IT Market In Indian Retail Sector To See An Upsurge

The IT market in the Indian retail sector will grow at an estimated Compounded Annual Growth Rate (CAGR) of 23% during 2008-2012; reaching US$1.4 billion by 2012, says the latest research from Springboard Research.

According to the report titled, “IT in the Indian Retail Industry: Emerging Trends and Market Opportunities,” market growth for 2009, however, is expected to slow down to 22% from the 43% growth seen in 2008, due to the downturn in the Indian and the global economy.

In terms of core IT categories, software is estimated to grow at a CAGR of 28% for the period under review, while hardware will grow at 19%. Findings of this report are based on Springboard’s interviews with leading IT vendors operating in the retail sector and 152 CIOs from both large and mid-sized retail companies across India.

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“Although the recession has affected retailers’ profitability, it opens a window of opportunity for IT vendors as retailers turn to technology to address the challenging economic scenario,” said Nilotpal Chakravarti, Senior Research Analyst at Springboard Research. “Many retailers are eschewing curtailing their long-term IT projects, while they remain cautious with short-term IT spending and new investments,” Chakravarti added.

Inventory Management is Key Focus Area

Nearly half of the CIOs in the retail sector interviewed by Springboard indicated large format stores/hypermarkets as the top business opportunity in the sector, while competition is named as the biggest business challenge by a majority of the CIOs. Inventory management emerged as the top strategic IT focus areas for the CIOs interviewed, followed by Supply Chain Management (SCM). Enterprise Resource Planning (ERP) topped the list of business applications in terms of actual deployments in the last 24 months.

According to Springboard’s data, POS is the top preferred store solution that Indian retailers have deployed in their stores. As compared to western markets, self-checkout terminals and self-service kiosks are still in the nascent stage.

Vendors Must Get Pricing Right

Springboard’s interviews with the CIOs revealed that a large number of retailers mentioned price as a key determinant in external IT vendor selection, while strong service and support came in the second place on the list of priorities. Other influencers like vendor reputation, existing relationship and so on, rank much lower in the priority hierarchy. Springboard also found that local IT vendors have a sizeable foothold in the retail space because they provide low-cost, industry-specific solutions.
According to Springboard’s data, SAP, Microsoft and Oracle hold the largest market share in the Indian retail sector, while HCL is the leading local vendor in the retail space. IBM is also named as among the leading vendors in this space.

“Best-of-class retail solutions like RFID, intelligent shelves, and kiosks still remain out of reach for the Indian market because of their high cost. IT vendors should look to address this gap by rationalizing costs, along with clearly defining ROI benefits for clients,” concluded Chakravarti.