it in india retail sector - report

MARKET RESEARCH REPORT

September, 2009

IT in the Indian Retail Industry

Emerging Trends and Market Opportunities

Lead Analysts:

Nilotpal Chakravarti, Senior Research Analyst Ravi Shekhar Pandey, Manager, Syndicated Research

TABLE OF CONTENTS

Table of Contents

INTRODUCTION ................................................................................................ 8

EXECUTIVE SUMMARY ...................................................................................... 9

TAXONOMY ................................................................................................... 11

Retail Sector Defined ......................................................................................... 11

RESEARCH METHODOLOGY ............................................................................ 13

Supply-side Primary Research ........................................................................... 13

Demand-side Primary Research ........................................................................ 13

Secondary Research .......................................................................................... 14

OVERVIEW OF THE INDIAN RETAIL MARKET .................................................... 15

Impact of Economic Slowdown ......................................................................... 15

Long-Term Strategic Investment Plans on Track for Large Retailers ................ 16

Government Initiatives ...................................................................................... 16

Innovative Retail Concepts ................................................................................ 17

Focus on Rural Retailing .................................................................................... 18

Retailers Look at Revenue Sharing Model with Malls ....................................... 18

IT IN THE INDIAN RETAIL INDUSTRY ................................................................ 20

Cost – A Deterrent ............................................................................................. 21

Caution is the Buzzword .................................................................................... 21

MARKET SIZE OF IT IN THE RETAIL INDUSTRY .................................................. 23

Market Size by IT Category ................................................................................ 23

FOCUS AREAS, BUSINESS CHALLENGES AND IT PAIN POINTS ............................ 27

Hypermarkets .................................................................................................... 27

Neighborhood Stores ......................................................................................... 28

Top Focus Areas of Retail Companies ............................................................... 29

Strategic Focus by Retail Segment .................................................................... 31

Top Business Challenges ................................................................................... 32

Top IT Pain Points .............................................................................................. 35

TABLE OF CONTENTS

Table of Contents

IT SOLUTIONS & DEPLOYMENT TRENDS FOR RETAIL COMPANIES IN INDIA ...... 37

Largest IT Solutions Implemented in Last 24 Months ....................................... 37

Focus on ERP...................................................................................................... 37

Store Solutions Challenges & Vendors in India’s Retail Industry ...................... 38

POS Vendors in India’s Retail Industry .............................................................. 40

Solutions Categories .......................................................................................... 42

Focus on Enterprise Business Applications ........................................................ 42

IT Spending by Retailers in the Last 24 Months ................................................ 44

Future Solutions & Solution Providers .............................................................. 47

Factors for External Vendor Selection ............................................................... 49

COMPETITIVE LANDSCAPE .............................................................................. 51

SAP ..................................................................................................................... 53

IBM .................................................................................................................... 54

Oracle ................................................................................................................ 54

HCL .................................................................................................................... 55

Microsoft ........................................................................................................... 56

Ginni Systems (GSL) ........................................................................................... 56

Sonata Software ................................................................................................ 56

SOLUTION DEPLOYMENT, CHALLENGES & SATISFACTION INDEX ...................... 60

Storage Deployment & Challenges in India’s Retail Companies ....................... 60

ERP Deployment, Satisfaction Level & Primary Vendor Among Retail

Respondents ...................................................................................................... 61

Primary ERP Supplier ...................................................................................... 63

CRM Deployment, Satisfaction Level & Primary Vendor Among Retail

Respondents ...................................................................................................... 64

Primary CRM Supplier .................................................................................... 67

Service-Oriented Architecture (SOA) in India’s Retail Industry......................... 68

SOA Deployments ........................................................................................... 70

Collaboration in India’s Retail Industry ............................................................. 70

Top Collaboration Tools ................................................................................. 71

TABLE OF CONTENTS

Table of Contents

Future Investment in Collaboration Tools ...................................................... 72

SPRINGBOARD RECOMMENDATIONS.............................................................. 74

CONCLUSION ................................................................................................. 76

LIST OF FIGURES

List of Figures

Figure 1: IT Market Size in India’s Retail Industry ........................................ 23

Figure 2: IT Software Market in India’s Retail Industry................................ 24

Figure 3: IT Hardware Market in India’s Retail Industry .............................. 24

Figure 4: IT Services Market* in India’s Retail Industry ............................... 25

Figure 5: Top Business Opportunities in India’s Retail Industry .................. 28

Figure 6: Top Strategic Focus Areas for India’s Retail Industry ................... 31

Figure 7: Top Business Challenges for India’s Retail Companies ................. 34

Figure 8: IT Used to Address Business Challenges? ..................................... 34

Figure 9: IT Pain Points for India’s Retail Companies ................................... 35

Figure 10: Key IT Improvement Areas .......................................................... 36

Figure 11: Retail Store Solutions in India ..................................................... 39

Figure 12: Client-Based (Premise) POS or Web-Based? ............................... 39

Figure 13: Top POS-Related Challenges in India's Retail Sector .................. 40

Figure 14: POS Hardware Vendors ............................................................... 41

Figure 15: Software POS Vendors ................................................................ 41

Figure 16: Largest IT Solutions Implemented in Past 24 Months ................ 42

Figure 17: Major IT Solution Categories ....................................................... 43

Figure 18: Amount Spent on IT Solutions in the Past 24 Months (in US$) .. 45

Figure 19: IT Solution Spending on Hardware ............................................. 45

Figure 20: IT Solution Spending on Software ............................................... 46

Figure 21: IT Services Spending on Largest IT Solution ................................ 47

Figure 22: Largest IT Solutions Considered for Implementation in Next 12

Months .................................................................................................. 48

Figure 23: Future IT Solutions Categories Planned For Next 12 Months ..... 49

Figure 24: Primary External Vendor Selection Factors ................................ 50

Figure 25: Leading Primary External Influencers ......................................... 51

Figure 26: Leading Primary Software Supplier ............................................. 52

Figure 27: Leading Primary Hardware Supplier ........................................... 52

Figure 28: Leading Primary IT Services Provider .......................................... 53

LIST OF FIGURES

List of Figures

Figure 29: Leading Network Infrastructure Platforms Among Respondents

............................................................................................................... 57

Figure 30: Leading Middleware Platforms Used by Respondents ............... 58

Figure 31: Leading Server Platforms Used by Respondents ........................ 58

Figure 32: Leading Storage Platforms Used by Respondents ...................... 59

Figure 33: Types of Storage Solutions Implemented ................................... 60

Figure 34: Storage Challenges for Retail Respondents ................................ 61

Figure 35: ERP Deployment Among Indian Retail Respondents .................. 62

Figure 36: Satisfaction Index of ERP Solution .............................................. 62

Figure 37: Reason for Low ERP Performance Satisfaction ........................... 63

Figure 38: Primary ERP Supplier for Respondents ....................................... 64

Figure 39: CRM Deployment According to Respondents ............................. 65

Figure 40: Satisfaction Index of CRM Solution ............................................. 66

Figure 41: Reason for Low CRM Performance Satisfaction ......................... 66

Figure 42: Primary CRM Supplier According to Respondents ...................... 67

Figure 43: Investment in SOA in India's Retail Industry ............................... 68

Figure 44: Future SOA Deployment in Next 12 Months .............................. 69

Figure 45: Reason for SOA Deployment ....................................................... 69

Figure 46: SOA Deployments in India's Retail Industry ................................ 70

Figure 47: Usage of Collaboration Tools by Respondents ........................... 71

Figure 48: Top Collaboration Tools Used by Respondents .......................... 71

Figure 49: Future Investment in Collaboration Tools .................................. 72

Figure 50: Future Investments in Collaboration Tools ................................. 73

LIST OF TABLES

List of Tables

Table 1: Retail Sector Segments ................................................................... 11

Table 2: Retail Market Segments, Business Focus & Companies ................ 11

Table 3: List of Vendors Interviewed ........................................................... 13

Table 4: Respondent Breakdown by Segment ............................................. 14

Table 5: Respondent Breakdown by Company Size ..................................... 14

Table 6: Top Indian Retail Companies .......................................................... 19

Table 7: IT Products & Solutions for the Retail Industry .............................. 20

Table 8: Strategic Focus Areas of Indian Retailers by Segment ................... 32

Table 9: IT Solutions Implemented by Retailers in India.............................. 43

8

INTRODUCTION

The Indian retail industry is at an inflection point today. Until last year, the retail industry

was booming and hailed as the "great Indian retail revolution," but a slowing economy

and over-ambitious expansion have left many retailers struggling to cope with the

changing economic dynamics. Also, when India's economy was thriving, large domestic

and foreign companies jumped into the sector to reach the growing middle class and

introduce Western-style chain-store shopping.

These companies were drawn to India because the country represented one of the last

virgin retail frontiers, which was dominated by small shops, but since last year, the

outlook for "Big Retail" has turned sour as the global economic downturn has deepened.

As a result, there is belt-tightening, and the country is undergoing a shift in consumption

patterns. Having said that it must be realized that in the long term there is still massive

potential in the market, but India must undergo a lot of economic development to sustain

shifts in the retail industry.

Retail industry changes in India are evident. Subhiksha, one of the largest domestic

retailers, has virtually shut down its stores across India due to the liquidity crunch and

non-payment of salaries. Foodland Fresh, a smaller Mumbai-based retail chain, has shut

39 of its 42 outlets, and even India’s largest retail chain, the Future Group, has slowed its

expansion plans. Other retailers are re-negotiating sky-high rents – which in Mumbai and

Delhi are among the world’s highest – to stay in business.

Springboard Research believes that the downturn could prove to be a blessing in disguise.

As a result, retailers will look at their business models, evaluate before acting, and take

their time investing.

This market research study on IT in India’s retail industry takes off from 2007’s study and

assesses the opportunities the industry presents for IT companies in 2009 and beyond.

This report examines eight key segments in the retail sector: Food/Grocery/Vegetables,

Garments, Electronics/Electrical (White Goods), Cosmetics/Medicines, Home Furnishings

and Furniture, Lifestyle Products (Jewelry/Shoes/Watches), Office Products and Multi

Product outlets. For this study, Springboard Research analysts surveyed IT decision makers

at major retail companies in India and CEOs of leading IT vendor companies for the retail

industry. Also included is market data, including market size and growth forecasts, to

provide insight into the retail sector for a big picture industry perspective.

9

EXECUTIVE SUMMARY

According to Springboard Research, the Indian retail industry is currently at the crossroads

of an intensive expansion spree that was fueled by the entry of foreign players into the

market. Recent growth in the sector can be largely attributed to the high economic growth

that the country has experienced for the past several years. As such, if India is able to

emerge from the present economic slump, organized retail can well re-surface as a sunrise

industry.

Overall, the retail sector was slow to leverage IT. However, retailers have now realized the

importance of IT for their business operations, especially during the economic slowdown,

and are in the process of streamlining their operations with IT adoption.

Guided by pursuing new business opportunities in untapped markets and regions and by

the challenges of intense competition, ensuring profitability, customer satisfaction and

quality of service, the retail industry is looking to innovative IT solutions. At the same time,

IT vendors are unveiling an entire range of IT products and solutions for the retail sector.

Key insights gained from Springboard’s assessment of the Indian retail industry are

included below:

1. IT Revenue in India’s Retail Industry Will Grow at a CAGR of 23%: Springboard

Research estimates that the IT market for retail in India will grow at a CAGR of 23% to

reach US$1,422 million by 2012. In 2008, the market was assessed at US$507 million.

We expect the market for IT in retail to slow down in 2009 due to the downturn in the

Indian, as well as the global, economy. As such, growth in 2009 will dip to 22% as

against 43% in 2008. However, it will pick up again in 2010.

2. Hypermarket Formats is Biggest Business Opportunity for Retailers: As shown by our

data, 46% of surveyed Indian retailers believe that establishing hypermarkets across

the country is the top business opportunity in retail today.

3. Inventory Management is Top Focus Area: According to Springboard Research data,

inventory management ranked as the top focus area for surveyed retail companies.

Maintaining proper inventory is of paramount importance to retailers who need to

have products available for consumers, yet at the same time avoid overstocking

unnecessary and costly inventory.

4. ERP is the Largest Implemented Business Application: According to Springboard

Research data, ERP solutions were the largest applications implemented by retailers

over the past 24 months. As retailers expand their business, the need for integrated

back-end solutions is becoming critical to manage growth. Moreover, to respond to

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rapid changes in the industry, retailers have realized that they must migrate to retail

ERP suites that provide information access, integrated business process capabilities,

and the modern technology platforms necessary to remain competitive.

5. Competition is The Biggest Challenge for Retailers: A large number of respondents

feel that increasing competition is a serious business challenge in today’s retail

industry. The organized retail segment also feels that there is competition from the

unorganized sector, which is huge in comparison.

6. POS is the Most Preferred Store Solution for Indian Retailers: According to our data,

POS is the top preferred store solution that Indian retailers have deployed in their

stores. As compared to the West, self-checkout terminals and self-service kiosks are

still in the nascent stage. While the Western world is rapidly moving toward self-

checkout terminals, the Indian market will be slower to adopt these technologies.

7. Retailers’ Future Focus is BI: According to Springboard Research data, retailers will

invest in business analytics solutions and business intelligence tools over the next 12

months. BI tools will gain more popularity as there is great need for an enterprise

system that addresses business patterns, trends, processes, and opportunities. As

such, retailers will focus on technologies that provide analytic data for better decision

making and planning.

8. SAP and Oracle Are Leading Players in India’s Retail industry: Our data shows that

SAP and Oracle have captured almost 45% of the market, with SAP named as leading

external influencer by 25% of respondents, and Oracle listed by20% of respondents.

9. Price is Key to Vendor Selection: When developing go-to-market strategies, IT

vendors should consider that a large number of surveyed retailers mentioned price as

a key determinant in external vendor selection. This response is primarily due to the

global economic slowdown, which has impacted the retail industry like it has all other

industries.

10. SOA Deployment Still Nascent in India’s Retail Space: Our data finds that 96% of

surveyed retailers have not invested in SOA, which shows that IT investments have

yet to reach the next level of maturity in India’s retail space. Only 4% of respondents

mentioned that they invested in SOA.

11

TAXONOMY

Retail Sector Defined

Springboard Research defines the retail sector as comprised of businesses engaged in

retailing merchandise and providing services associated with the sale of merchandise. The

scope of our study encompasses retailers who sell products such as the below.

Table 1: Retail Sector Segments

Food/Grocery/Vegetables Garments

Electronics/Electricals (White Goods) Cosmetics/Medicines

Home Furnishings and Furniture Life Style Products

(Jewelry/Shoes/Watches)

Office Products Multi-Product Outlets

Source: Springboard Research

Key retail segments, their business focus and representative companies are described

below.

Table 2: Retail Market Segments, Business Focus & Companies

Key Retail Industry

Segments

Business Focus Companies

Food/Grocery /Vegetables Multi-product/Multi-brand

outlets

Reliance, Subhiksha, Big

Bazaar, Vishal Mega Mart

Garments

Single brand/private

label/multi-brand outlets

Wills Lifestyle, Pantaloon,

Westside, Shoppers Stop,

Reliance

Home

Furnishings/Furniture

Single brand/private


Big Bazaar, Reliance,

Westside, Godrej, Neel

Kamal

Cosmetics/Medicines Multi-brand outlets LifeSpring, 98.4, Guardian,

Religare, Apollo

12

Lifestyle Products Single brand/private


Tanishq, D’Damas, Viveks

Office Products Single brand/private


Godrej, Snowhite

Multi-Product Outlets Multi-product, multi-brand,

private label

Big Bazaar, Ansal Plaza,

Shoppers Stop, DLF Mega

Mall, Vishal Mega Mart

Electronics/Electricals

(White Goods)

Single band/multi-brand Big Bazaar, Reliance, Next

Source: Springboard Research, 07/09

13

RESEARCH METHODOLOGY

The methodology employed included supply and demand-side primary research, which

was supplemented by secondary research. Additional details on each of these research

elements are provided below.

Supply-side Primary Research

Research interviews were conducted with senior executives and/or managers of Indian

operations at leading solution providers as well as at system integration and other

software provider companies. Respondents were led through a structured questionnaire

to gather quantitative and qualitative inputs on their operations, performance, strategies

and views on the overall India market, including key developments, and technology

trends. Data from interviews was consolidated, checked for consistency and accuracy,

and then inserted into Springboard’s data model. The following table lists the vendors

interviewed for this report.

Table 3: List of Vendors Interviewed

Vendors Interviewed

IBM ITC Infotech

SAP Oracle

HP Microsoft

Demand-side Primary Research

To integrate user perceptions and adoption trends into our research methodology,

Springboard interviewed a total of 152 CIOs from both large and mid-sized retail

companies across India.

Interviews were conducted over the phone using a formal questionnaire that gathered

quantitative and qualitative inputs on IT implementations and usage as well as company

spending. Additional details on our sample frame are provided below.

14



Secondary Research

This phase involved an extensive secondary research exercise to scan public information

sources on the Internet and elsewhere. Key information sources consulted included

vendor websites, earnings statements and white papers. In addition, reports, articles,

websites, blogs and journals from other research bodies, associations and government

entities were used to create an initial framework of understanding on the retail industry in

India.

Table 4: Respondent Breakdown by Segment

Segment No. Of Respondents

Food/Grocery/Vegetables 16

Garments 46

Home Furnishings/Furniture 4

Lifestyle Products 62

Office Products 1

Cosmetics/Medicines 6

Multi Product Outlets 7

Electrical/Electronics 10

Total 152

Table 5: Respondent Breakdown by Company Size

No. Of Employees in Respondent Company No. Of Respondents

50-99 37

100-499 68

500 and above 47

Total 152

15

OVERVIEW OF THE INDIAN RETAIL MARKET

According to Springboard Research estimates, the size of the Indian retail industry in 2006

was US$325 billion. While consistent economic growth over the years has contributed to

expansion in this sector, the retail industry has also undergone a transformation due to

enabling government policies and investments by large domestic corporations and MNC

retailers. According to Springboard Research, notwithstanding the current economic

slowdown, the retail sector is expected to grow at twice the rate of the country’s GDP

over the next few years, driven largely by the emergence of domestic retail companies,

consolidation in the sector, corrections in property prices, and rise of new technologies.

Although the retail sector has been hit by recession, the growth of organized retailing and

rise in consumption by the Indian population is positively impacting the vertical. Organized

retail in particular is at an all-time high in India, with growth boosted by changing

population demographics, professional practices implementation, media proliferation,

brand recognition, favorable funding options, and enabling regulations like VAT policies.

Impact of Economic Slowdown

India's retail industry is changing or delaying expansion plans largely due to the economic

slowdown. In one instance, Subhiksha’s US$195 million expansion plan to open 130

consumer durable stores across India was put on hold in early 2009. Originally, the

company aimed to increase its number of outlets to 2,200 from 1,320 by March 2009, but

is now re-adjusting that target. However, the company is more cautious now and has

shelved its expansion plans. Also, as a strategy, fruits and vegetables have been de-

emphasized in some stores where they don’t see adequate profitability.

Meanwhile, Wadhawan, a food retailer, opened more than 200 convenience stores under

its Spinach, Sabka Bazaar and Smart brands, but its hypermarket plans have been put on

the backburner. The company now plans to focus on neighborhood stores in the near

future, as it expects further corrections in property prices.

In another example, Reliance Retail has decided to close 30 of its unprofitable stores and

reduce staff by at least 1,000. Also, the retailer is renegotiating rental prices for its 900

properties to cut its costs by a third. Reliance has also unified its sourcing for all its retail

formats. Its chains include Reliance Fresh neighborhood stores, supermarket chain

Reliance Super, Reliance Mart hypermarkets, and Reliance Wellness, a beauty and

wellness chain.

16

In light of the economic slowdown, Ambuja Realty also shelved plans to open 30-40 more

outlets of its food and beverages retail venture, Tea Junction.

Long-Term Strategic Investment Plans on Track for Large Retailers

Despite the slowdown, several investments in India’s retail sector are on track even if

some big retailers are cutting costs and rationalizing expenses. Impact Retail Private Ltd. is

still planning to invest US$41.16 million to launch 30 Xcite consumer electronics retail

showrooms in Indian metros by December 2009. In addition, Pyramis India is planning to

launch 215 exclusive showrooms at an investment US$4.11 million, over the next four

months. German lifestyle brand Puma is entering into a joint venture (JV) with Knowledge

Fire to sell Puma products including apparel, shoes, and accessories. Puma will hold 51%

stake in the JV, which aims to open 40 retail stores in India in 2009, and 140 by 2015.

Meanwhile, Indian ethnic wear chain, Fabindia, has assumed a 25% stake in the UK-based

women’s wear retailer EAST. Footwear retail company Pavers England Footprint, with 25

stores in India, will invest US$10 million to establish 1,000 stores across India by 2013. The

company is also looking to invest US$3 million to set up an R&D facility in Chennai for

footwear design.

In addition, a partnership between the Future Group and Axiom Telecom (a mobile retail

company from West Asia) has resulted in a joint venture company called Future Axiom

Telecom Ltd. The 50:50 JV plans to invest an initial US$40 million to set up 1,500 outlets

by the end of December 2009.

Other expansion plans come from Spencer's Retail, which will establish 300 additional

stores by 2010 with an investment of US$102.88 million. Presently, Spencer's operates

700 stores, which account for 2.5 million-sq.-ft. of retail space, which will further increase

by another 1.3 million-sq.-ft. by 2010. Similarly, ITC's Wills Lifestyle and John Players plan

to expand their presence in tier II and III cities, increasing their retail space by around 15-

20%. Currently, there are over 50 Wills Lifestyle stores in India.

Shopper's Stop is also planning to invest US$205.78 million to increase its present store

space of 1.3 million square feet to 2.7 million square feet over the next 3-4 years. Leading

footwear retailer Bata India is planning to establish 60 stores in 2009 across the country.

Government Initiatives

The government has implemented various measures to encourage investment in the

Indian retail industry. Currently, the government allows 100% FDI in cash and carry

through the automatic route and 51% in single brands. In addition, franchises are available

for big operators. To further attract global retailers, India’s 2007-08 economic survey

17

recommended a foreign equity share in all retail trades and 100% for luxury brands and

other specialized retail chains.

There is an urgent need to streamline the country’s tariff structure as India levies one of

the highest duties and taxes on imported luxury goods. This fuels grey market growth and

increases in duty-free purchases, even as the stringent regulatory environment encumbers

investment by foreign brands.

Innovative Retail Concepts

To address the entry of new players and the market’s competitive landscape, retail players

are adopting innovative retail concepts to attract consumers. With reduced commodity

prices and the recent excise duty cuts, input costs have come down by around 25-30% in

several categories. Subsequently, many value retailers have decreased prices by over 15%

in various product categories to encourage greater consumption. Retailers like Big Bazaar,

D'Mart, Spencer's and Food Bazaar, among others, have begun slashing prices in product

categories like apparel, home products, and food (private label). In fact, modern retailers

are now also selling private labels to consumers looking for more affordable brands.

Retailers are also stepping up their bargain and discount offers. In addition, Big Bazaar is

introducing Customer Advisory Boards (CABs) to gain valuable customer feedback.

Retail companies are also developing and promoting their in-house brands. The Future

Group is targeting profits of US$2.05 billion from its in-house brands in the FMCG,

household consumer durable and electronics, and apparel categories by 2012. After the

good performance of its in-house consumer brands such as Tasty Treat, Fresh & Pure,

DJ&C, and Koreo, the company now wants to extend it to additional categories like health

and beauty, dairy, apparel, and accessories.

With the US$6.31 billion pharma retailing segment becoming progressively more

organized, players are now looking at newer formats to attract more people to their

stores. Pharmacy chains like MedPlus and Goodlife have started providing health check-

ups, diagnostic services, dental care and medical counseling to its patients, in addition to

pharma and wellness products.

Goodlife is tying up with the Future Group, to set up these convenience clinics at malls

and in the high streets. MedPlus operates 15 such integrated clinics, and is planning to

open 50 more in 2009.

In recreational retail, customized kiosks and storefronts offering made-to-order pottery

painting, portraits, caricatures, and gold and silver impressions, have proliferated in malls

to draw consumers and offer a customized retail experience.

18

Focus on Rural Retailing

There is a renewed focus on rural retailing, given that rural markets are growing at double

the rate of urban markets, and more than 60% of the country’s 1.12 billion population

lives in rural areas, and 87% of rural markets do not have access to organized marketing

and distribution.

To tap the immense potential in this segment, Corporate India is firming up plans to tap

the rural retail market. While a number of products sold to the rural market are agro-

based, companies are aiming to provide more products ranging from cricket bats to

customized credit cards in association with banks, following the expansion and entry of

new players into this emerging sector.

For example, the Bharti-Wal-Mart joint venture plans to invest a substantial amount over

the next 3-4 years to establish a supply chain network in rural India. In another

development, Reliance Retail plans to open more of its retail hubs (food processing,

storage and farmer supply locations) in Punjab, Maharashtra, West Bengal, Andhra

Pradesh and Gujarat. Pantaloons also plans to establish similar hubs in rural areas.

Other retailers have already established themselves in rural India. DCM Shriram launched

its Hariyali Kisan Bazaar in 2002 in Punjab, Haryana, Rajasthan, Madhya Pradesh, Uttar

Pradesh and Uttarakhand. DCM now has more than 70 stores with an average store area

of 9,000-10,000 square feet and catchment radius of 25 kilometers. Major domestic

retailers like AV Birla, ITC, and Godrej have already set up farm linkages. In addition to

Reliance Fresh, Hariyali Kisan Bazaars (DCM) and Aadhars (Pantaloon-Godrej JV); Choupal

Sagars (ITC), Kisan Sansars (Tata), and Naya Yug Bazaar are established rural retail hubs.

However, challenges remain. Poor infrastructure, demand seasonality, complex buying

behaviors and price sensitivity are the main market inhibitors that need to be addressed

by companies planning to enter rural retail markets.

Retailers Look at Revenue Sharing Model with Malls

With the economy slowing down, and the retail industry also facing a slowdown, retailers

are looking for ways to ease pressures on margins. Taking advantage of falling rental

demand, retailers are now negotiating revenue-sharing agreements with mall developers.

This is a win-win situation even for developers bearing the brunt of decreased demand.

While revenue sharing is certainly a concept well established in developed countries, in

India, retail developers tend to build properties and sell them off. As it gains traction,

revenue sharing should promote long-term mall development as the developer is more

committed to the property.

19

Table 6: Top Indian Retail Companies

Retailers Business Focus Revenue (2007-08 est.)

in US$ Millions

Future Group (Pantaloon,

Big Bazaar)

Garments, Lifestyle, White

Goods, Home Furnishings 683

RPG Retail Grocery, Lifestyle,

Electronics 289

Shoppers Stop Garments, Lifestyle

Products, Home Furnishings 171

Vishal Megamart Garments, Home

Furnishings, Grocery 116

Trent (Westside) Garments 92

Reliance Retail Food, Vegetables, Grocery 50.5

ITC Retail Garments, Grocery,

Hypermarkets Figures not available

Bharti Retail Multi-store, Hyper markets Figures not available

Landmark Group (Lifestyle) Lifestyle Products and

Home Furnishings Figures not available


20

IT IN THE INDIAN RETAIL INDUSTRY

The IT in retail market in India can be divided into three broad categories: software,

hardware and IT services. Each of these categories is comprised of several products,

solutions and services as detailed in the following table.

Table 7: IT Products & Solutions for the Retail Industry

Software Products & Solutions Hardware Products &

Solutions

Services

Industry-specific Solutions (Retail

software, Billing software)

Desktop Computers,

Laptops, Scanners,

Billing Machines,

Servers, POS solutions

Managed IT Services

Business and Back Office

Application Software (ERP, CRM,

HR, payroll, etc.)

Storage

Devices/Systems

IT Infrastructure

Management

Security, Data Backup, Storage,

Radio Frequency Identification

(RFID)

Security Appliances Application

Development

Supply Chain, Enterprise

Application Integration (EAI)

Networking Equipment IT Consulting


Although the recession has affected retailers’ profitability, it opens a window of

opportunity for IT vendors as retailers turn to technology to address the challenging

economic scenario. IT vendors are now called upon to act as business partners rather than

just technology providers, which could prove to be a win-win situation.

Indian retailers are still lagging behind when it comes to leveraging the power of IT, but

large domestic retailers like the Future Group, Shoppers Stop and ITC Retail are adopting

technologies quicker than ever before. The fact that these retailers started late in

comparison to their Western counterparts gives them the advantage of analyzing which

21

solutions work best. Still, Indian retailers are in the nascent phase of IT adoption, and

understanding its benefits for retail.

Currently, large and medium-sized retailers are in the phase of implementing robust

transaction systems, which includes POS solutions, merchandise management and CRM

applications. Following this round of implementation, retailers will invest in best-of-class

supply chain and logistics management systems and business intelligence and analytics

systems. In fact, many large retailers have already deployed these solutions as tools to

increase efficiencies during the economic downturn.

However, IT innovation and deployment in India is confined to the organized sector, which

is a small portion of the overall retail industry. Also, organized retail in India is

comparatively new, as compared to the West, where the organized sector has proliferated

for the last 50 years. Retailers are also lagging behind in the area of advanced IT products

and solutions like replenishment planning, analytics, RFID, and warehouse management

systems, with cost being one of the major deterrents.

Cost – A Deterrent

With competition intensifying, retailers are pushing hard to maintain customer loyalty and

provide a superior shopping experience. As such, large domestic retailers are looking to

affordably leverage IT to better connect with consumers.

Despite the fact that some retailers are using various technologies including biometrics,

RFID tags, SCM, POS, and e-payment, it will take some time before the retail industry goes

completely high-tech. The reason is cost. All other obstacles of availability of products or

solutions and skilled manpower are there and can be overcome, but some of the world-

class solutions like RFID, intelligent shelves and kiosk solutions, still remain out of reach

for many Indian retailers. For instance, putting an RFID tag on a product can cost more

than the product itself. As a result, the use of such solutions becomes limited to niche

product categories. In such a case, RFID may be used only with high-value goods (such as

fashion apparel and jewelry). For such solutions, the cost of implementation must come

down drastically before there is widespread usage.

Caution is the Buzzword

Although India’s domestic retail industry is facing the impact of a global financial

meltdown, most retailers Springboard interviewed said they would not curtail IT spending

on long-term projects. Instead as expected, retailers will be cautious with short-term IT

spending and new investments. For instance, the Future Group indicated that it was

reviewing their small budget projects and financial allocations, but is holding steady for

long-term infrastructure projects.

22

Shoppers Stop, another large domestic retailer, mentioned it would also review new

investments with a lot more diligence than in the past. And as far as its overall IT

investments are concerned, it will continue to invest in long-term strategic projects, while

deferring some nice-to-have initiatives. In addition, keeping the economic crunch in mind,

Shoppers Stop evaluated its budgets and brought in efficiencies with the help of its vendor

partners.

Bharti Retail on the other hand mentioned that its IT investments remain unaltered. The

company will continue to increase its investments with its solution partner IBM for a

countrywide data warehousing solution.

23

MARKET SIZE OF IT IN THE RETAIL INDUSTRY

Springboard Research estimates that the IT market for retail in India will grow at a CAGR

of 23% to reach US$1,422 million in 2012 (Figure 1). According to our estimates, the

market grew 43% in 2008 to reach US$507 million, and is expected to grow by 22% in

2009 to reach a market size of US$619 million. According to Springboard Research, the

slowdown in 2009 is attributed to the fact that many retailers have shelved their

expansion plans, and large ticket IT investments plans have been put on the back burner.

Even though many large retailers have not cut down on their IT expenditure plans for the

long run, yet, they are deferring some IT investment plans for the short term to optimize

costs. With decision making and sales cycles becoming prolonged, the overall retail IT

market in India will slow in 2009.

Figure 1: IT Market Size in India’s Retail Industry


Market Size by IT Category

Springboard Research estimates that the market for software products, applications and

solutions in the Indian retail industry will grow at a CAGR of 28% from 2008 to 2012 to

reach US$513 million by the end of the period under review. We have estimated the

market to be around US$149 million in 2008, which translates to 46% growth over 2007

(Figure 2). Retail companies are mostly implementing enterprise software applications like

ERP, CRM, store and inventory management solutions, which are driving the growth in the

software market.

2007 2008 2009 2010 2011 2012

Revenue (US$ Million) 354 507 619 792 1053 1422

Growth 43% 22% 28% 33% 35%

0%

10%

20%

30%

40%

50%

0

200

400

600

800

1000

1200

1400

24

Figure 2: IT Software Market in India’s Retail Industry


Springboard Research estimates that the market for hardware products and solutions in

the retail sector will grow at a CAGR of 19% from 2008 to 2012 to reach US$737 million by

the end of the period under review. We estimated the market to be around US$306

million in 2008, which translates to 41% growth over 2007 (Figure 3). Hardware

deployments are mostly centered on servers, storages and routers and POS hardware.

Although many retail companies have already set up their basic infrastructures, many of

them are also in the process of installing new PCs, POS systems, and network

infrastructure, which are driving the hardware segment.

Figure 3: IT Hardware Market in India’s Retail Industry


2007 2008 2009 2010 2011 2012


Growth 41% 19% 24% 27% 28%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0

100

200

300

400

500

600

700

800

2007 2008 2009 2010 2011 2012


Growth 46% 28% 34% 40% 44%

20%

25%

30%

35%

40%

45%

50%

0

100

200

300

400

500

600

25

Springboard Research estimates that the services market in retail will grow at a CAGR of

27% from 2008 to 2012 to reach US$172 million by the end of the period under review.

We have estimated the market to be around US$52 million in 2008, which translates to

49% growth over 2007 (Figure 4). IT services will play a significant role for retail companies

as they re-orient their operations by restructuring the business segments in which they

operate, introduce new products, enter strategic alliances and upgrade their IT networks.

Figure 4: IT Services Market* in India’s Retail Industry

Source: Springboard Research 07/2009 *Market including Systems Integration, Consulting, Outsourcing &

Support Services

Springboard Research’s forecasts for IT market size growth in the Indian retail industry are

based on the following key assumptions:

Most major retail companies in India have started making sizable investments in their

business with significant budget allocations for IT. We expect this trend to grow over

our forecast period. Moreover, expected new investments in the retail industry by

smaller retailers will also spur growth in the IT market.

Most organized retailers are currently either in an expansion or a diversification

mode, and aggressively reaching out to new consumers/audiences. We expect this

trend to grow with the expansion in the Indian economy over our forecast period,

barring a dip in 2009.

The increasing focus on differentiation, customer retention and loyalty will drive

significant investments in IT.

2007 2008 2009 2010 2011 2012


Growth 49% 25% 32% 42% 41%

0%

10%

20%

30%

40%

50%

60%

0

20

40

60

80

100

120

140

160

180

200

26

The need to upgrade existing infrastructure and implement more robust IT solutions

to streamline operations will also drive IT investments during our forecast period.

27

FOCUS AREAS, BUSINESS CHALLENGES AND IT PAIN POINTS

As in other industries, business opportunities, challenges, and IT pain points are the key

deciding factors for how retail companies invest in IT infrastructure. In this section,

Springboard Research analyzes input from retail company CIOs and other senior IT

decision makers on what they consider their top focus areas, business challenges and IT

pain points.

Top Business Opportunities in Retail

Hypermarkets

According to our data, 46% of respondents believe hypermarkets offer the greatest

opportunity in Indian retail today. Hypermarkets sell everything from automobiles and

fruits and vegetables to consumer durables under one roof, and retailers believe such a

format offers consumers the ultimate shopping convenience. These formats seem to work

best in Tier 1 and Tier 2 cities, and provide excellent expansion opportunities. To tap the

potential in this segment, Reliance Retail launched one of the largest hypermarkets in

India – Reliance Mart in Ahmedabad. Reliance Mart carries more than 95,000 products

catering to the entire family. Products include fresh produce, food and grocery items,

home care products, apparel and accessories, non–food products, consumer durables and

IT equipment, automotive accessories, lifestyle products, and much more. Each of

Reliance Mart’s 61 checkout counters are equipped with the Mobile POS system for faster

checkouts. The store’s atmosphere and layout were also been designed specifically to

provide “a complete solution” to the customer. Reliance plans to roll out 500 more

hypermarkets across the country by 2010.

The Future Group has already forayed into the hypermarket format, and big players like

the Aditya Birla Group and Bharti Retail are also following suit.

The hypermarket segment has certainly emerged as the format with the highest growth in

most emerging markets and is likely to see the most action in India, too. While a large

majority of respondents (71%) from hypermarkets and large format stores mentioned that

expanding into a hypermarket model offered them the biggest business opportunity

today, 50% of respondents each from cosmetics/medicines and home

furnishings/furniture said hypermarkets provided the biggest business opportunity given

the present market scenario.

28

Neighborhood Stores

While large format stores and malls are mostly an urban phenomenon in India,

neighborhood stores, which many in India felt would die with the advent of organized

retailing, still holds its own, and many retailers feel that the format has enough scope to

grow and offer ample business opportunities.

Although shopping malls seem to be opening on every corner, contrary to most people’s

assumptions, these retail formats are not likely to diminish local neighborhood or mom-

and-pop store business, as they too are upgrading their stores. Realizing the potential of

such a format, Reliance Retail has announced its intentions of awarding Reliance Fresh

franchises to certain neighborhood stores, or taking over the local shops to convert them

into small supermarkets. Most retailers feel that there is enough opportunity for all

formats to survive, just as long as they offer some additional or localized services to

differentiate themselves.

Hindustan Lever Ltd. has also ventured into this space by launching its own “Super Value”

stores. Interestingly, 38% of the respondents from the food/grocery/vegetable retail

segment said that neighborhood stores offer the most business opportunity, while 33% of

respondents from the cosmetics/medicines space said that neighborhood stores offer the

topmost business opportunity.

Figure 5: Top Business Opportunities in India’s Retail Industry

Q: What are the top business opportunities in the retail industry today? N=152/Source: Springboard Research, 07/2009

1%

1%

1%

1%

2%

3%

6%

6%

9%

9%

15%

46%

0% 10% 20% 30% 40% 50%

Other

Cosmetics & Toiletries

Electronics Retailing

Discount Stores

Food & Groceries Retailing

TV Shopping

Markets in B & C Class Cities

Lifestyle Retailing

Rural Markets

Online Shopping

Neighborhood Stores

Large Format Stores / Hypermarkets

29

Top Focus Areas of Retail Companies

Focus on Inventory Management

According to Springboard Research data, inventory management ranked as the top focus

area for surveyed retail companies, with 31% of respondents mentioning it as their

strategic focus for IT investments. Maintaining proper inventory is of paramount

importance to retailers who need to have products available for consumers, yet not

overstock unnecessary and costly inventory. By automating inventory management,

retailers can improve control over stock, reducing the amount of extra inventory and

increasing stock turnover, making the inventory more profitable. In addition, inventory

management can improve operational efficiencies, minimize stock level requirements and

automate processes to align with billing, sales, finance and customer relationship

management.

Segment-wise, 35% of garment retailers said their focus was on inventory management,

while 31% of respondents from lifestyle product retailing said inventory management was

their top focus area. From the hypermarket space, 29% of respondents said inventory

management was their top focus area, while 25% each from grocery/vegetable retailing

and home furnishings/furniture said their top focus was on inventory management.

Focus on Supply Chain Management

There’s no doubt that an efficient supply chain is imperative to a successful, competitive

and profitable retail operation. As such, implementing a supply chain management (SCM)

solution is among retailers’ top strategic focus areas. Springboard Research data shows

that 28% of retailers consider SCM as instrumental in their efforts to get closer to

customers.

Also, as Indian retailers ramp up their operations by opening multiple stores across the

country, the need for integrated supply chain management solutions becomes critical to

improved store management and increased ROI.

With the expansion of the retail industry in India, the supply chain takes on an increasingly

important role. As consumers become more demanding and time conscious, retailers feel

the pressing need to provide just-in-time services.. Clearly in retail, where competition is

intense and the stakes are high, customer satisfaction is paramount.

However, infrastructure in India in terms of road, rail, and air links is insufficient. To

overcome these challenges, Indian retailers are focused on reducing transportation costs

and investing in logistics solutions through partnerships or directly. . Also, as retail in India

grows, the role of the supply chain will become all the more important. IT vendors can

maximize their opportunities in this area by focusing on solutions that are more

30

responsive and adaptive. IT vendors must also ensure that their SCM solutions are more

cost efficient and collaborative to help retailers win customers amidst the immense

competition in this sector. Today, the usage of IT in the back-end supply is fairly low in

India. The unorganized sector, a considerable portion of the retail industry, is lagging

behind in IT usage and this could be one of the key reasons why IT usage percentage

remains low in the Indian retail industry.

By segment, according to our data, 31% of respondents from food/grocery/vegetable

retail said SCM was their top focus area, while 26% of respondents from garment retailing

said SCM was their top focus area.

Focus on CRM

CRM is quite a new phenomenon in the Indian retailing industry. According to Springboard

Research data, 11% of respondents said CRM was their current top focus area. However,

it’s important to note that it is mainly big retailers that have installed CRM systems to

identify and track customer purchases. Organized retailers like Big Bazaar, Westside,

Shoppers' Stop, and ITC have started concentrating on providing more value to their

valuable customers using targeted promotions and services to increase their share of

wallet, i.e., the percentage of the customers' purchases made from these retailers with

these customers. Nearly all these retailers have also started loyalty programs to reward

frequent shoppers with incentives and discounts. These programs help retailers increase

store traffic and enhance sales. For example, Shoppers' Stop, one of the leading apparel

retailers in India, increased net profits by 96% with the company's loyalty CRM program,

First Citizen Club, which accounts for 63% of sales.

In another case, Raymond implemented CRM to gather data on customer preferences and

buying trends. As part of the implementation, regular customers receive a premium card

that tracks purchase patterns and holds customer data.

The program, called “Premium Circle,” is offered to Raymond customers at 265 of 365

Raymond shops in India. With the help of this solution, a central repository of information

has been created about premium customers whose details are accessible at any retail

outlet where this system has been implemented.

Overall, organized retailing in India is operating in a tough competitive environment where

only those retailers that nurture customer relationships through effective CRM strategies

and programs will survive. In times to come, CRM is going to be the most dominant

marketing tool to enhance overall retailer performance.

31

Figure 6: Top Strategic Focus Areas for India’s Retail Industry

Q: Which has been the top focus area for your company in terms of IT investment? N=152/Source: Springboard

Research, 07/2009

Strategic Focus by Retail Segment

Among the various retail segments, the office products segment is more focused on

inventory management and supply chain management. As office products take up lot of

space, it is critical for this segment to have an efficient inventory management in place. In

addition, lifestyle retailers and garment retailers are also focused on inventory

management, since inventory is key to the proper functioning and operation of their

businesses.

SCM was named as the top focus area by 75% of respondents from the home furnishings

and furniture retail segment. Companies in other segments including electronics/electrical

retail, food and grocery, pharma and cosmetics, and lifestyle products were also focused

on CRM. Additional IT strategic focus areas by retail segment follows in Table 8.

2%

3%

4%

5%

5%

6%

7%

11%

28%

31%

0% 5% 10% 15% 20% 25% 30% 35%

Store Solutions

Delivery & Distribution

Business Intelligence

Sales & Marketing Management

Online Business/E-commerce

Reaching New Markets

Other

Customer Relationship Management

Supply Chain Management

Inventory Management

32

Table 8: Strategic Focus Areas of Indian Retailers by Segment

Top Focus

Areas

Cosmetics/

Medicines

White

Goods

Food Garment Furnishing /

Furniture

Lifestyle Office

Product

Multi-Brand

Outlets

SCM 33.33 30.00 31.25 26.09 75.00 24.19 0.00 28.57

Inventory

Mgmt.

16.67 30.00 25.00 34.78 25.00 30.65 100.00 28.57

New

Markets

0.00 0.00 6.25 4.35 0.00 9.68 0.00 0.00

Delivery &

Distribution

0.00 0.00 0.00 0.00 0.00 4.84 0.00 14.29

B I 0.00 0.00 6.25 6.52 0.00 1.61 0.00 14.29

CRM 16.67 10.00 18.75 8.70 0.00 12.90 0.00 0.00

Sales &

Marketing

16.67 10.00 0.00 0.00 0.00 0.00 0.00 14.29

Store

Solutions

0.00 0.00 0.00 4.35 0.00 1.61 0.00 0.00

Online

Business

0.00 10.00 12.50 4.35 0.00 3.23 0.00 0.00

Customer

Relationship

Mgmt.

16.67 10.00 18.75 8.70 0.00 12.90 0.00 0.00

Other 16.67 10.00 0.00 10.87 0.00 4.84 0.00 0.00


Top Business Challenges

Competition

Given the massive potential of India’s retail sector, the rush to tap the booming market is

heating up, and each major player is trying to capture a sizable chunk of the retail pie. As

33

such, a large number of respondents – 49% – feel that growing competition is a serious

business challenge in today’s retail industry. The organized retail sector also feels that

there is competition from the unorganized sector, which is huge compared to organized

retail in India. Unorganized retailing has existed in India for centuries, and its main

advantage is customer loyalty that endures from generation to generation. The sector also

boasts a low-cost structure, as it is mostly operated by owners, has very low real estate

and labor costs, and low taxes.

However, as India continues to witness the continued entry of global giants into the

country, existing retailers will have to innovate, experiment and take risks to stop the

erosion of their market share from these large global retailers. Most retailers are thus

gearing up to meet this challenge by investing in supply chain management and

developing relationships with their vendors and suppliers. The key for the unorganized

retailer is not only to avoid the erosion of its customer base, but also to generate more

customers for its products and services to maximize business and survive in the market by

achieving economies of scale.

Sector-wise, a large majority of retailers from lifestyle retailing (60%) said competition was

the topmost challenge today, while 57% of respondents from hypermarkets said

competition was their biggest challenge.

Rising Real Estate Costs

Springboard’s survey results show real estate costs are the second most critical challenge

for 24% of interviewed. India may be one of the fastest growing retail markets, but

exorbitant property rental prices are affecting retailers’ bottom lines.

As such, while the retail slowdown may not have affected some retailers, spiraling

property rentals in some pockets of India have put pressures on profits. With high rental

costs in India nipping at margins, retailers are now being forced to rethink their expansion.

However, lately there has been a correction in property prices, and retailers are looking to

cash on in this opportunity by tying up with developers for a revenue-sharing model.

Yet overall, the real estate market in India is unpredictable and expensive for shop

owners, retailers, multiplex owners and food and beverage operators, among others, and

this is acting as a deterrent to robust growth of the sector. More affordable retail space

will enable retailers to deliver more products and value-added services to their

consumers, resulting in increased volumes and efficiencies of scale, reducing costs in the

supply chain.

By category, according to our data, 37% of respondents from the food/vegetable/grocery

segment said rising real estate costs were a prime challenge, while 33% of respondents

from cosmetics and medicine said real estate costs was a challenge.

34

Figure 7: Top Business Challenges for India’s Retail Companies

Q: What are the business challenges in the retail industry today? N=152/Source: Springboard Research, 07/2009

Significantly, 63% of respondents said that they have closely aligned their IT systems to

address business-related challenges, while 22% of respondents said they were in the

process of doing so.

Figure 8: IT Used to Address Business Challenges?

Q: How closely is your organization’s IT framework aligned to meet your business challenges? N=152/Source:

Springboard Research, 07/2009

1%

1%

2%

3%

3%

3%

4%

5%

5%

24%

49%

0% 10% 20% 30% 40% 50% 60%

Political Hurdles

Manpower Costs

Government Regulations / Laws

Lack of Trained Manpower

Slowdown in Economy

Other

Understanding Customer Preferences

Rising Energy Costs

Streamlining Supply Chain

Rising Real Estate Costs

Competition

1%

3%

5%

6%

22%

63%

0% 10% 20% 30% 40% 50% 60% 70%

None

Streamlining the Supply Chain

Need Customized Solution

Other

Streamlining IT Systems

Required Infrastructure in Place

35

Top IT Pain Points

No Issues

According to our data, 40% of respondents said they had no IT-related pain points. The

absence of IT pain points for many retail respondents can be ascribed to the fact that most

retail companies have a very simple IT system in place or have only started building an IT

infrastructure. Once retailers implement more complex enterprise-wide IT operations,

pain points are certain to arise.

IT Infrastructure

Although 40% of respondents indicated they had no pain points, 25% of respondents cited

that existing IT infrastructure was a pain point. Network failure, desktop management,

software upgradation, and security-related issues plague retailers to a large extent, and

lead to infrastructure management challenges. Among segments, 37% of

food/grocery/vegetable retail respondents said IT infrastructure was a problem, while 24%

of respondents from lifestyle retailing said IT infrastructure was an issue.

Figure 9: IT Pain Points for India’s Retail Companies

Q: What are your organization’s top IT pain points? N=152/Source: Springboard Research, 07/2009

Furthermore, 20% of respondents said IT infrastructure upgradation was a key

improvement area for their IT frameworks, and 15% of respondents said they needed to

implement ERP to streamline their back office operations. This is a clear indication that

retailers view IT as a critical component of their business, and realize the need to have a

robust IT infrastructure in place to bolster operations.

1%

2%

5%

5%

6%

16%

25%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Data Centralization

Server Issues

Other

Lack of Skilled IT Manpower

Data Consolidation

Bandwidth/Connectivity

Existing IT Infrastructure

No Issues

36

Figure 10: Key IT Improvement Areas

Q: What are the key improvements that your IT systems and processes need? N=152/Source: Springboard

Research, 07/2009

2%

3%

4%

5%

8%

10%

10%

11%

12%

15%

20%

0% 5% 10% 15% 20% 25%

Other

Need Skilled IT Manpower

Storage Upgradation

Customization

Managing Supply Chain

No Improvements

Better Networking

Maintenance of IT Systems

Streamline Inventory

ERP Implementation

Infrastructure Upgrade

37

IT SOLUTIONS & DEPLOYMENT TRENDS FOR RETAIL COMPANIES IN INDIA

To better operate in India’s intensely competitive environment, retail companies are

presently focused on the effective deployment and implementation of IT systems for

improved customer insights that will be used to boost profit margins. As mentioned

earlier, inventory management, supply chain management and CRM are the main focus

areas of IT deployments by surveyed retail companies. As our data shows, 18% of

respondents mentioned they implemented ERP solutions during the past 24 months to

improve their business (Fig. 16). As such, we infer that streamlining back office operations

is on the radar of these companies.

Largest IT Solutions Implemented in Last 24 Months

Focus on ERP

While retail companies have invested – and plan to continue doing so – in an array of

technology and IT solutions, Springboard Research found that they have made significant

investments in enterprise resource planning (ERP) solutions in the past 24 months. A

healthy percentage of respondents (25%) said the largest IT solution implemented in their

organization in the past 24 months was ERP.

As retailers expand their business, the need for integrated back-end solutions is becoming

critical to manage the growth. Moreover, to respond to rapid changes in the industry,

retailers have realized that they must migrate to retail ERP suites that provide the

information access, integrated business processes, and modern technology platforms

necessary to remain competitive. Retailers are implementing ERP to integrate functions

from warehousing to distribution, front and back office store systems and merchandizing,

as they expand operations throughout India. To optimize their growing business, retailers

need information regarding consumer demand, sales, assets, and other analytics to

provide insight into customer preferences, inventory control and so on. The focus of retail

companies on ERP is turning out to be a significant business opportunity for vendors like

SAP and Oracle, who have developed packaged ERP solutions that cater to the needs of

retailers.

SAP’s ERP package is becoming popular in India with leading companies like Pantaloon

Retail and Vishal Megamart, who join a growing list of companies that have chosen ERP

solutions to enhance their critical business processes. SAP’s ERP package in particular

helps retailers manage global sourcing, distribution, transportation and logistics, product

innovation, inventory visibility, financial transparency, compliance, point-of-sale and data

management processes. Another provider – Oracle – has also made inroads in the retail

38

sector, with some key clients like Bajaj Electricals, who have opted for Oracle’s ERP (eBiz

Suite) application to make their organization more agile.

ERP was the top solution implemented by almost all the retail segments Springboard

surveyed. While 55% of lifestyle retailer respondents said they implemented ERP, 50% of

respondents from garments retailing said they had implemented ERP in their

organizations.

POS

Retailers, both big and small, are using point-of-sale (POS) systems to improve the

customer experience and differentiate themselves in a crowded marketplace. Retailers are

investing in POS for enhanced customer service and transaction handling, better customer

information gathering, improved store labor management and seamless channel

integration.

According to Springboard Research data, 18% of respondents mentioned they

implemented POS solutions in their stores during the past 24 months. In India, most of the

surveyed retailers are using the latest POS for checkout, and most items are bar coded and

scanned by either flat bed or handheld bar code scanners. Each POS terminal is also

equipped with a scale for weighing items. In addition, the systems include receipt printers

and embedded MSRs for capturing credit card information.

Most of these POS systems are well known brands in the retail industry and are not

generally home grown. As such, Indian retailers are able to incorporate the industry’s best

practices gained from years of experience by global POS vendors. This puts the Indian

retail industry on par with their Western counterparts.

In one such installation, Madura Garments implemented an end-to-end retail POS solution

from IBM for purchase order management, price management, planning, allocation,

replenishment, CRM, and back office enterprise reporting.

Store Solutions Challenges & Vendors in India’s Retail Industry

According to our data, POS is the single most preferred store solution Indian retailers have

deployed in their stores, with 93% of respondents indicating they have deployed POS

solutions in their stores. Furthermore, as compared to the West, self-checkout terminals

and self-service kiosks are still fairly uncommon. While the Western world is rapidly

moving toward the usage of self-checkout terminals, the Indian market will take some

time to adapt to them, especially since organized retailing and its tools are new concepts

in India.

39

Figure 11: Retail Store Solutions in India

Q: What retail store solutions do you have in your stores? N=152/Source: Springboard Research, 07/2009

Interestingly, the majority of retailers surveyed (84%) said that their POS was client

(premise)-based as opposed to web-based.

Figure 12: Client-Based (Premise) POS or Web-Based?

Q: Is your POS client (premise)-based or web-based? N=152/Source: Springboard Research, 07/2009

The majority of the respondents we spoke to felt that client-based POS was easy to use

and had no connectivity issues. Furthermore, some retailers said that since they had a

93%

0%

7%

POS

Touch Screen/Information Kiosks

Both

84%

16%

Client(Premise)-Based

Web-Based

40

limited number of stores, web-based POS did not make sense for them, and as client-

based POS was more centralized, it was more convenient.

Figure 13: Top POS-Related Challenges in India's Retail Sector

Q: What are the top POS-related challenges you face in your organization? N=152/Source: Springboard Research,

07/2009

While a large majority of retailers (89%) said they did not have any POS-related challenges

as of now, 4% did say that server downtime was a challenge that affects customers. In

addition, 2% of respondents said connectivity was a challenge.

POS Vendors in India’s Retail Industry

Springboard Research data revealed that HCL was clearly the preferred POS hardware

vendor for retailers. HCL’s POS solution is comprised of the HCL Ambience PowerMate and

HCL Beepos, which are powered by Intel’s Core 2 Duo processor and includes either a 15

inch or 17 inch touchscreen kiosk, the HCL Thermal High Speed Retail TSP 700 printer for

barcode, label, receipt and ticket printing, and the HCL Elegance POS with finger touch

option.

The HCL Ambience PowerMate solution can be used as a mobile POS for immediate check-

out. It has the capacity to operate for 4-5 hours during power failures, has a small

footprint and can’t crash the hard disc. The solution is targeted to small and medium

businesses and retail clients.

Following HCL, HP was the preferred hardware vendor for 21% of respondents.

1%

1%

1%

1%

1%

2%

4%

89%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Retrieving Data

Aligning the Inventory

Integration with Legacy Systems

Difficult to Update all Locations

Lack of Trained Manpower

Connectivity Issues

Server Downtime

No Issues

41

Figure 14: POS Hardware Vendors

Q: Which hardware brand do you use for POS? N=152/Source: Springboard Research, 07/2009

With regards to software, Tally emerged as the leading provider of software POS solutions

for the Indian retail sector, with 23% of respondents naming Tally as their provider. SAP

came in second, with 19% of respondents naming it, and Oracle third with 17% of

respondents using the vendor’s POS software in their stores.

Figure 15: Software POS Vendors

Q: Which software brand do you use for POS? N=152/Source: Springboard Research, 07/2009

6%

9%

10%

19%

21%

35%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Other

NCR

Dell

IBM

HP

HCL

7%

9%

9%

16%

17%

19%

23%

0% 5% 10% 15% 20% 25%

IBM

LS Retail

Other

Microsoft

Oracle

SAP

Tally

42

Figure 16: Largest IT Solutions Implemented in Past 24 Months

Q: What is the largest IT solution implemented by your organization within the past 24 months? N=152/Source: Springboard Research, 07/2009

Solutions Categories

Focus on Enterprise Business Applications

Springboard data has made clear that surveyed retailers in India realize that in order to

succeed, they need to adopt an external and internal focus. On one hand, it is critical to

improve interactions with customers and suppliers. And on the other hand, retailers must

ensure the efficiency of internal functions by enabling better interconnectivity and

synergy. To achieve both of these goals, retailers are deploying a standard architectural

framework that integrates external interactions with the enterprise’s back office

functions. As such, 63% of respondents said the solutions they implemented revolved

around enterprise business applications, while 18% of respondents said their solutions

were more retail specific.

From this information, we can infer that retailers are aware that with a standard

architectural framework, they are better positioned to deliver value to employees,

customers, suppliers and other key stakeholders.

As was seen earlier, most the solutions deployed by surveyed retailers were ERP, store

solutions and CRM, which amplify the fact that enterprise business applications are

gaining traction with this industry.

3%

4%

4%

5%

6%

10%

10%

15%

18%

25%

0% 5% 10% 15% 20% 25% 30%

Other

Security Software

Network Infrastructure

Upgrading Existing Infrastructure

Industry Specific Software

BI

Inventory Management

CRM

POS

ERP

43

Figure 17: Major IT Solution Categories

Q: What are the solution categories in which each mentioned solution implemented in the past 24 months falls? N=152/Source: Springboard Research, 07/2009

Specific IT solutions implemented by several major retailers are shown below.

Table 9: IT Solutions Implemented by Retailers in India

Retailer Line of Business Solutions Implemented

Pantaloon Apparel mySAP Business Suite, SAP Advanced

Planning Tool for Merchandise Planning &

SAP Apparel & Footwear Solutions, RFID

application by Wipro Infotech

Shoppers Stop Apparel & more JDA suite of applications for retail, Oracle

Financials for financial accounting, Business

Objects for reporting, SharePoint portal for

internal and external collaboration, and

Microsoft Exchange and Communication

Server for messaging. Blade servers and

multi-core servers with VMWare for

application deployment, NetApps' SAN and

NAS technologies for storage consolidation

and virtualization

1%

1%

4%

7%

10%

18%

63%

Security

Storage

Infrastructure Software


Store Solutions

Retail-Specific Solution

Enterprise Business Applications

44

Arvind

Megamart

Apparels, Textile Oracle Retail merchandising, planning, supply

chain and store applications

Vishal

Megamart

Hypermarket SAP retail solutions

Liliput Apparel Microsoft Dynamics NAV and LS Retail

HyperCITY

Retail India Ltd.

Hypermarket JDA Software's Advanced Store

Replenishment by E3


IT Spending by Retailers in the Last 24 Months

As Indian retail companies aim to improve efficiencies and lower operational expenses,

they are becoming more mature in their use of technology. A significantly higher

proportion of retail companies are increasing their IT spending, albeit at a moderate rate.

IT infrastructure building and upgrades, store solutions as well as retail-specific solutions

and back office integration, comprise the core IT spending drivers.

Amount Spent on Each IT Solution Implemented in Past 24 Months

In the past 24 months, 16% of our respondents mentioned they spent between

US$200,000 to US$600,000 for their largest IT solutions. 13% of respondents said they

invested US$6,00,001 to US$50,00,000 for their largest IT implementation during the past

24 months.

Encouragingly, 9% of our respondents mentioned they had spent more than US$50,

00,000 during the course of the past 24 months for their largest IT solution.

By segment, 29% of respondents from the hypermarket retail space said they spent

US$50,00,000 and above for the largest IT solution they implemented during the past 24

months. 33% of respondents from medicine and cosmetics said they spent US$600,001 to

US$50, 00,000 for their largest IT solution during the past 24 months.

31% of respondents from food/grocery/vegetable retailing said they spent US$200,000 to

US$600,000 for their largest IT solution during the past 24 months, while 20% of

respondents from electrical/electronics retailing said they spent US$200,000 to

US$600,000 on their largest IT solution in the past 24 months.

45

Figure 18: Amount Spent on IT Solutions in the Past 24 Months (in US$)

Q: For each of the solutions implemented, what was your total level of external IT spending? N=152/Source: Springboard Research, 07/2009

Springboard’s data reveals that 34% of respondents spent 41% to 60% of their IT budget

on hardware for the largest IT solution they implemented in their organization during the

past 24 months. 26% of respondents said hardware spending on the largest IT solution

that they implemented was 21% to 40%.

Figure 19: IT Solution Spending on Hardware

Q: How was your organization’s spending distributed across hardware in terms of %? N=152/ Source: Springboard Research 07/2009

8%

9%

13%

16%

55%

10,000 - 2,00,000

50,00,001 and above

6,00,001 - 50,00,000

2,00,001 - 6,00,000

Don't Know/Can't Say

9%

26%

34%

7%

26%

1%-20%

21%-40%

41%-60%

61%-80%


46

As far as spending on software is concerned, data shows that 36% of respondents had

spent 21% to 40% on software when implementing the largest IT solution in their

organization during the past 24 months.

29% of respondents said they spent 41% to 60% on software for their largest IT solution

implementation during the past 24 months.

Figure 20: IT Solution Spending on Software

Q: How was the spending distributed across IT software in terms of %? N=152/ Source: Springboard Research, 07/2009

On the services front, 29% of respondents said they spent 1% to 20% on IT services when

implementing their largest IT solution during the past 24 months. 20% of respondents said

their IT services spending for their largest IT solution during the past 24 months comprised

21% to 40% of their IT budgets.

Significantly, 21% of respondents mentioned that their IT services spending on their

largest IT solution during the past 24 months was zero.

9%

36%

29%

1%

26%

1%-20%

21%-40%

41%-60%

61%-80%


47

Figure 21: IT Services Spending on Largest IT Solution

Q: How was spending distributed across services in terms of %? N=152/ Source: Springboard Research, 07/2009

Future Solutions & Solution Providers

Our data indicates that Indian retailers will continue to invest in IT solutions to streamline

their businesses and boost their profit margins. IT adoption in the Indian retail industry is

maturing, and with competition intensifying, and consumers growing more demanding,

these companies are investing in an array of technologies to provide consumers with the

latest in customer service, store experience, and more.

According to Springboard Research data, 25% of our respondents will invest in business

analytics and business intelligence (BI) tools over the next 12 months, while 22% said they

will invest in ERP tools over the next 12 months.

Retailer focus on BI tools provides sales opportunities for BI vendors like SAP, Oracle and

SAS as retailers gear up to move to the next level of IT implementation, and streamline

their operations to cope with current economic conditions.

BI tools will also gain more popularity as there is great need in the industry for an

enterprise business intelligence system that addresses the business nuances, processes,

and opportunities of retail.

Global retailers in mature markets extensively use business intelligence tools to survive

and grow in their competitive environments. Springboard Research believes that as the

Indian retail landscape becomes more competitive, retailers will leverage the power of

analytics to increase competitiveness. In addition to enterprise BI solutions, retailers will

21%

29%

20%

4%

26%

0%

1%-20%

21%-40%

41%-60%


48

also focus on analytic solutions for specific areas such as customer loyalty and store

productivity.

Figure 22: Largest IT Solutions Considered for Implementation in Next 12 Months

Q: What is the largest IT solution you are considering for implementation in the next 12 months? N=152/Source: Springboard Research, 07/2009

Future Solution Categories/Trends

Almost half of our respondents (45%) said their future investments will be related to

enterprise business applications, while 32% said their investments will be focused on

network infrastructure.

Specifically, as retailers in India expand, the issue of managing growing volumes of data

arises. As such, retailer focus naturally falls on enterprise business solutions that allow

them to accurately utilize burgeoning amounts of customer, sales, trend, and operational

data, and on network infrastructure to support data management.

2%

2%

3%

3%

6%

10%

12%

15%

22%

25%

0% 5% 10% 15% 20% 25% 30%

Video Conferencing


Online Portal

SOA

Focus on Existing Solutions

None

Infrastructure Upgrades

CRM

ERP

Business Analytics/BI

49

Figure 23: Future IT Solutions Categories Planned For Next 12 Months

Q: What are the solution categories in which each mentioned solution falls? N=152/

Source: Springboard Research 07/2009

Factors for External Vendor Selection

Price

In what could be a critical piece of information for IT vendors’ go-to-market strategies, a

large number of retailers mentioned price as a key determinant in external IT vendor

selection. This response is primarily due to the global economic meltdown, which like for

all industries, has hit the retail industry too. With retailers grappling with profit margins,

they are keen to implement IT to streamline and automate operations to cut costs, and so

price has become a key issue.

According to our data, 25% of respondents mentioned price as a key factor for external

vendor selection.

Strong Service & Support

An encouraging 23% of our respondents mentioned that strong service and support are a

key consideration in external vendor selection. From the vendor point of view, this is a

favorable response. The fact that a fairly large respondent base focuses on other selection

drivers than cost enables vendors to put more focus on their capabilities in the

marketplace. Given retail companies’ focus on industry-specific solutions, vendors who

have established themselves in this domain, and have solutions customized for this

industry or its segments, and who offer strong service and after-sales support are set to

gain market share.

5%

5%

5%

9%

32%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Retail-specific Solutions

Store Solutions

E-Commerce

Infrastructure Software


Enterprise Business Application Software

50

Figure 24: Primary External Vendor Selection Factors

Q: What is your primary factor for external vendor selection for solution implementation? N=152/ Source: Springboard Research, 07/2009

1%

2%

5%

11%

14%

20%

23%

25%

0% 5% 10% 15% 20% 25% 30%

Other

Commitment to Organization

Existing Relationship

Strength in Particular Solutions

Reputation

Knowledge of Industry

Strong Service & Support

Price

51

COMPETITIVE LANDSCAPE

With the retail space in India gaining momentum despite many challenges, a large number

of IT vendors are targeting the industry. Vendors focused on providing retail-specific

solutions to retailers include both MNCs and local IT companies. Local IT vendors have a

sizeable foothold in the retail space because they provide low-cost, industry-specific

solutions.

Our data shows that almost 45% of the market is captured by SAP and Oracle with SAP just

ahead with 25% of the respondents naming it as their leading external influencer. 20% of

respondents named Oracle. Other MNC vendors such as HP and JDA have 10% of market

share among our respondents. HCL, with 12% of the market share among retailers

surveyed, is the leading local vendor in the retail space.

Notably, 10% of our respondents mentioned they have deployed their solutions in-house.

Figure 25: Leading Primary External Influencers

Q: Which vendor was your primary external influencer for implementing your IT solutions? N=152/Source: Springboard Research, 07/2009

Leading Primary Software, Hardware and IT Services Vendors

Software Suppliers

Our data indicated that SAP was the primary software supplier among our respondent

base with 25% of interviewed retailers naming it as their software solutions provider.

Next, 20% of respondents mentioned Oracle as their leading software solutions provider.

HCL was named by 12% of respondents.

8%

10%

10%

12%

15%

20%

25%

0% 5% 10% 15% 20% 25% 30%

Other Indian Vendors

Other MNC Vendors

In-House

HCL

IBM

Oracle

SAP

52

Figure 26: Leading Primary Software Supplier

Q: Which vendor was your primary software supplier for your IT solutions? N=152/Source: Springboard Research, 07/2009

Hardware Suppliers

Our respondents (22%) mentioned their primary hardware supplier was HP, while 20%

mentioned IBM. HCL was named by 18% of respondents, and Dell by 15% of those

surveyed.

Figure 27: Leading Primary Hardware Supplier

Q: Which vendor was your primary hardware supplier for your IT solutions? N=152/


8%

8%

8%

9%

10%

12%

20%

25%

0% 5% 10% 15% 20% 25% 30%

Wipro

Other Local Vendors

IBM

Microsoft

Other MNC Vendors

HCL

Oracle

SAP

4%

6%

7%

8%

15%

18%

20%

22%

0% 5% 10% 15% 20% 25%

EMC

Wipro

Other

SUN

Dell

HCL

IBM

HP

53

Services Suppliers

Wipro is the primary services supplier for our respondents with 20% of surveyed retailers

naming the company as their services vendor, while IBM was second with 17% of

respondents naming it as their services supplier. HCL was named by 15% of respondents,

and TCS by 13%. “Other,” comprised of several smaller Indian services providers, was

selected by 17% of respondents.

Figure 28: Leading Primary IT Services Provider

Q: Which vendor was your primary IT services provider for implementing your IT solutions? N=152/ Source: Springboard Research, 07/2009

Leading Vendors in India’s Retail Space

An overview of the leading vendors for the retail industry in India follows below. Please

note that the following information is indicative data only.

SAP

With over 72 high growth Indian retail companies using SAP technology for their retail

solutions, SAP India has significant presence in the growing Indian retail sector. Major

retail players such as the Future Group, Reliance Retail, Tata Trent, ITC Retail, Great

Wholesale Retail Club, Vishal MegaMart, Welspun, Nilgiris Dairy Farm, Videocon, and

Spencers, have partnered with SAP to build integrated solution portfolios for maximized

profit margins.

SAP established a SAP Retail Innovation Center in India to better serve both the Indian and

global markets with forward-thinking uses of retail technologies. The center develops

2%

3%

3%

4%

6%

13%

15%

17%

17%

20%

0% 5% 10% 15% 20% 25%

Satyam

Reliance

Tulip

CMS

Datacraft

TCS

HCL

Other

IBM

Wipro

54

technologies to capitalize on new market opportunities and seamlessly integrate them

into retail operations networks for best practices-based retail expansion.

The company’s SAP for Retail application provides an integrated technology platform for

retailers and a one-point solution for supporting and managing different business models

such as owned stores, franchises, etc.

The SAP for Retail solution portfolio combines the SAP Business Suite family of business

applications with a broad set of integrated retail applications to help companies meet

consumer demand across multiple channels.

Some of the most common solutions used in the retail industry by its customers are

Merchandise and Master Data Management, Merchandize and Category Management,

Forecasting and Replenishment, Workforce Management, Store Management, and POS

Data Management.

IBM

To expand its foothold in India’s growing retail market space, IBM unveiled its Store

Integration Framework (SIF) middleware developed specifically for retail that integrates all

of a retailer’s devices, applications and solutions to create “intelligent” stores. IBM’s retail

suite includes solutions such as IBM Digital Video Surveillance (DVS), Integrated Multi-

channel Retailing, and AnyPlace Kiosks. IBM’s Store Innovations uses service-oriented

architecture to better serve retailers’ customers, boost productivity, and streamline store

processes. IBM has tied up with Reliance Retail to provide end-to-end IT solutions for

Reliance’s retail business. IBM will provide systems for Reliance Retail stores, processing,

distribution and collection centers, and also its primary and secondary transportation

facilities, along with IT systems for the national and state headquarters.

IBM is looking at the retail sector as one of their major focus areas for supply chain

management solutions. IBM has also created a team in India to cater to the emerging

sector domestically.

Oracle

With a number of strategic acquisitions that include Retek, 360Commerce, and ProfitLogic,

Oracle offers one of the broadest sets of retail-specific functionality both globally and in

the fast-emerging retail industry in India. The company also offers advanced analytic

capabilities for retail.

Oracle’s direct presence in India and its center of excellence for retail in Bangalore has

helped Oracle build a dedicated practice in the country. The center, comprise 200 retail

experts, is a platform for the world’s leading retail organizations to exchange ideas,

develop concepts and showcase scalable and best-of-breed solutions.

55

Its solution for the retail industry, Oracle Retail, includes applications like the

infrastructure software Oracle Database, and Oracle Fusion Middleware, as well Oracle E-

Business Suite’s, Oracle Financials.

One of the major retailers in India, Arvind Megamart, selected Oracle Retail to support its

aggressive growth plans as it seeks to achieve leadership in fashion and value-priced

merchandise retailing in India. Oracle Retail provides Arvind with an integrated, scalable

platform to manage its retail processes from the supply chain to store. Oracle Retail and

other business applications are deployed through Arvind’s network of a centralized

distribution center and other regional distribution centers across India.

With this deployment, Arvind expects to increase its inventory turnover, improve its

forecast accuracy, enable shorter replenishment lead times, and overall improve its

service levels at its 93 Megamart stores and outlet centers.

Another major retailer, Aditya Birla Retail, has also invested in retail and supply chain

applications from Oracle to facilitate the establishment of its new store and various store

formats under the brand name “More.”

HCL

HCL Technologies is increasing its focus on the retail segment with its total outsourcing

offering for the small and medium enterprise category. For large retailers, HCL is pitching

its best-of- breed solutions that cater to specific needs.

With its outsourcing platform, HCL provides application development and maintenance

(ADM), business process outsourcing and infrastructure management solutions.

HCL sees the outsourcing model gaining traction with retail players and are in talks with

almost all the top players in the Indian retail segment.

The company has close to 45 customers (both locally and globally) in the retail segment.

HCL Technology also has tie-ups with retail solution providers such as JDA, Infor, SAP and

others. HCL is partnering with JDA to become the prime implementer for JDA solutions in

India and the preferred implementation partner for APAC. HCL has been the hardware

supplier for retailers in India and this association makes it a one-stop shop for hardware,

software, and support for the retail community. The company is also in the process of

working with its technology partners to create models such as pay-per-use or software-as-

a-service for the SME segment.

56

Microsoft

Retail has become a strong focus area for Microsoft in India. The IT major is engaged

directly, or through partners, with several major retail chains and is in talks with many

others, including the top 10 retailers in the country. Microsoft is also in the process of

setting up a retail center of excellence in India that will bring together all its solutions and

serve as a resource base for its customers..

To further focus on the retail sector, Microsoft unveiled Microsoft Dynamics for Retail, an

integrated end-to-end business management solution for specialty retail chains. The new

solution offers a way to generate accurate, timely data, streamline supply chain processes

and operations, and drive down costs across their organization.

The Microsoft Dynamics for Retail solution also delivers business intelligence, such as real-

time exchange of inventory, and sales and financial data between headquarters and

stores.

For smaller companies, Microsoft offers a software-plus-service offering.

Local IT Vendors in Retail

Ginni Systems (GSL)

GSL was established in 1999, and is a provider of specialized software solutions for retail

Industries. The company has significant presence in the retail domain and provides

solutions across the entire gamut of retail segments including department stores, chains,

hypermarkets, discount stores, multi-brand outlets, and food and grocery stores.

With its flagship product GINESYS, GSL provides retailers with point-of-sale solutions, back

office applications, and enterprise resource management applications.

Sonata Software

Sonata is an IT consulting and software services company headquartered in Bangalore,

India that provides point-of-sale (POS) information systems.

Sonata has three development centers in Bangalore, one in Hyderabad and two in

Hanover, Germany. Sonata's services include IT consulting, product engineering,

application development, application management, managed testing, business

intelligence, infrastructure management and packaged applications development.

Vendor Share in IT Infrastructure of Retail Companies

57

Network Infrastructure Platform

Springboard’s research reveals that Cisco and D-Link are the two leading network

infrastructure platforms used by our respondents. Cisco is the leader with 61% of

respondents using its networking infrastructure platform, while 45% named D-Link as their

networking infrastructure platform. Netgear was used by 3% of the respondents.

Segment-wise, 71% of hypermarket respondents, and 61% of lifestyle retailers said they

used Cisco networking infrastructure platform. D-Link’s platform was used by 63% of

food/grocery/vegetable retailers, and by 52% of garment retailers.

Figure 29: Leading Network Infrastructure Platforms Among Respondents

Q: Which platform do you use for network infrastructure? N=152/Source: Springboard Research, 07/2009

Middleware Vendors

For middleware, 30% of our respondents used SAP, while 26% of respondents reported

Oracle as their middleware vendor. 18% of respondents reported that IBM provided their

middleware. 15% of our respondents used Microsoft middleware. Interestingly, 3% of

respondents mentioned they assembled their own middleware platform.

1%

1%

1%

1%

2%

2%

2%

3%

45%

61%

0% 10% 20% 30% 40% 50% 60% 70%

Alcatel Lucent

Avaya

3Com-Huawei

Reliance

Nortel

Airtel

Assembled

Netgear

D-Link

Cisco

58

Figure 30: Leading Middleware Platforms Used by Respondents

Q: Which platform do you use for middleware? N=152/Source: Springboard Research, 07/2009

Server Vendors

IBM led our survey in server deployment with 40% of respondents mentioning it, while

35% named HP. 10% of respondents stated they had deployed Dell servers in their

organizations, and 6% mentioned Sun.

Figure 31: Leading Server Platforms Used by Respondents

Q: What platform do you use for your servers? N=152/Source: Springboard Research, 07/2009

3%

8%

15%

18%

26%

30%

0% 5% 10% 15% 20% 25% 30% 35%

Assembled

HP

Microsoft

IBM

BEA/Oracle

SAP

2%

3%

4%

6%

10%

35%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Hitachi

Assembled

HCL

Sun

Dell

HP

IBM

59

According to our data, the biggest adopters of HP servers are from the garment retail

segment with 78% of respondents naming HP as their server platform. Hypermarket

retailers were the largest users of HP servers with 55% of them naming it as their server

platform.

Storage Vendors

In storage, IBM and HP were the leading players again, with 40% and 38% respondents

naming each respectively. Dell was a distant third with 6%.

Figure 32: Leading Storage Platforms Used by Respondents

Q: Which platform do you use for storage? N=152/Source: Springboard Research, 07/2009

Among segments, cosmetics and medicines retailers, and electronics/electrical retailers

were the largest adopters of IBM storage with 67% and 60%, respectively, naming the

vendor as their storage platform provider.

75% of respondents from the home furnishing retail segment said they have HP’s storage

platform, while 3% of respondents from cosmetics and medicine said their storage

platform was from HP.

3%

4%

4%

5%

6%

38%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Hitachi

EMC

Sun

Assembled

Dell

HP

IBM

60

SOLUTION DEPLOYMENT, CHALLENGES &

SATISFACTION INDEX

Storage Deployment & Challenges in India’s Retail Companies

Springboard Research data revealed that 58% of survey respondents mentioned they had

internal storage solutions deployed in their organization, while 26% mentioned they have

implemented direct attached storage (DAS) in their company.

66% of respondents from the lifestyle retail category said they had internal storage, while

54% of respondents from the garment retail segment said they had internal storage. 50%

home furnishings retailers said they had DAS, while 57% of respondents from the

hypermarket segment said they had DAS.

Figure 33: Types of Storage Solutions Implemented

Q: What types of storage solutions has your organization implemented? N=152/Multiple Responses Source:

Springboard Research, 07/2009

Storage Challenges

Although 86% of our respondents mentioned they do not have storage-related challenges,

7% of our respondents did mention that their primary storage-related challenge was

establishing proper infrastructure. 3% of our respondents said upgrading was their main

challenge, while another 3% said data backup was their main storage challenge.

Even as storage needs continue to grow at exponential rates, available floor space, power

and cooling resources, budget, and skilled staff are becoming troublingly scarce. In

addition, storage must meet compliance requirements, recover quickly in the event of

58%

26%

20%

7%

Internal Storage - Inside the Server

External - Direct Attached Storage (DAS)

External - Storage Area Network (SAN)

External - Network Area Storage (NAS)

61

disaster, and allow for new functionalities and devices (including mobile equipment).

Enterprises need a practical path for getting a handle on these increasingly difficult

storage environments while, at the same time, also controlling costs and improving service

levels.

Figure 34: Storage Challenges for Retail Respondents

Q: What are your organization’s top storage-related challenges? N=152/Source: Springboard Research, 07/2009

ERP Deployment, Satisfaction Level & Primary Vendor Among Retail

Respondents

Although ERP has been a focus for Indian retailers who aim to streamline their back office

operations for quite some time, , Springboard Research data found that most respondents

have invested in ERP just over the past 24 months.

This is a clear indication that IT applications for retail are increasingly high on the radar of

Indian retailers, and that they are investing in IT to optimize operations and remain

competitive.

1%

1%

3%

3%

7%

86%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Storage Configuration

Storage Centralization

Backup Related Issues

Upgrading Storage Capacity

Establishing Proper Infrastucture

No Issues

62

Figure 35: ERP Deployment Among Indian Retail Respondents

Q: Have you deployed an ERP solution at your organization? N=152/Source: Springboard Research, 07/2009

In regards to performance, our data revealed that 36% of the respondents who deployed

ERP in their organization were “very satisfied” with its performance, while a large majority

of 53% said they were “somewhat satisfied.”

This is indicative of the fact that there is ample scope for IT vendors to improve ERP

implementation and deployment.

Figure 36: Satisfaction Index of ERP Solution

Q: How satisfied are you with the ERP application? Please rank on a scale of 1 to 5 where 5 is very satisfied and 1

is not at all satisfied. N=152/Source: Springboard Research, 07/2009

69%

31%

Yes

No

36%

53%

8%3%

Very Satisfied

Somewhat Satisfied

Neither Satisfied nor Dissatisfied

Somewhat Dissatisfied

63

Significantly, 40% of respondents said their satisfaction level was low due to application

performance issues, while 15% said the application required customization.

Figure 37: Reason for Low ERP Performance Satisfaction

Q: Why is your satisfaction low? (multiple coding possible) N=152/Source: Springboard Research, 07/2009

Especially significant is that 15% of our respondents also mentioned that their present ERP

solution didn’t meet their emerging business challenges, which means that ERP vendors

have an opportunity to further understand retail market dynamics.

High operational costs were also an issue for 15% of respondents using ERP solutions in

their stores or outlets.

Primary ERP Supplier

According to Springboard Research data, SAP emerged as a leading player in the ERP space

among those surveyed, with 32% of respondents naming the company as their primary

ERP supplier.

By segment, 57% of respondents from electrical and electronics retail chains mentioned

their ERP supplier was SAP, while 40% of respondents from the medicine/cosmetics retail

category named SAP as their primary ERP supplier.

6%

9%

15%

15%

15%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Lower than Expected ROI

Lack of Vendor Support

High Operational Costs

Application Can't Address Emerging Business Challenges

Requires Customization

Application Performance Issues

64

Figure 38: Primary ERP Supplier for Respondents

Q: Which vendor is your primary ERP supplier? N=152/Source: Springboard Research, 07/2009

Oracle is the second largest primary ERP supplier for the retailers in India we interviewed

with 21% of respondents naming the vendor as their primary ERP supplier. Among

segments, 20% of retailers from the lifestyle retail segment named Oracle as their primary

ERP supplier, while another 20% of retailers from the cosmetics and medicine segment

said Oracle was their primary ERP supplier.

Microsoft too has made a mark in the ERP space in the retail segment with 11% of the

respondents naming the vendor as their ERP supplier. Significantly, 10% of the

respondents said they developed their ERP solution in-house.

The need for organization-specific customization has led several retailers to build ERP

systems in-house. Some retailers believe that it is difficult to find an ERP system that

encapsulates the business processes which the company has developed over the years.

Moreover, an ERP solution available in the market is very expensive and what adds to the

cost is a significant percentage for an annual maintenance contract and some more for

upgrades, customization and so on. While deploying a ready-made ERP system involves a

change in business processes, in-house ERP system integrates smoothly with business

processes.

CRM Deployment, Satisfaction Level & Primary Vendor among

Retail Respondents

Over the past few years, several large domestic retailers have focused on CRM to better

serve and understand consumer behavior and thus increase competitiveness. As such,

5%

6%

6%

9%

10%

11%

21%

32%

0% 5% 10% 15% 20% 25% 30% 35%

Ginni Systems

DVS (LS Retail)

Ramco

Other

In-House

Microsoft

Oracle

SAP

65

74% of the respondents we spoke to said they had implemented CRM solutions in their

stores, while 26% said they have yet to implement CRM solutions in their stores.

Figure 39: CRM Deployment According to Respondents

Q: Have you deployed a CRM solution at your organization? N=152/Source: Springboard Research, 07/2009

In regards to performance, our data revealed that 51% of the respondents who deployed

CRM in their organizations were “very satisfied” with its performance, while 38% said they

were “somewhat satisfied.” Retailers in India have realized that an important advantage

CRM has over all other customer strategies is its lifetime approach. CRM is not for a mere

single transaction, but rather its benefits extend over the entire duration of customer

relationships.

CRM retail software also encourages good marketing, and enables the collection and

management of customer information, and using that information to segment and

effectively serve the market.

26%

74%

Yes

No

66

Figure 40: Satisfaction Index of CRM Solution

Q: How satisfied are you with the CRM application? Please rank on a scale of 1 to 5 where 5 is very satisfied and

1 is not at all satisfied. N=152/Source: Springboard Research, 07/2009

Interestingly, 40% of respondents said their satisfaction was “low” because they had very

little vendor support. 30% of respondents said high operational cost was the reason for

their low satisfaction level.

Figure 41: Reason for Low CRM Performance Satisfaction

Q: Why is your satisfaction low? N=152 (multiple coding possible)/Source: Springboard Research, 07/2009

51%

38%

10%

Very Satisfied

Somewhat Satisfied

Neither Satisfied nor Dissatisfied

8%

10%

12%

30%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Application Performance Issues

Not a Complete Solution

Applications Cannot Address Emerging Business Challenges

High Operational Costs

Lack of Vendor Support

67

From these results, it is quite clear that vendor support and price are critical factors that

should be considered by vendors eyeing this high growth industry.

Primary CRM Supplier

According to Springboard Research data, Oracle emerged as a leading CRM supplier

among our survey base, with 28% of respondents naming the company as their primary

CRM supplier. By category, 40% of respondents from the garment retailing segment said

they use Oracle’s CRM solution, and 20% of respondents from the hypermarket segment

said they use Oracle’s CRM application.

Figure 42: Primary CRM Supplier According to Respondents

Q: Which vendor is your primary CRM supplier? N=152/Source: Springboard Research, 07/2009

SAP has also gained a significant market share in the CRM space according to our

respondents, with 25% of those interviewed mentioning SAP as their CRM supplier.

Segment-wise, 66% of respondents from the electronics and electrical retail segment said

SAP was their primary CRM supplier, while 33% of respondents from the hypermarket

segment mentioned SAP as their primary CRM supplier.

Microsoft also has a presence in the CRM space according to retailers, with 17% of

respondents naming it as their primary CRM supplier.

Local players like Ginni Systems and Sonata Software were named by 13% and 9% of

respondents, respectively.

8%

9%

13%

17%

25%

28%

0% 5% 10% 15% 20% 25% 30%

Other

Sonata Software

Ginni Systems

Microsoft

SAP

Oracle

68

Service-Oriented Architecture (SOA) in India’s Retail Industry

It’s clear that the key to success in retail today is the ability to share and update

information throughout the retail enterprise. Service-oriented architecture, or SOA,

enables retail organizations to do just that, by aligning people, processes, and data via

consolidated applications and shared information services, even if enterprises use

different systems, from mainframes to cash registers to customer kiosks to online stores.

By aligning consistent data sources across previously incompatible systems, retailers can

reap better sales data, strengthen loss prevention, reduce in-store pricing errors, improve

promotion personalization and timing, and deliver more in-depth product information

directly to customers and sales associates.

SOA can also be the best way to integrate the benefits of RFID tagging into the retail

process. With an RFID network in an SOA implementation, retailers can track every item in

a shipment as it passes out the doors of a warehouse, into the retail store, and off the

shelf down to the unit. As such with SOA, retailers are squeezing new efficiencies from

existing processes and systems, although the concept is at a very nascent stage in India.

Figure 43: Investment in SOA in India's Retail Industry

Q: Has your organization invested in SOA? N=152/Source: Springboard Research, 07/2009

Our data finds that 96% of the retailers we interviewed have not invested in SOA, which is

significant because it is evident of the fact that IT investments have yet to reach the next

level of maturity in India in the retail space. Only 4% of respondents mentioned they

invested in SOA in their organization.

When asked if they intended to invest in SOA in the next 12 months, an encouraging 10%

of respondents said they will deploy SOA within the next 12 months. By segment, 33% of

electronics and electrical retail respondents said they plan to deploy SOA in the next 12

4%

96%

Yes

No

69

months, while 14% of respondents from the hypermarket segment they will invest in SOA

in the next 12 months.

Figure 44: Future SOA Deployment in Next 12 Months

Q: Does your company plan to deploy SOA in the next 12 months? N=152/Source: Springboard Research,

07/2009

When asked why they planned to deploy SOA, 62% of respondents equally mentioned

they would like to integrate data across the enterprise and achieve application integration

within their organization.

Figure 45: Reason for SOA Deployment

Q: Why do you plan to deploy SOA? (multiple coding possible)/N=152/


10%

90%

Yes

No

33%

38%

62%

62%

0% 10% 20% 30% 40% 50% 60% 70%

Deliver Web Services

Make Services Sharable Across the Enterprise

Achieve Application Integration

Achieve Data Integration Across the Enterprise

70

Significantly, 33% of respondents mentioned they would deploy SOA to deliver web

services, which means that Indian retailers are aggressively looking to explore the Internet

to further their business prospects.

SOA Deployments

According to our data, 50% of respondents mentioned their SOA deployment was at the

enterprise-wide level.

Figure 46: SOA Deployments in India's Retail Industry

Q: What kind of SOA deployment do you currently have? N=152/Source: Springboard Research, 07/2009

This level of deployment suggests that applications have been standardized at the back

end, and retailers are now looking to take standard applications to the next level.

According to our data, 33% of respondents said they are automating a particular business

process by streamlining the back end. Overall, 17% of respondents who deployed SOA said

they have deployed SOA for web services, which means that online retail is beginning to

gain momentum in India.

Collaboration in India’s Retail Industry

Springboard Research data finds that collaboration has yet to pick up in the retail space in

India. As such, only 22% of respondents indicated they use collaboration tools (such as

instant messaging, web conferencing, etc.) in their organizations, while 78% said they do

not use any collaboration tools.

17%

33%

50%

0% 10% 20% 30% 40% 50% 60%

Collection of Web Services

Business Process Automation of a Process

Enterprise-Wide Initiative

71

Figure 47: Usage of Collaboration Tools by Respondents

Q: Do you use collaboration tools like instant messaging, web conferencing, video conferencing, and/or audio

conferencing in your organization? N=152/Source: Springboard Research, 07/2009

Top Collaboration Tools

Springboard Research data finds that instant messaging is the most popular collaboration

tool among those surveyed, with 74% of respondents saying they use instant messaging

tools within their organizations.

Figure 48: Top Collaboration Tools Used by Respondents

Q: What are the top collaboration tools/applications used in your organization? N=152/Source: Springboard

Research, 07/2009

22%

78%

Yes

No

3%

6%

6%

12%

74%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Other

Web Conferencing

Audio Conferencing

Video Conferencing

Instant Messaging

72

As retailers further focus on cutting costs, the focus on instant messaging tools to virtually

communicate across stores in various locations is understandable.

While 22% of respondents were presently using collaboration tools, encouragingly, usage

is set to increase, albeit marginally, with 28% of respondents saying they will invest in

collaboration tools in the next 12 months.

With the retail market in India set to expand, retailers are gradually realizing the benefits

of collaboration tools to reduce costs and increase productivity. Also, as IT investment

matures in India, collaboration tool usage will also increase.

Figure 49: Future Investment in Collaboration Tools

Q: Does your company plan to invest in collaboration tools in the next 12 months? N=152/


Future Investment in Collaboration Tools

Video conferencing and web conferencing will be the investment drivers in the

collaboration space in India’s retail industry over the next 12 months. According to our

data, 60% of respondents said they will invest in video conferencing in the next 12

months, while 33% of respondents mentioned their investments will be directed toward

web conferencing.

This provides great opportunities for networking vendors to tap the market, with Indian

retailers looking to invest in these tools.

28%

72%

Yes

No

73

Figure 50: Future Investments in Collaboration Tools

Q: Which of the following collaboration tools/applications are you planning to invest in over the next 12 months?

(multiple response)? N=152/Source: Springboard Research, 07/2009

As businesses strive to establish enterprise-wide standards and to enhance interaction

between different departments and stakeholders, improved communication is becoming a

must, and thus we see retailers more keen to invest in collaboration tools.

7%

19%

31%

33%

33%

60%

0% 10% 20% 30% 40% 50% 60% 70%

Other

Audio Conferencing

Instant Messaging

Voiceover IP

Web Conferencing

Video Conferencing

74

SPRINGBOARD RECOMMENDATIONS

As the retail market in India continues to grow, Springboard Research predicts a rapid

increase in IT demand from this segment as retailers look to build scalable/cost-optimized

infrastructures to support their growing businesses. Many Indian retail companies have

already made significant investments in building their IT infrastructures, and others have

committed to doing so. Retailers are realizing that IT systems can enhance their business

with benefits such as operations integration, real-time data access, inventory and

merchandising management, and reductions in processing and warehousing costs.

According to Springboard Research, once retailers have set up their basic IT

infrastructures, they will focus on strategically investing in IT to boost competitiveness,

efficiency, productivity and profitability. IT will be also be required to manage the growth

in the scale of operations. It is also important to note that while small retailers currently

have a marginal focus on IT, they will increasingly rely on IT to stay competitive in the face

of expected rivalry from the large players, which will offer a plethora of opportunities to IT

vendors to cash in on the market.

Springboard Research recommends that IT vendors maximize their sales opportunities in

the expanding Indian retail segment by focusing on the following:

Focus on Applications That Build the Competitive Edge for Retailers: In retail, the

competitive advantage is best achieved by innovation and efficiency in business

processes, including supply chain, inventory and customer relationship management.

IT vendors must provide solutions that dynamically incorporate the retailer’s need for

innovation and efficiency-building.

Rationalize Costs: With competition intensifying, retailers are pushing hard to

maintain customer loyalty, and provide a better shopping experience. Specifically,

large domestic retailers are looking to leverage IT that enables them to better connect

with consumers. However, cost remains a factor. As such, best-of-class solutions like

RFID, intelligent shelves and kiosks, still remain out of reach for the Indian market

because of their high cost. IT vendors can tap this opportunity by rationalizing costs.

Clearly Define ROI Benefits: A number of CIOs that Springboard interviewed wanted

to have a clear understanding of the ROI associated with IT solution implementation,

especially considering shrinking profit margins. As such, vendors that provide CIOs

with a holistic understanding of an application’s ROI benefits will take the lead in

vendor selection, and accelerate final decision making.

Help Retail Companies in Expansion Mode: As retail companies expand to new

geographies, they will leverage IT to integrate their locations and businesses. IT

75

vendors can reap this opportunity by providing solutions to retailers that address and

optimize application integration.

Focus on Small Retailers: The retail industry is fragmented with thousands of small

players. While most IT vendors are now focused on large and mid-sized retail players,

small businesses in this segment can also provide huge sales opportunities. However,

IT vendors will have to rethink their product development, marketing and price

strategies, since the small players are less likely to opt for high-priced solutions and

rather concentrate on cost-effective, industry-specific solutions that don’t stretch

their relatively smaller IT budgets.

76

CONCLUSION

As retail companies ramp up their operations and build greater efficiencies, the industry

will increasingly rely on technology to meet its business goals. More and more retail

companies are investing in an IT infrastructure to sustain their rapid growth. The key

challenge for IT vendors will be to keep pace with the rapid changes in the dynamics of the

retail industry and provide solutions and services that enable these companies to compete

in a demanding marketplace.

Springboard Research believes that much of the growth in India’s retail industry will be

driven by IT innovation. Since managing costs and improving operational efficiency will

always be important in the low-margin retail industry, IT vendors who anticipate and meet

the needs of retailers and help them to implement solutions that enhance their revenues

will gain a significant foothold in this high growth market.

CONTACTS

www.springboardresearch.com

Contacts

E-MAIL

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