Print

Comment

Email

Digg

Del.icio.us

Reddit

Twitter

Those were the good old days when every time you had to buy something, all you had to do was skip across to your neighborhood kirana store. The mom-and-pop store was almost like an extended family who knew your family since agesand not because you had the customer loyalty card. From the familiar kirana stores, we have now arrived in the age of super-marts and hyper-marts where customer is the king and discounts and freebies are offered to lure you away from competition. The Indian retail market never had it so good; from being a relatively unorganized sector with the mom-and-pop stores and petty vendors dominating a majority chunk of the market, the scenario has changed rapidly. The entry of corporate giants like Future Group, ITC and Reliance has changed the way retail business is conducted.

The retail boom is being driven by the growing purchasing power of the Indian middle class that has made India a happening market for the retail players. The growing market opportunity has attracted a diverse group of companies to the retail business from home grown entrepreneurs and multinational retail giants to business conglomerates like Bharti, Reliance and Tata, among others, who have plans to invest billions of dollars in the Indian retail industry.

IT as an Enabler
The growth of the retail market has spurred the retail companies to look at technology for facilitating expansion or entry in the market. Today retail is one of the largest industries in India, accounting for over 10% of the Indian GDP, and more than 8 % employment. Industry analysts say that it is on a high growth trajectory with a projected $453 billion potential by 2011, fuelled by the governments increasing focus on achieving higher GDP growth, and the increasing consumer income level and aspirations, says Amit Mukherjee, Group CIO, RPG. With such a huge demand and an operations-intensive supply side, Indian retailers are gradually realizing the power of technology as a key growth enabler.

Many Indian retail companies have already made significant investments in building their IT infrastructure, and others have committed to doing so. Retailers are realizing that IT systems can enhance their business with benefits like operations integration, real-time data, inventory and merchandising management, and reductions in processing and warehousing costs.

The offering of the organized retailers is contingent on a strong IT backbone and every retailer recognizes this globally. India is no exception to the case and every company that started operations during the last 5-6 years has invested in IT solutions since inception. Some companies that started in the late 90s initially started with basic IT solutions for retail operations and Point of Sale, which were subsequently replaced with retail ERP solutions.

Initially, retail companies started technology adoption by using processes like financial accounting, planning, billing, etc. As retail is a volatile business, demand for better customer services increased and it was not possible to address these without technology support. Technology always goes hand in hand with business solution for quick and better response, says Sudesh Agarwal, Vice President IT, Lifestyle Stores.

For instance, Shoppers Stop, which began operations in 1991 issued electronic receipts to customers in a world of cash memos. The initial focus for us was to ensure that the customer is the beneficiary of the investments made and thus we deployed store solutions linked to merchandise management systems in the back office. These were subsequently extended to warehouses, range, assortment planning and forecasting. The basic financial accounting and other related technologies were implemented in parallel, says Arun Gupta, CTO, Shoppers Stop.

Key Drivers
Even as retail fever gripped India in 2000, automation process could commence only a couple of years ago. The main reason for technology laggardness was the lack of scale. The industry was nascent, share of organized retail was a miniscule percentage of the total market base, and the retailers were still experimenting. In a semi-automated world, the key challenge is to ensure that the processes are consistently followed apart from the speed at which information flows within the enterprise. For instance when a stock-keeping unit sells off an item, the replenishment system and the warehouse requires the information for replacing the item in the store. Merchandise, range and assortment planning with a large number of stores cannot be effectively managed without IT.

Before technology adoption, reaction time to any event was high as the time taken to identify the trend was on the higher side. With the deployment of systems, new trends can now be captured in the early stages itself. Handling of stock and sales can also be done seamlessly.

Shoppers Stop currently uses a technology stack that connects all these points together from planning, buying, providing the merchandise to the store, selling and replenishment. On the other hand, it also assists us to track the buying pattern of our First Club members and allows us to stack products that are in demand, adds Gupta.

Organized retail is only possible with the extensive support of technology. Organized retail requires a strong IT backbone to support operations. And IT will essay two key roles- automation of process to be more user friendly, flexible and easy to use application; deployment of new technology for adding revenue, says Meheriar Patel, GM, IT Globus.

Technology can benefit business in more ways than one as it helps in collaborating real time data, data analysis, inventory and merchandising management, and reduction in processing and warehousing costs.

Retailing Focus
According to Springboard Research, IT market opportunities in the Indian retail segment are expected to grow at a CAGR of 44% from 2006 to 2010. In 2007, retail IT market revenue was projected at $354 mn. By 2010, Springboard Research forecasts the market to grow to $1.07 bn. Companies that enter the retail business in the next few years will generate much of this growth, says Nilotpal Chakravarti, Senior Analyst Vertical Research at Springboard Research.

Most Indian retailers are well aware that an efficient supply chain is imperative to a successful, competitive and profitable retail operation. As such, implementing a Supply Chain Management (SCM) solution leads among the top strategic focus areas for retailers. Also, as Indian retailers ramp up their operations by opening multiple stores across the country, the need for integrated supply chain management solutions becomes critical to improved store management and increased RoI.

IT assists us to track the buying pattern of our First Club members and allows us to stack products that are in demand Arun Gupta, cio, Shoppers Stop	As retail is a volatile business, demand for better customer services increased, and it was not possible to address these without technology support Sudesh Agarwal, VP, IT, Lifestyle	Organized retail requires a strong IT backbone to support operations Meheriar Patel, GME IT, Globus

Secondly, retailers are also keen on streamlining their inventory management, a major challenge for retailers as they need to have products available for consumers, yet not overstock unnecessary and costly inventory. By automating inventory management, retailers have improved control over inventory, reducing the amount of extra inventory and increasing stock turnover, making the inventory more profitable. Thus inventory management becomes imperative for successful retail business.

While technology is certainly beneficial for retailers, the customers too are waking up to smell the coffee. As more customer-related information is captured, personalized campaigns and communications become a reality. Retailers will find that 60% of their business is through repeat customers, says Patel. Chakravarti agrees that CRM remains one of the top focus areas for retailers in India as retailers realize that the key to success is an effective customer relationship management (CRM) application, since its personalization capabilities can provide increased value to todays more discerning consumer.

From Springboards perspective, Indian retailers appear to understand the importance of leveraging customer profile information. Data collected at the store level shows what the customers are buying and how often, this can be shared with the retailers supply chain network of suppliers, factories and distribution centers to meet anticipated product demand.

Associated Challenges
Key challenges facing retail organizations that can be effectively tackled through the implementation of IT include streamlining and improving merchandising, store planning/operations, profitability, customer relations, workforce and supply chain management. Many retailers are also seriously starting to look at IT solutions for tracking and monitoring their assets. In addition, technologies like RFID and e-commerce offer significant business benefits to the retail industry, even though their implementation is not yet widespread.

Even though most retail companies have only recently started making large investments in their business with significant budget allocations for IT, it is expected that this trend will become stronger over the next few years and new investments in the retail sector will spur growth in the IT market.

Once retailers have set up their basic IT infrastructure, they will focus on strategically investing in IT to boost competitiveness, efficiency, productivity and profitability. IT will be also be required to manage the growth in the scale of operations. It is significant to note that while small retailers currently have a marginal focus on IT, they will increasingly rely on IT to stay competitive in the face of expected rivalry from the large players.

Future Beckons
As organized retail is on the growth trajectory, retail companies cannot envision growth without technology. As retail companies set up shop in remote locations, robust IT infrastructure will become a must in order to sustain rapid growth. Currently, the industry is at the threshold of evolution wherein retailers will look to en-cash the first-mover advantage for grabbing larger market share. And in case of new set-up, business feasibility is 100% dependent on IT as it provides the required analysis to prove whether business is viable or not. The key challenge for IT vendors will be to keep pace with the rapid changes in the dynamics of the retail industry and provide solutions and services that enable these companies to compete in a demanding marketplace.

Stuti Das
Stutid@cybermedia.co.in

Page(s)   1