1. K.J.Somaiya Institute of Management Studies And Research.
Submitted to: - Submitted by:-
Prof. Srinivasan Jigar Mehta
Roll no:-21
PGDM-RM.
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2. K.J.Somaiya Institute of Management Studies And Research.
I.T. in Retail
Retail in India
Organized retailing is a decade old industry in India with an overall market share
of 3 percent. Currently, the estimated total sales of organized retailers are Rs.175 billion.
The sector has witnessed robust growth during the last two years which could mainly be
attributed to the establishment of international quality formats modified to suit the Indian
purchase behavior; entry of several domestic and international players; development of
retail-specific properties; improvement in retail processes and turnaround in operations of
some existing retailers.
This growth in organized retail is being driven by a number of structural, social,
and demographic and macroeconomic factors as well. The increasing globalization of the
Indian economy has led to growing exposure to foreign markets resulting in increasing
demand for international shopping experience in India.
Availability of credit cards, increased ‘lifestyle spending’ and higher mobility due
to increase in car / scooter owning families for whom shopping also becomes a family
outing, have also helped in driving the growth of organized retailing in India.
The Indian retailing industry has been witnessing some exciting developments.
Some of such key developments are as follows:
• Emergence of Region-Specific Formats: With organized retail penetrating beyond
metros, the retail industry has witnessed the emergence of stores with different
sizes and formats. To illustrate, within the departmental stores’ format, there are
different sizes for metros and different for other cities.
• Emergence of Discount Formats: Larger discount formats are now emerging as
major competitors to both unorganized and organized retailers. This has resulted
on account of penetration of organized retail into the lower strata of income
groups and consumer demand for increased value-for-money.
• Entry of International Players: Over the years, a number of well-known
international brands have capitalized on the opportunities available in the sector
by executing licensing agreements with Indian players.
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3. K.J.Somaiya Institute of Management Studies And Research.
• Development of malls: The establishment of malls has increased dramatically and
funds for such products are being earmarked for non –metros as well.
• Improvement in Retail Operating Efficiencies: Existing retail players are taking
steps to improve the internal operations of their businesses and are implementing
ERP and planning support systems.
• Improving Profitability and Retail Revenues: Most of the retail players in the
country are experiencing improved profitability, which is also expected to
improve their credit profile in the industry.
Major retail players having prominence in the organized retail market include
Shopper’s Stop Limited, Pantaloon Retail (India) Limited, Trent Limited etc. The retail
industry is poised for expansive growth over the next few years. The industry is in an
investment mode and requires substantial funds for expansion and growth.
With global players knocking at the door, waiting for the government to open up the
floodgates, all the big Indian organized retail companies are feeling the heat. The fight is
now not between Big organized retail stores (3%) and Unorganized Kirana Shops (97%),
but it’s between global giants like Wal-Mart, Tesco and Shopper’s Stop, Pantaloons.
So what could the Indian counterparts do? The Indian government can’t really protect the
Indian retail firms for long. It has been very clear after the current WTO conference, that
FDI’s would be allowed in the Indian retail sector. The issues before the government of
India are in what phases they would allow FDI in India. Would they open up the retail
sector totally or would they follow China’s path of allowing FDI flow in phases,
providing enough time for domestic players to be globally competitive. So whatever may
be the procedure of FDI flow in Indian retail industry, the domestic players have to be
competent enough to sustain against the global giants. They should try to leverage their
know-how of Indian consumer behavior over the new global entrants. They definitely
have better distribution channels and network as of now, and it would take time for the
global entrants to implement the whole supply chain and distribution network effectively.
But what are these domestic companies afraid of? Is it the product portfolio, the prices or
the quality of goods or service? Above everything else the greatest fear is the scale of
their operations and the new age technologies used by the global giants. The global retail
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4. K.J.Somaiya Institute of Management Studies And Research.
giants like Wal-Mart, Tesco, k-Mart operate in such a scale that reduce their cost of
procurement of goods and they are able to transfer these low cost advantages to the end
consumers by providing them goods at cheaper price. But it is not how cheap they are
selling their goods for but how they are achieving this kind of low cost leadership, that
need to be understood. If we look into their operations in a holistic manner we will see
that all the cost savings these global giants could achieve, may be in procurement, supply
chain, distribution, retention of customers, reducing least expenses per customers per sale,
is been achieved though optimum use of technology and IT.
So in this paper we will discuss what are the different technologies that could be
implemented in retail industry from Indian point of view, what are their advantages, and
how can Indian retail players make them globally competitive by the use of these
technology in their operations that will help them to sustain competitive advantage
against the onslaught of the global players entering in India.
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5. K.J.Somaiya Institute of Management Studies And Research.
Technology in Retail
Over the years as the consumer demand increased and the retailers geared up to
meet this increase, technology evolved rapidly to support this growth. The hardware and
software tools that have now become almost essential for retailing can be into 3 broad
categories.
1. Customer interfacing system
Bar coding and scanners
Point of sale systems use scanners and bar coding to identify an item, use pre-stored data
to calculate the cost and generate the total bill for a client. Tunnel scanning is a new
concept where the consumer pushers the full shopping cart through an electronic gate to
the point of scale. In a matter of seconds, the items in the cart are hit with laser beams and
scanned. All that the consumers have to do is to pay for the goods.
Payment
Payment through credit cards (plastic money) has become quite widespread and this
enables a fast and easy payment process. Electronic cheque conversion, a recent
development in this area, processes a cheque electronically by transmitting transaction
information to the retailer and consumer’s bank. Rather
than manually processing a cheque, the retailer voids it and hands it back to the consumer
along with the receipt, keying digitally captured and stored the image of the cheque,
which makes the process very fast.
Internet
Internet is also rapidly evolving as a customer interface, removing the need of a consumer
to physically visit the store.
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6. K.J.Somaiya Institute of Management Studies And Research.
2. Operation support system
ERP system
Various ERP vendors have developed retail-specific systems which help in integrating all
the functions from warehousing to distribution, front and back office store systems and
merchandising. An integrated supply chain helps the retailer in maintaining his stocks,
getting his supplies on time, preventing stock outs and thus reducing his costs, while
servicing the customer better.
CRM systems
The rise of loyalty programs, mail order and Internet has provided retailers with real
access to consumer data. Data warehousing & mining technologies offers retailers the
tools they need to make sense of their consumer data and apply into business. This, along
with the various available CRM systems, allows the retailers to study the purchase
behavior of consumers in detail and grow the value of individual consumers to their
business.
3. Strategic Decision Support System
Store Site Location
Demographics and buying patterns of residents of an area can be used to compare various
possible sites for opening new stores. Today, software packages are helping retailers not
only in their location decisions but in decisions regarding store sizing and floor-spaces as
well.
Visual Merchandising
The decision on how to place & stack items in a store is no more taken on the gut feel of
the store manager. A large number of visual merchandising tools are available to him to
evaluate the impact of his stacking options. The plannogram is an example of products
helping in modeling a retail store design.
E-Commerce
E-commerce in India ha almost doubled in size in the last few years, despite of relatively
low Internet penetration of 15%. The number of Internet users grew from 5 million in
2000 to 16.6 million by the end of 2002, a rise of 232% over a span of just 2 years. In
2003-04, B2C (Business to Consumer) turnover was up by 76% from the previous year.
For Example: www.futurebazaar.com, www.ebay.com.
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