Reader's Poll

Which of the following technologies/concepts are likely to witness significant traction this year?
Any data to show


Tele Data

Mobile Subscribers Yearwise comparision

  • JUser::_load: Unable to load user with id: 1679

Ease of Doing Business: Telecom tools redefine the retail industry

October 16, 2015
E-mail Print PDF

The Indian retail industry is among the fastest growing industries globally. According to AT Kearney’s Global Retail Development Index (GRDI) report, the country has been moving up every year in ranking, from 20 in GRDI 2014 to 15 in GRDI 2015. This has been a result of economic stability and regulatory reforms aimed at improving the ease of doing business, although foreign direct investment (FDI) restrictions on multi-brand retail remain.

The retail sector also contributes significantly to the economy. In India, it accounts for more than 10 per cent of the country’s gross domestic product and for about 8 per cent of the total employment.

Industry overview

According to a report titled “Retail 2020: Retrospect, Reinvent, Rewrite” by the Boston Consulting Group and the Retailers Association of India, the country’s retail market is expected to nearly double to $1 trillion by 2020 from $600 billion in 2015. The report states that while the overall retail market is expected to grow at 12 per cent per annum, modern trade will expand twice as fast at 20 per cent per annum and traditional trade at 10 per cent. As of 2014, retail spending in the top seven Indian cities amounted to $57.6 billion, while organised retail penetration stood at 19 per cent. Online retail is expected to be at par with physical stores in the next five years. Meanwhile, driven by robust investments in the sector and a rapid increase in the number of internet users, India is expected to become the world’s fastest growing e-commerce market and expand to over $100 billion by 2020 from $3.5 billion in 2014. The key growth drivers for India’s retail industry include favourable demographics, increasing urbanisation, nuclearisation of families, an increase in the purchasing power and disposable incomes of consumers, a growing preference for branded products, and greater buyer aspirations.

The growth in the retail industry is also being encouraged by strong policy support from the government, which has taken various initiatives for attracting higher investments into the retail sector and strengthening the industry. For instance, it is working towards the implementation of the Goods and Services Tax Bill, which is expected to play a key role in facilitating industrial growth and improving the overall business climate. According to the Department of Industrial Policy and Promotion, the Indian retail industry in the single-brand segment has received FDI equity inflows of $275.4 million between April 2000 and May 2015. With an increasing number of global players entering India and domestic players announcing expansion plans, multifold growth is expected in the Indian retail industry over the next few years.

Select major investments that have been announced in India’s retail industry over the past few months include:

  • Swedish company IKEA, a leading global brand in the home furnishing segment, has entered into an MoU with the Telangana government to set up its first store in India at Hyderabad. IKEA retail outlets have a standard design and each location entails an investment of $78.59 million-$94.31 million.
  • The Foreign Investment Promotion Board (FIPB) has cleared five retail proposals worth $66.01 million from organisations like Bestseller, Puma SA and Flemingo. The FIPB has also approved three 100 per cent single-brand retail proposals worth $34.97 million.
  • Abu Dhabi-based Lulu Group is planning to invest $402 million in a fruit and vegetable processing unit, an integrated meat processing unit, and a modern shopping mall in Hyderabad, Telangana.
  • Aditya Birla Retail, part of the $40 billion Aditya Birla Group and the fourth largest supermarket retailer in India, acquired Total Hypermarkets, which is owned by Jubilant Retail.
  • Amazon, the world’s largest online retailer, is planning to invest $5 billion in strengthening its retail presence in India, making the country its biggest market outside the US.
  • Wal-Mart India Private Limited, a wholly owned subsidiary of Wal-Mart Stores, Inc., is planning to open 500 stores in India in the next 10-15 years.
  • British retail major Tesco has invested $133.8 million in multi-brand retail trading through an equal joint venture (JV) with Tata group company Trent. For the JV, Tesco has bought a 50 per cent stake in Trent Hypermarket Limited, which operates the Star Bazaar retail business in India.
  • Paytm is planning to set up 30,000-50,000 retail outlets where its customers can load cash into their digital wallets. It is also working towards enrolling retailers, mostly kirana stores, as merchants for accepting digital payments.
  • Mobile wallet company MobiKwik has partnered with Jabong.com in order to provide mobile payment services to Jabong’s customers.
  • FashionAndYou has opened three distribution hubs, in Surat, Mumbai and Bengaluru, to accelerate deliveries.

Changing industry landscape

The growing middle class is contributing to the rise of India’s retail industry. It is estimated that about 91 million households will be “middle class” by 2030, up from 21 million today. In addition, by 2030, 570 million Indians are expected to live in cities, nearly twice the current population of the US. It is this expanding population that is driving the growth of organised retail in the country. India’s consumption level is ex-

pected to double within five years to $1.5 trillion from the current level of $750 billion. Organised retail, which made up just 7 per cent of the overall retail market in 2011-12, is expected to grow at a compound annual growth rate (CAGR) of 24 per cent and command a 10.2 per cent share of the total retail market by 2016-17. The Indian online retail market is estimated to grow more than fourfold to reach $14.5 billion by 2018 on account of the rapid expansion of e-commerce. According to research and consultancy firm RNCOS, it is projected to grow at a CAGR of 40-45 per cent during 2014-18.

With the increasing popularity of online retail and the growing mobility among consumers, retail industry players are making significant investments in technology for building strong businesses beyond the traditional brick-and-mortar business models. According to Deloitte’s annual technology trends report, dimensional marketing is redefining the Indian retail industry. Since a large amount of consumer data is captured in the retail industry, the technology for serving customer needs is critical, and sales often depend on the strength of customer engagement. Therefore, retailers are evaluating software platforms and competent technology providers in order to adequately capture and address consumer behaviour, particularly when consumers are increasingly integrating the digital world into their physical world.

The internet of things (IoT) is also gaining popularity among retailers. IoT can help retailers bring in transformation in areas like supply chain management, inventory and warehouse management, marketing and in-store experience. Using IoT technologies like radio frequency identification (RFID), retailers can improve the in-store experience of consumers. For example, RFID can be considered by retail apparel stores for offering virtual changing rooms, which are equipped with an RFID reader, a camera and a tablet. Based on data, the changing room senses a customer’s selection of apparel and allows users to virtually try out different clothes before they make a final purchase. In addition, smart check-out counters with automated picking services enable the delivery of purchased items at check-out counters, giving customers a hands-free shopping experience, much like an online store.

Software defined networking (SDN) is another technology gaining popularity among retailers. According to Deloitte, SDN provides organisations an opportun-ity to virtualise and operate their entire operating environment, including servers, storage and networks. Through virtualisation, retailers can reduce infrastructure-related costs, improve speeds and reduce the complexity of provisioning, deploying and maintaining technology footprints. Deloitte also emphasises the immediate need for the core renaissance of infrastructure and networks by retailers. It states that because many consumer product companies were early adopters of enterprise resource planning packages that served as the core enterprise application, they have become legacy systems designed for earlier market realities, running on previous-generation architecture. Furthermore, the internal design knowledge of the core application erodes over time due to several factors, including (but not limited to) poor governance, staff attrition, mergers and acquisitions, and evolving market realities. In such a scenario, it is critical that organisations undertake periodic technology reviews and accordingly introduce changes.


The biggest challenges facing India’s fast expanding retail industry are the lack of retail space and high rentals. With retailers having to spend a huge amount on rentals, the industry’s overall profitability is getting affected. In the organised retail sector, the lack of trained manpower is a major issue. With the growth of e-commerce and the increasing trend of discounts being offered on goods sold online, traditional retailers are facing immense price pressures.

According to a PricewaterhouseCoopers’ report titled “The Indian Kaleidoscope: Emerging Trends in Retail”, the retail experience has moved on from traditional brick-and-mortar stores and come to include a number of touch points like online stores, social networks and call centres. The changing economic dynamics, diverse choices in products and services, numerous shopping formats, and unparalleled access to information have empowered customers to expect more from their retail experience. The report concludes that in today’s rapidly changing and digitally connected world, customers are more value-conscious while making purchase decisions. In such an evolved and competitive market, industry players need to transform organisational structures and keep pace with technological advances in order to stay connected with new-age digital customers.

 Your cart is empty

Monday morning

Monday morning