Technology Behind the GLITZ

Those were the good old days when every time you had to buy something, all
you had to do was skip across to your neighborhood kirana store. The mom-and-pop
store was almost like an extended family who knew your family since agesand not
because you had the customer loyalty card. From the familiar kirana stores, we
have now arrived in the age of super-marts and hyper-marts where customer is
the king and discounts and freebies are offered to lure you away from
competition. The Indian retail market never had it so good; from being a
relatively unorganized sector with the mom-and-pop stores and petty vendors
dominating a majority chunk of the market, the scenario has changed rapidly. The
entry of corporate giants like Future Group, ITC and Reliance has changed the
way retail business is conducted.

The retail boom is being driven by the growing purchasing power of the Indian
middle class that has made India a happening market for the retail players. The
growing market opportunity has attracted a diverse group of companies to the
retail business from home grown entrepreneurs and multinational retail giants to
business conglomerates like Bharti, Reliance and Tata, among others, who have
plans to invest billions of dollars in the Indian retail industry.

IT as an Enabler

The growth of the retail market has spurred the retail companies to look at
technology for facilitating expansion or entry in the market. Today retail is
one of the largest industries in India, accounting for over 10% of the Indian
GDP, and more than 8 % employment. Industry analysts say that it is on a high
growth trajectory with a projected $453 billion potential by 2011, fuelled by
the governments increasing focus on achieving higher GDP growth, and the
increasing consumer income level and aspirations, says Amit Mukherjee, Group
CIO, RPG. With such a huge demand and an operations-intensive supply side,
Indian retailers are gradually realizing the power of technology as a key growth
enabler.

Many Indian retail companies have already made significant investments in
building their IT infrastructure, and others have committed to doing so.
Retailers are realizing that IT systems can enhance their business with benefits
like operations integration, real-time data, inventory and merchandising
management, and reductions in processing and warehousing costs.

The offering of the organized retailers is contingent on a strong IT backbone
and every retailer recognizes this globally. India is no exception to the case
and every company that started operations during the last 5-6 years has invested
in IT solutions since inception. Some companies that started in the late 90s
initially started with basic IT solutions for retail operations and Point of
Sale, which were subsequently replaced with retail ERP solutions.

Initially, retail companies started technology adoption by using processes
like financial accounting, planning, billing, etc. As retail is a volatile
business, demand for better customer services increased and it was not possible
to address these without technology support. Technology always goes hand in hand
with business solution for quick and better response, says Sudesh Agarwal, Vice
President IT, Lifestyle Stores.

For instance, Shoppers Stop, which began operations in 1991 issued
electronic receipts to customers in a world of cash memos. The initial focus
for us was to ensure that the customer is the beneficiary of the investments
made and thus we deployed store solutions linked to merchandise management
systems in the back office. These were subsequently extended to warehouses,
range, assortment planning and forecasting. The basic financial accounting and
other related technologies were implemented in parallel, says Arun Gupta, CTO,
Shoppers Stop.

Key Drivers

Even as retail fever gripped India in 2000, automation process could
commence only a couple of years ago. The main reason for technology laggardness
was the lack of scale. The industry was nascent, share of organized retail was a
miniscule percentage of the total market base, and the retailers were still
experimenting. In a semi-automated world, the key challenge is to ensure that
the processes are consistently followed apart from the speed at which
information flows within the enterprise. For instance when a stock-keeping unit
sells off an item, the replenishment system and the warehouse requires the
information for replacing the item in the store. Merchandise, range and
assortment planning with a large number of stores cannot be effectively managed
without IT.

Before technology adoption, reaction time to any event was high as the time
taken to identify the trend was on the higher side. With the deployment of
systems, new trends can now be captured in the early stages itself. Handling of
stock and sales can also be done seamlessly.

Shoppers Stop currently uses a technology stack that connects all these
points together from planning, buying, providing the merchandise to the store,
selling and replenishment. On the other hand, it also assists us to track the
buying pattern of our First Club members and allows us to stack products that
are in demand, adds Gupta.

Organized retail is only possible with the extensive support of technology.
Organized retail requires a strong IT backbone to support operations. And IT
will essay two key roles- automation of process to be more user friendly,
flexible and easy to use application; deployment of new technology for adding
revenue, says Meheriar Patel, GM, IT Globus.

Technology can benefit business in more ways than one as it helps in
collaborating real time data, data analysis, inventory and merchandising
management, and reduction in processing and warehousing costs.

Retailing Focus

According to Springboard Research, IT market opportunities in the Indian
retail segment are expected to grow at a CAGR of 44% from 2006 to 2010. In 2007,
retail IT market revenue was projected at $354 mn. By 2010, Springboard
Research forecasts the market to grow to $1.07 bn. Companies that enter the
retail business in the next few years will generate much of this growth, says
Nilotpal Chakravarti, Senior Analyst Vertical Research at Springboard Research.

Most Indian retailers are well aware that an efficient supply chain is
imperative to a successful, competitive and profitable retail operation. As
such, implementing a Supply Chain Management (SCM) solution leads among the top
strategic focus areas for retailers. Also, as Indian retailers ramp up their
operations by opening multiple stores across the country, the need for
integrated supply chain management solutions becomes critical to improved store
management and increased RoI.

IT assists us to track the buying pattern of our First Club members and allows us to stack products that are in demand Arun Gupta, cio, Shoppers Stop	As retail is a volatile business, demand for better customer services increased, and it was not possible to address these without technology support Sudesh Agarwal, VP, IT, Lifestyle	Organized retail requires a strong IT backbone to support operations Meheriar Patel, GME IT, Globus

Secondly, retailers are also keen on streamlining their inventory management,
a major challenge for retailers as they need to have products available for
consumers, yet not overstock unnecessary and costly inventory. By automating
inventory management, retailers have improved control over inventory, reducing
the amount of extra inventory and increasing stock turnover, making the
inventory more profitable. Thus inventory management becomes imperative for
successful retail business.

While technology is certainly beneficial for retailers, the customers too are
waking up to smell the coffee. As more customer-related information is captured,
personalized campaigns and communications become a reality. Retailers will find
that 60% of their business is through repeat customers, says Patel. Chakravarti
agrees that CRM remains one of the top focus areas for retailers in India as
retailers realize that the key to success is an effective customer relationship
management (CRM) application, since its personalization capabilities can provide
increased value to todays more discerning consumer.

From Springboards perspective, Indian retailers appear to understand the
importance of leveraging customer profile information. Data collected at the
store level shows what the customers are buying and how often, this can be
shared with the retailers supply chain network of suppliers, factories and
distribution centers to meet anticipated product demand.

Associated Challenges

Key challenges facing retail organizations that can be effectively tackled
through the implementation of IT include streamlining and improving
merchandising, store planning/operations, profitability, customer relations,
workforce and supply chain management. Many retailers are also seriously
starting to look at IT solutions for tracking and monitoring their assets. In
addition, technologies like RFID and e-commerce offer significant business
benefits to the retail industry, even though their implementation is not yet
widespread.

Even though most retail companies have only recently started making large
investments in their business with significant budget allocations for IT, it is
expected that this trend will become stronger over the next few years and new
investments in the retail sector will spur growth in the IT market.

Once retailers have set up their basic IT infrastructure, they will focus on
strategically investing in IT to boost competitiveness, efficiency, productivity
and profitability. IT will be also be required to manage the growth in the scale
of operations. It is significant to note that while small retailers currently
have a marginal focus on IT, they will increasingly rely on IT to stay
competitive in the face of expected rivalry from the large players.

Future Beckons

As organized retail is on the growth trajectory, retail companies cannot
envision growth without technology. As retail companies set up shop in remote
locations, robust IT infrastructure will become a must in order to sustain rapid
growth. Currently, the industry is at the threshold of evolution wherein
retailers will look to en-cash the first-mover advantage for grabbing larger
market share. And in case of new set-up, business feasibility is 100% dependent
on IT as it provides the required analysis to prove whether business is viable
or not. The key challenge for IT vendors will be to keep pace with the rapid
changes in the dynamics of the retail industry and provide solutions and
services that enable these companies to compete in a demanding marketplace.

Stuti Das

Stutid@cybermedia.co.in