The Indian retail sector is thriving with a three year compounded annual growth rate of 47%, making it the fastest growing sector in the Indian economy. While organized retail in India is only 3% of the total $250 bn retail industry, it is expected to grow 25% annually, driven by changing lifestyles, strong income growth, and favorable demographic conditions. It is estimated that by 2010 organized retailing will cross the $22 bn mark from the current $7.5 bn. The branded retail sector, estimated at about $6 bn makes up for only 3% of the total market, but is forecast to grow at 25-30% annually over the next four years, with plush department stores and malls mushrooming across the country.

Retail is India's largest industry and the largest source of employment after agriculture. It also accounts for over 10% of the country's GDP. The Indian population is witnessing significant change in its demographics. And, the huge potential of this industry, which is estimated at $250 bn, has compelled global big names in retail like Wal-Mart and Carrefour to come to India. "It is not so much a question of 'unsatisfactory' penetration; India is big opportunity. There are markets such as India and China where you can see retail opportunities coming up, and there are opportunities in parts of Indonesia, Africa, and Latin America. Like everyone else, we are seeing these markets opening and developing," says, Cliff Crosbie, head of Global Retail Marketing, Nokia. A large young working population, nuclear families in urban areas, increasing working women population, and emerging opportunities in the services sector are going to be the key growth drivers of the organized retail sector.

Irrespective of the debate on FDI in retail, Indian companies are building their strength. Reliance is rolling out a nationwide chain of supermarkets as part of its $5.5 bn retail strategy. In similar lines, Pantaloon, India's largest retailer, has announced plans to invest $1 bn to expand its retail space by 2010. In its report, FICCI estimates that India's retail industry will grow to $427 bn by 2010, and the market share of organized retail will swell to 22%.

The 'IT' Story
Today, retailers are in favor of utilizing technologies to their business benefit. While managing costs and improving operational efficiency will always be critical in the low margin retail industry, retailers are now shifting their focus to solutions that enhance the basic customer experience and drive revenue across all channels. This revolution has been focused on the stores in recent times, but knowledgeable retailers will now demand that all technologies should have a positive impact on the customer experience across all channels.

Retailers are seeing IT as the biggest enabler of their success. They are looking to increase their IT spending by almost 15% in 2006, allocating almost half of this increase to application software with a particular focus on tools that facilitate multi-channel customer relationships, point of sale systems, strategic merchandising, and supply chain management. The past couple of years have seen several retailers implementing solutions ranging from F&B operations to discount clothing implementing supply chain management (SCM) solutions to improve core business processes such as global sourcing, distribution, logistics, innovations, transparency and visibility in financials and inventory, and compliance and management of point of sale (POS) data. However, organized retailers have not taken well to the concept of 3PL (third party logistics) due to their apprehensions of losing control over the supply chain. Currently, the transportation is carried out partly by organized service providers and partly by truckers and local transporters.

From a retail industry point of view, the critical activities that can be handled by IT are finance, accounting, business intelligence, vendor development and management, merchandising and inventory management, facilities management, stores management, customer relationship management, branding, marketing, sales promotion, HR, and supply chain management. In fact, having a robust and scalable supply chain that will facilitate rapid growth is one of the key imperatives for India.

Since one of the basic objectives of retail organizations is to make data available to users and customers, proper IT implementation and superior IT infrastructure is essential to ensure that. In spite of getting minimal details, the retailer captures the right information, which flows to everyone from the back office staff to head office managers. The entire information flow must be seamless. A retail business works on a network environment because the stores connect to one another as well as to supplier sites. This is because in the retail business quick response is the key to success.

Key Opportunities in Retail
Logistics: The focus of major retail expansions will be around the food and grocery segment, with all major corporates entering retail through this segment. With the objective to have better control over price, consistency in product supply as well as quality, there will be huge investment in supply chain infrastructure. Worldwide, IT has been on the forefront in SCM initiatives as it plays an integral role in automation and information sharing during the whole chain.

Warehousing: As retailers take control over the inventory management as well as distribution across the supply chain, warehousing will play a pivotal role in the distribution process. Advanced computerized systems such as Real Time Warehouse Control Systems would offer enhanced integration of information flow on a real time basis, leading to more accurate inventory planning processes and elimination of wastages.

Merchandising: The growth in the size of the formats brings in the complexity of management of stock keeping units, which includes planning of merchandise from sourcing till phasing out of the item. The problem becomes more intricate with in-house private labels where retailers take the risk of product development and commit on the production quantities. Private label not only brings in additional margins for retailers, but also competitive edge in terms of positioning of products in respective categories. It is a big opportunity, as internationally 17% of the sales are generated through private labels. Though merchandising decisions are largely taken with human intervention, IT plays an important role as a decision support system, helping users in taking well informed decisions for merchandise management.

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