Biztech2.com Questionnaire

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1. aHow has the retail industry evolved in the past few years in terms of IT? Please list the recent IT developments.

The Retail Market is in a state of exponential growth. One needs to see the mushrooming of malls and shopping complexes in the metros and small towns in India to grasp the enormity of this growth. The sudden spurt in demand and a greater awareness amongst buyers for quality products and services, created a vacuum that could only be met by an organized retail sector, with fine-tuned supply chains, efficient inventory management and a totally customer focused view that was alien to India.

One of the key factors in achieving an organized and efficient retail operation is the use of technology as an enabler. IT is the key enabler to improving customer satisfaction, operational efficiencies and by extension profitability. Considering the evolution of information technology in retail industry, there is definitely an upsurge seen year on year in terms of awareness and adoption. Retailers of all operational sizes are adopting cost effective IT solutions based on new technologies.

Off late solutions like Business Intelligence and analytics have become the needs of the hour coupled with solutions, such as Point of Sale (PoS) systems, SCM and ERP to name a few which has helped several retailers optimize their business in terms of sales, inventory, supply chain management, customer relationship and other business functions which in turn have helped them maximize profits.

Also, Retailers are adopting new technologies which are cost effective; require less hardware and manpower for maintenance like Software-as-a Service (SaaS). The requirements of retailers also extend to adopt a readymade IT solutions rather than reinventing the wheel.

2. Which are the key retail verticals showing maximum interest in adopting IT?

The key verticals up to our knowledge who have been showing maximum interest in adopting IT have been Food/Grocery/Vegetables, Garments, Electronics/Electrical (White Goods), Cosmetics/Medicines, Home Furnishings and Furniture, Lifestyle products (Jewellery/Shoes/Watches), Office Products and Multi Product outlets. But, it does not rule out the fact that other industries are catching up very quickly to beat the competition in acquiring customers.

3. How well are technologies like BI, RFID and SaaS being adopted by the retail segment? How can each of these technologies help retailers in maximizing profit?

BI and its Benefits:

A Gartner study said the rapidly growing Business Intelligence market in India underwent a growth of over 20 per cent in 2008 despite economic slowdown. India is emerging as one of the fastest growing BI markets today—presently pegged at $47 million in the year 2009 with a revenue potential of $68.8 million by the year end. This clearly shows the amount of potential the market presents. 

Benefits

It helps to better understand customer buying behavior, to drive sales and profitability, and to reduce operational costs is a necessity for long-term survival. Business Intelligence Solutions helps retailers take critical decisions on daily issues like:

– How to dynamically decide product pricing and discounts / deals

– Which customers need to be informed on arrivals of new products

– How much to reorder of an existing product line

– How to track the most profitable transactions

– How can the Inventory levels be optimized for maximum profit

SaaS technology and its benefits:

SaaS growth and momentum in the APAC region will last in the long run. Springboard Research estimates the SaaS market in the region will experience a CAGR of 66% year-on-year growth between 2006 and 2010, and account for 15% of the enterprise applications software market by 2010.

Benefits of SaaS Software as a Service (SaaS) is proving to a one such technology innovation, which:

a.Brings down TCO for an end customer drastically.

b.Eliminates need for an in-house team of support personnel

c.Fast-tracks the implementation process, with virtual plug-and-play cycles.

4. What percentage of the market has been the early adopter of technology?

It is difficult to say the percentage of IT adoption amongst Indian Retailers as it is still in a nascent stage. But, we can give definitive figures about importance of Technology being felt amongst the CIO’s of retail companies in India to be at 23% as per IDC reports.

The current adopters of Software solutions like Business Intelligence applications in Indian Retail Industry are mostly the leading industry houses like Future Group, Lifestyle, AB Birla, Reliance, Tata and Madura Garments but Business intelligence software is making inroads into the small business arena as they face tough competition from biggies. More over, advancement of technology and cost effective Business Intelligence software has made adoption easier and viable.

5. Do you think the industry is lagging behind in terms of adopting new technologies as compared to other industries? Please elaborate.

There is no denying the fact that industries in India is on a growth curve with technology playing a key role in its business success. The Indian retail industry has of late seen the entry of the biggies of the global retail market, and with technology playing an integral role in the success of any business, this has expectedly resulted in the established players going in for advanced IT adoption in a bid to retain their market share.

More and more Indian enterprises are witnessing a growing automation trend leading to more sophisticated usage of IT but, more importantly, this has resulted in increased IT spending across verticals.

According to the Dataquest-IDC Mega Users Survey in 2009, Traditional spenders like BFSI, IT/ITeS and Oil & Petrochemical though have spent the most in 2009, the percentage growth in the use of IT is maximum in retail.At 43% upsurge, the retail sector clocked the highest growth in IT spend in the current year amongst all verticals. Other sectors like BFSI, IT and ITeS, and automobile maintained the industry average; while utility was the only other vertical that crossed the industry average. This year too oil and petrochemicals was the relative laggard, joined by pharma and biotech which clocked 10% and 11% growth respectively despite the fact that both these verticals are regarded as tech-savvy.

6. Please list the key problem areas when it comes to IT adoption in retail.

The usage of IT in the retail industry is fairly gaining in India. But, the unorganized sector, a considerable portion of the retail industry, is lagging behind in IT usage. This could be one of the key reasons why IT usage percentage remains low in the Indian retail industry. Even though technology is available to cater to this segment, factors such as money and low understanding of benefits deter its usage. Currently, national and multi-format retailers are the most aggressive players in IT spending.

On the other hand, implementation has not been managed well due to the lack of sector understanding, both with clients as well as IT consultants. Where we are also lagging is in the realm of advanced IT products and solutions such as replenishment planning, analytics, RFID (radio-frequency-identification) and warehouse management systems.

7. Shade some light on the technical challenges that the retail industry is facing in terms of the pace of change, customer expectations and competition?

Retailing has seen such a transformation over the past decade that its very definition has undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring mere availability of his product. Today, retailing is about so much more than mere merchandising. It’s about casting customers in a story, reflecting their desires and aspirations, and forging long-lasting relationships. As the Indian consumer evolves they expect more and more at each and every time when they step into a store. Retail today has changed from selling a product or a service to selling a hope, an aspiration and above all an experience that a consumer would like to repeat.The retail scenario is characterized by logistical challenges, constant changes in consumer preferences, evolution of new retail formats, transparency, Infrastructure,distribution and inventory, management of point sale (POS) data.

Some of the technical challenges of retail industry is facing in terms of IT implementations are:

1)Legacy applications (POS, warehouse management and order management and fulfillment) which is difficult to integrate with new technology software applications.

2)Old hardware infrastructure which does not support current day software applications

3)Cost of implementing new IT solutions.

4)Low awareness about benefits of IT solutions in unorganized retailing

5)Lack of IT consultants who are domain specialists

6)High implementation time and maintenance cost of software applications 

8. How can retailers overcome these challenges?

Retailers can over come these challenges with

 a)Robust and integrated IT infrastructure and good analytic capabilities

 b)Adopt new technologies like Software-as-a-Service (SaaS) for various Enterprise applications which brings down the cost drastically, without retailer maintaining the application and hardware required

c)Retailers can also go for ready made applications rather than implementing on their own.

d)Most importantly, underpinning IT organizations will need to align processes, procedures, technologies and personnel with these challenging business initiatives in order to deliver on the promise of improved customer experience.

9. When we talk about use of IT in retail, do you think the Indian industry is still at a nascent stage when compared to international markets?

Awareness about IT in SMB and Large retail companies in India is very high, but the level of deployment is low, which is why India is still a large untapped market. Smaller businesses are now willing to invest in IT because of increased awareness about its benefits. However, lack of resources, financial and otherwise, constraints their ability to deploy costly software.

As compared with India, retail players in various regions like US and European markets make huge investments in IT, in line with customer demands. This is primarily because they are mature markets. Adoption of Retail technology especially Business Intelligence solutions in India is very high. Recent market research from Gartner has revealed that the rapidly growing Business Intelligence market in India underwent a growth of over 20 per cent in 2008 despite economic slowdown.

The core difference between US, UK and India markets are in terms of implementation and customization. India has become an early adopter of new technology like SaaS on a larger scale while the US and UK are still catching up

10. Can we expect an upsurge in IT adoption by the Indian retail industry in the near future?

Answers available in #3 and #5

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