Specialty Retail: Making a Statement

Retailing in India is finally coming of age. The growing popularity of niche
retailing in addition to large format retails (LFR) like Shoppers Stop,
Pantaloons, Westside, Lifestyle and Big Bazaar is a sure indicator of the newest
trend catching up with the Indian consumers.

Booming sectors like IT, ITeS and telecom, which are driving the thriving job
market in the country, have contributed to huge rise in disposable income in the
hands of the middle class. This has resulted in a continuous craving for better
lifestyle, comfort and convenient living. And the middle class, which
constitutes the majority of the Indian urban population, now dont hesitate to
shell out the extra cash to buy the lifestyle they are looking for.

Sensing the new psyche, todays retailers are increasingly becoming active in
offering consumers world class experience through comfort shopping.
Understanding the pulse of the Indian shopper, who is price conscious yet ready
to spend if getting value for money, retailers are coming up with reasonable
pricing powered with innovative schemes in addition to comfort factorin order
to allure them. No doubt the Indian population is increasingly getting hooked on
the modern retail environments.

Retailers Day Out

There is no doubt that the Indian retail sector is on an upswing, and thers
plenty of industry research reports to confirm this. According to AT Kearneys
eighth annual Global Retail Development Index, the Indian retail market held the
fifth position globally in 2009. In addition, Global Consultancy Northbridge
Capital declared that the market size of the Indian retail sector is expected to
grow from $400 bn to $700 by end of this year. A McKinsey report, The rise of
the Indian Consumer Market, further estimates that the Indian consumer market is
likely to grow four times by 2025. However, currently only 6% of the total
Indian retail sector is organized. But it is expected to witness more and larger
format malls, and branded retail stores.

Interestingly, the growth is not only limited to the metro cities. Tier-2
cities like Noida, Amritsar, Kochi and Gurgaon are observing retail growth like
never before, and are emerging as the favored destination for the retail sector.

Out of the estimated $441 bn, organized retail in India contributes around 6%
of the market. There was this sense of euphoric growth during 2006-07 during
which many large business groups jumped on to the retail bandwagon. The economic
upset that followed, however, laid to rest all such euphoria and retail was
grounded even before it could take off. Almost all retailers saw diminishing
footfalls and conversions. However, the last three months have seen a steady
upswing and retailers believe that the worst is almost over and the industry is
about to see a period of sure though slow growth.

With a booming Indian economy, there has been tremendous change in the level
of growth expectations among retailers. In fact, over these years the whole of
retailing has gone through drastic changes, especially when it comes to niche
retail, which now has a defined characteristics and growth attached to it. Till
some time back though it was difficult to define growth and market size or the
structure of retail as a vertical. But it has now evolved in a manner where we
can talk about specialty or niche retail as a micro vertical under retailing.

What is Specialty Retail?

Chains such as the Bengaluru based Kids Kemp, the Mumbai books retailer
Crossword, RPGs Music World, and the Times Groups music chain Planet M, are
focusing on specific market segments and have established themselves strongly in
their sectors. Due to its widespread product inclusion and extremely broad
horizon, it is difficult to define what specialty retail is. Some would consider
fashion, luxury, furnishing or footwear as specialty retail, others would
consider electronic or FMCG or grocery as another; while some might consider
books, cosmetics, apparel or jewellery as specialty retail. Specialty retails
like these today contribute to approximately 50% of the total organized retail
market in India. According to Jitesh Shetty, director, vertical solutions,
Microsoft India, apparel retail has always existed and now the CDIT (donsumer
Durables and IT) category is seeing a nationwide resurgence giving boost to
niche retailing in India.

"It is very difficult to define specialty retail as there are a number of
sub-verticals under retail. The retail industry as a whole is right now in the
growth phase and in the next five years the annual growth rate is going to be
about 40%. That of specialty retail would be between 40-50%," says Rakhee Nagpal,
MD, Dynamic Vertical Solutions.

Tech, the Saviour

The niche retailers are now realizing the need for technology
implementations for their business growth and expansion. More importantly, they
now understand the need for integrated application that would steer their
business to the next level of growth required in this world of cut-throat
competition and give their business the required boost and edge. And, very
important in retail, better customer service and efficient operational
functionality resulting into higher customer satisfaction. Hence, technology
adoption is on the rise.

IT is increasingly becoming a business enabling tool for retailers and there
has been a visible change in the mentality and awareness levels among those in
the business. The retailers today are also more forthcoming and aware about
technology, and its use and benefits. Therefore, overall, its an optimistic
transformation that this industry is witnessing, as it evolves towards a
momentous growth phase. "There is tremendous opportunity attached to this
sector, given that people have started to understand the importance of
technology. The scope for IT is pretty huge since modern retail business
functions heavily relies upon IT," says Nagpal.

According to recent studies, the Indian retail sector is expected to invest
around $503.2 mn in retail technology service solutions in the current financial
year. Retailing has shifted irreversibly and globally. Some markets might
respond more slowly to the change (retailer or consumer demanded), but the
change has happened. In many respects, customers want more meaningful
engagements. Greater use of higher quality technology like business analytics
can send hyper accurate marketing to customers and that is critical. This can
help in analyses of the sales data, response rate data and so on, to continually
refine the messaging and offers that lead to success. "We also realize that in
India SaaS is helping Indian retailers to adopt IT solutions in a cost-effective
way. SaaS facilitates the end customers to cut down their total cost of
ownership, eliminates the need for an in-house support team, and fast-tracks the
implementation process," says David Boden, senior director, retail, Oracle Asia
Pacific and Japan.

According to IDC, IT applications are witnessing adoption from the start till
the last mile of the business operation for most retail functions, and the key
solutions being looked upon by retailers in India today are ERP/ERM solutions,
supply chain management, inventory management and security solutions. Today
Indian retail customers are looking for solutions which provide better insights,
agility and more efficiency. In todays business environment, retailers are
increasingly opting for a collaborative modus operendi, joining hands to share
the loyalty view by increasing customer base. "A report from Springboard
Research illustrates the transition of the India retail marketplace from a
nation of shopkeepers to a rapid transformation of national retail chains and
globalization. With a primary focus on supply chain and inventory management,
the compelling value proposition must consider the foundation of detailed item
level data accuracy (universal data cleanse) for the purpose of enabling process
change on item, vendor/supplier management," informs Rajamani Srinivasan, vice
president, solution engineering, SAP.

The current retail players seem to prefer solutions like CRM, BI and
analytics. BI applications are complete, prebuilt and deliver intuitive,
role-based intelligence throughout an organization. This application helps the
retailer in understanding customer behavior, driving sales and profitability
while at the same time reducing costs. These days, retailers are dependent on
solutions like SCM, CRM and ERP. "Currently, IT covers each aspect of the Indian
retail market and encompasses everything from social networking to ERP
solutions," says Boden.

"Our solutions are extremely verticalized, addressing the needs of these
niche sectors. The solution we offer as their tech partners has to be flexible
in order to meet the demands of the customers," says Nagpal. "Therefore some
sort of customization and change in configurations are required based on the
nature of the products these stores sell or the volume and breadth of their
businesses. Depending on the nature of products, the focus area becomes
different," she adds.

Conclusion

Specialty retail is here to stay since they offer the breadth and depth of
the prescribed category. As Boden points out, retailers specializing in high
level of involvement categories would do better as specialty stores are
designated destination shopping landmarks. IT would play critical role in this
growth story and would continue to prove a vital tool in the areas of supply
chain management, customer relationship management, managing business
performance and driving multiple channels of sales.

Piyali Guha

piyalig@cybermedia.co.in