Hawking their ware: Would technology find its next big market in India retail?
As policies get less amorphous and global retail giants scramble for a share in the great Indian bazaar, a set of players, keenly watching these developments, would be a group of technology companies. While the relevance of technology in retail was always perceived to be limited in India, emerging trends indicate that offline retailers need to have very strong back-end support in logistics, recommendation, fulfillment, etc., progressively becoming more dependent on technology as they scale up.1
Technology companies across the spectrum are betting big on retail. The large IT services and products companies would be the obvious winners, given the significant amount of IT infrastructure that would be needed. This would include the large enterprise software vendors and also the global infrastructure providers operating in the storage, computing and networking space. We predict that the niche SME focused ERP solution providers would find adequate space in the market. We also expect the emergence of many Tier-3 local vendors, targeting the long tail of the retail segment. Such Tier-3 vendors would provide basic billing management, inventory management and POS applications.
Deloitte predicts that in the long run, the fragmented nature of the market would lead to consolidation. Among small and medium-sized Indian technology players, there could be more opportunities to act as System Integrators and Support and Maintenance providers.2
With the online and offline models facing off, Deloitte envisages significant investments in technology facilitating a coherent multi-channel marketing strategy. Analytics and campaign management that is seen as a niche play currently will gradually become mainstream in the online retail space. However, it would be sometime till we see large scale usage of analytics by a significant chunk of brick and mortar retailers in India. Many serious solution providers would use analytics and big data as a selling proposition, though their actual implementation would still be fledgling at best. While we may see significant capability build-up among the technology service providers in the analytics and big-data domains to serve the western markets, this capability would see limited traction in India for the time being. For e-commerce platforms, creating better customer-interface and user interaction would remain a major driver for technology investment. Solutions for distribution and supply chain optimisation would emerge as a growth area for all retailers with an estimated visible impact of around 20 to 40% on their bottom-line.
The other area where technology would find significant whitespace is transaction facilitation. Around 65% of the consumer transactions in India are still cash-based.3 This provides a significant potential for non-cash-based transactions, which could be driven by a combination of online, mobile, NFC and card-based payment solutions.
As a whole, this year could turn out to be the beginning of a significant technology-adoption story in the domestic Indian retail market that could give rise to a set of new champions among technology vendors focused on the retail segment.
(3) Gartner: Predicts 2013: Indian IT Industry Set to Embrace Uncertainty to Secure the Future