Developing your Retail Business

The retail industry provides an exciting way of life for the more than 24 million people who earn their livelihood in this sector of the U.S. economy. Retailers provide the goods and services that you and I need--from food, auto parts, apparel, home furnishings, appliances and electronics to advice, home improvement and skilled labor.

Retailing is one of the fastest-growing segments of the economy. As one of the nation's largest employers, the retail industry provides excellent business opportunities for you. At least one-third of the 500,000 or so new enterprises launched each year are retail operations. The entrepreneurs behind these ventures risk their capital, invest their time and make a living by offering consumers something they need or want.

Most retailing involves buying merchandise or a service from a manufacturer, wholesaler, agent, importer or other retailer and selling it to consumers for their personal use. The price charged for the goods or services covers the retailer's expenses and includes a profit. Each year, this vital sector of our economy accounts for about 38 percent of our gross national product--more than $3 trillion.

The National Retail Federation says more than 1 million retailing companies operate more than 1.4 million retail establishments in the United States. Most are store retailers, though there are other types of enterprises--such as e-commerce, mail order, automatic-merchandising (vending) machines, direct retailing (door-to-door and home party sales), and service providers.

Types of Retailers

To give you an overview of the competitive marketplace, we'll take a look at the various faces and configurations of selling to the consumer. Keep in mind that all these enterprises began as a simple concept and grew to various proportions through popularity and perseverance. At this point in your exploration, anything is possible for you, too.

• Store retailing. The retail scene in America is a dazzling array of independent shops, department stores, discount and off-price enterprises, convenience stores, membership warehouse clubs, national and regional chains, category-killer stores, conventional supermarkets, and other large-scale enterprises that seem to dominate the retail sector.

Store retailers operate fixed point-of-sale locations designed to attract a high volume of walk-in customers. In general, stores have extensive merchandise displays and use mass-media advertising to attract customers. They typically sell merchandise to the general public for personal or household consumption, but some also serve business and institutional clients. These include establishments such as office supply stores, computer and software stores, building materials dealers, and plumbing and electrical supply stores.

• Specialty retailing. While power retailers like Wal-Mart or Target tend to sell "needs," specialty retailers tend to sell "wants." They focus more on neighborhood convenience, the richness of the shopping experience, and inventory that meets the needs of their target customer on a personalized basis. Small stores show surprising strength and resilience in the face of competition from large-scale retailers and e-commerce outlets. They offer the consumer a warmer atmosphere, and perhaps a broader and deeper selection of merchandise.

Many stores can be owned and operated by one person with minimal assistance. Compared to manufacturing operations, specialty retail outfits are relatively easy to start both financially and operationally. However, a number of failures are due to undercapitalization, poor location and insufficient market analysis.

• Nonstore retailing. When you look at the array of business opportunities in retailing, be sure and include the $123 billion nonstore retailing sector. These businesses are primarily engaged in the retail sale of products through television, electronic shopping, paper and electronic catalogs, door-to-door solicitation, in-home demonstration, portable stalls, vending machines, and mail order. With the exception of vending, these businesses do not ordinarily maintain stock for sale on the premises.

There are many advantages to this type of retailing--one being that buying, maintenance and protection of a large inventory is not necessary as you contract with others to handle these matters. The U.S. Census Bureau says there are more than 44,000 non-store retailers in the United States.

• Mail order. From glossy wish books to basic brochures, catalogs are popular with those who live far from shopping areas, the elderly, those seeking the unusual or obscure, and those who simply hate to shop. With direct mail, sales materials can be sent to thousands of potential customers at one time to either make a sale or generate a sales lead.

Mail order enterprises include general merchandise businesses, companies that sell specialty goods of all kinds, novelty firms, various types of clubs (CDs, DVDs, books) and so on. In most cases, catalogs are sent to consumers in defined niches on a regular basis. You can work out of your home, a warehouse or a brick-and-mortar store. An up-to-date mailing list is the key to direct-mail profits with back-end fulfillment and relational database support. If you think this is the retail area for you, read our extensive how-to on mail orderfor more information.

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• The internet. The internet has changed the retail landscape, connecting companies, markets and individual consumers. "The retailer who does not understand the impact of the internet on its store and catalog channels is likely to under invest in the Internet, missing opportunities to capture incremental sales in all channels," according to Ken Cassar, a senior analyst with Jupiter Communications.

Regardless of the type of retail business you want to start, you cannot ignore the Internet. Don't let it discourage you, either. Each type of retailing has strengths and weaknesses, so you decide which approaches you want to use in your business.

• Vending machines. Automatic merchandising--or vending machine retailing--has been a proven business concept for more than a century. Vending Times, the industry's trade magazine, reports that snacks and soda sales alone totaled more than $20 billion in 1999. As with any other sales venture, having the right product in the right place at the right time is key. This business is highly appealing because of the low startup cost, low working capital and low overhead. This is a cash business, with you collecting the money when you replenish supplies.Is retail the right opportunity for you? Weighing several factors will help you answer that question. Personality, motivations, your strengths and weaknesses, money, and experience should be at the top of your checklist.

• Making a good career decision involves both self-assessment and market research. Begin the self-assessment process by examining your skills and identifying what kinds of products or services you can offer. What skills do you most enjoy using? If you are artistic, merchandising a store and designing advertising may appeal to you. Or you may be mechanically inclined, enjoy solving puzzles or helping people. Therefore an auto parts store, business consulting practice or birthing coach business may be for you. By tying your skills to your market's wants and needs, you greatly increase the likelihood that your new business will be successful.

  Personality

  Many people successfully make the transition from being an employee to an employer, but many do not. Do you have what it takes to be in business for yourself? Even if you are suited to be a business owner, is a consumer-focused business for you? Are you better suited to be a wholesaler, distributor or manufacturer? Answer the following five questions honestly. Talk to your spouse, best friend or prospective partner about your answers as a reality check.

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Money Business

First, you need a place to vent or tout your triumphs. We've all been there. First and Third person. Maybe you were the customer that "got served". Maybe you were the sales person dealing with the latest Bigger-Better Idiot. Maybe everything was unexpectedly wonderful. In short tell me about your extreme customer service experiences, both good and bad. If you like the site, tell your friends. If you hear a story that would be appropriate, please refer the persons involved to www.retailmadness.com. Please limit your submissions to those incidents to which you were a witness or participant.

Second, I need data for my book about customer service. It's important that the information be accurate and verifyable to the extent possible. That means at least an approximate time, location, business(es) involved. All names will be changed to protect the guilty, so go ahead and say your piece. If you want to be anonymous, you will be by default. If, on the other hand, you want your name in print, just add something in your post along the lines of "It's okay to print my name and city."

Thanks for your time and contribution... Check back for more unbelievable stories of the good, the bad and the ugly in customer service interaction.

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Microsoft yanks Money off retail shelves

It had become a ritual for Microsoft's consumer unit. Every year it came out with a new version of Microsoft Money and sent new boxes to retail stores.

That tradition is now dead.

Microsoft, via a newsgroup posting from one of its enthusiasts, announced it will no longer update Money each year and, more importantly, it will stop selling the product at retail stores.

It's the latest indication that Microsoft is seeing a shift in the way people, particularly consumers and small businesses, buy their software.

"More and more retail consumers are going online to shop the endless rows of digital shelves," Microsoft said, according to the newsgroup posting, which was noted earlier Friday by ZDNet blogger Mary Jo Foley. "In response to our retail partners' needs, consumer behavior and business efficiencies, Microsoft is focusing distribution efforts for Microsoft Money Plus software online via download and discontinuing traditional box sales of the software at retail."

Money is not the first consumer title to see its fortunes change in recent years. Another perennial shelf space occupant, Microsoft Digital Image Suite, was discontinued altogether last year.

However, Microsoft added in the posting that it is not abandoning packaged software companywide.

"Microsoft does not see shrink wrapped software going away anytime soon and we are always talking to customers about different ways to price and package our software offerings," it said in the posting. "The company is evolving its strategy and product solutions to meet customer demand and optimize business efficiencies."

Indeed, the company has seen very strong sales of the latest version of Office and its OneCare security software is also sold heavily at retail stores. The company just introduced Equipt, which is a subscription service combining the two, but sold as a packaged product at retail.

The company has been eyeing this shift for some time and looking at options like subscriptions, online services, and even advertising-funded software on the PC. After years of weighing the issue, the company went ahead with Microsoft Works SE, an ad-supported free version of its consumer productivity package.

Intuit, another big name in consumer software, has already seen a huge shift to both online sales as well as selling its personal and small business finance programs as online services, rather than packaged software.

The company already gets more money from its TurboTax online service than it does for the packaged product, with more than 10 million people doing their taxes online. The company also has 128,000 small business customers using its online services, according to spokeswoman Heather McLellan.

It has also debuted niche products that are online-only such as a medical account expense manager product.

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Business RI retail market remains optimistic despite hard times

Business, Despite some optimism and efforts from governments worldwide to address the global downturn, the overall economic situation remains marked by uncertainties, as property investors maintain a *wait and see' attitude.

In these tough economic conditions, higher competition and limited fund availability will impact on retailer expansion and put pressure on rental rates.

Data from the first quarter of 2009 shows that the occupancy rate for the rental retail market in Jakarta is 85 percent, a 3 percent decrease from the last quarter. This is due to a number of new retail malls entering the market, with many tenants in various stages of fitting-out.

In strata title retail centers, the take up rate is continuing to fall, a trend since 2006. The occupancy rate for this sector during the first quarter 2009 is around 63 percent.

By and large however, the retail market sector remains resilient, underpinned by Jakarta's huge population and consumer spending.

Whilst a large number of retail projects have been constructed in recent years, the potential for more is still there in particular for well-planned sub regional and community developments that cater to the everyday needs of the communities they serve, within the wider urban sprawl, offering many opportunities for savvy developers.

These developments must provide a hub, a meeting place for the community, provide the right products and services and suit the individual target market needs and aspirations, within a modern, bright, family friendly environment.

However, for any developer to succeed in this current market, they must be willing to meet the retailers' requirements for softer terms and negotiate packages to attract retailers to the development.

The downturn in consumer spending, the tight monetary policies on bank finance and lending is creating cash flow and liquidity issues contributing to effects on retailer expansion strategies. Therefore, a flexible approach to negotiating commercial terms is imperative to close deals.

There are several approaches to flexible terms that will maintain the capital value of the property, yet make it easier for retailers to commit to leasing space.

Despite the demand for softer terms, retailers are now clearer on the type of malls in which they will consider opening branches. More retailers are adopting a wait and see approach to opening new stores based on the success of the mall, its location, the quality of the tenant mix and the management team.

Supply is still expected to remain high for the next two years despite some delays anticipated in construction schedules of several projects, it is estimated that there will be around 290,000 m2 of retail space entering the market in 2009-2010.

However, as some retailers are closing unprofitable shops due to decreasing consumption patterns, and reviewing territories for expansion strategies, this will contribute to the slowdown in absorption.

Recent economic updates indicating positive sentiment, underpinned by a stronger rupiah, have created conducive economic conditions, driving a stronger retail consumption pattern that will support a return to growth by the end of 2010, so that Jakarta's retail property market will back on track.

Whilst retailers are generally wary of committing to any development, given the downturn in consumption, the government can also assist in strategies to improve retail spending within Indonesia and this can be done with tourism incentives, both domestic and international.

Jakarta is one of the best kept secrets in the retail market in Asia. The city has a wonderful array of amazing shopping venues and malls with many international brands offering a range of merchandise at much lower prices than other nearby countries within the region.

A "Shop Jakarta" brand should be developed and marketed internationally using this as a vehicle to promote tourism in other areas of Indonesia other than Bali.

Similar projects have been done in Hong Kong, Singapore and Kuala Lumpur respectively, with great success.

The international future retail trend is away from mega malls to one stop community shopping centers in suburban areas, where ease of shopping, parking, and community lifestyle options are paramount.

People are veering away from large impersonal malls looking for a friendly, green environment with an emphasis on outdoor food and beverage and lifestyle venues.

For Indonesia, especially Jakarta, the trend is still to develop large one stop shopping malls, however, the consumer is becoming more conscious of the lack of green space available in the city, and more pressured by the traffic congestion and pollution and their affect on health.

Savvy developers in the future will provide true green parkland and outdoor spaces within the mall environment to cater to the needs of young educated families, who want to combine shopping with an outdoor activity attraction suited to the whole family.

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Modern Trade

How do you define the term modern trade in the retail environment. supermarkets,hypermarkets do fall in this definition, the question is what are the defining characteristics to classify a shop as modern trade outlet.

In French 'la grande distribution' opposed to traditionnal small retail trade (I do not know if 'modern trade' has a specific meaning or not)

Usually the basic criteria is the size of the outlet:
- Hypermarkets are the biggest (over 2500 m2)
- Supermarkets come second
- Smaller shops come then, but are still part of 'grande distribution' (they might be called supérette in French, mini-markets)

But there is also another criteria, which is the organization of the shop:
- All these cited above are self service, and you pay at the cash counter at the exit of the outlet
- Other type of outlet is the department store, like Harrods in London or Le Printemps in Paris. There, you are attended by sales persons, and you pay in each department. This type of outlets were invented in the 19th century, and I guess they do not belong to 'modern trade'.

Finally, another criteria to classify outlets is the goods they sell. Hypermarkets usually sell everything (food and everything else), Supermarkets may be generalists or specialized (sports, books, etc...), and supérette are normally basically for food

The NEW OXFORD Dictionary
OF ENGLISH

hypermarket
noun chiefly Brit. a very large self-service store with a wide range of goods and a large car park, typically situated outside a town.
ORIGIN 1970s: translation of French hypermarché, from HYPER- beyond, exceeding+ marché ‘marke

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Repeat Business is Online Retail’s Core Customer Metric

In a study released recently by MarketLive, research confirms the importance of repeat business to online retailers. Many online (and off line) retailers focus strictly on acquiring new customers, often in the mistaken belief that volume is the name of the game.

This work indicates that it’s the size of the online basket that makes all the difference. New customers buy 10% less than existing customers, and are less engaged with the retailer and the buying process in general.

Not surprisingly, marketing budgets for online retailers reflect this disparity, with more than half being spent on acquisition, and only about 20% being spent on retention or loyalty.

Yet another reason why knowing what’s best to measure is more important than traditional marketing methods or metrics.

The NEW MarketLive Intelligent Marketing and Merchandising (IMM) Suite™ is an integrated set of segmentation, personalization, alerting, email, and search engine optimization technologies that attract the right customers and reach individual shoppers with relevant emails and offers. The IMM Suite, built for the MarketLive Intelligent Commerce Platform ,enables personalized merchandising from the first email touch, through the first transaction, and across all interactions with the customer throughout the relationship. The IMM Suite dramatically reduces the time and resources required to design and execute effective marketing campaigns. It provides a consistent consumer experience resulting in stronger brands, increased conversions, more revenue and customer loyalty.

The MarketLive IMM Suite combines best-of-breed personalization, email and on-site content technologies that are informed by MarketLive Intelligent Selling best practices. The Suite powers effective marketing and merchandising with fewer marketing resources and without special expertise. It allows merchants to rapidly shift from generic, "batch-and-blast" promotional efforts to high-ROI marketing campaigns.

One-to-One Recommendations
A powerful built-in personalization engine profiles shoppers, identifies their preferences, and tracks the products they want. Real-time recommendations present the most compelling choices, designed specifically for each shopper. Real-time alerts keep consumers in the know with their favorite styles, brands collections and information. Merchants maximize cross-sell and up-sell impact for increased conversion, average order value, and revenue.

Early pilots show meaningful results. One leading women¹s apparel and accessories retailer achieved:

• 66% improvement in click throughs from recommendation-based emails

• 350% increase in email conversion rates

• 26% increase in average order value

One-to-One Email
The IMM Suite leverages email to drive higher quality traffic to the site and increases repeat business from each shopper. The value of every email is increased through segmentation that is built on purchase and campaign response behaviors. Relevant messages are then delivered to each segment with personalized offers extended to each shopper within that segment. Additionally, analysis of recency, frequency and monetary purchase values help retailers uncover hidden customer groups that can be reached with appropriate messages and offers. By combining purchase history and click behavior, retailers can build profiles for each buyer that can be leveraged in future campaigns. Transactional, promotional, and loyalty-building emails are easily developed, automatically delivered, and analyzed for optimal campaign management.

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The Retail Misconception A White Paper

"Retail" has become a dirty word in the North American energy industry. The industry is rife with stories about the rise and fall of energy retailers in gas and electricity markets that have opened to retail competition.

We have heard the stories of startup affiliate retailers and new players entering competitive retail markets, taking on the

regulated utilities with false hopes and promises and, soon after, admitting defeat. Few of the 1997-1999 Era of new entrants in North America are surviving let alone prospering. Most have collapsed in debt or non-profitability, been sold off, or exited the market, sometimes defeated by the failure or closure of the market itself, as was the case in California.

By contrast, retailing is a respectable business and necessary tier of the distribution chain in other industries. And in other energy markets around the world, retail is similarly considered essential. So why has energy retailing developed a bad reputation in North America? The answer lies in the interpretation of the term "retail".

What Retail Really Means
According to the Energy Information Administration (EIA), a statistical agency of the U.S. Department of Energy, retail means "sales covering energy supplied for residential, commercial, and industrial end-use purposes." Retail, as the end-use sales part of the utility industry supply chain, is distinct from generation, transmission and distribution.

Retail is the customer touch point—the downstream part of the energy industry that sells the energy commodity directly to the end consumer. Unlike the corner stores, strip malls and Wal-Marts, which commonly characterize what we might think of as the "retail industry", the energy retailer does not need a store front to attract walk-by traffic. Instead, sales can be completed over the phone, online and by sending out a regular bill, all of which directly "touch" the end-consumer.

Defined in this way, as sales to end-use customers, retail clearly applies to traditional regulated energy markets as well as deregulated energy markets. It follows that the properly defined term "energy retailer" applies to all energy market structures—regulated, transitioning and competitive. Granted there are different retail rules for different markets, but all energy markets contain the retail function.

Regulated Utilities are Energy Retailers
As we look at U.S. energy markets and the progress of deregulation, we can identify two distinct forms of energy retailing—regulated retail and competitive retail. In a traditional regulated market the vertically integrated utility performs generation, transmission and distribution as well as retail functions. In its regulated retail role, the integrated utility signs up, services and bills energy consumers according to Regulated rules and tariffs. The misconception that regulated utilities are not energy retailers is exactly that—a misconception.

In transitional retail markets, such as the Pennsylvania, New York and Ontario electricity markets, not only are new market entrant "retailers" operating competitive retail businesses, but the regulated utilities maintain their regulated retail operations for the customers who haven’t switched to a competitive retail supplier. In these transitional market structures, regulated retail operates in parallel with competitive retail.

In contrast, in a fully competitive market such as the Texas electricity market, the historically vertically integrated utility is disaggregated (separated) into separate business units corresponding to the main components of the energy industry—generation, transmission, distribution and retail. The generation company produces the energy commodity; the transmission company transports the energy in bulk; the distribution company manages the wires, switches, and transformers that serve neighborhoods and businesses; the utility retailer is left to sell the commodity direct to the end consumer in a free market environment. The utility retailer plays by the same free market rules as new entrant retailers.

We refer to these previously regulated, now competitive utility retailers as "incumbent retailers". In the competitive Texas electricity retail market, for example, market share is dominated by three major incumbent retailers—TXU Energy, Reliant Energy Retail Services and AEP (through its subsidiaries AEP Central Power & Light and AEPWest Texas Utilities). The big three compete with one another alongside other smaller incumbents and new entrant retailers such as Green Mountain Energy and Republic Power.

In a fully competitive market, all retail participants, including both incumbents and new market entrants, are classified as competitive retailers. However, in some competitive retail energy markets, including the Texas electricity market, a regulated retail role does continue in the form of POLR (Provider of Last Resort). We see competitive retail businesses providing the supplementary POLR role to support social policy objectives for otherwise unwanted consumers as dictated by the market regulator.

So it would appear that "retail" is not such a dirty word after all. Energy retailing has existed since Thomas Edison established his utility business in the financial district of New York City in 1882, and exists today for 188 million U.S. electricity and gas consumers. It is just that much of the retail in the U.S. Today is regulated as opposed to competitive, and this has caused confusion in terminology.

Regulated Markets are Retail Markets
A related misconception in the North American energy industry is that all retail markets are competitive markets—one and the same. So often we hear people referring to"retailers" and "retail markets" when in actuality they mean "competitive retailers" and "competitive retail markets" which are subsets of the overall retail function.

The EIA defines a retail market as "a market in which electricity and other energy services are sold directly to the end-use customer." By this definition, every U.S. energy market includes retail, whether it is regulated, transitioning or competitive. This is not to be confused with the 26 retail gas markets and 23 retail electricity markets that have transitioned to some level of retail competition. The other 24 gas and 27 electricity markets in the U.S. are regulated retail markets.

Almost all other energy markets around the world use the broader definition of the term "retail energy market" to refer to the end tier of the energy distribution chain. In Australia, where New South Wales and Victoria have evolved toward competition and Queensland, Northern Territory, South Australia, Tasmania and Western Australia remain regulated, there is no talk of regulated utilities versus competitive retailers. All Australian energy companies billing the end-consumer consider themselves energy retailers in the retail energy business.

Leading Australian energy retailer Country Energy, which supplies gas and electricity to750,000 consumers in five Australian states, has always led with its retail mindset. John Adams, Group General Manager Retail, explains, "If you’re in the business of billing energy consumers then you’re in the business of energy retailing, it’s as simple as that. Energy retailing is about pushing the boundaries of excellent customer service and operational efficiencies, whatever market you’re in."

Xcel Energy in the United States shares this retail mindset regardless of the fact that 99 percent of its consumers are in regulated markets. Headquartered in Minneapolis, Minnesota, Xcel Energy is the nation’s fourth largest utility company serving both electricity and natural gas customers. The company has regulated retail operations in 11 western and mid-western states and competitive retail operations in Texas.

Patricia Vincent, president of Retail Services at Xcel Energy, is responsible for customer service, marketing and sales across the company’s regulated and competitive territories. Her title and role reflect Xcel Energy’s forward-thinking view on the retail business function.

She comments, "My focus is on retail services for 3.2 million electricity customers and 1.7 million natural gas customers in a wide range of markets. Our retail customers don’t think of themselves as being regulated or competitive, and we don’t pigeonhole them either. They want high quality service from their energy retailer and we are here to Provide that consistent level of service across all customers in all markets."

Common System Core
Business drivers will differ in regulated and competitive retail markets but the basic cash flow/revenue cycle is critical to both retail disciplines. A regulated retailer will be driven by regulatory service obligations within a defined supply territory, whereas a competitive retailer will focus on customer acquisition to Increase market share or customer retention to defend market share across many distribution areas. However, the billing/payment cycle is the cash flow lifeblood of any retail energy business, whether regulated or competitive.

The diagram below demonstrates that there is significant functional overlap between regulated and competitive retail businesses. The center overlap area of the diagram contains the critical business functions common to both types of retailers. This includes premise management, bill presentment and calculation, accounts receivable, account maintenance, Internet self-service and customer care.

These common business functions account for the majority of retail energy transactions, as well as manage the cash flow lifeblood of the business. Usage, interval usage, billing, accounts receivable and collections transactions occur ten to50 times more frequently than other periphery transactions such as customer signup or field service. This means that system scalability, robustness, usability and efficiency are at least ten times more important in these critical overlap areas.

Independent Energy learned this lesson the hard way. The high profile start-up retailer entered the competitive United Kingdom electricity market with strong public and government support, and it signed more than a hundred thousand customers in a relatively short period of time. However, when it came tactually billing their large volume of customers, Independent Energy experienced significant difficulty, resulting in poor cash flow and eventual bankruptcy in 2000.

Retailers are wise to concentrate on the core functional areas first and foremost when evaluating and selecting a new Customer Information System (CIS) for improved service performance and efficiencies. Further, attempting to bolt on pieces of functionality in these core areas is simply not feasible because of the high transaction volumes and associated risk. Togo the distance requires an advanced, reconciled system core.

Converging Functional Requirements
The functional overlap between regulated and competitive energy retailing is becoming more pronounced in today’s dynamic energy industry. These days the expectations of regulators, customers, and shareholders are changing and a new, forward looking regulated industry is swiftly emerging with intense emphasis on improved customer service, operational efficiencies and cost-savings—in other words, "competitive" best practices.

An emerging driver for adopting competitive best practices is performance-based regulatory (PBR) schemes, whereby regulated utilities can earn extra profits above the allowed rate of return, conditional on improvements in performance. At the same time, forward-thinking utilities are looking to replace their legacy systems to Reduce their risk or to prepare themselves for competition. As a result, the system needs of regulated retailers are becoming more aligned with their competitive counterparts.

On the other side of the equation, competitive retailers are becoming more intent on core functionality in an effort to realize further efficiencies in the areas that count most. This is because the early days of U.S. energy competition were dominated by small start-up retailers focused primarily on acquisition and enrolment to Increase market share. Today, there exist large-scale competitive retailers in North America, such as American Electric Power (AEP) and Direct Energy, which have more mature functional needs centered on robust and scaleable billing, customer care and accounts receivable and collections. In this respect, they have much in common with the traditional large-scale utility.

There are many signs of the convergence of regulated and competitive retail needs. Due to changed market conditions and client feedback, for example, META Group’s Energy Information Strategies for Unregulated Markets and Energy Information Strategies for Regulated Markets services were earlier this year consolidated to form a single Energy Information Strategies practice, which covers both regulated and competitive retail markets.

One System for All Markets
It is not uncommon in North America for energy industry executives to think in terms of a regulated CIS versus a competitive CIS. This stems from the misconception that regulated utilities are not retailers and therefore require a vastly different system to their competitive counterparts. In reality, an advanced competitive CIS with support for regulated functions can span all market types.

An example of this is Country Energy Central in New South Wales, Australia. New South Wales introduced a staggered timetable for electricity deregulation as early as 1995, starting with very large commercial and industrial customers and extending to all customers over a five-year period. During this time, Country Energy Central maintained a single competitive CIS for its 120,000 regulated and competitive customers. As each customer segment became competitive, Country Energy Central would simply switch between regulated tariffs and competitive rate plans within the same system.

While a competitive CIS can support regulated retailing, a legacy system built for traditional regulation cannot deal with the complexity of competitive retailing, no matter how many competitive functions are bolted-on. This is because the central focus of a regulated system—the assumption that the regulated energy retailer also controls the premises and meters in a defined franchise area—does not hold true for a competitive market. The customer is the asset and primary focus in a competitive market, requiring a customer-centric CIS that tracks customer details across multiple distribution areas and markets. The fact that an advanced competitive CIS can support regulated as well as competitive businesses is proof that new market entrants, incumbent retailers and traditional utilities have much in common.

They are all energy retailers selling the energy commodity directly to the end consumer. It makes sense that they will have similar system requirements in performing the retail function. We need to stop ourselves from thinking in polarized terms of regulated versus competitive markets, participants and systems, and start adopting a broader retail mindset focused on the business function at heart—energy retail.

The Peace Advantage
Peace Software is the world’s largest energy CIS software developer. The company’s browser-based Energy suite has been selected by regulated and competitive retail energy companies to drive efficient operations and provide excellent customer care for 13 million residential, commercial, and industrial customers in 40 markets around the world. The innovative Energy suite can be phased into existing CIS environments and new version upgrades are available every 12-18 months. Founded in 1984, Peace Software has offices in Australia, Canada, New Zealand, the United Kingdom, and the United States.

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