Exciting times ahead

India's retail industry has never had it so good. Despite the government's

go-slow strategy for opening up the sector to foreign investments, organized

retail is quietly spreading its tentacles to every nook and corner, thereby

creating job opportunities and leveraging an economic boom in the country.

The Indian retail industry, which is one of the fastest growing sectors of

the Indian economy, has been traditionally dominated by disorganized retail-the

small, family-owned retail shops. The consumer today is richer, younger, and

much more aspiring than ever before. S/he values convenience and choice, as much

as getting her money's worth. And the explosion of organized retail formats like

supermarkets and hypermarkets in an otherwise fragmented Indian retail market is

one example of how modern retailers are catering to this “new” consumer. Also,

as incomes rise in India, there has been considerable growth in the number of

shopping malls and large department stores developed.

Consequently, this new market opportunity has attracted a diverse group of

companies to the retail business from home grown entrepreneurs, to 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



As the retail market evolves and grows, retail companies will need IT to

accommodate their expansion or entries into the market. Many Indian retail

companies have already made significant investments in building their IT

infrastructure, and others have committed to doing so. Retailers are quickly

learning 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.

While there is no denying that retailers will benefit from the large scale IT

adoption, from an IT perspective, technology usage is far lower in India

compared to more advanced economies. As such, most Indian retailers do not use

integrated IT systems for business operations and lack an overall IT strategy.

Again, this is due to the fact that the market is dominated by small

neighborhood retailers.

As the organized retail industry evolves in India, Springboard Research has

observed that Indian retailers realize the need for a complete end-to-end IT

infrastructure to manage their increasingly complex operations. And as retailers

expand their business and build supplier relationships, set up distribution

centers, and new retail outlets, an enterprise-wide IT system will be required

to integrate core operations and provide real-time information processing at the

central data center for improved business intelligence.

What the Focus is On



In terms of IT, 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. Springboard Research data

shows that majority of retailers consider SCM as instrumental in their efforts

to get closer to the customer.

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 improve store management and increase Rol.

Secondly, retailers are also keen on streamlining their inventory management.

It poses challenges for retailers as they need to have products available for

consumers, yet not overstock unnecessary and costly inventory. CRM also remains

one of the top focus areas for retailers in India. They have realized that a key

to success in the industry is an effective customer relationship management

(CRM) application, since its personalization capabilities can provide increased

value to today's more discerning consumer.

ERP Migration



Retailers are implementing ERP solutions to integrate functions from

warehousing to distribution, front and back office store systems, and

merchandising as they expand operations throughout India. To optimize their

growing business, they also need information regarding consumer demand, sales,

assets, and other analytics to provide insight into customer preferences,

inventory control, and so on. The focus of retail companies on ERP is turning

out to be a significant business opportunity for vendors like SAP who have

developed packaged ERP solutions that cater to the needs of retailers.

Currently, the retail industry is in the early stages of evolution, which

means many retailers will aim for the first mover advantage in procuring retail

space and market share. To “get in while the getting is good,” retailers will be

willing to commit large resources for the expansion of their businesses. And

with this growth, the market for IT companies is bound to be significant.

(The author is senior analyst, Vertical Research at Sprinboard Research)