Organized retail is the new thing in India, with business houses such as Bharti Enterprises Ltd, Reliance Industries Ltd and Aditya Birla Group venturing into it. Efficient retail businesses are heavily dependent on information technology (IT). Specialists in retail software, the Nasdaq-listed JDA counts leading Indian retailers such as Shoppers’ Stop, Crossword Bookstore, Piramyd, Globus and Hypercity among its clients. Abel Correa, country manager, JDA Software India Pvt. Ltd, spoke to Mint on how IT could make a difference to organized retail in India. Edited excerpts:
Organized retail has seen the entry of big corporate houses such as the Tata group, Reliance Industries, Bharti Enterprises Ltd and Aditya Birla Group. Many of them are talking about a “farm-to-fork” retail strategy. What role does technology play in enabling this?
We are speaking to both Reliance and the Aditya Birla group to provide JDA software for their retail business, which allows companies to get a single view of their entire supply chain and also optimize it. Retailers also need specialist modules for assortment and merchandise planning. India is progressing rapidly in the organized retail business unlike the developed countries, which took two to three decades to develop. The country has hitherto lacked a collaborative initiative between retailers and suppliers because bargaining power has tended to be with suppliers. Very few retailers as a result have scheduled deliveries from suppliers that align with end customer demand. This is despite big retailers being aware technologically of the resources available or best practices worldwide.
How far can software systems help neighbourhood kiranawala and mom-and-pop stores compete with the big daddies of retail?
The transaction system needs to be set right for smaller retailers before high-end solutions can be implemented. In many cases, proper records of sales and purchase too are not maintained in an electronic format. It’s important to remember that technology itself is not going to give a competitive advantage. A vision of how best to service the customer helps remove chaos, too. This is important because many small retailers have suppliers that the bigger retailers know about. Larger retailers can buy from these suppliers in bulk and get better prices too. So, smaller retailers need to do a good job to retain their niche.
While some retailers in India have focused primarily on getting things right before embarking on a rapid expansion, others have said, “let’s go out and capture the market first and fix the back-end systems and processes later...”
Market share has taken priority over efficiency. At some point of time, both strategies will converge to give you a healthy bottom line.
The retail business is driven by volatility of demand unlike manufacturing that’s largely stable. Retailers in India also face other problems in trying to put systems in place. At this point, it’s very difficult to get people with retail IT expertise. Lots of colleges have started retail-training programmes, so this problem will get solved in two to three years. This country also needs more people with merchandise planning experience, as right now every new retailer is poaching from the existing ones.
For retail infotech and merchandise planning functions, the problem is that often we don’t have the people to say what solutions fit the retailer’s requirement. That’s why retail professionals from abroad are being hired from markets that already have advanced practices, to train people here, ramp up operations and transfer knowledge before they go back. Right now the retail industry in India is facing a crunch of both real estate and talent. The industry is even using non-government organizations to train people in smaller towns in areas like sales operations.
Indian retailers are now beginning to venture online. How far do you think they will succeed?
In the next 18 months the click (Internet) model will happen. Customers have already started experiencing shopping on the Net. In categories where buyers need to be indulged, selling through the Internet won’t be as successful. Bouquets of flowers, toiletries and shampoos will sell well. Retailers made mistakes in the earlier dotcom boom. Now they have realized their mistakes and put in placegreat third-party logistics facilities to deliver without high handling costs. Retailers need to blend technology and processes to make people accountable. Tech alone won’t do that.