With growing retail space and changing consumer behaviour, the retail market in India is poised for a strong growth. The sector is expected to grow at a CAGR of 13%, and according to the Investment Commission of India, it is likely to grow three fold from its current size to $660 bn by 2015. Organised retail is growing at a rate of 15-20%. Irrespective of the phenomenal growth in organised retail in recent years, local kiranas and traditional family-run stores in the unorganised sector still account for about 93% to 95% of Indian retail market. According to a recent report by consultancy firm PricewaterhouseCoopers (PwC), there are over 12 mn mom-and-pop stores in India’s unorganised sector. While mall-based shopping formats are gaining popularity in most cities, kirana stores offer credit and apply flexible conditions for product returns and exchange. Apart from these factors, neighbourhood locations, personal services etc are among the strengths of the unorganised retail sector.
That said, the unorganised sector lacks access to modern technology to run the business and adoption of information technology is still at a nascent stage in the sector. Traditionally, the sector has not adopted IT due to reluctance of the retail store owners to automate operations. According to a survey conducted by the Indian Council for Research, fewer than 10% of the unorganised sector retail outlets use billing software. Fewer still. have access to Internet and network connectivity. And less than 7% use a card-payment device.
However, rising competition is prompting the unorganised stores to change and go techy to tap the new opportunities. With the government amending rules to make way for foreign direct investment in the multi-brand retail, local retail shop owners now need a paradigm shift towards technology and process implementation. To compete in urban markets and middle-class neighbourhood, kirana owners must adopt at least basic automation, say experts.
According to Sachin Sharangpani, Vice President of Sales and Markets Manufacturing, Retail & Services, Atos India, there is a huge need for unorganised retailers to build processes and use technology to support their business processes. However, there is no specific one-size-fits-all technology package for retailers. Multiple factors -starting from basic technology knowledge and expertise to store location, products, size and online operations make the needs unique.
“Although a PC-running point-of-sale (PoS) software, barcode scanner and billing printer are basic requirements for a retail shop,” said S M Ramprasad, Deputy General Manager, Consumer Product Group, Epson India. “They also need to adopt a solid retail platform and back-office functionality. This will help them retrieve data on what is selling, what is contributing and what is not working,” he said. Most of these are offered by managed service providers and the cost of entry is negligible. Next, a reliable Internet connection and a low-end computer opens up a world of possibilities for the small merchant where a host of Cloud-based solutions can help manage assortments, inventory and replenishment as well as distribution, logistics and accounting.
Seeing the rising opportunity in this space, service providers and solution vendors have started offering solutions that integrate the value chain for kirana operators, connecting wholesalers and vendors. These solutions, which are often free to small merchants, help manage sales and inventory and replenishment. In exchange, service providers monetise their solutions by offering consolidation of kirana business volumes for wholesalers. Additionally, thanks to proliferation of consumer channels such as mobile and social applications, unorganised retailers have a unique opportunity to modernise their operations and engage their customer at a new level.
A retailer can start his IT journey with a simple PoS system. Karthik Shivasankaran, Proprietor of Chennai-based Ravi Pharmacy, felt that a PC-based PoS solution with bar-coding system will help retailers like him to improve stock management and control, and to get more in-depth cash and financial reporting. Understanding the specific problems of unorganised players, vendors have started to make tailour-made PoS solutions for the unorganised sector. “There are various new billing solutions used by retailers that benefit the unorganised sector. The customised computer-based billing solution is fast gaining importance for industry verticals such as retail,” said Narang. Low cost, easy to use, flexible solutions which can be installed easily are now available in the market.
For the store owners, Cloud computing is addressing two important barriers -making technology more affordable and eliminating the need to commit to ongoing maintenance and upkeep of these assets. “Relative ease of entry and widespread adoption of Cloud has unleashed innovation and enabled technology startups develop and deploy software solutions in record time with little capital investment. Computing resources are offered by services providers in shared hosted environment, which create economies of scale for users of technology. Software applications running in Cloud are typically available through web browsers running on inexpensive computers, mobile devices or tablets,” said Natasha Giannopoulos, Associate Vice President, International Operations, LoyaltyOne.
Another technology that is fast catching up in the retailing space is mobility. Mobile penetration is predicted to reach most of the population by 2015. At the same time according to IDC’s latest mobile phone tracker data, smart phone penetration has increased by 68% last year and will continue this trajectory for the next few years. These factors, together with low set up costs and little additional infrastructure investment create a natural opportunity for the retail operators to use mobile as the medium to communicate with customers. “Low-cost tablets are becoming available for unorganised retail sector along with accessories such as scanners and printers which can also be used as PoS. Many of the apparel stores are already adopting the same which also help the sales person in detailing the product, capturing the order and billing,” explained Sharangpani of Atos.
Although the use of IT is increasing in the unorganised retail sector, there are still certain challenges faced by the sector because the IT systems are widely dispersed in nature. For many players, computer literacy remains to be an obstacle. How does a player select, install, integrate and maintain the technology he/she needs? How will you train employees to operate it? How do you manage the online presence? Such queries remain a concern for many. Also, most shopkeepers are scared of ongoing costs of operating and upgrading technology. Resistance to change is another big trouble. “At the heart of the challenge facing the retail industry in India is a lack of effective mechanisms to maintain visibility of product flow from sourPortsmouth prepares for annual First Night eventsce to consumer.
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