IT plays a key role in strategic decision making for retailers

by CXOtoday Staff    Apr 01, 2013

IT retail

India is the world’s fourth–largest economy in terms of purchasing power parity, and retail plays a crucial role in driving inclusive growth, impacting three key stakeholders: producers, workers and consumers. India’s retail sector accounted for 22 percent of GDP and 8 percent of total employment. The retail sector in India is largely unorganized, with only 8 percent of the market being organized.

According to the CII–BCG IT End User Survey 2013, the organized segment of retail has been growing at a CAGR of 29 percent, more than double the 12 percent rate of growth for the overall industry. Going forward, organized retail would increase its market share, driven by a host of factors—rising income levels, favorable demographics, increasing urbanization and nuclearization of families, penetration of plastic money, and rising rural consumption.Some of the key trends that will shape organized retail in India are:

Foreign Direct Investment: With the Government allowing up to 100 percent FDI in single–brand retailing and 51 percent in multi–brand, international retailers will enter/expand their presence in India to grab a piece of the fast–growing local

Expansion of organized retail in tier 2/3 cities: Increasing real estate prices in tier 1 cities, lesser competition, and affordable rents would drive retailers to expand their footprint in tier 2/3 cities.

Online retail: Increasing Internet penetration, improved payment solutions, a growing base of web–friendly customers, and PE/VC–backed E–commerce start–ups would lead to rapid growth of the online retail format in India.

Luxury market: Higher disposable incomes and rise in the number of HNIs will increase the demand for luxury products in India.

Business trends driving IT adoption and key areas of opportunity

To support their fast growth, organized retailers will have to invest significantly in developing their IT systems to make their operations efficient, cost–effective and scalable. Some of the areas where IT will play an important role in organized retail are:

Customer interface: Retailers will increase investments in their IT systems to develop solutions that can enable them to provide best–in–class services to customers. Data analytics and customer relationship management are key IT capabilities that will be targeted by retailers. Applications for storage and analysis of data will be demanded by retailers. Companies will also seek to identify key factors driving customer decision making and predict future customer mentality, and therefore, will require solutions for the same.

Back–end processes: Organized retail demands very robust and stable back–end systems to ensure that the right products are available at the right time and at the right place. IT spends of retailers would be focused on developing solutions to improve productivity, and managing their operations in an efficient and cost–effective manner.

– Supply chain management: Facilitates organized and efficient processes for procurement of raw materials

– Inventory management: Helps maintain a defined process of procurement and reduction of stock–outs

– Warehouse management system: Enables quick decision making on warehousing, logistics support and transportation Business management: IT will play a key role in strategic decision making by providing retailers with real–time information on their business performance. IT –enabled solutions, such as ERP, performance management systems and business intelligence, would allow retailers to accumulate crucial data on business operations so that they can develop insights on key performance indicators—thus improving business performance, meeting targets, and improving returns.

Online retail: Online retail is already a growing phenomenon in India. The presence of more advanced IT systems compared to brick–and–mortar retail is the differentiating factor in online retail. The growing trend of online retail, which is attracting interest from existing retailers, would drive IT investments in this space—both from new and existing retailers, who will seek applications and solutions to increase their presence in the virtual market.

Tags: Retail, FDI, IT, ERP