have maintained your margin by passing on the full impact of any increase in buying prices, you'll need more than a good memory and that famous fall-back, retailer's instinct. If you've seen turnover going up over the year but profits are down, it may be time to ditch the instinct and rely on some good solid sales data.
"Epos is an essential part of running a successful convenience store at any time, but when consumers are feeling the pinch it's even more
critical to make sure that the margin on each product being sold is correct," says Jamie Shipstone, managing director of epos supplier YP Electronics. "Every time the outer cost changes you have to be able to accurately calculate the retailer margin, and as the credit crunch bites deeper, it's essential that every retailer is armed with the tools to tell how the store is performing."
As Bedfordshire retailer Kishor Patel confirms, it's now vital to get a bit of byte behind your business.
"I see a lot of retailers who don't have epos or don't use it to anything like its full potential," he says. "These guys are struggling even to keep the selling price updated, let alone the cost price, and the result is that they're losing control of their profitability."
Kishor, a Nisa member, runs an epos system which downloads prices from the wholesaler and tells him instantly what he should sell items for in order to maintain his margin. He can look at historic data on the price of thousands of items and make sure he passes cost increases on to the customer.
"For me this is a key benefit of electronic data," he says. "If I was
investing in a system now, the first question I would ask the supplier would be: 'How can your equipment safeguard the profitability of my business?'"
Hugh Fraser, with five forecourt sites in the Thames Valley area, is another enthusiast. "A lot of people think of epos systems as being just for scanning goods through the tills, but that's missing the true benefits. We can print off daily, weekly or monthly reports of sales volumes for each category, or even each product, and see how sales respond to price fluctuations. When we order through Spar we receive an electronic delivery note and any price changes are highlighted in red. That tells me we have to amend our selling price on
these items."
Hugh has used Torex's Prism software and Iridium pos equipment for six years and feels he is still exploring its potential. He warns, however, that any off-the-shelf product may struggle to meet all of your individual needs.
"We gave Torex a wish list of about 100 amends that we felt would give us
a clearer understanding of stock movement - things like recording when we last did a stocktake, and showing eight weeks of sales on a single screen. They're still working their way down our list."
It's an ongoing relationship - Hugh's on the phone to the supplier a couple of times a week and as the system evolves he becomes ever more reliant on it.
Hugh accepts that embracing IT can be a big step for small stores and warns that, although it's done wonders for his control of the business, it takes quite a commitment to get the best out of the technology. "I can't imagine running our business without epos, but it's a bit of a treadmill," he admits. "It drives you - if you stop, you fall off. Once you start scanning everything in, if you miss anything, the data becomes useless."
So don't expect to switch on and sit back - you'll still need to make the right choices to keep your business buzzing, but you'll be on a firmer footing with the advantage of accurate data. It's not necessarily the case that trusting in
technology will save you time, but with the market as volatile as it currently is, it may well save your business.

The honest truth

Kishor Patel has a handy tip for fellow retailers who worry that customers will rebel against creeping price rises. "Make sure they know why they're paying more," he says. "Cut out some headlines showing how material prices are driving the market, or make up your own notices to put on the shelf by the affected items. It's easy enough to compare prices of say, dairy products, with Tesco or Asda, and publish theirs alongside yours, so your customers understand you're only passing on the cost to sustain your business.
"When you're selling a product in volumes and it's price sensitive, it's good practice to ensure all staff are aware of why the price has gone up and how to communicate this effectively to the consumers."

What's up?

How retail prices have changed since the beginning of the year (%)
Fresh fruit and vegetables +15.9
Laundry and paper products +15.7
Ambient +8.4
Meat and fish +7.0
Baby products +6.6
Dairy +6.2
Frozen +4.5
Drink +4.3
Household goods +2.2
Bakery and cereal +0.2
Pet food -1.5
Health and beauty -2.3
Ready meals/prepared food -5.1
Overall +5.8
Source: Verdict Research Jan-May 08