Retail

Indian retail poised for big boom

The Indian retail segment contributes 20 percent to the country’s GDP but remains one of the most unorganised sectors in the country with less than 3 percent IT penetration. This offers huge opportunities for Indian software companies, says Stanley Glancy

Economic liberalisation and rising disposable income saw consumer spending grow at an average of 11.5 percent per year during the last decade. A joint report by McKinsey and the Confederation of Indian Industry (CII) has pegged the Indian retail market at $180 billion. The report goes on to add that the market is growing at a steady rate of 11 to 12 percent and accounts for around 10 percent of the country’s GDP. India has become a hot target for foreign retailers stepping up their international expansion programmes. What does all this portend for the Indian IT industry?

Maurice D’Souza says that Systime’s VersaPOS works well as a standalone product but is also highly scalable for use in multi-chain outlets

If we go by what industry pundits have to say, the opportunities are vast. According to certain rough estimates, the total ERP market in India is currently worth Rs 550 crore and growing by the day. Retail accounts for 10 percent of this market. Elaborates S Narendran, general manager-marketing, TVS-Electronics, “India has the potential to become the world’s largest transaction hub. The prime mover in IT demand are SMEs, specifically in retail. With over two million outlets with less than 3 percent IT penetration, there is a huge market out there for both products as well as multiple solutions.” Organised retail as the West knows it may be some way off, but retail has definitely taken root in India for good.

A study undertaken by global real estate consulting group Knight Frank predicts that the organised retail market in India will witness a 20 percent growth rate by 2010. Not at all surprising if you take into account the fact that the organised sector is currently growing at a steady 8.5 percent year-on-year. Another notable trend that the study has brought to light is the growth of integrated retail-cum-entertainment centres in India.

But all this has only complicated matters for the Indian retailer, especially those looking at expanding existing businesses either by increasing their product portfolio or by setting up specialist branches across the country. Organisations have realised that technology is the way forward but have little knowledge about the advantages that IT can provide. The most affected are the small and medium businesses in retail.

According to S Narendran, with over two million retail outlets in India and less than 3 percent IT penetration, there is a huge market for both IT products as well as multiple solutions

Add to this the competition from multinational chains with their structured management and sophisticated services and the old style of shop management definitely seems to be on its way out. Evolved work practices, efficient inventory and financial management, development and management of customer relationships have suddenly become the only means of survival. The challenges in developing a market from scratch are huge. But Indian software giants have risen to this challenge.

Main players

Sensing this opportunity, many players—some offering customised solutions and others offering end-to-end products—have ventured into this sector. Specialised products have been developed, both in the hardware as well as the software space to fit all budgets, from that of multinational retail outlets to the neighbourhood general store. In fact, some of these products have achieved worldwide renown or have been sold in the international market before being adapted to meet Indian demands.

Navision, which boasts of more than 500 retail customers worldwide introduced its solution for the retail segment a few months ago. Christened GoPro, the product has already managed to garner attention from several retail chains and multiplex entertainment centres, including multinational food chains. According to Sujoy Choudhury, principal consultant for Navision, Indian retailers prefer GoPro’s distributed architecture to a centralised one, as a database at each location ensures business continuity in case of a breakdown.

Dib Chaudhari, general manager for ICICI Infotech’s enterprise solutions business feels that there should be individual systems in each store. The information collected by each of these systems should be consolidated and put together in a centralised location. ICICI Infotech has, according to Chaudhuri, identified the best business practices of the industry and built it into Orion, its offering in the retail space. But he believes that smaller stores cannot afford these products. Hence, it has developed two products, Excalibur and Merlin, for the lower end of the retail market.

Delhi-based Eastern Software Systems (ESS) has developed ebizframe, which in addition to handling all the functions of an organisation such as sales, materials, accounts, human resources and payroll, also allows for production and planning to be integrated with the functioning of customers, suppliers and multiple branches or manufacturing locations. Says Sanjay Agarwal, director, ESS, “ebizframe offers the benefits of enterprise automation along with those of e-commerce, including collaborative computing, CRM and SCM.”

Systime’s VersaPOS was sold in the US market for more than a decade before it made its entry into the Indian retail space. Says Maurice D’Souza, manager for global services at Systime Computer Systems, “Though this product works well as a standalone product it is also highly scalable for use in multi-chain stores.” VersaPOS boasts of features like tracking of customers’ spending patterns, inventory control and frequent shopper programmes. The software also offers more than 175 built-in custom reports.

In the hardware space, one product that has done India proud is TVS Electronics’ bill printing solution, Proton. The company also offers a full transaction automation system via TVS point of sales (PoS) systems. Explains Narendran, “This is a rugged local language-enabled PoS system, for grocery stores, auto parts, agro products and such like.”

Time-to-market

Most product vendors say that what they have attempted to do is put together a completely integrated end-to-end solution. Several retailers have attempted to create a customised solution best suited to their needs. But such a strategy is generally not advisable as a retailer can significantly reduce time-to-market by deploying a readymade product. Plus, the development expertise of the vendor ensures a better quality product.

ICICI Infotech has identified specific regions in the country that have seen a spurt in the growth of organised retail outlets. According to Chaudhuri of ICICI Infotech, southern India has seen a plethora of retail chains coming up in the recent past. This is not to say that other states have been lagging behind, but the company has been concentrating more on these regions. ICICI Infotech has also been partnering with various industry associations in order to reach out to the retail community and educate them about the benefits of IT.

Navision, on the other hand, treats every product category as a strategic business unit. It provides analysis of sales across categories. Choudhury feels that the Indian retail segment is shifting from brand management to category management. For instance, a garment outlet, instead of focusing on certain specific brand of clothes, would now identify the trends in a particular category, say trousers t-shirts.

Challenges

The Indian retail segment is still at a nascent stage. Allocation of funds for IT implementation remains a key challenge for most vendors. Most retailers are still uncertain about the benefits of technology. Though it’s a fast growing segment, small and medium size retail outlets are still some way off from adopting technology in a big way.

Such players may not be open to the idea of straightaway deploying an end-to-end solution. This is where vendors need to take a modular approach. Such an approach offers retailers the option of deploying those modules that focus on their immediate needs. As and when the retailers’ confidence in technology grows and he realises the competitive advantages offered by technology, he can add further modules to the existing system. As Chaudhuri of ICICI Infotech says, it is important to conceptualise and deliver a product that is not complicated.

Way forward

The neighbourhood kirana stores are here to stay for a while but the Indian retail sector is all set to receive a facelift. The mushrooming of retail chains and shopping malls across the country, as also the opening up of more branches, point to the fact that the Indian retail sector is set to boom, especially in the metros and major cities.

Operational efficiency is the current mantra. Most retailers are already familiar about the benefits of IT as a front-end tool. They are slowly beginning to realise that IT at the back-end is equally, if not more, important. Retailers have realised the need to cut costs, reduce expensive inventory, achieve greater operational efficiency in servicing customers, and put in place effective customer loyalty schemes.