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Retail technology: not yet checked out

With the impending entry of retail giants like Walmart and Carrefour in the multi-brand retail segment, Indian retailers, both large and small, need to move beyond PoS to analytics and SCM for streamlining their operations and enhancing their business efficiencies. By Venkatesh Ganesh

Subhashish Saha, the CTO of Apeejay Surrendra Group is a worried man. After the first hype around Indian retail, there was a slowdown. Things started picking up in 2011 and, accordingly, companies like the Apeejay Surrendra Group started making investments pertaining to technology in retail (the company owns Oxford Book store). Now, with an uncertain global climate resulting in a possible slowdown in the Indian economy, coupled with restrictions on FDI in retail about to be lifted, Saha is figuring out ways to make technology the cornerstone of the company's strategy going ahead.

Similarly, other Indian retailers such as Shopper's Stop and Pantaloon Retail are devising strategies to leverage technology internally and on the customer-facing fronts.

A growing middle class coupled with a high disposable income in purchasing power parity terms makes India the third most attractive retail market for global retailers among the 30 largest emerging markets, according to a AT Kearney report published in June 2010. According to the BMI India Retail Report for the third quarter of 2011, total retail sales in India will grow from $395.96 billion in 2011 to $785.12 billion by 2015.

The Indian retail sector is a highly fragmented with over 90% of the business undertaken by traditional family-run small stores. This provides an immense opportunity for large scale retailers to set up their operations and a slew of organized retail formats like departmental stores, hypermarkets, supermarkets and specialty stores are altering the retailing landscape in India.

Paused at PoS

The Asia-Pacific is the largest regional EPOS market, accounting for 32% of global shipments in 2010, with IBM having a 22% share, according to London-based consulting firm RBR.

However, Indian retailers saw a bad June quarter. As inflation took its toll and rising rentals dented the margins of Indian retailers, technology spend could be hit going forward.

"Companies want to keep their fingers on the pulse of the business and That’s where BI solutions help." Nagaraja Prakasam Managing Director - South & Southeast Asia, CDC Software India

Some Indian retailers are starting to use analytics to identify costs across the enterprise and to optimize their business processes. Additionally, they are looking at improved decision making, efficiency and productivity. “Companies want to keep their fingers on the pulse of business and find ways to work faster, smarter and better and this is where BI solutions help,” said Nagaraja Prakasam, MD, South and Southeast Asia, CDC Software India.

Large and mid-sized retailers are still in the process of putting a transaction system in place that includes a POS system. Logically, analysts opine that this should be followed by merchandise management and CRM systems. In the final stage, retailers invest in supply chain and logistics management as well as business intelligence and analytics systems.

Shopper's Stop has used SAS BI across the enterprise for functions such as merchandising, operations, customer-service and procurement. “Indian retailers have not yet adopted techniques like data mining or supply chain efficiencies,” said Samartha Raghava Nagabhushanam, CEO, Smart Sky Electronics and Research.

However, modern business dynamics are forcing retailers to look at suitable technological options. Some retailers are deploying applications such as CRM for loyalty programs, ERP, inventory management, supply chain management and security solutions, POS, master data repository, data management etc. to get the basic infrastructure in place. Retailers are beginning to move from card based offline programs to mobile-based real-time solutions since the cost of issuing physical cards is going up.

“We have deployed loyalty programs across both our Web and physical store and our challenge is in providing the same experience whereby a customer can redeem these at any store anywhere in India,” according to Saha. This, vendors opined is due to the data that is lying within the enterprise.

“In retail, analytics has to be done in real time and, in our experience, mostly structured and unstructured data are not in sync resulting in different customer experiences,” opined Sumanth Tarigopula, Director, BestShore, Application Services, HP.

To address issues like this, in 2010, Dynamic Vertical Solutions (DVS) announced being chosen to set up its Retail Center of Excellence’(CoE) in India by LS Retail. The logic behind setting up this retail CoE was to provide retailers with insights into the usage and application of technologies in the industry. “With retail evolving aggressively, customized vertical solutions will become a huge differentiator,” said Subhomoy Sengupta, Group Head, Microsoft Dynamics India.

"We have witnessed customer engagement solutions and analytics taking off in the last three years." Aneesh Reddy Co-Founder & CEO, Capillary Technologies

Selling is undergoing a transformation and enterprises are selling through Web sites, ATMs etc. and the way that people are buying is also starting to change. Some advanced retailers have already started using Cloud computing and BI tools to empower their storefront staff, according to Aneesh Reddy, Co-founder & CEO, Capillary Technologies. Capillary counts Raymonds, Indigo Nation, Siyarams, Spice Hotspot, Mobile Store, Woodland, Gitanjali Lifestyle, Puma, Pizza Hut as its customers among others. These steps have enabled retailers to drive cross-sell and up-sell activities right from the storefront to generate incremental business. Vendors are also trying to sell these solutions using RoI as the selling proposition with payoff times ranging from one to three years. “We have witnessed customer engagement solutions and analytics taking off in the last three years,” added Reddy.

Agreed Nagabhushanam. “We are working with a leading retailer to arm its workforce with tablets so that the sales force is fully aware of the products being sold in its stores and enable a customer to compare products and make decisions on the spot.”

"For multi-channel commerce to happen, a framework has to be put in place." Vikram Gulati CEO & Mng. Director, Happiest Minds Technologies

“For multi-channel commerce to happen, a framework has to be put in place and we see a demand in the Indian retail market for the same,”said Vikram Gulati, CEO and MD, Happiest Minds Technologies.

This exuberance of vendors need to be put in perspective with things happening on the ground. “While we know the way to deploy retail solutions, our ecosystem including suppliers and logistics providers, does not have systems in place for the overall solution to be effective,” explained Saha.

While tech usage is on the rise, much remains to be done, opined analysts. “A lot of urban retailers are in grappling with the next phase wherein qualitative data is not accurately reflected in their systems—whether it is for internal use or for customer-facing activities,” said Nitin Khanapurkar, Executive Director at KPMG.

Also, as competition kicks in, retailers will have to ramp up their technology infrastructure; else they could be wiped out. “International retailers use technology more efficiently, which has resulted in benefits to the end consumer over time,” said Gaurav Gupta, Director, Deloitte. Newer ways of promoting products and attracting footfalls can be achieved through the use of analytics. “Looking at the middle-class growth and consumption patterns, retailers in India have a unique opportunity to embrace tech in an innovative manner wherein store catalog information can be hosted on the Cloud,” said James Markarian, CTO, Informatica. He added that quicker checkouts for physical stores and clickstream methods for online retailing were things that Indian retailers could look into.

Furthermore, the use of RFID (at affordable price points) and barcoding needs to be a hygiene factor since most stock-taking in small format retailers is still done manually, opined Khanapurkar.

According to recent research from VDC, the average investment in RFID solutions is expected to touch $7 million in 2011. This increase can be attributed to spillover demand from retail to manufacturing, healthcare and other industries for item-level tracking to better monitor inventory levels and track assets, the report added.

The concept of the Cloud is beginning to enter the retail domain, vendors are bullish about the advantages that it brings. In the UK, retailer Sureworks is seeking beta sites for its POS system that's designed to help retail and restaurant owners quickly realize profits without major cash outlays. Sureworks Checkout tracks sales, manages inventory and enhances customer service and its checkout service will be offered as a subscribed service delivering the functionality of an on-site POS application. This application works online and offline with data stored in the Cloud.

A seamless experience across screens is something that retailers are working on. Making the Web store compatible with mobile phones, evaluating the feasibility of using in-house IT infrastructure and the integration of brick and mortar are some challenges. Apart from that, other technical challenges like payment gateway support and compatibility of technologies are issues that they are grappling with. Currently, in most companies, PoS is not integrated. In the future, PoS will be integrated with all of the functions within a retailer's organization.

Adopting mobile tech

Currently, retailers are fine tuning their mobile solutions play and industry watchers peg that about 20% of retailers are using it in one way or the other. Oxford Book Stores’ mobile loyalty programs are secured by a code and delivered through SMS. “The customer can redeem the voucher by providing the secure code after which the code is fed into a Web-based application to complete the transaction,” said Saha.

As an extension of loyalty card programs, retailers like the Future Group, Landmark Group, Reliance Retail and others are adopting SMS-based marketing campaigns. For example, Lifestyle stores allows customers to accrue and redeem points through an SMS without a customer's loyalty cards.

In May, Channelplay, a retail marketing company launched RADAR, a Web-based reporting tool, which integrates mobile technology to enable real-time data aggregation. Sundeep Holani, CEO, Channelplay, said, “It enables a manager to see the type of POS system deployed, its quantity, deployment in outlets and is compatible with all kinds of GPRS-enabled handsets.”

If 3G price points drop to reasonable levels (currently they stand at seven to ten times that of GRPS/EDGE), the mobile Web could end up being leveraged for m-commerce. Due to the high price points of 3G and no substantial difference in terms of a shopping experience, m-commerce is still a long shot. However, with a variety of smartphones available at sub-Rs 10,000 price points (and their number is growing) and some innovative marketing (such as a retailer tying up with a tablet or a smartphone manufacturer to run special promotions)—this could be the way ahead.

Some baby steps have been taken in this direction. In January, the Future Group rolled out the GSM mobile telephony services of Tata Teleservices in Karnataka (prior to that it had rolled out these services in six other states), whereby a customer can get additional talk time and other services from Future Group shopping outlets.

Rural retail: a big opportunity

While organized retailing is crawling towards maturity, a slew of retailers are salivating at the prospect of rolling out retail chains in rural India. For example, the Future Group and Godrej Agrovet's joint venture in rural retailing called Aadhar has been set for a revamp and the group promoter, Kishore Biyani, has revealed that the JV is planning to come up with wholesale distribution centers across different districts and franchisees that would be rolled out to local entrepreneurs who would have a better understanding of their respective areas. They would be able to source the products from these wholesale centers and then sell the same in their villages.

The alliance operates stores in Gujarat, Maharashtra, Haryana and Punjab and mostly sells wheat and paddy apart from daily use products. It also provides farmers with solutions to problems regarding their agricultural output, which includes what kind of crop can they plant and when, along with techno-commercial suggestions to help them boost their yield. “These kind of initiatives requires analytics and an infrastructure to link the complete supply chain,” said Tarigopula.

Similarly, Champion Agro Ltd is planning to come up with a single window shopping facility for farmers. The company has 35 agri-retailing outlets in the Saurashtra region, and is expected to open around 400 outlets at the taluka level across Gujarat by 2016. It will open 50 new outlets by the end of 2011 with an investment of $3.3 million and plans to invest $66.7-88.94 million.

Vadodara-based ACIL Cotton Industries is all set to come up with around 40 outlets of 'ACIL Krishi Store' in Gujarat. Of these, four outlets were made operational in April-May 2011 and will sell all types of seeds, fungicides, fertilizers, micronutrients etc.

Moreover, FMCG and retail giants are making good use of technology to reach out to rural India. From low-cost handsets to tablet PCs, the Indian FMCG and retail sectors are latching on to technology to widen their reach in the country. Marico is using mobile technology to arm its field representatives in their procurement process. The IT team at Marico developed a mobile-based application for Nokia 5235 series handsets. The company gave these GPS-enabled phones to 120 of its field representatives, with mapped routes. This helped the representatives in finding out the exact route, thereby saving on time. Further, pictures of crop and soil taken from the camera are used for monitoring the progress of contract farming, seed information and weather condition. Since the data is available online, this also helps the company quickly analyze and take decisions. Another advantage with the mobile application is its ability to get real-time data from farmers.

Hindustan Unilever Ltd is experimenting with tablet PCs in its attempt to increase its rural reach. It has been able to reach out to 500,000 outlets in a year’s time. Distribution has been the bugbear of retailers and companies like HUL are in the process of mapping far flung locales in India to get their distribution right.

The way ahead

There is a lot of innovation that technology can enable in the retail sector, opined analysts. Reliance ADA Group is planning to come out with an STB that captures information regarding a customer’s profile and relays the usage pattern of the user to the concerned marketer. “Retailers can use this as a way to reach out to their target audience, wherein they would get a better picture of their target audience,” according to Khanapurkar.

LG Electronics is betting on the fact that Indian retailers will adopt marketing strategies like E-catalog, mobile PoS and digital signage. “With E-catalog, a retailer can keep select merchandise in-store and the rest can be browsed from kiosks,” said Don Kim, Senior General Manager- B2B Marketing, LG Electronics India. This also saves on a retailer's real estate costs. Similarly, mobile PoS will help in addressing long queues and digital signboards integrated with an automated tracking system can help a customer track a product, he added.

Organized retail in India is expected to increase from 5% in 2008 to 14-18% and reach $450 billion by 2015, according to a McKinsey report. Organized retail accounts for only 8% of the overall retail industry and it is estimated that 2% of the unorganized segment will migrate to the organized segment every year.

For all this to happen the whole technology ecosystem needs to be in place and information needs to flow seamlessly for the benefit of both the retailer and consumer. One of the main reasons that the unorganized sector still forms the bulk of Indian retail is due to the 'close to the customer' approach of a kirana store. Can technology enable big format retailers to do the same? Only time will tell.

venkatesh.ganesh@expressindia.com