Trend

IT innovations in Indian retail

The organized retail sector has recognized that IT can give it an edge over the neighborhood kirana store. By Neeraj Gandhi

Retail in India is a the crossroads of an intensive expansion spree, coupled with the entry of foreign players into the market. This exponential growth can be largely attributed to the high economic growth that the country has been experiencing for several years. If the trend continues, organized retail could well emerge as a sunrise industry.

It took some time for IT vendors to realize the vast potential in retail; the sector itself had been a little slow in leveraging IT. Now that the smoke has cleared, vendors are unveiling an entire range of IT products and solutions for the retail sector.

According to a report titled, ‘Winning with Intelligent Supply Chains’, brought out by FICCI and Ernst & Young, the Indian retail sector is presently valued at $280 billion. Of this, the organized retail segment accounts for $14 billion, approximately 5%. That said, it is expected to increase to 30% by 2010. “A mid-sized retail company can easily spend around Rs. 10-20 crore in the initial setup phase including enterprise applications,” said Pinakiranjan Mishra, Partner, Retail & Consumer Products Practice, Ernst & Young.

“It is estimated that over $2.5 billion will be spent on IT in the Indian retail sector by 2010. This will include the cost of acquiring new assets as well as looking after existing infrastructure. Over 40% of this will be spent on software and services,” said Ajay Aggarwal, Founder, Seacom.

According to Patrick Mathias, Regional Manager-Enterprise, Cisco India, “Of the total investment, approximately 4-10% is invested in IT. And within this approximately 30-40% is meant for networking infrastructure.”

“IT plays a crucial role in the retail industry. Retail is amongst the fastest growing sectors in the country and India ranks first, ahead of Russia, in terms of emerging markets potential in retail,” added Lokvir, CEO, PineLabs.

Innovation in retail

The IT innovation revolution in retail is steadily taking shape in India. The process is such that it has the potential to change the way in which we purchase even the basic necessities such as groceries and vegetables. Innovation is happening not just at the backend, but also at the customer facing end. It’s taking place all over, right from where the customer enters a store to the point where he leaves. This essentially covers the whole process of buying of products, right from selecting to decision making and paying at the checkout counter.

“Innovations in the retail industry are multi pronged and are aimed at enhancing the end user experience, optimizing resources and logistics, creating a technology platform to keep pace with the dynamics of the industry and manage the unprecedented growth given the geographic spread and diversity,” said Dr. Anurag Srivastava, Vice President, Consulting Division, Wipro.

Some of the key innovations include:

• Customer identification using RFID: This involves identifying customers by issuing them smart cards embedded with smart chips. These cards would be RFID enabled and would give information regarding the customer like his preferences, shopping behavior etc.
• E-Catalog based selling: Here a limited range of merchandise is available in-store, while the range of a hyper format is made available through self browse kiosks.
• Mobile Point of Sale (POS): This would enable the purchase of goods while putting them in a shopping cart. The customer would be spared the hassle of standing in long queues.
• Digital Signage: Static signboards have not proved beneficial in terms of helping a customer track a product. Digital signboards integrated with an automated tracking system can make this easier.
• Intelligent database: A detailed database of the customer is made available online and helps the retailer understand a particular customer’s buying characteristics.

In addition, retailers are even deploying applications such as CRM for loyalty programs and personalized service and ERP, inventory management, supply chain management and security solutions, POS, master data repository, data management etc to get the basic infrastructure in place.

Large scale IT adoption is not equal across categories in the retail industry. There are eight key segments in the retail sector, food/ grocery/ vegetables, garments, electronics/electrical, cosmetics/medicines, home furnishing and furniture, lifestyle products (jewelery, shoes, watches), office products and multi product outlets. “Lifestyle and apparels are more open towards IT. Even grocers are thinking of deploying basic IT solutions. On a whole every retailer is looking at a tailor made solution which meets his needs,” said Sridhar Hariharasubramanian, Head, Retail Solutions IBM, India.

Where are we placed?

Indian retailers are leapfrogging in terms of leveraging IT. The fact that they started late in comparison to their western counterparts, gave them the advantage of analyzing which solutions work out and which do not. Retailers adopting these IT innovations in India are still at an introductory phase, and in the process of understanding the benefits of IT in retail.

“It is indeed the beginning. The market is showing trends which are difficult to predict. This Diwali the sales of white goods far outdid the sales of gold. This was a surprise shift which no one was geared for. The Indian consumption pattern is changing. Thereby the needs of the retailer will evolve and IT will have to catch up to the pace of the need. That will drive innovation in adaptation,” said Srivastava.

Aggarwal opined, “Large and medium size retailers are going through the cycle of putting a robust transaction system in place which includes a suitable POS system, merchandise management system and a CRM system. Following this investment will be made in world class supply chain and logistics management system and business intelligence and analytics systems.”

That said, the innovation and deployment that is taking place in India is confined to the organized sector, which is a small proportion of the overall retail industry. Also organized retail in India is comparatively new, as compared to the West where it has been since the last 50 years. “Indian retail is quite advanced in basic IT adoption like ERP, network, etc. compared to foreign retailers. However they have not managed implementation well due to lack of sector understanding both with clients as well as IT consultants. Where we are also lagging is in the area of advanced IT products and solutions like replenishment planning, analytics, RFID, warehouse management systems, etc,” said Mishra.

The road ahead

The way the Indian retail industry is shaping and developing presents an opportunity no less than a goldmine unearthed for vendors. What should be noted is that deployment should happen in a phased manner, starting from the foundation and then going up the ladder. Presently the retail industry offers two extremes. On one hand it is lagging behind in terms of basic standards in place (sometimes barcodes go missing), and on the other it’s going out of the way and experimenting with technologies like RFID.

In addition, the unorganized sector—a sizable portion of the retail industry—is lagging behind in terms of IT usage. This is the reason why the IT percentage remains considerably low in the Indian retail industry. Even though technology is available to cater to this segment, factors like money, lack of education and comfort factor are playing spoilsport. “Even the unorganized sector is using IT, but it’s largely user driven. The approach still remains traditional,” said Mathias.

In contrast, the organized sector seems to have reached a point of no return. The growth is constant and is expected to continue. It is here that a lot more innovation and development can be expected in the near future. “Currently, there is a lot of talk about BI and data warehousing and RFID. The goal is to increase footfalls and reduce transaction time, Contactless payments (NFC) is what some of the banks and big retailers could look at,” said Lokvir, CEO, PineLabs.

“Spending will shift towards innovating store technologies since customers frequent the stores often. There would be increased adoption of store mapping technology. We could also see more value added services in place to enhance the customer experience,” said Hariharasubramanian..

“Digital signage at the store level, mobile POS, a customer recognition system integrated with customer loyalty programs is the way forward. But it will be Unified Communication systems that will become the focal point of IT innovation and will drive a lot of changes,” added Mathias.

neeraj.gandhi@expressindia.com