IT issues in F&B retail in India

Some of the points which I discussed in a recent feedback on Indian retail....

For a F&B retailer, what are the typical pain areas of operations -- for instance, SKU management, inventory tracking, billing, analysing shopper data or others?

Typical technology pain areas include – localization requirements like multiple MRP’s, SKU rationalization – EAN/UPC codes, batch controls, forecasting of different types of categories since we are a hypermarket chain with a wide assortment. Vendor collaboration is a big pain area as most of our vendors fall in the medium to small range with low process maturity. We need to educate our vendors and bring their process maturity to an acceptable standard which would make our operations more efficient. Other major pain is the unreliable telecommunication infrastructure where we struggle to get consistent service levels from our telecom vendors. Lack of trained manpower in operations who are exposed to best of breed retail processes. This hampers us from utilizing the enterprise application to its fullest potential.

Are technology firms well versed with the specific needs of a retail operation? Is there sufficient understanding of the business of retail? Are there any specific concerns that you would want a tech company to address (areas they currently do not address)?

Indian service providers generally are tuned to develop software as per given specifications by their overseas clients, they are not used to design or develop innovative solutions as per business requirements. They do not have sufficient domain knowledge consultants or do not understand the importance of domain knowledge in requirement analysis leading to mismatch of expectations in the execution of the projects. To address the local market this needs to change and tech companies in India need to give sufficient importance to consultants who understand the domain and the technology and act as the interface between the business and technology teams. Indian tech companies need to understand that technology is just a tool and it’s the ultimate business objective which needs to be fulfilled with acceptable price points. Retail business is tough with minimal margins so the technology companies needs to employ innovative methods to keep the investments low and in return giving measurable business benefits. Only companies which would provide value would survive in the Indian market. 

Which are the areas of operation that are completely or partially technology-enabled? E.g Point-of-Sale (POS), ERP, Workforce Management, Retail Media Networks, SKU-level RFID tagging, GDS, CRM etc etc

Our operations are completely technology enabled in the following areas:

• In store operations – (POS, Direct Store Deliveries (DSD), Price and promotion management,  payroll, Loyalty (Group Loyalty and CRM).
• Supply Chain and Merchandise Management, Warehouse Management, Vendor Management
• Core ERP implemented for Financial Management (AP,AR,GL), Fixed Asset Management etc.
• Human Resource Management System (HRMS)

All systems are integrated.

Currently we do not have any plans for RFID especially at SKU level, as we do not think this currently makes business sense to go in for this investment. Our focus is on operational efficiency and we would thus stress more the analytics, as now we have a base application in place giving us the fodder to now focus on using the data converting into meaningful information.

Retail IT products in India

More and more western Retail IT product vendors are eyeing the Indian market for their IT products  but what they do not understand is that they would never get the premium license payments which they are used to in the west. Since retail IT products are typically niche products they command a premium pricing in the west. This pricing is typically in the range of 1.5-2 million USD per mid size implementation for a tier 1 retail ERP. 

 In the US where a mid sized retailer is typically 50-150 store retailers this amount is accepted (this is also changing) but in India or even the APAC this is completely out of the line. No retailer in India/APAC is going to shell out 1.5/2 mill USD for an IT implementation. So the vendors who believe in the “premium” pricing strategy are going to just bleed in India.

 Recently I had the opportunity to work with a leading ERP vendor. This ERP is now rated 3-4^th after the SAP’s and Oracle’s of the world. Their strategy was to appoint “re-sellers” in India for the sales of the retail/CPG ERP product and they expected the re-seller to find leads, train consultants, create marketing awareness and even take product liability !! Their investment – just a small office with 2-3 persons in India for support.  The re-seller was also expected to pay for the training of the personnel. The ERP vendor promised no support but expected “sales targets” to be met from the reseller. The price of the ERP – 1 mill+ USD ! Such short sighted strategies for selling IT products in India are 100% bound to fail.

 

So what is the solution?

A partner focused strategy is the only way to go. This is the strategy which has led to SAP and Oracle ERP products being the de facto standards in India. A partner eco-system which is well supported by the principal brings down the TCO for the ERP implementation. An India specific licensing policy with minimal upfront payment would bring down the initial investment needed to procure the ERP. Since India is still relatively immature in organized retail processes, base or stripped down versions of the ERP products with an option to enable the more advanced functionality at a later stage would work with similar options in licensing. The ERP vendor needs to invest in nurturing the partner and look for long term partnership with the local vendor. Flexible licensing payments, investments in having a established office in India to prove to the prospective customer in India that they are serious of the Indian market.

 The most important aspect of selling a retail ERP product in India is the localization. India has one of the most complex tax structures with multiple tax rates, VAT, multiple MRP requirements etc. A product vendor who is serious about the Indian market has to invest in adding the localization or at least collaborating with a local vendor to enable their product for the Indian market.  Absence of such localization means the product would never sell. No Indian local company is going to touch the product if it does not handle statutory localization.

 Last but not least the vendor needs to have patience and have a long term plan to stay in India to succeed.  Only then will the vendor succeed in the Indian market. The IT tech spend in India is bound to go skyward but its not a easy pie, you need to work hard for earning it.