Cover Story

Retail IT reloaded

Although the organised retail sector accounts for just 3 percent of the Indian retail market, big players are using IT to prepare themselves for global competition, says Shivani Shinde.

In a recent report by A T Kearney, India displaced Russia as the most attractive destination for overseas mass product and food retailers. One of the biggest factors driving this was a greatly improved investment climate following the relaxation of direct ownership restrictions on foreign retailers (at the time of writing this article, there is opposition from the CPI). According to the report, the country’s retail market totals $ 330 billion, and has grown by 10 percent on average over the past five years.

Retail growth is visible everywhere, especially in the metros. Almost every other day we come across a new mall opening or a new food superstore being inaugurated. The report states that global retailers such as Walmart and Tesco are warming up to the favourable FDI rules, and are looking for partnerships with local retailers.

With a growing market for hi-tech retail establishments and increasing global competition, Indian retailers are gearing up for the same with the help of IT. One instance is RFID adoption. Although it has yet to gain patronage among global players, many big retail outlets in India have already piloted this technology.

IT essential for growth

As with all businesses, after a certain amount of growth there is a need for IT. For consolidating growth, the retail segment in India is also doing the same. The recently-formed Retail Association of India’s first annual national conference had the theme of IT as an enabler to the retail business.

IT applications allow one to take better business decisions based on analysis K V S Seshasai Head IT & Corporate Quality Trent

According to a recent survey carried out by IMRB for Express Computer on IT deployments in various verticals, retail is fast realising the importance of IT. The survey pointed out that growing business means bringing in practices that make systems more organised in terms of IT and solve some sector-specific problems. 42 percent of respondents stated that their top IT priority was to redesign or rationalise their IT architecture. They have also started using IT for solving age-old problems and are getting their systems more organised.

For instance, one of the biggest problems faced by companies in this sector is keeping track of the supply chain; this helps them check stocks which in turn aids in issues such as pilfering and the shelf life of products. This becomes particularly important after a chain of outlets has been established.

In a country that has so many kirana (grocery) shops, how can IT really help?

K V S Seshasai, Head, IT & Corporate Quality, Trent, explains, “This is precisely why the concept of retail chains is seeing the light of the day.” There are outlets within the same geography, and owned by a single family, so members can physically visit each outlet. However, the more recent ones such as Pantaloon and Shoppers’ Stop have outlets spread across the country due to their technological advancement.

According to analysts, chain stores are growing at 22 percent and are expected to overtake other store formats in sales. So as kirana stores start branching out to different locales, the need for IT will be felt.

The role of IT in retail comes when one store multiples to become two or three and starts spreading across cities. A few essential IT applications for a chain of stores are a robust point-of-sale (POS) system, telecom network for transfer of data, merchandise management systems, financial systems, and at a later stage, a CRM system. Seshasai believes that these systems allow one to take better business decisions based on analysis.

C K Nageswaran, General Manager, PMG & IT, Globus, feels that inventory is one of the most critical cost components in retail. As the scale of retail increases, the complexity of managing inventory boils down to understanding the smaller details of inventory which becomes almost impossible without an IT system.

Many agree that IT deployment is based more on the volume of business. Pantaloon is one such case which has been using technology to increase its business. It is in the process of revamping its systems to address the growing demands of customers. The company is now in the final stages of deploying SAP for its entire retail business encompassing the apparel outlet (Pantaloon) and grocery business (Food Bazaar).

Along with this, Pantaloon has also introduced some innovative methods to enrich customer experience. One of them is the use of handheld scanners. At some Big Bazaar outlets, employees have been provided with such scanners to reduce the time taken for the customer to check out. “We found that during special offers and festivals, queues at cash counters tended to be long which resulted in people leaving behind trolleys full of unpurchased goods—this was business lost,” points out Chinar Deshpande, CIO of the company. The system is now being used in 22 outlets, and, according to Deshpande, the advantages include saving time, avoiding queues and gaining business.

Food and apparel show the way

The Indian retail segment has two sectors that are growing rapidly—food and apparel. According to estimates by Cygnus Economic and Business Research, the Indian apparel industry will grow 4 to 5 percent a year in volume, and 13 percent a year in value.

Although the demand for technology in retail is growing, most retailers opt for applications and tools from vendors abroad rather than sourcing the same from the domestic market.

One of the biggest chains of foodstores, Foodworld, is an apt example. (Foodworld is run by the RPG group; today the group has 93 outlets of Foodworld, 74 MusicWorld outlets, 3 Spencer Hypermarkets, and 32 Health and Glow stores.)

Foodworld started in 1996, and right from the beginning had plans of diversifying. Because Indian vendors did not have the required expertise, they bought Norwegian solutions that suited the group’s supermarket layout. These solutions had features such as cash management, promotion-related details and POS. However, with the growing demands of the business, they realised that they would have to upgrade their systems. Foodworld had a home-made solution on FoxPro which was later changed to a solution offered by Zensar Technologies. This, the company reckons, gave them a solution that is scalable with time. “We looked at solutions such as SAP, but there was nothing specific to our needs,” says Rajatdas Gupta, Head, IT, Foodworld.

The other aspect of the retail segment is supply chain management and customer care management. One major pain area for these companies is gathering data from locations across the country and making the same available in real-time. Realising the importance of sales data, investment in IT applications for sales force automation and supply chain management are getting top priority.

Sify, with its Forum SCM product, has managed to make inroads in the retail space. Chennai-based Sri Lakshmi Agro Foods, which produces and supplies pulses to over 30,000 retailers in Tamil Nadu, uses Forum for managing invoicing, debtors, inventory and sales order booking at its head office. This was the company’s first phase of implementation; in the second phase, Forum has been installed on the sales force’s laptops. “We currently run a night shift to manually enter details about orders and collection receipts. There was no escaping the night shift since the next day’s dispatches had to be scheduled on time,” says Sudhakar, Director at Sri Lakshmi.

The company felt that once the sales force was empowered, it would be able to take orders and even issue cheque and cash collection receipts, thus speeding up the whole process. The idea was that sales reps could periodically connect to the Internet and upload details about the status of cheque and cash collection to the head office. Sri Lakshmi felt that this would do away with one of the biggest bottlenecks in its supply chain.

Forum will also be deployed by retail organisations. Inside Trading, which deals in apparel and fashion accessories, is already using it. Says Glenn Trotman, Director at the company, “We use Forum in six of our retail stores, a warehouse in Hong Kong, and the head office in Delhi. It is used as a POS tool, to manage inventory, and to communicate with the head office and warehouse.”

This is one area where technologies such as RFID are also being looked at. Although RFID is still at an evolutionary stage, initiatives such as a common barcode have been gaining ground. Recently, some leading manufacturers and retailers came together to launch Global Data synchronisation. This is a Web-based system that will be a data pool service to manufacturers and suppliers. It will be a database with current information about all products retailed, stock levels, products out-of-stock, overstocking, new product initiatives, changes in products, changes in description, product withdrawals, etc.

Abel Correa, Assistant General Manager, Systems, Crossroads, believes that for an efficient supply chain integration of data is necessary. This will involve synchronisation of product code and description, price lists, and to some extent inventory lists. This data needs to be available to suppliers, retailers, logistics providers, and manufacturers.

Shoppers don’t stop

The Indian retail business is quite different from its international counterpart, both in terms of maturity and volume. States Unni Krishnan T M, CTO, Shoppers’ Stop, “IT is a critical part of retailing. If one has to effectively manage a large number of outlets, he has to use IT.” The organisation has been at the forefront of delivering IT applications to its business with its entire focus being on providing a customer-friendly environment. He explains, “Recently, when Mumbai was hit by heavy rains, all our outlets were functioning absolutely fine, and as soon as we opened the shutters at Mumbai all our systems were up and ready with the latest data.”

Indian retail is still at a nascent stage. With the kind of innovation that IT can bring, these outlets are making sure they are fully geared up for any competition—foreign or Indian.

shivani@expresscomputeronline.com