Cover Story

Retail unleashed

Organised retail is tapping the benefits that accrue from implementing advanced IT applications. By Faiz Askari

India is on the threshold of a retail revolution. Initially, this was about Indian corporate houses rolling out malls and supermarkets, but with Wal-Mart coming into the Indian market, the era of the superstore has dawned for good. Unlike the kirana stores that served us for decades, this new breed of retail chains is heavily dependent on IT.

"SOA can help a retailer to manage complexity within his organisation, while at the same time improving business processes" - Akshay Aggarwal Head Systems Engineering BEA Systems India

This trend is a great business opportunity for software vendors who are targeting the segment. Retailing is also the biggest source of employment, and generates more than 10 percent of India’s GDP. Organised retailing, however, occupies a miniscule two to three percent of the overall Indian retailing industry, but that is poised to change.

Explaining the growing importance of IT in the retail segment is Akshay Aggarwal, Head, Systems Engineering, BEA Systems India. “As monitoring and asset tracking in retail grows more stringent, there will be heavy reliance on upgrading or establishing IT systems aimed at enhancing productivity and improving processes. Technologies such as RFID and Web portals offer great business benefits to the retail industry.”

An SOA (Service Oriented Architecture)-based approach can also offer retailers certain benefits. On all fronts, the retailer and manufacturer are required to rethink their operations, from format differentiation and in-store innovation to real-time information facilitation for the customer. Notes Aggarwal, “SOA can help a retailer to better manage the diversity and complexity within his organisation, while at the same time improving business processes aimed at customers and trading partners.”

"Oracle applications do not require a big-bang implementation, and allow a retail entity to start with a minimum set of modules" - Mukesh Mathur Head, Retail Business Oracle India

Mukesh Mathur, Head of Oracle’s retail business in India, describes how the company is targeting the retail industry in the country. “In order to enhance its offerings for the retail industry, Oracle has made a number of strategic acquisitions—including Retek, 360Commerce, and ProfitLogic—to offer the industry’s broadest set of retail-specific functionality globally and in the fast-emerging retail industry in India. Not only does Oracle provide all the key components—database, middleware and applications, all based on open standards— for the retail industry, but it also offers advanced analytic capabilities for retail, thereby enabling business intelligence. Also, keeping in mind the relative scale of operations of a retail company vis-à-vis large-scale manufacturing operations, Oracle applications do not require a big-bang implementation, and allow a retail entity to start with only minimum specific modules.” He continues, “We recently established the Oracle Retail Centre of Excellence comprising nearly 200 retail experts in Bangalore in order to better understand the needs of retail organisations."

Informs Mohit Oberoi, Senior Vice-president & Business Head, Polaris Retail Infotech, “Apart from the organised retail segment, which constitutes the Tier 1 retail chains, we also target the smaller retailers, or in our words, Tier 3 retail houses. As far as the break-up of the retail market in India is concerned, 92 to 93 percent marketshare is with the Tier 3 segment.”

"Organised retail contributes just about two percent of the retail industry in India, but it is growing rapidly. HCL is bullish about this vertical" - Apurva Chamaria Category Marketing Manager Retail HCL Technologies

Discloses Apurva Chamaria, Category Marketing Manager, Retail, HCL Technologies, “With organised retail contributing just about 2 percent of the retail industry in India, but growing rapidly, HCL is bullish about this vertical. Thanks to our engagements with leading global retailers, we have the domain expertise to share with three of the top five Indian retailers."

"Most IT managers are only aware of transactional systems. When it comes to data analytics, many are in the dark" - Ranjan Chopra Chairman Team Computers

According to Ranjan Chopra, Chairman of Team Computers, “The awareness of IT systems is low among retailers, resulting in poor decision-making. In most cases, organised retailers in India have installed solutions that help them automate transactional systems. "

Understanding IT@retail

With the retail sector in India undergoing a transformation due to the entry of large corporate houses, IT managers and CIOs are now looking forward to know how IT can help them achieve the business goals of their organisations.

Says Mathur, “IT managers have to become increasingly business-savvy, exploring ways and means to increase sales, margins and customer loyalty.”

Awareness among IT managers and CIOs of the retail sector regarding IT systems and applications is perceived to be low. Insists Chopra: “Most IT managers are only aware about transactional systems. When it comes to data analytics, many are in the dark.”

To which Aggarwal adds, “Our experience with IT managers and CIOs of the retail segment has been pretty interesting. They do have a legitimate requirement for a complete end-to-end IT infrastructure, but currently they are focussing on core retail applications like Supply Chain, ERP, Warehouse Management System and Store Management System. As they grow and tie up with more suppliers, distribution centres and stores across the country, they will require an end-to-end IT infrastructure that will integrate all their core applications and provide real-time information at the central data centre for the purpose of business intelligence and reporting.”

HCL’s Chamaria says that the retailers’ strategy is built around a structure that is business-driven, and IT is viewed as an enablement of the business to support the retailer’s strategy and business growth.

Mission retail

Oracle offers retail-specific functionality, enabling retail organisations to focus on

• Improving information integrity for the extended retail enterprise
• Enabling an insight-driven enterprise
• Collaborating with all stake-holders for greater efficiency
• Empowering workforce excellence
• Driving an excellent customer shopping experience.

Comments Aggarwal, “Retail organisations deal with goods right from the suppliers to their distribution centres and finally to the storefront. The ideal application would provide real-time status of what’s left on the store shelf so that supply and distribution centres can replenish goods at the back of the store in time.”

Standards-based architecture and software support all kinds of mission-critical IT applications for enabling greater efficiency, significant cost savings, and new business value. The critical activities that can be handled by IT are finance and accounting, business intelligence, vendor development and management, supply chain management, merchandising and inventory management, facilities management, stores management, customer relationship management, branding, marketing, sales promotion and HR.

RFID's the buzzword

The Indian retail market is booming, and there are numerous applications—both business and consumer—that can be built around radio frequency identification (RFID) to deliver operational efficiencies. For instance, if a retailer is able to track shipments and high-value assets in real-time, it can minimise losses. Apart from improved and enhanced accuracy, RFID can also lead up to 80 percent savings in time spent on scanning items.

Explains Chamaria, “RFID is a transformational technology that has the potential to change the way business is conducted. Although at a nascent stage, we expect RFID will start gaining traction around 2010. The cost of tags and readers is fairly high today; once it comes down and ROI is established, it will surely be a boon for both retailers and CPG companies.”

Aggarwal of BEA elaborates. “While RFID is at a nascent stage, there are several killer applications that can utilise RFID technology across verticals. Supply Chain Visibility and Reusable Asset Tracking will emerge as key solutions that have high applicability in the Indian market, especially in manufacturing, retail, government and healthcare."

But as of now, RFID has hardly any presence in India. Laments Chopra, “Indian retailers are still to adopt bar-coding completely. The level of bar-code usage is also largely due to the retailers’ initiatives of printing these codes at their warehouses, unlike in developed countries, where suppliers print bar-codes. Most retailers do not have integrated IT systems today. Many retailers have few IT systems in the areas of supply chain management, vendor development, merchandising and inventory management. The annual expenditure on IT is quite negligible.”

Retail applications

With the increasing entry of large corporate houses into the retail sector, and the consequent entry of IT professionals from across industries, the awareness level of IT managers in the retail industry has grown. Mathur throws some light on the status of enterprise applications like ERP and CRM: “There is still a need for showcasing and informing people about the benefits that can be accrued by implementing ERP and CRM applications in a retail organisation. We at Oracle Retail are spending considerable time and effort to create awareness about the availability of IT applications and the consequent benefits to retail organisations.”

Aggarwal believes that the IT managers of retail organisation are aware that they will need ERP and CRM applications to initiate their business. “As they grow over a period of time, they will feel the need for better and more flexible IT infrastructure to run their business more effectively. They have started to realise that IT has to run at the speed of business, and that this is possible only when their core ERP and CRM applications start to communicate in real-time and receive data as soon as it’s captured at source. This in turn is possible only if they implement a service-based infrastructure.”

Like any other vertical, retail also stands to benefit from elaborate IT set-ups. However, this is subject to the scale and size of the organisation, as well as an objective assessment of its requirements. Key common challenges which are facing retail organisations, and which can be effectively tackled through the implementation of IT, include accurate merchandising, improved planning, increasing profitability, enhancing customer experience, strengthening store operations, improved workforce management, and improving the supply chain.

Reveals Mathur, “We have created a unified view of information that helps in delivering economic value to the whole business, from in-store operations to corporate strategy to supply chain to logistics management, thereby transforming the entire business.” 

Adds Oberoi, “Customer retention is critical for any organisation today, hence access to information in real-time also becomes critical.”

One of the key imperatives facing retailers in India is to have a robust and scalable supply chain that will facilitate rapid growth. One measure of efficient operations is the inventory turns ratio. Many Indian retailers surveyed by KPMG have inventory turns levels between 4 and 10. Another measure of efficient supply chain management is stock availability on the retail shelves. Global best-practice retailers can achieve more than 95 percent availability of all SKUs on the retail shelves (translating into a stock-out level of less than 5 percent). As per KPMG, the stock-out levels among Indian retailers ranged from 5 to 15 percent. Looking at the inventory turns and stock availability measures, retailers in India clearly need to improve their operations.