RETALIX LTD.

Our Market Opportunity
The customer retention battle
The retail food and fuel industries today are characterized by intense competition, resulting in increased pricing pressure and narrowing operating
margins. Retailers are losing customers to their larger competitors that offer aggressive pricing as well as greater shopping convenience and superior
customer service. The largest retailers, such as WalMart, are increasingly using their size and scale to realize cost savings and operating efficiencies from
their supply chain, which they then pass on to the consumer in the form of lower prices. This trend creates an industry dynamic whereby more and more
consumers are attracted to these price-cutting retailers, thus accelerating these retailers’ revenue growth and allowing them to further increase their
economies of scale. The distributors that supply many of these retailers are facing the same market trends, as they are asked to become more efficient, to
offer better products at lower costs, to consolidate services, to provide visibility into the supply chain and to facilitate the competitive capabilities of their
customers – the retailers.
At the same time, large food retailers and distributors are expanding their operations beyond their traditional focus on food supermarkets to
encompass additional retail formats, such as convenience stores, food service, fuel stations and quick service restaurants, or QSRs. This has increased the
competition in the convenience store market sector, which historically has been served by smaller chains and independent retailers. These small and
independent operators are finding it increasingly difficult to compete effectively with the aggressive pricing and associated lower margins resulting from
increasing competition. Similarly, competition has reduced margins at the fuel pump, causing large fuel retailers to add convenience store and QSR,
formats in an effort to increase their overall margins. This has further increased competition in the convenience store and fuel station market sectors, which
in turn favors the large retailers and distributors that can leverage their size and scale to realize operating efficiencies in their supply chain, thereby
lowering their cost base and allowing them to deliver lower prices.
One of the primary factors that allows such large retailers and distributors to realize supply chain operating efficiencies is their use of sophisticated
retail information systems, often developed in-house, that provide them with comprehensive visibility into their extended supply chain. Armed with such
visibility, these retailers and distributors can more efficiently execute and track all of their supply chain tasks, such as order optimization, inventory
management, merchandising and pricebook management. In addition, this supply chain visibility also allows retailers to optimize their pricing and
promotion decisions in order to increase demand and sales.
The information system needs of food and fuel retailers and distributors
In order to compete more effectively, food and fuel retailers and distributors need retail information systems comparable to those used by the largest
food retailers, distributors and major fuel chains in order to be able to realize additional operating efficiencies from their supply chains. In particular,
retailers and distributors require robust retail information systems that can:
increase operating efficiencies through tighter integration of in-store, enterprise level and warehouse management systems, enabling visibility
across the entire scope of their retail and distribution operations;
capture and analyze data and leverage customers’ demand information to enable advanced forecasting capability and thereby to optimize the
ordering and inventory stocking process in the store and in distribution centers; and
extend supply chain visibility to include suppliers and customers, enabling retailers and distributors to share data and collaborate between
themselves and with suppliers in supply chain decisions.
However, in order to deter customers from shifting their patronage to the largest chains, smaller retailers and distributors require more than increased
operating efficiencies and competitive pricing. In order to compete effectively with these larger chains, smaller retailers need to provide consumers with an
improved shopping experience through diverse retail formats and better customer service and to incentivize their customer base to increase their patronage
of their stores through customer loyalty and other promotion strategies. As a result, in an effort to increase customer retention and influence customer
spending habits, retailers and distributors are increasingly seeking information systems that can, in addition to achieving operating efficiencies, also:
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