Opportunities in the retail sector
With the government opening up the retail sector for FDI, the opportunities for the partners will grow exponentially in the coming years
According to the India Retail Report 2013 from the Images Group, the size of the Indian retail industry, estimated at $500 billion in 2012, is expected to increase to $800 billion by 2015. While 5 percent of the market is addressed by organized players, the rest is dominated by kirana stores and departmental stores.
The concept of shopping has undergone a vast change in terms of format and consumer buying behavior due to increasing purchasing power and spending. This is triggering the proliferation of large format retail as well as online retail. Modern retail is likely to increase from the current $27 billion to $220 billion by 2020. Moreover, according to Forrester Research, e-commerce revenue in India will increase by more than five times by 2016 from $1.6 billion in 2012 to $8.8 billion in 2016.
In addition, modern retail is expecting a major boost as the government has notified 51 percent FDI in multi-brand retail. Says Amit Bhatia, Head, Retail Business, NEC India, “The government recently diluted the mandatory 30 percent local sourcing for multi-brand retailers and permitted states to include cities with a population of less than one million for allowing such retailing. This will attract more FDI and hence more IT investments.”
IT investment in retail is primarily driven by flourishing organized players. “Modern retailers spend 5-8 percent of their revenue on IT. Even unorganized players are now spending 0.5-0.8 percent,” informs Bhatia.
This amounts to an IT spend of $4.25 billion spread through an estimated 1.5 crore retailers across the country. “Retail is seeing consolidation and there will be fewer players in the mid-to-large retail segment. The segment will be mainly driven by multinationals, large Indian retailers, and e-commerce sites which are investing in IT,” observes Sandeep Lodha, Director, Tyrone Systems.
Adds V Sreenivasan, Senior VP, ITC Infotech, “The best part is that even unorganized small players are looking for IT solutions because of their need to cut costs and improve inventory management. Large players are focused on offering a better experience to consumers and identifying buying behavior.”
There are opportunities for partners in solutions such as billing and inventory management, e-commerce, ERP, CRM, analytics and surveillance.
Billing and inventory management
Billing solutions through PoS billing printers are the largest commodity product line for retail shops. “The PoS solution is the first step in automation for a retailer. Barcode scanning was the first major technology application adopted by Indian retailers. It made cashiers more productive, reduced the number of errors at the register, and made inventory and buying trends more visible and accurate,” says PB Ganesh Kumar, Head, Sales & Marketing, Chennai, TVSE.
Moving ahead, NEC identifies a trend toward NFC-enabled mobile PoS solutions. Bhatia expects mobile PoS to capture the market in the next
“The best part is that even unorganized small retailers are looking for IT solutions because of their need to cut costs and improve inventory management” V SREENIVASAN Senior VP, ITC Infotech
couple of years as the transaction can be done through NFC-enabled smartphones. “These solutions enable retailers to manage queues during peak hours because retailers can add more terminals as needed. It has been observed that about 40 percent of customers purchase less than 10 items at a time. Mobile PoS solutions are ideal for these small transactions.”
NEC has installed this solution at PVR Cinemas and two large retail chains. “As most customers now carry smartphones this solution can decrease the transaction time by upto 80 percent. This is what is attracting retailers the most,” adds Bhatia.
PoS solutions are also easing inventory management issues for retailers. “In a new trend, small-time retailers are opening super stores which are normally 400 sq ft. We have sold integrated billing and inventory management solutions to about 25 such retailers in the last one and half year. The trend is now catching across Gujarat,” says Sunil Bhavsar, Director, Parth Systems, Ahmedabad.
E-commerce adoption is growing at a rapid pace with even small retailers keen to provide online shopping convenience to their customers. “More than just e-commerce, the retail industry is looking at adopting digital commerce which spans online, mobile and social channels. We expect this trend to grow over the next five
“As most customers now carry smartphones, NFC-based PoS solutions can decrease the transaction time by upto 80 percent. This is attracting retailers” AMIT BHATIA Head, Retail Business, NEC India
years,” states Sreenivasan.
“Right now the large opportunities are in developing portals for retailers who are coming into e-commerce. Reliance and Lifestyle are two big names which are starting their own portals,” informs Vipul Dutta, CEO, Futuresoft Solutions, Delhi.
More than a platform to sell, retailers are identifying e-commerce portals as a means to expand visibility and reach. “While most of the large players are establishing their own portals, many small players are rendering their products through large online marketplaces like Flipkart and Snapdeal,” says Bhatia.
Many vendors are offering cloud-based e-commerce platforms to retailers. “Cloud-based platforms give scalability and the opex model which are attracting retailers. Even small retailers are opting for e-commerce platforms. We have over 20 national retailers, 200 local retailers and 1,00,000 consumers on Klisma, our cloudbased e-commerce platform. The platform can also be used as a customer management solution by mall owners,” says Ajay Aggarwal, Chief Customer Experience Officer, Klisma.
Moreover, partners are seeing opportunities in the backend IT infrastructure upgrade requirements of the e-commerce plans of retailers. “Every large retailer wants an online presence and is spending heavily on the backend as well,” says Lodha.
“While smaller players rely on Tally, large players are adopting full-fledged ERPs. Average deal size ranges from ` 20 lakh to ` 40 lakh” DEVESH AGGARWAL CEO, Compusoft
Planning & analytics
IT partners are seeing many retailers moving from home-grown legacy ERP to standardized full-fledged or mini-ERPs. “As more retail stores are opening there isn’t much difference in their product positioning, hence the focus is on creating customer loyalty, understanding the customer, and offering targeted schemes,” says Samik Roy, Director and Country Head, Dynamics, Microsoft India.
According to Devesh Aggarwal, CEO, Compusoft, Mumbai, “While the smaller players are relying on financial management solutions such as Tally, large players are adopting full-fledged ERPs to gain insight into their inventory and supply chain. The average deal size ranges from ` 20 lakh to ` 30 lakh.”
Besides ERP, customers are opting for CRM and analytics to offer a better customer experience.
“Demand for big data and analytics is increasing,” says Lodha. “Retailers want to know what customers are buying, how frequently they are buying, their age and gender. This information forms the basis of various schemes that they introduce to target loyal customers.”
Pune-based Mobien Technologies has developed a mobile application named Distribution Networking Automation, and in the last six months has sold it to large customers including Himalaya SKL, Kriti Industries and Birla Cellulose which are heavily dependent on their distribution and retail partners. “It provides the retailer
“While surveillance has been around in retail, retailers are now adopting IP to analyze customer behavior and footfalls, and compare results with actual sales” GUNJAN SHAH Director, Insight Business Machines
an interactive platform to increase cross-selling,” explains Ajit Gokhale, CEO, Mobien. “While surveillance has been around in retail for a long time, retailers are now adopting IP to analyze customer behavior and footfalls, and then compare the results with actual sales,” says Gunjan Shah, Director, Insight Business Machines, Mumbai.
Besides analytical data, IP surveillance has become important due to the increasing incidence of shop-lifting. “While surveillance has become mandatory for retailers in most states, the demand for IP-based solutions is increasing due to their sharp images and analytics,” adds Shah.
Seeing the opportunities, partners are now adding surveillance to their portfolio. “Till a year ago we were not offering surveillance solutions, and as a result we lost many large retail customers,” shares Vimesh Avlani, CEO, Graftronics, Mumbai. “But now we offer a complete solution comprising IP cameras, networking, MPLS and VPN circuits.”
Retailers are also adopting signage solutions to disseminate schemes and promotional offers to customers. “Digital signages are normally deployed in large stores which are 1,000 sq ft upward. Larger retailers are adopting mature digital signage solutions with centralized data control and interactive customer feedback solutions,” says Bhavsar.