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Issue of March 2007
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Overview

Indian Retail: An Overview

As organised retailers carve out a bigger piece of the retail pie for themselves it’s an exciting time for the retail sector. By Dominic K

Emerging markets such as India and China are the final frontier for retail taking the focus away from saturated Western markets. Since 2001, 49 global retailers entered 90 new markets, but at the same time, 17 retailers left markets in 2005.

The Indian retail industry in valued at about $300 billion and is expected to grow to $427 billion in 2010 and $637 billion in 2015. Only three percent of Indian retail is organised. Retailers of multiple brands can operate through a franchise or a cash-and-carry wholesale model.

Retail is India’s largest industry, accounting for over 10 percent of the country’s GDP and around eight percent of employment. Retail in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. That said, the heavy initial investments required make break even hard to achieve and many players have not tasted success to date. However, the future is promising; the market is growing, government policies are becoming more favourable and emerging technologies are facilitating operations.

Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. Modern retail has entered India as seen in sprawling shopping centres, multi-storeyed malls and huge complexes offer shopping, entertainment and food all under one roof.

The Indian retailing sector is at an inflexion point where the growth of organised retail and growth in the consumption by Indians is going to adopt a higher growth trajectory. The Indian population is witnessing a significant change in its demographics. A large young working population with median age of 24 years, nuclear families in urban areas, along with increasing working-women population and emerging opportunities in the services sector are going to be the key growth drivers of the organised retail sector.

Initially, this was about Indian corporate houses rolling out malls and supermarkets, but with Wal-Mart coming into the Indian market, the era of the superstore is dawning. Unlike the kirana stores that served us for decades, this new breed of retail chains is heavily dependent on IT.

Wal-Mart, the world’s largest retailer, and Bharti Enterprises have signed a Memorandum of Understanding (MoU) to explore business opportunities in the Indian retail industry. This joint venture will mark the entry of Wal-Mart into the Indian retailing industry.

The biggest competitor for Bharti-Wal-Mart is likely to be Reliance Retail, the retail wing of Reliance, which had planned to establish 10,000 stores by 2010. It had already opened 11 pilot stores under the “Reliance Fresh” format in Hyderabad.

All these trends and developments present a great business opportunity for software and hardware vendors from across the globe. Indian solution providers are targeting this segment have reason to rejoice. For while organised retail occupies a miniscule two to three percent of the overall Indian retailing industry, that is poised to change.

In spite of the prospects being good things aren’t quite as rosy when it comes to awareness of IT systems. In most cases, organised retailers in India have installed solutions that help them automate transactional systems.

With the retail sector in India undergoing a transformation due to the entry of large corporate houses, IT managers and CIOs are now looking forward to know how IT can help them achieve the business goals of their organisations.

Standards-based architecture and software support all kinds of mission-critical IT applications for enabling greater efficiency, significant cost savings, and new business value. The critical activities that can be handled by IT are finance and accounting, business intelligence, vendor development and management, supply chain management, merchandising and inventory management, facilities management, stores management, customer relationship management, branding, marketing, sales promotion and HR.

Like any other vertical, retail also stands to benefit from elaborate IT set-ups. However, this is subject to the scale and size of the organisation, as well as an objective assessment of its requirements. Key common challenges that can be tackled through IT implementations include accurate merchandising, improved planning, increasing profitability, enhancing customer experience, strengthening store operations, improved workforce management, and improving the supply chain. This is in fact one of the key imperatives facing retailers in India, to have a robust and scalable supply chain that will facilitate rapid growth.

Since a basic objective is to make data available to users and customers, proper IT implementation and superior IT infrastructure ensure that in spite of getting minimal details, the retailer captures the right information, which flows to everyone from the back office staff to the head office managers. The entire information flow must be seamless. A retail business works on a network environment because the stores connect to one another as well as to supplier sites. This is because in the retail business quick response is the key to success. Proper IT implementation also ensures that investment in retail reduces substantially.

 
     
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