The Indian retail industry's information technology spend is expected to grow by 23% to reach US$1,422 million in 2012, reveals a recent research report from Springboard Research. As per the report, most Indian retailers identify inventory and supply chain management as the top strategic investment area. However, Indian retail IT spends has reduced to 22% in 2009 from 43% in 2008 due to the economic downturn. Findings of this report are based on Springboard's interviews with leading IT vendors operating in the retail sector and 152 CIOs from large and mid-sized Indian retail companies.
"By automating inventory management, retailers plan to improve inventory control, reduce extra inventory, and increase stock turnover. They also look at improving operational efficiencies and automating processes to align with billing, sales, finance and customer relationship management (CRM)," says Nilotpal Chakravarti, the senior analyst for vertical research at Springboard Research.
Chakravarti estimates that the market for software products, applications and solutions in the Indian retail industry will grow at an estimated compounded annual growth rate (CAGR) of 28% from 2008 to 2012. The Indian retail software market is expected to be worth US$255 million by the end of 2010. Retail software includes enterprise resource planning (ERP), CRM, point of sale (POS) software, billing software, inventory management software, and other retail-specific software.
IT hardware market
Springboard's report observes that integrated supply chain management solutions are critical to improve store management and increase return on investment, as Indian retailers ramp up their operations with multiple stores across India. Nearly half the retail sector CIOs interviewed by Springboard indicate large format stores and hypermarkets as the top business opportunity in the sector, while competition is named as the biggest business challenge by a majority of CIOs.
Talking about information security concerns in the retail industry, Chakravarti says, "There are great security concerns, especially when retailers scale up their IT infrastructure and get flooded with crucial huge data volumes. With multiple outlets being the norm and the resultant focus on connectivity, CIOs are going the extra distance to ensure data and network security".
Online retail or e-tailing (e-commerce) is still at an evolutionary stage in India. Online retailing has seen limited success mainly due to low Internet usage and hesitance of Indians to shop online. "However, some larger retailers have recently built digital storefronts. In one prominent example, the Future Group (owners of Big Bazaar and Pantaloon) aggressively market their online store as "the" place to buy products of all kinds," says Chakravarti. Many interviewed retail CIOs think of e-tailing as a key strategy to extend their presence to new market segments and geographies.
A large number of retail CIOs mentioned price as a key determinant in external IT vendor selection, while strong service and support came in second on the list of priorities. Other influencers like vendor reputation and existing relationships rank much lower.
Springboard observes that local IT vendors have a sizeable foothold in the retail space because they provide low-cost, industry-specific solutions. SAP, Microsoft, Oracle and IBM hold the largest market share in the Indian retail sector, while HCL is the leading local vendor in the retail space.