IT adoption in the unorganised sector is far less compared to its organised counterparts. That simply means there lies a huge untapped market for modern all-in-one point-of-sale solutions, Cloud and mobile-based applications, which are fast catching up
By KTP Radhika
With growing retail space and changing consumer behaviour, the retail market in India is poised for a strong growth. The sector is expected to grow at a CAGR of 13%, and according to the Investment Commission of India, it is likely to grow three fold from its current size to $660 bn by 2015. Organised retail is growing at a rate of 15-20%. Irrespective of the phenomenal growth in organised retail in recent years, local kiranas and traditional family-run stores in the unorganised sector still account for about 93% to 95% of Indian retail market. According to a recent report by consultancy firm PricewaterhouseCoopers (PwC), there are over 12 mn mom-and-pop stores in India’s unorganised sector. While mall-based shopping formats are gaining popularity in most cities, kirana stores offer credit and apply flexible conditions for product returns and exchange. Apart from these factors, neighbourhood locations, personal services etc are among the strengths of the unorganised retail sector.
That said, the unorganised sector lacks access to modern technology to run the business and adoption of information technology is still at a nascent stage in the sector. Traditionally, the sector has not adopted IT due to reluctance of the retail store owners to automate operations. According to a survey conducted by the Indian Council for Research, fewer than 10% of the unorganised sector retail outlets use billing software. Fewer still. have access to Internet and network connectivity. And less than 7% use a card-payment device.
However, rising competition is prompting the unorganised stores to change and go techy to tap the new opportunities. With the government amending rules to make way for foreign direct investment in the multi-brand retail, local retail shop owners now need a paradigm shift towards technology and process implementation. To compete in urban markets and middle-class neighbourhood, kirana owners must adopt at least basic automation, say experts.
According to Sachin Sharangpani, Vice President of Sales and Markets Manufacturing, Retail & Services, Atos India, there is a huge need for unorganised retailers to build processes and use technology to support their business processes. However, there is no specific one-size-fits-all technology package for retailers. Multiple factors -starting from basic technology knowledge and expertise to store location, products, size and online operations make the needs unique.
“Although a PC-running point-of-sale (PoS) software, barcode scanner and billing printer are basic requirements for a retail shop,” said S M Ramprasad, Deputy General Manager, Consumer Product Group, Epson India. “They also need to adopt a solid retail platform and back-office functionality. This will help them retrieve data on what is selling, what is contributing and what is not working,” he said. Most of these are offered by managed service providers and the cost of entry is negligible. Next, a reliable Internet connection and a low-end computer opens up a world of possibilities for the small merchant where a host of Cloud-based solutions can help manage assortments, inventory and replenishment as well as distribution, logistics and accounting.
Seeing the rising opportunity in this space, service providers and solution vendors have started offering solutions that integrate the value chain for kirana operators, connecting wholesalers and vendors. These solutions, which are often free to small merchants, help manage sales and inventory and replenishment. In exchange, service providers monetise their solutions by offering consolidation of kirana business volumes for wholesalers. Additionally, thanks to proliferation of consumer channels such as mobile and social applications, unorganised retailers have a unique opportunity to modernise their operations and engage their customer at a new level.
The transformation
A majority of unorganised retail outlets are equipped with little more than a cash register. However, in urban areas and developed neighbourhoods, card payment devices have started 
finding their way to the kirana checkout counters. The unorganised retail sector is shifting from manual to electronics billing as the process is fast, convenient, takes less space and is cost-effective,” said Sudhir Narang, Managing Director-India, British Telecom(BT). Also, managed service providers are offering a plethora of very inexpensive billing and retail operations solutions for retailers.
A retailer can start his IT journey with a simple PoS system. Karthik Shivasankaran, Proprietor of Chennai-based Ravi Pharmacy, felt that a PC-based PoS solution with bar-coding system will help retailers like him to improve stock management and control, and to get more in-depth cash and financial reporting. Understanding the specific problems of unorganised players, vendors have started to make tailour-made PoS solutions for the unorganised sector. “There are various new billing solutions used by retailers that benefit the unorganised sector. The customised computer-based billing solution is fast gaining importance for industry verticals such as retail,” said Narang. Low cost, easy to use, flexible solutions which can be installed easily are now available in the market.
Up next comes an advanced business management software. A business management 
software will provide the retailer with more insights into products that sell well and also help them analyse their sales better and improve the customer experience. Said Shivashankaran, “We have more than 35,000 products in our store. Embedded business management solution is helping us to organise, manage and maintain products and stocks.” Advanced PoS solutions are providing all these functionalities in a single package. “Modern PoS include advanced functionalities such as inventory, CRM, financials and so on -all built into the PoS software. New PoS solutions are providing absolute control over sales and inventory while presenting simplicity and speed,” said Ramaprasad of Epson.
Through the Cloud
Cloud computing is removing barriers to technology adoption for small retail operators. It provides cost-effective computing resources on-demand without the need to spend capital to own and maintain technology. Cloud is enabling opportunities for progressive kirana owners to become organised and more competitive in the fast evolving Indian retail market space.
For the store owners, Cloud computing is addressing two important barriers -making technology more affordable and eliminating the need to commit to ongoing maintenance and upkeep of these assets. “Relative ease of entry and widespread adoption of Cloud has unleashed innovation and enabled technology startups develop and deploy software solutions in record time with little capital investment. Computing resources are offered by services providers in shared hosted environment, which create economies of scale for users of technology. Software applications running in Cloud are typically available through web browsers running on inexpensive computers, mobile devices or tablets,” said Natasha Giannopoulos, Associate Vice President, International Operations, LoyaltyOne.
Another advantage of Cloud-based software is that they will have timely automatic revisions, security updates and new features. Cloud-based solutions also have commercial and organisational flexibility to respond to seasonal demand or other competitive pressures. According to Narang of BT, Internet-based computing has a number of implications for businesses. “Among other things, it enables retailers to improve their production and services while, at the same time, giving them opportunities to cut back on expenses. Using Cloud computing, retailers can tune customer programmes as necessary and immediately address problems with supply chain, merchandising, or marketing departments of their operations,” he added. There are various services that can be rendered through Cloud such as data storage, desktop management services, managed security services and spam filtering. According to 
Mahavir Chand, Co founder, GoDB Tech, Cloud based solutions will help in lowering the total cost of automating the retail operations. “Cloud based services are catching up slowly in retail sector. With the available of Cloud based services, solutions such as PoS, Business intelligence, CRM, SCM is gaining popularity amongst big players in unorganised retail,” he added.
Mobility and more
Another technology that is fast catching up in the retailing space is mobility. Mobile penetration is predicted to reach most of the population by 2015. At the same time according to IDC’s latest mobile phone tracker data, smart phone penetration has increased by 68% last year and will continue this trajectory for the next few years. These factors, together with low set up costs and little additional infrastructure investment create a natural opportunity for the retail operators to use mobile as the medium to communicate with customers. “Low-cost tablets are becoming available for unorganised retail sector along with accessories such as scanners and printers which can also be used as PoS. Many of the apparel stores are already adopting the same which also help the sales person in detailing the product, capturing the order and billing,” explained Sharangpani of Atos.
Mobile applications for the retail sector are also evolving at a great pace. “Many of the mobile applications available today benefit the traditional brick-and-mortar stores by improving the in-store experience or driving traffic to stores with discounts. While they provide product information and coupons, shoppers are looking for a more useful, integrated experience,” said 
Prashant Gupta- Head of Solutions, India, Verizon Enterprise Solutions. For store staff, accessing the systems of vendors for checking availability of an item are also becoming possible with mobile apps. Echoing the sentiment, Giannopoulos of LoyaltyOne stated, “There are virtually thousands of mobile and tablet based apps in areas like accounting, order capture and processing, inventory management and sourcing for small merchants. The ubiquitous nature of mobile technology enables consumers, merchants and everyone in the entire supply chain to be at par and operate in the same playing field.”
As mobility and mobile based apps are gaining more importance and acceptance in the sector, even the small retailers are able to launch loyalty programmes, which are completely based on mobile. “By creating and maintaining a consumer community over mobile apps and enabling a smart phone app to communicate with customers, unorganised retailers can increase consumer loyalty and drive product co-creation activities,” suggested Narang of BT. e-commerce and social media are also gaining importance among retailers. Players have started adding e-commerce capabilities for their existing websites and also started creating Facebook pages for their outlets.
Security is another area of IT investment for retailers. CCTV Surveillance is the first step for most of them retailers. “Adoption of CCTV is quite high in the unorganised sector. Currently most of them use IP cameras for security purpose,” said Chand of GoDB. However, advanced security measures such as RFID have not taken off in the unorganised sector. “But RFID tagging of high value merchandise is done in some big apparel retailing,” opined Atos’s Sharangpani.
Impediments remain
Although the use of IT is increasing in the unorganised retail sector, there are still certain challenges faced by the sector because the IT systems are widely dispersed in nature. For many players, computer literacy remains to be an obstacle. How does a player select, install, integrate and maintain the technology he/she needs? How will you train employees to operate it? How do you manage the online presence? Such queries remain a concern for many. Also, most shopkeepers are scared of ongoing costs of operating and upgrading technology. Resistance to change is another big trouble. “At the heart of the challenge facing the retail industry in India is a lack of effective mechanisms to maintain visibility of product flow from source to consumer. This is especially pronounced in the traditional trade channel and with the distributor route to market approach, which together represent the bulk of retail volume in India,” said Narang of BT.
The lack of skilled man power to manage IT is another area of concern since the sector is highly cost sensitive. “As modern technologies creep into the businesses we find it difficult to get good manpower to manage and monitor IT needs,” said Shivasankaran of Ravi Pharmacy. Inability of vendors and applications to work in local language, lack of long-term vision, inability to decide on the optimal IT solution given the business requirements, all remain as obstacles in the way of IT adoption.
Connected to the future
While there are several new technologies out there for the unorganised players, there is a grave need to focus on implementing basic applications such as invoicing, inventory management, billing, automation to the standard business processes in the unorganised sector. Small and mid-sized retailers are still in the process of putting a transaction system in place, which includes a PoS. This can be followed by merchandise management and CRM systems. Going up the ladder, there are applications with user-defined screens that help retailers take care of their front-end store needs as well as back-end warehouse requirements. Such entry-level solutions will work for small retailers with fewer stores. But as their number of stores increase, more evolved technology and solutions need to be adapted.
Large FMCG companies are already integrating their supply chains across the country, giving them real-time insights into retail stores and helping them manage their supply chain better. This will help the retailer in giving better customer experience in the long term. With more technology adoption in the unorganised sector, both e-commerce and m-commerce will catch up. Though barcode and RFID are not yet mainstream, they will help unorganised retailers make their operations more efficient. In sum, supply chain, warehouse management and web-based applications and other evolved technologies that are currently being adapted by the organised retail market are likely to ultimately make their into the unorganised retail sector.
