IT and Unorganized Retail Sector in India

The Retail Market Space in India is populated by millions and millions of traditional, unorganized retailers rather than the modern corporate backed organized retailers. The local kirana shops and the owner manned general stores, one can find in any nook and corner of any part of India account for 97% of total retail market. [1]. On the Contrary major portion of academic and industrial retail research in India is centered on the organized retail industry. In this Paper, we discuss about wiring the large portion of unorganized retail sector through the internet. Any merchandise, organized or unorganized will need Point of Sales, Inventory and Accounting Management as part of their daily business. Through a service oriented and subscription approach we wire up the unorganized sector. By this way once the information of the larger section of the retail market is computerized, and then the software services that can be built using this data are enormous. For instance, this data could be used to make the supply chain management efficient in this sector. Also, using the web 2.0 strategies of collective intelligence [5] upon the collected data, we can make recommendations on products, goods to be people that can be obtained from the unorganized retail market at a much higher quality and low cost than procuring the same from organized retail chains. We discuss about the prospect of IT enabling in unorganized sector, a way to combat against the organized retail sector. The paper discusses about wiring the unorganized retail sector and discusses the various software services that can be build upon that and how that will serve the different stakeholders of the system which includes the unorganized retailers themselves, consumers, suppliers and Government.

TABLE OF CONTENTS
1. Traditional Retail Sector in India 3

2. Business Management in Unorganized Retail Sector .. 3

3. Role of IT in Organized and Unorganized retail Sector . 4

4. Enablement of IT in unorganized Retail Sector . 4

5. A day in the life of a Kiranawala with the proposed IT Solution. 4

6. Benefits for different stakeholders of the System.

7. Practical difficulties in the implementation of the idea.

8. Conclusion.

9. Appendix.

1. Traditional Retail Sector in India

The evolution of retail sector in India can be traced back to the days of emergence of local kirana stores which catered to the convenience of the neighborhood consumers. India being a land of rich cultural diversities, the consumer preferences also varies over different regions. These needs for localization were well addressed by the local owner manned general stores. The statistical studies of the Indian retail sector show that retailing contributes to 10 percent of GDP. [4] Also the empirical data claims that the Indian retail sector is fragmented with 97% of its business run by unorganized retailers. [2].

2. Business Management in Unorganized Retail Sector

Any merchandise will have the fundamental processes that need to be managed for its successful run of business. This includes point of sales, inventory and accounting management. Even the supply chain management becomes an integral part of any retail firm. Currently this 97% of whopping traditional trade in India is being managed by manual ways. Employing household labor and self managed owners these local kirana shops handle the different aspects of business themselves. Though this manual way of processing the business needs was self sufficient for these retailers in the past, now with the entry of Organized retail sector poses a threat to the way the entire business process is managed. As per the study by ICRIER, the organized retail market is growing at a break neck speed of 35% annually while the growth of unorganized retail sector is pegged at 6%. [1]. It is true that the unorganized retail market has its own advantages of customer specific goods procurement and personal relationships with their customers. But on comparison with the rate and the scale at which the organized retail sector is growing in India, an effortful attempt is needed by the kirana stores to stand the competition.

3. Role of IT in Organized and Unorganized retail Sector

IT, one of the most powerful applications of computerization is efficiently used by the organized retailers to manage their entire business process. Integrating the entire stream lined flow of procurement of goods to the point of sales the entire business operations of organized retail are backed up by a wide network of complex enterprise scale IT systems. IT, a boon for the organized retailers, stands as a curse for the latter in their ladder of scaling up against the organized retail sector. Owing to the large capital investment required in building an IT infrastructure, the unorganized retail sector can not afford to procure the same systems to stand the retail war. The spectrum of unorganized retailers include the shops whose size range only 500sq ft. And the data says that over the 12 million operating outlets only 4% of them are bigger than 500 sq ft. [3]

4. Enablement of IT in unorganized Retail Sector

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Computerization of information though has enormous advantages; the unorganized retail sector due to the high cost involved could not make use of the state of art IT systems. Here, we propose an IT Solution which will enable the unorganized retailers to leverage the power of IT systems at virtually in a zero cost investment. We propose a Service Oriented, Subscription based IT System which will cater to the business needs of the retail stakeholders in a hosted model. In the sense, that the investment cost related to the purchasing the hardware and Software, installation and maintenance cost is completely made zero. Being a Web based hosted service; a device with an internet connection is the minimum requirement to start consuming the services.

5. A day in the life of a Kiranawala with the proposed IT Solution

To best illustrate the details of how the system will be consumed by the different stakeholders let us look a scenario of a daily usage of the proposed system. Let us consider a general department store owner A wants to make use of the system to manage his business. A procures a computer and an internet connection and sets up the stage to tap on to the services. A creates an account for him, a more similar process like how one creates a Google account for consuming the services provided by Google. Later, he logs into the system, and provides his personal / demographic / business specific details as requested by the system. During this process he also finds that certain of his suppliers say B and C are also having similar accounts in the system. He creates a link with them and associates them with the goods they supply to him. Once the initial configuration is completed, he is all set and ready to use the system in live and in production the very next moment. Now let us consider that a customer D visits his system to purchase certain goods. A, the general stores owner logs into the system and accesses the Point of Sales service. He then enters the details of the goods that are being billed and creates a bill out of the System. Once this Sold data is received by the system, it updates the inventory of our particular kirana shop owner A. At the end of the day, when our shop merchant A wants to close the sales for the day, he accesses the Accounting service available and has a consolidation of sales made for the day. Also the stock take on the inventory also can be done based the sold goods. The key point to note is that the entire services that A consumes will be at a minimum subscription cost of 100 Rupees per Month to start with. But as we progress this subscription cost could also be removed when the innovative ideas of revenue generation through advertisements are brought in. The methods of revenue generation through the advertisements and other innovative ideas will stand as a separate paper on its own right.

6. Benefits for different stakeholders of the System

From a different stake holders point of view we analyze the take away that can be obtained by system. From a local merchant point of view, he gains a powerful tool to manage his business effectively and thus stands tall in the retail war facing the organized retail giants. The system also

brings in the local players to the wired up arena where one can get a higher visibility and limelight based on his quality of service. For all we know, a local general merchant can offer a better home made product which is not available in a branded retail chain. Based on the consumer ratings of the general merchant, it opens up a way for him to expand his franchise, thus increasing his business. Another critical improvement which can be done using the collected data will be improving the efficiency of the supply chain. This will help the small Kirana shops give competitive pricing for their product offerings. From a Consumer point of view, he gets to know the goods and services offered in his neighborhood which can be acquired more easily than obtaining from a retail chain. The consumer gets to find a local general merchant who offers a product that matches his personal preferences and gets to place an order online through the system and get it delivered to his place. From a supplier point of view, he gets to know sales distribution of a product over a temporal and geographic space. One can channelize the goods from an area of excess to an area of demand and balance the distribution. From a nations development point of view, it brings in a way for the major population of retail sector to combat the growing retail chains and brings in a healthy and a fair competition between the two sides. The wiring up of the 97% of the retail market space brings in a change in the fundamental way the business is done on a daily basis which will eventually lead to both sides of the equation to prosper. The huge set of data collected gives us millions of potential insights into user experience, marketing, personal tastes and human behavior in general. The computational services that could be built over this collected data are also as immense as imagination.

7. Practical difficulties in the implementation of the idea

Though we have overcome the hurdle of capital investment required for an IT solution we have to face the problem of low IT / Internet penetration in tier II cities and rural India and also the major hurdle of educating the Users of the system. A study by JuxtConsult, shows that the internet population in Urban India has reached to 30.32 million [6] and expected to grow at a rate of 28% annually. In a land of 1.15 billion people [7], 30.32 million just accounts for 2% of the internet users. The remaining 98% of the population will include the rural population that includes the general merchants as well as consumers. To connect them, we need a mammoth scale up from the internet service providers also for the process of wiring them up. The same effort would also be required in educating the remaining percentage of the users who would never have used an internet / an IT System in their life time. Another difficulty would be the device which lets the retailers to use the services. This can be computers but a low cost device which is internet enabled can make the adoption easier.

8. CONCLUSION
The idea we propose in this paper discusses about the enablement of IT in the unorganized retail sector. The sheer mammoth size of the unorganized retail space in India will be the key for the

success of the idea and at the same time, its the same scale that needs to be tackled for the idea to be implemented. Facebook one of the most popular and highly scaled internet application currently has 300 million active users across the world. [8]. But the scale which we are addressing here is 1.15 billion. It surely involves a lot of technical issues to be addressed from a scalability and performance point of view to adhere the availability of services to this gigantic base of users. Nevertheless, the final reward which might be got makes it worthwhile to fight the tough battle. The idea of wiring up the unorganized retailers indirectly makes the entire nation to consume the system either as a merchant or as a buyer. The entire idea can be compared to that of the first railway line laid between Mumbai and Thane in 1853. Now the Indian Railways is one of the largest rail networks in the world. Now this idea of wiring up of India digitally will unleash more of what India can deliver to the world.

9. APPENDIX
1. http://www.indianrealtynews.com/retail-market/icrier-begins-survey-of-indian-retail-sector.html 2. http://www.valuenotes.com/one-time/IndianRetailSector_11oct06.asp?ArtCd=86179&Cat=&Id 3. http://en.wikipedia.org/wiki/Retailing_in_India#cite_note-8 4. http://www.indiabiznews.com/biznews/categoryNewsDesc.jsp?catId=12469 5. http://cci.mit.edu/ 6. http://www.marketingcharts.com/?attachment_id=638 7. http://geography.about.com/od/obtainpopulationdata/a/indiapopulation.htm 8. http://www.facebook.com/press/info.php?statistics