A mammoth 40 percent of the world's retailers are in India, thanks to 9.3 million retailers, most of them unorganised kirana stores. Only four percent of India's retail market is controlled by large supermarket or chain stores, while in China the share is about 20 percent and in Brazil 36 percent .
Now, technology-giant SAP has found a way to build a powerful business network that can connect many of these mom-and-pop kirana stores in the fast moving consumer goods (FMCG) space with Ganges, a new cloud-based solution that connects large Consumer Packaged Goods (CPG) companies with the last mile in retail, consisting of distributors, banks and retail stores.
According to the India Brand Equity Foundation, the Indian fast moving consumer goods sector consisting of personal care, household care, and food products was valued at $36.8 billion in FY 2011-12.
Developed at SAP Labs in Bangalore, Ganges is a business network built on the SAP HANA Cloud Platform, an in-memory cloud platform that's best suited for performing real-time analytics, and developing and deploying real-time applications. For instance, SAP HANA can process at 3.5 billion scans per second per processor core and from next year will be able to process at 5 billion scans per second per processor core, making real-time analytics a breeze.
To put it simply, using the Ganges network, a CPG would able to know in real-time about sales information aggregated from retail stores (helping in reporting and forecasting), or wouldn't need to wait a few weeks once a new TV ad has been aired in a particular region to find out if there's a positive impact. Thanks to the constant flow of data, the CPG would know within a day if sales are picking up because of the new ad. In addition, they can use SAP Ganges as a direct marketing channel to reach retail stores. SAP executives said that all the 12 large CPGs in India (players like P&G, HUL, Nestle, Marico, etc) are part of the Ganges network.
Distributors and wholesalers can know when SKU replenishment needs to be done at your neighbourhood kirana store automatically, they can track inventory at stores and can receive payments digitally. Banks can use the information gained from the network to assess credit eligibility of retailers and to adjust credit limit periodically based on retail store sales.
And for the kirana store owner, he gets a cheap yet extremely powerful Point of Sale (POS) terminal that helps him aggregate sales, automates SKU replenishment (a typical Indian retailer has around 300-400 SKUs) and most importantly, gives him access to bank credit to grow and stock higher numbers of SKUs to serve customer needs better.
Offered on a Software-as-a-Service (SaaS) subscription model, with six products for various categories in the retail chain, ranging from affordable point-of-sale (POS) made by POS OEMs for retailers, to software for distributors, CPGs and banks, the initial cost for the retailer is as low as around Rs 6000, which is far lower than the Rs 35000 to Rs 60000 it costs for a typical POS terminal today, said SAP executives. Larger retailers can go for POS terminals with more features. The entire network is controlled through a command centre that monitors data flowing in and being crunched in real-time.
This delivers powerful analytics using the SAP HANA platform where raw data is transformed into actionable information that CPGs, banks and others in the FMCG retail chain can use instantly rather than having to wait for weeks earlier, or not being able to access this data at all. For instance, since retailers didn't leverage automation earlier banks had no way to fix credit limits.
The POS terminals have also been designed for semi-literate retailers who won't be able to type. Icons with brand names make billing easy for such retailers. SAP Ganges has been in testing for over a year now and large scale rollout will begin in 2014, so if your neighbourhood kirana store owner buys into what SAP Ganges promises, you should see him using a SAP Ganges POS sometime in 2014.
Incidentally, SAP Ganges could also be extended to the Indian government's much hated Public Distribution System (PDS) chain of fair-price shops to not only transform the supply chain for PDS shops but also plug leakage and reduce corruption, which is the bane of India's PDS system and why PDS exists more on paper than in the real India.
The challenge though will be India's parallel black market, cash-based economy. While SAP Ganges will definitely benefit CPGs, wholesalers and retailers who don't care about bank credit and don't have ambitions to grow may not be interested since automation also means that their actual sales numbers would be available for tax authorities, thus wrecking their ability to profit from India's parallel black market economy.
"Software and communication technologies are reshaping the world around us and amplifying our ability in the process in unprecedented ways," said Dr Vishal Sikka, member of the Executive Board of SAP AG, Products & Innovation. "With SAP Ganges, we have shown that SAP HANA has the ability to transform and evolve entire industries in India. SAP HANA is helping connect businesses of all sizes in real-time: from the millions of kirana stores; to the large CPG companies serving them, and the financial institutions supporting them; by bringing new value to all points along this network and empowering people to conduct businesses in a totally open, transparent and real-time way."
Telecom services providers which enable remote connectivity would also be partners in the business network. Conceptualised through what SAP calls intensive design thinking-based co-innovation, SAP Ganges was developed by a team of less than 10, but with internal crowd-sourced help from 75 others across SAP's facilities in Brazil, China and Ireland. Developers went to the remotest corners of India to study the business models of retailers and they realised challenges like semi-literacy, which would stop any traditional POS system, but have been solved through innovation in SAP Ganges.
Following the release in India, SAP plans to roll out SAP Ganges to other retail-intensive economies such as Brazil, South Africa, China and Indonesia.
Updated Date: Dec 21, 2014 00:50 AM