e Ability of the emerging organized Indian vegetablesand grocery retailers
Author name(s): Paulrajan Rajkumar and Fatima Jacob
Authors affiliation : Department of Management Studies, Anna University Chennai, India.
Author Address : Paulrajan Rajkumar,
27/6 Bazaar Street
West KK Nagar, Chennai 600078
India
Author e mail :
e Ability of the emerging organized Indian vegetables and grocery retailers
Abstract:
Indian retail industry is expanding in phase with overall economical growth of the nation and being transformed from a traditional to an organized trade rapidly. Globally, retail and distribution sectors have impacted heavily by variety of technologies. Most of them are positive effect on retailers and benefited them.
First and foremost, retailers should have ability to adapt to new technologies. Though retailers are enable to adapt better, reliable and most sophisticated retail technologies; but adaptation alone will not yield any profit, market share and business growth. It is possible to draw the benefits of technology, only based on the retailer’s ability to implement, practice and utilise the same technology.
An exploratory study had been carried out with objective to investigate and understand the underlying the abilities to employ and use electronic technology (‘e’ ability), among corporate, regional and independent types of organized grocery and vegetable retailers who have operation in the city of Chennai. Corporate, regional, independent retailers, electronic equipment and system suppliers, support service organizations and customers were interviewed for data collection. Personal interview and Questionnaire were the instruments used. The questionnaire consists of open ended questions and interview is a semi structured.
The findings of this study are useful to understand the readiness and ability to adapt to new technology by organized grocery and vegetable retailers. Corporate retailersare ‘e- Able’ organizations with lot scope for further improvement to match with global players and capable to take challenges. Technology definitely serves as an enabler for regional organized retailers and technological disability persists with independent retailers. Enabling customers a better shopping experience with technology is a fast-growing trend in organized grocery and vegetable retailing.
The budget allocation and spending on technology as well as inability factors to go for technology are not part of this study. This is the limitation of this study and also scope for further future research.
Key words: Retail, Technology, Grocery, Vegetable, India.
e Ability of the emerging organized Indian vegetables and grocery retailers
Introduction:
India is 12th largest economy in the world with GDP of USD 1,170 billion, agriculture output constitutes 18 percent and Trade 45.8 percent of GDP for the year 2007 (World Bank, 2008). Agriculture in India is the means of livelihood of almost two thirds of the workforce in the country and employs nearly 66.7 percent of the population (UNDP, 2005). Indian government economical policy change to open up economy during the last decade had significant effect on retail sector and particularly grocery and vegetable retailing which is high volume of transaction and low profit margin business. Indian retail industry is expanding in phase with overall economical growth of the nation and being transformed from a traditional to an organized trade rapidly.The Indian industrial growth and liberalized economical policy attracted global players to India in every industrial sector (Saxena and Sahay, 2000). The Indian retail market, which is the fifth largest retail destination globally, was ranked second most attractive emerging market for investment in the retail sector by AT Kearney's seventh annual Global Retail Development Index (GRDI, 2008). Though fresh vegetable and grocery retail has been considered as a very low margin business, the market potential has attracted Indian business houses and corporate, driving the forays through different models like single-format, multi-format or integrated urban-rural model (Sengupta, 2008).
Both domestic and global corporate entry in to fresh vegetable and grocery market initiated evolution of organized retailing in a big way.Indian food retail consists of staple commodities comprising grains, pulses and vegetables. Organized retailing refers to marketing activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax and business is managed by group of persons,partnership firms, cooperatives or incorporated; both public and private limited companies. Organized retailers can be classified in to three types for this exploratory study purpose; viz corporate houses (Corporate Retailer) with multi format outlets operation across the country, regional operators (Regional Retailer) with supermarkets format chain who are active in a specific cities or graphical area and stand alone and owner managed local players (Independent Retailer) with single store establishment or few outlets; department stores, discount stores or specialty stores.
According to a report by Research on International Economic Relations, the retail business in India would grow at 13 per cent annually from US$ 322 billion in 2006–07 to US$ 590 billion in 2011–12. Organized retail, which constituted a low four per cent of total retail in 2006-07, is estimated to grow at a rate of 45-50 per cent per annum and attain a 16 per cent share of total retail by 2011-12 (ICRIER, 2008).Government of India termed retail as a sunrise sector and the value of the organised retail sector in India by 2010 would be around US $ 45 billion from US $12.4 billion business in the calendar year 2006 Food and Grocery retail in India is the single largest block estimated to be worth a whopping 62 per cent but the share of organised sector in this is minuscule (GOI, 2007).
The government allows foreign direct investment in cash and carry type business model to the tune of 100 per cent equity participation in the fresh vegetable and grocery segment. The joint ventures of domestic Indian companies with the global players allowed to operate with domestic companies have controlling stack in the vegetable and grocery retail. The partnering global companies implement electronic communication and data processing technology in their Indian operations. Also need has been felt by other organised retailers - corporate, regional and independent type; to establish or capability to handle electronic communication and data processing technology enable the high volume and low value retail operations efficiently. All type of organized retailers is currently adapting to new technology which is the trend in grocery and vegetable retailing. The degree by which each retailerspracticethe new technologies varies among them. An exploratory study was conducted to understand the current ability to establish and assess practicing electronic communication and data process technology of grocery and vegetable retailers in the organized sector. The undertaken study revealed the selected three types of organized retailer’s ability in the area of electronic technology.
Electronic Environment:
The technological developments in recent years particularly in the area of electronics and its applications like Information system, software, Internetand telecommunication have significantly changed the way we do business. Electronic environment (e-Environment) in business is providing new opportunities and passing through a phase of dramatic transformation due to the ongoing challenges being posed by information and communication technology (ICT).ICT involvesSoftware, Electronic Data Processing (EDP), Electronic Communication (EC), Information Systems (IS) or Management Information Systems (MIS) and Internet technology.
‘e-Environment’ is the foundation used for automated methods to process commercial data as well as a corner stone in the implementation of Enterprise Resource Planning (ERP) system. Typically, information and communication system is a gateway in accessingand processing large volumes of similar information in retailing environment; starts from purchase orders, goods receipts, stock updates, availability information, planning, to counter sales, billing and payment.
Retail Technology Trend:
Retailing is a technology based business. Retail business opportunities are enabling through technology and transformation with it. Adaptationto technology makes enterprise more agile, creating competitive advantages in the long term, process improvement and optimization, ability to respond to customer requirement quicker and sustaining a steady growth. Extending information technology to the point of activity is the key to achieve sustainable, competitive and profitable business (Jerome Swartz, 2000). Organized grocery and vegetable retail sector which has high volume of transactions, each and every function is crucial and applications of electronic devices are desirable and inevitable. Operational applications of electronic devices are barcoding readers (BCR), Electronic Point-of-Sale (EPOS), Electronic Payments System (EPS) -Electronic Card Reader (eCR), DigitalCheque Reader (DCR), Digital signature capture (DSC) device, Biometric Fingerprint capture (BFP) device, Electronic Weighing Machine (EWM), Electronic Cash Register(ECR), Kiosks, Computers and display screens, Network, and Printers. Shopping aid electronic devices; price checkers, customers self checkouts.The retail back office which is technology driven has clearly emerged as the central hub and conduit of information flow between the store front and the retail enterprise.Retail Technology solutions in the functional and process area of the business are Electronic Data Interchange(EDI)and Radio Frequency Identification (RFID) technology. Information System (IS) applications are Retail Management System (RMS), Purchase, Inventory, warehouse and invoice systems, Customer Relationship Management (CRM), Retail Information System (RIS) and Business Intelligence (BI) tools(RIS News, 2006).
Even though grocery retailers were early leaders in the development of universal product codes (bar codes), but they are among the last to realize the payoff from their universal adaptation and use. The automobile industry adapted to just-in-time delivery channels two decades ago and clothing retailers adapted a “quick response” system in the 1980s. (Jean and Sara, 2000).The latest innovations have occurred because of new electronic communication and information technology, management systems, and global competition. Corporate, Regionaland Independent organized retailers in grocery and vegetable sector are always trying to get the edge on their competitors. The competition is not always for the width and depth of the merchandise but shopping convenience and comfort, accurate check out,detailed billing, payment options and promotions.
Changing retail trends are to adapt to new technologies and become “e-Able Organization”. Ability to establish an Integrated retail information systems and adapt for a business process automation (BPA) tools to help increase competitive advantage and deliver tremendous value and visibility to your business, customers, and trading partners.Electronic devices enables to make accurate and fast reading possible, eliminating error-prone reentries and reducing errors and provide the means for automatic data capture of information.
Research Objectives:
Globally, retail and distribution sectors have impacted heavily by variety of technologies. Most of the technological impacts are positive effect on retailers and benefited them as well as customers. The technologies make enterprise more agile, creating competitive advantages in the long term, process improvement and optimization, ability to respond to customer requirement quicker and sustaining a steady growth.
First and foremost, retailers should have ability to adapt to new technologies. Though retailers are enable to adapt to better, reliable and most sophisticated retail technology; but adaptation alone will not yield any profit, market share and business growth.It is possible to draw the benefits of technology, only based on the retailer’s ability to implement,practice and utilise the same technology.
The objective of this study is to investigate the current ability to adapt, implement, practice and utilise the information and communication applications of electronic technologies by Indian grocery and vegetable retailer in the emerging organized retail sector. The survey objective is to understand the underlying the abilities to employ and use electronic technology (‘e’ ability), among corporate, regional and independent types of retailers.Hence a study is needed to explore the facts of ‘e’ abilityof retail market and an exploratory study had been carried out. As the Indian organized grocery and vegetable market is very huge by its geographical spread and taking in to consideration of the resource and location constrains the researchers have to satisfy, the study has been conducted at the city of Chennai.
The findings of this study are useful to understand the readiness and ability to adapt to new technologies by organized grocery and vegetable retailers. The budget allocation and spending for technology as well as inability factors to go for technology are not part of this study. This is the limitation of this study and also scope for further future research.
Methodology:
This study is an exploratory study. Organized grocery and vegetable retailers who have operation in the city of Chennai; 5 corporate retailers, listed in the table 1, regional retailers who constitute 9 numbers as listed in table 2, independent retailers 40 numbers and electronic equipment, system hardware, software suppliers and support service organizations make up to 11 and30 customers of organized retailer were interviewed for collecting data. Personal interview and Questionnaire were the instruments used. The questionnaire consists of open ended questions and interview is a semi structured. The study revealed that three types of retailers classified for the purpose of this study; Corporate, Regional and Independent retailers have distinct ability to adapt themselves into electronic environment. They differ in the coverage of processes, usage and practice of information, communication and electronic technology.
Table 1: List of Corporate Retailers.
Sl. No. / Name of the Corporate Retailers.1 / Food Bazaar (Pantaloon Retail (India) Ltd)
2 / More (Trinethra Superretail Ltd.)
3 / Reliance Fresh (Reliance Retail Ltd.)
4 / Spencer’s Retail Ltd
5 / Subhiksha Retail Ltd.
Table 2: List of Regional Retailers.
No. / Name of the Regional Retailers.1 / Daily Life Super Market
2 / Grace Super Market
3 / Jeevan buy N save
4 / Kovai Pazhamuthir Solai
5 / Margin Free
6 / Saravana Stores
7 / Subam Supermarket
8 / Fish and Fresh
9 / Murugan Supermarket
e Ability of Corporate Retailers:
Currently all corporate organized retailers are practicing ‘Hub and Spoke’ model of grocery and vegetables chain with minor modifications to fit in to their marketing and logistical strategies. Their operation can be categorized in to three functional areas viz supply source, back office entities and outlets as illustrated in the figure 1 and system view deployed at distribution center, head office and outlets are in shown in figure 2.
Figure 1: Operational view of Corporate retailers.
Corporate retailers are aggressively implementing latest information and communication technology in a phased manner. For example ‘Spencer’s’ has completed their ERP system - SAP implementation, covering eastern and northern regions of India. Retail technology products like RFID, Digital Cheque Reader (DCR), Digital signature capture (DSC) device, EDI and interfacing with suppliers are not part of their plan to implement for near future. Software products like customer relationship and supplier relationship management and e commerce are yet get thrust. Codifications of stores label products are not as per GTIN or adhere to Uniform Code Council standards but follow simple numerical codes. Technology also facilitates organizations standardization across business locations and technological capability aided them to graduate to a consolidated planning at all national level and detailed scheduling at store level.
Figure 2: System view of Corporate retailers.
Business Intelligence (BI) tools are used to analyse the trends and patterns for sales from the retail sales data capture through transaction systems. Overall they are “e-Able Organizations” for the current volume and spread of businesses.
e Ability of Regional Retailers:
The regional retailer’s operational model and system model are shown in figure 3 and 4 respectively. As far as information flow is concern sales outlets and back office are unconnected islands and no network connection exists between stores.They have implemented EPOS system for faster and accurate counter sales. Product coding is carried out at individual stores level; adoptmanufactures bar codes and allocation of code number for stores labelproducts are carried out centrally. EPOS includes multiple terminals of bar code readers, electronic cash registers, display screens and printers. A stand alone electronic payment system is available with store level interface. Individual stores transaction are reported by stores manually and analysed manually by the head office.
‘Digital Gap’ – the gap between deploying technology and utilization of the same facilities are prevailing with many regional retailers. For example multi-store supermarket formatted discount retailer ‘Saravana Stores’, to some extentadapted to ‘e environment’ for good receipt and vendor payment but not practicing product coding; both manufacture’s codes and code for private label products, bar code readers in EPOS. This lack of ‘e ability’ leads to unfriendly customer service.
Figure 3: Operational view of Regional retailers.
They yet to realize the benefits of technology in terms of cost savings, accessibility of information, transparency and accountability and, but they are at a situation wherein most of the business activities are technology-dependent. Majority of the regional retailers are not using any business intelligence (BI) tools for analyzing sales data. Currently regional retailers have low level of ‘eability’ and very limited utility of technology in the area of inventory, vendor payment and EPOS.