Vendors Strive for Segment Pack Leader Status; Does Retalix Measure Up?

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Retalix is a supply chain software and solutions provider headquartered in Dallas, Texas (US) and Ra'anana, Israel with a truly focused vertical orientation in the retail food industry, worldwide. Retalix's growth strategy over the past several years has been to expand its enterprise and supply chain management applications while maintaining close integration with their widely installed, in-store solutions. It has grown both organically and through acquisition. Retalix acquired OMI International in early 2004, a warehouse management system (WMS) and supply chain execution (SCE) vendor that is also focused on the retail food sector in early 2004. It continued with its growth strategy through acquisitions of IDS and TCI Solutions in April of 2005. The planned integration of OMI's best-of-breed supply chain execution solutions into the current application suite, as well as the new combination of technology and expertise that will ensue will enable Retalix to offer broader wholesale distributor appeal. The IDS acquisition gives Retalix a stronger install base (along with more enterprise resource planning-like applications) to farm as a growth opportunity for the future. TCI Solutions, also retail food centric, brings to the table a set of merchandising, price management, promotions, and inventory management products to round out the product portfolio suite.

Vendor Strategy and Trajectory

Retalix' vision, from the day the company was founded in 1982, has been to build its competitive position by offering superior retail food sector technology. The software is designed to be modular, scalable to large transaction volumes, capable of handling rapid scanning with extreme reliability, and able to integrate multiple store formats and hardware systems, which are all key requirements of the retail food segment.

What is most compelling about Retalix is its absolute dedication to the food related segment of retail. Best described by Barry Shacked, Retalix' chief executive officer since 1982, the company's focus is on "the grocery, convenience store, fuel, and food service retailers and wholesale distributors world wide". Retalix only has one target sector, which is really a sub-segment of "retail" and it has its entire product, and human and intellectual resources solely aiming at this same target.

This is a unique quality in today's retail software market landscape. Many software vendors pursue growth via merger and acquisition, coupled with product verticalization into sectors that are not necessarily their domain. At the high end, SAP's ventures into twenty-six verticals are overwhelming, especially given that it's actually targeted all of these verticals over the years. Oracle's recent acquisition of Retek is a clear move to shore up its retail expertise, install base, and product footprint. But neither of these mega-enterprise resource planning (ERP) vendors has significant traction in food-related retail, in relative terms, compared to their other varied segments. For mid-market vendors, far too often solution providers espouse vertical initiatives or capabilities driven by opportunistic means. In other words, they signed up a client or two that happen to fall into a market segment that they didn't necessarily target. Many retail software solution providers today are heavily steeped into retail apparel segments with its vast array of complex and unique requirements.

Yet, we are not likely to see Retalix announcing any initiatives into apparel any time in the near future, because it is not a part of Retalix' "genetic makeup". Retalix is of the sound opinion that its targeted market segment holds significant growth opportunity for the future, and if its stays squarely focused on this one segment, it can win the "lion's share" of the market over time, driving healthy organic growth.

Vendors with a deep vertical focus and an expanded footprint can achieve pack leader status.

Recognizing a Market Pack Leader

Software vendors want to be the leaders in there areas of expertise, and Retalix is no exception, but how do we recognize a pack leader? What are some of the key elements (besides revenue) that characterize a pack leader? Below are some of the key elements of supply chain pack leaders:

Elements of Segment Leadership

Deep vertical differentiation and industry domain expertise including

  • Specific functionality required by those verticals, and scalability for high transaction-volume verticals like food-service retail

  • Compliance for key vertical initiatives

  • Market segmentation (territory and tier), and vertical business unit expertise, from sales to implementation to support

Expanded functional footprint from the warehouse to the store, throughout the enterprise, and across the enterprise

  • Cross-enterprise footprints from physical and informational process integration with suppliers and contract services entities, with customers via browser or extensible markup language (XML) to back-office systems, to actionable supply chain event management, such as ability to support multi-channel sales

  • Proven multi-channel enablement within the warehouse from order capture to delivery as a key strength

Horizontal influences

  • Technology such as Web services, Microsoft .NET, J2EE, mobile, voice, radio frequency identification (RFID), portals

  • supply chain visibility and event management capabilities for both inbound and outbound information

  • Operational business process management and workflow, including logistics process management with cross-functional process models from the viewpoint of a role; and workflow configuration with pre-established workflow templates by role within vertical.

  • Integration technology at various levels, with focused integration products that operate among modules (e.g.warehouse management systems and transport management systems for wholesale distribution, yard, labor/resource, productivity management); systems supporting new supply chain initiatives (including supply chain planning from a long term view or short term planning that falls within the execution time window); and other cross-enterprise applications

Strong value proposition

  • Includes return on investment (ROI) market messaging, ROI justification, and value assessment tools spanning the project life cycle from pre-sales to post-implementation support

Structured implementation process

  • Refined over several years of field deployment experience, and tailored to cover the full spectrum from quick short-cycle implementations in a stand-alone facility, to complex highly automated environments with multi-node distribution network configurations

Strong sales and service alliances

  • Particularly in field sales and implementation service consultancy

Well balanced mix of revenues

  • Licenses, services, maintenance, hardware, geographies, and tiers

Major Factors Determining Pack Leader Success

Retalix and other striving pack leaders must continuously show that they possess many or all of the following traits and characteristics:

  • Solid and consistent financial performance including revenue growth, revenue size, and income (profit) along with a clean balance sheet and cash position

  • Strong vertical marketing message and product depth

  • Good value proposition messaging and cost-of-ownership models that extend before, during, and after the sale, and have equivalent importance, tracking, and measurement tools to establish benchmarks for measurement

  • Simple-to-understand expanded supply chain or supply network messages with a technology footprint for supporting future cross-enterprise collaborative opportunities

  • Implementation methodologies that manage tasks and risks, and are standardized for the sector of domain expertise

  • Ability to execute in the field resulting in deployments that are flagship references

  • Strong post-implementation support structures and personnel that are vertically aligned

When selecting a supply chain software provider, prospective buyers need to look for these characteristics, and have an exhaustive and fully executed due diligence plan for functional compatability which uses an RFI and response-selection process. Anything less will result in heightened the risk in your endeavors to select and implement the best software and services solutions possible. Adding the vertical elements to this process are key for retail food segment buyers of technology.

Part One of this article is outlining the elements and characteristics of a segment pack leader within a particular vertical segment.

Part Two will focus on Retalix' stand and positioning versus the necessary elements and characteristics.

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