IT Set To Change Face Of Indian Retail Sector

Focus like a laser on customer experience and you will reach the highest peak even before you realise it. Simply say the right thing about a product to a customer and in every odd probability he/ she will not get very impressed, but try saying the same right thing in the right way and the customer will be interested in hearing more. These are some of the top mantras that come to our mind for success in customer service and satisfaction. Though these lines hold true for every business, it suits retail the most. Retail today has changed from selling a product to selling an experience that consumers would like to indulge in once again. This is evident from the mushrooming of malls and shopping arcades in every loop and corner of the nation. Retailing has gone way beyond merchandising and mere availability of products does not ensure sales.

This sudden change in consumer behaviour has created a vacuum that can be filled only by an organised retail sector, which requires fine-tuned supply chains, efficient inventory management and a totally customer-focused operational style. These requirements can be met only with the use of technology. The retail industry is witnessing an upsurge year-on-year in terms of IT awareness and adoption. Retailers are adopting cost-effective solutions based on new technologies. A recent IDG report reveals that 23 percent of CIOs from the retail industry have felt the importance of technology in their business.

Emphasis on IT

Of late, solutions like BI and analytics have become the need of the hour for retail players. "BI is useful in understanding customer buying behaviour, and for driving sales and profitability while reducing operational costs, which is a must for long-term survival. This along with other solutions such as Point of Sale (PoS), Supply Chain Management (SCM), Warehouse Management Systems (WMS), and Enterprise Resource Planning (ERP) has helped retailers optimise business," says Niraj Jaipuria, Director-Product Engineering, BIRetail. Jaipuria’s firm supplies BI solutions made specifically for the retail industry.

According to a Springboard research report, PoS is the top preferred store solution deployed by Indian retailers. However, best-of-class retail solutions like RFID, intelligent shelves, and kiosks remain out of reach of most Indian retailers because of the high cost involved in their deployment.

Future Group has a BI system that provides reports, executive dashboards and analytics to various Lines-of-Business (LoB). They also have a centralised data warehouse. "As we increase the amount of data under management, we are able to make smarter decisions about customers, products, pricing and promotions across all outlets, thus maximising profit. RFID is also in the initial pilot stages and we see huge potential from the use of this technology," says Parakh Dave, Head of Technology Services, Future Group.

With the advent of SaaS, it is becoming easier for Indian retailers to adopt IT solutions in a cost-effective way. It helps bring down TCO for end customers, eliminates need for an in-house support team, and fast-tracks the implementation process. Springboard Research has predicted that the IT market in the Indian retail sector will grow at a CAGR of 23 percent from 2008 to 2012, reaching $1.4 billion in 2012.

Rate of Adoption

In the recent past, some big global retail names have forayed into the Indian industry and are making advanced IT adoptions. In fact, the current adopters of IT solutions include leading players like Future Group, Lifestyle, Aditya Birla Group, Reliance Industries, Tatas and Madura Garments.

"IT in retail is more relevant to the modern retail business. This comprises around 5 percent of the total retail industry size of $380 billion. The total estimated spend on IT, including capital and revenue spend, is estimated to be around $150 million," says Kumar Rajagopalan, CEO, Retailers Association of India (RAI).

The growing automation trend and sophisticated usage of IT has resulted in increased IT spending across verticals. The key verticals that have been showing maximum interest include FMCG, electronics, cosmetics, furnishing, lifestyle products and multi-product outlets.

The Dataquest-IDC Mega Users Survey 2009 revealed that though traditional spenders like BFSI, IT/ ITeS and oil and petrochemical have spent the most in 2009, the percentage growth in the use of IT is maximum in retail. At 43 percent upsurge, the retail sector clocked the highest growth in IT spend in the current year amongst all verticals.

Dave agrees that IT adoption in retail has been fairly good. "For example, WMS has been adopted by a number of retailers ahead of some other sectors like manufacturing. It gives complete process control within the warehouse (distribution centre) environment."

Where does the Challenge lie?

While the organised retail sector is in the limelight for the adoption of sophisticated solutions, the unorganised sector often remains neglected. This is one of the key reasons why the overall percentage of IT usage by Indian retail industry remains low. The problem is, though they perceive the need for IT, they are unable to afford it and often lack awareness. "Many of the IT solutions available for retail originate from other advanced countries, which boast a different level of purchasing power. Such solutions offered by global vendors do not factor in the India pricing principle," says Rajagopalan.

On the other hand, Jaipuria believes that implementation of IT solutions are not managed well due to a lack of sector understanding, both among clients as well as IT consultants. Legacy applications like POS, WMS, Order Management and Fulfillment, are difficult to integrate with new software applications. Old hardware infrastructure does not support current day software applications.

However, another serious problem that Dave points out is that of few rightly skilled people being available. "Merely having all kinds of automated systems is not enough. You need people, who are rightly skilled to implement and manage these systems, coupled with good domain understanding of retail."

What is the way ahead?

In order to overcome these challenges, retailers need robust and integrated IT infrastructure and good analytic capabilities. "There is a dire need to adopt new technologies like SaaS for various enterprise applications, which brings down the TCO drastically. Retailers can also go for ready-to-use applications rather than custom designing apps," suggests Jaipuria.

Meanwhile, Rajagopalan is of the view that though the usage of technology in terms of total spend per retailer is not very high, most modern retailers are in the early adoption stage and the future looks good as businesses get bigger. "Most modern retailers spend around 2 to 5 percent of their revenues on technology depending upon the age of the business. As retail technology in India gets more robust and becomes available at India prices, the adoption rates would go up significantly."

On the vendor side, there is a need to rationalise costs of retail-specific technologies like RFID, intelligent shelves, and kiosks along with clearly defining RoI benefits for clients. This would enable the unorganised retail sector to leverage technology and be on par with the organised sector.
Retail players in various regions like US and Europe make huge IT investments primarily because they are mature markets. In India, the adoption of certain technologies like BI is very high. India is also among the early adopters of new technologies like SaaS on a larger scale, while the US and UK are still catching up on this front. So the core difference between the US and UK and the India market remains only in terms of choice of technologies and customisation.

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Updated Date: Feb 02, 2017 22:20:51 IST