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)