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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.
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.
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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 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.
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 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 is also rapidly evolving as a customer interface, removing the need of a consumer to physically visit the store.
2. Operation support 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.
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.
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 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.