With business houses like Reliance on the verge of making a big bang entry into the retailing arena it goes without saying that retail is growing in India and indeed the format of retailing is also witnessing a sea change. From small formats to large formats retailing is the buzzword of this millennium.

Attribute it to the sophisticated lifestyle of today's urban Indian or his appetite for a pleasant shopping experience or the increasing disposable income levels, all these factors are at the core of the humungous growth of retail and mall culture in India. It is not only the well heeled and affluent class that has been bitten by the 'shopping-at-mall' bug, the dwellers of second rung towns are also showing greater inclination for shopping in the soothing and consumer friendly ambience of a retail shop.

The retail sector in India is witnessing a huge revamp as traditional markets and family run 'pop-n-son' shops are steadily paving the way for new format retail outlets, departmental stores, mono and multi-branded retail shops and specialty stores. Even in IT industry the scenario is undergoing stellar changes as traditional, small reselling stores are converting into branded outlets. Channel partners are promptly refurbishing their shabby looking outlets to new look retail store that has everything to lure a customer as he walks in. While talking to industry players about why retailing is capturing the minds of resellers and buyers alike, several interesting facts came to light.

“Though we have Nehru place in Delhi and Lamington road in Mumbai as the major IT hubs but these are highly unorganized markets that cannot be regarded as retailing junctions.”
Sandeep Chillar, Owner, Landmark Technologies

Retail! Is it happening in IT sector?
First things first, while everybody has so much to say about retail and its future forecast, at this juncture it is imperative to see whether retailing is actually happening in IT domain. The answer is of course. IT business is the one area where lot of retailing has been happening of late. In order to quench their thirst for possessing the latest technological marvels, customers are increasingly taking the route of retailing junctions, where they can actually touch and feel the products that are going to enhance the beauty of their homes, in addition to enhancing productivity. Said Sanjeev Walia of Jetage Computer Traders, Chandigarh, “In the past IT products could be sold on their specifications. On merely showing glossy brochures and catalogues customers would make their buying decision, whereas IT purchasing has now become a family affair. Apart from the buying behavior of the consumer, the decision making has also become a collaborative endeavor of all the members of a family who visit retail showroom.” Sharing his own experience of how retail made an impact on the sales figures of his company, K Nagendran, MD, Chennai based GBS Systems explained, “When we opened a retail outlet in 1998 in the city suburb, GBS Systems used to sell only 10 PCs a month and today, we sell more than 250 machines every month. This demonstrates the power and influence of retail on the consumer's mind.”

However, despite the pace at which retailing has caught the attention of all, and the optimistic claims made by vendor companies, the bitter fact remains that IT industry as such still has miles to go in order to match the retailing myth of other consumer articles and commodities. V Krishnan, GM – Consumer Sales (Imaging and Printing Group), HP India Sales corroborated, “The market for IT products still has not reached a maturity level, and perhaps it may take years for IT products to be sold in a large format retail store environment in India. Apparently, the reason for this lag are the extremely low margins in IT sector and circumcised awareness on IT products to a common man.”

Echoed Rajendra Kumar, Executive VP, HCL Infosystems Ltd, “Yes, the organized retail culture has been growing in India and the pace of growth is also remarkable but as far as IT retailing is concerned, it is still in the nascent stage. Currently, 98 percent of IT retailing is unorganized. Thus a huge market opportunity exists that makes IT retailing one of the promising industries of tomorrow.”

“Primarily channel partners who are willing to foray into retailing need to understand that retail is a cash intensive business that requires excellent financial behaviour on the part of partners.”
AK Singh, Owner, Computer Land

However, every individual and company, which has immersed itself into retailing, is extremely bullish on its present status and the pace at which IT retailing is growing amidst current Indian market scenario. Though in India the retailing phenomenon happened quite late in comparison to the other countries, with the kind of investment that is happening in the retail segment over the past two–three years, the day is not far that it will catch up with the global retail standards very soon.

Reasons for IT retail growth
Evidently, the paramount reason behind the growth of the retail sector is changing lifestyles and an evolution in the buying behavior of today's consumer that has transformed the 'savings' oriented Indian buyer to be a more indulgent breed. A rise in the middle and upper middle class families with dual household incomes has aroused a desire to possess latest gadgets and gizmos. Today's socio-economically groomed customer wants to satiate himself and experience the product before actually purchasing it and that has fueled the mushrooming growth of retail shops. It is also the customer's yearning to wipe out the lacuna that existed since long owing to lack of proper product knowledge. Kumar added, “With India becoming a global economy, buyers have become more aware of the choices available to them. Now they want to explore each and every aspect of the product before taking ownership. Moreover, beyond the product they look for a complete shopping experience.”

“Role of channel partners automatically becomes larger when they embark on retailing journey. With the help of manufacturers, they will need to improve their own knowledge on new technologies and develop their role from mere price-based selling to an advisory function for consumers.”
Ravinder Zutshi, Deputy MD, Samsung India

Probably to satisfy this hunger for knowledge the best place to shop is the retail outlet that displays latest products. Apart from exhibiting products another plus point of retail outlets is the demo centers that they have. Now customer can actually experience the product and know how it works since demo centers give this opportunity. Paramjeet Singh Juneja of Ludhiana-based Secant Technologies asserted, “Customers no longer want to read specifications of a product on a paper, they want to feel, touch and experience the product. By giving live demonstrations, the customer can be made to take faster decisions and be persuaded for impulsive buying that was never possible in reselling business.” AK Singh of Delhi-based Computer Land added, “There are a plethora of bits, bytes and technicalities associated with IT products that a customer tends to get perplexed with, he wants to go somewhere where he can see these products in action and confirm whether his perceptions about the products are right or wrong. Certainly, retail outlet is a place where a customer can understand the products and know its functionality even before possessing it.”
Boom in IT retailing is also somewhere related to the marketing strategies of multinational companies that have set shops in India. Said RM Meenatchi­sundaram, CEO, AN Marketing Service Pvt Ltd, “MNC vendors have always vouched for retail business model since it gives them an opportunity to easily establish visibility for their product line.”

After successfully making waves in metropolitan cities and satellite towns retailing is now unfurling its wings in India's tier two cities. According to a research by KSA Technopak and ICICI Property Services, 85 percent of the retail explosion, which has so far been concentrated in the metros, will percolate to smaller cities and towns and the contribution of these tier two cities to total organized retailing sales will grow to 25 percent.

“Pulling customers to retail outlets involves lot of challenges, expert level consulting by skilled manpower is extremely crucial to convert queries into actual sales.”
V. Krishnan, GM – Consumer Sales (Imaging & Printing Group), Hewlett Packard India Sales

Channel perspective
Today channels have started seeing mounting value in retailing, one of the obvious reasons for this are the attractive margins that retail has to offer. Since retail is the last mile interface between customer and the product, retailers could very well convince potential customers for even impromptu buying and make good margins. To a certain extent, market dynamics are also compelling channel folks to resort to retailing. It is already a prevalent phenomenon with sub-distributors and resellers. Walia of Jetage opined, “Indeed, retail is the best option through which we can allure customers through various product lines and brands displayed under one roof. Also the kind of margins that retailing offers are far better as compared to reselling job.”

Suresh Kumar, Director, Karthik Business Machines Pvt Ltd, Bangalore reflected, “Buying habits of customers are forcing channel partners to adopt to retailing, moreover, it is the rule of life that change is a constant thing and if one doesn't change to keep pace with the emerging scenario our businesses will die an unnatural death.”

Not everybody's cup of tea
Though retailing is the buzz word and channel partners are increasingly showing an inclination towards riding the retail wave, there are few people in the market who will agree that retailing enquires matures into 100 percent sales. Even though the footfalls at retail outlets are high, the conversion rate is still minimalist. Singh of Computer Land pointed out, “There is a very good opportunity for channel fraternity in retailing provided they do a good job. Since most partners come from the background of normal retailers who remain involved in rotating the money of distributors and customers, they lack vision for effective retailing. If 80 percent of the enquiries at any retailing junction do not mature into effective sales then that would be the downside of the business. Primarily, channel partners who are willing to foray into retailing need to understand that it is a cash intensive business that requires excellent financial behavior on the part of the partner. There are people who sell cow dung and become millionaires, while there are others who sell diamonds and go bankrupt, hence it is up to the individual as to how they can leverage retailing.”

“Retailers are becoming more sophisticated in their marketing strategies and need to understand the impact that their advertising and promotional activities are having on their retail brand”
Alok Bharadwaj, VP, Canon India

Availability of prime retailing space at an affordable price point is another factor that is putting partners off from going the retail way. Sandeep Chhillar of Delhi-based Landmark Technologies explained, “Today if somebody wants to register their retail presence, soaring real estate prices is one of the factors that dissuades him from taking the decision. Unlike Singapore and other western markets where the government has allotted dedicated sites for the construction of IT malls, Indian government policies still do not match those standards. Though we have dedicated markets in every region which are touted as IT hubs of the respective states, those are not the organized retailing junctions.” He added, “For IT retailing to actually take off the government should encourage dealers and vendors in popularizing information technology, since vendor companies cannot accomplish the task alone.”

Retail: Potential threat to conventional distribution models!
Probably, this one is an issue that has stirred debate among the channel and vendor groups alike. While most of the channel players have taken retail into their stride and vouch for it, others feel that retail will eventually wipe out the redundant channel stratums from the market. Manish Agarwal, Placewell Retail (Placewell Systems and Solutions), Sili­guri commented, “Yes, retail is going to replace all other models of trading in the coming years. The redundant sub-distribution and reseller layers would ultimately pave way for retailers who will directly address the end users. Also, the market dynamics will undergo transformation since all business will than be done on cash and carry mode eradicating credit business.”

On the other hand vendors are of the belief that retailing will not cast a shadow on conventional distribution model that will continue to remain a backbone of retailing business.

R Manikandan, GM - IT Division, LG India pointed out, “We don't believe that the growth of retail will kill or impact other business models, but instead they would transform/revolut­ionalize the existence of other forms of retailing and act as a force multiplier. Sub-distribution outlets may transform into super markets or hyper markets and so on.”

Seconded Krishnan, “India is a very fragmented market and every customer has a distinct need and budget and as long as this state of affair continues to stay every stratum of the channel ecosystem will survive and get its share of business given they get out of the box pushing syndrome.” Since PC penetration in India is still very inconspicuous there is likelihood that all the business models will coexist and share a piece of the market pie.

Steps vendors should take for growth in retail
Since retail outlets are like the face of vendors to customers, they ought to put in every possible effort to make it better. Ranging from supporting partners, finding good retailing locations to funding retail shop interiors to providing complimentary demo units, vendors have left no stone unturned to woo partners for entering retailing business. Alok Bharadwaj, VP, Canon India commented, “Canon realizes that the Indian retail sector is poised to become the largest market in the world in the next few years. Consequently, we have been expanding particularly into three domains. These include IT, photo and audio-visual segments. These retail platforms are franchisee owned and are non-exclusive. For strengthening the channel connection, Canon is planning extensive website support, extranet for partners and printed collateral for communication.”

Furthermore, vendors persuade their channel partners to improve their operational efficiencies to make a mark in retailing. Ravinder Zutshi, Deputy MD, Samsung India said, “I see the role of the channel evolving and getting bigger when they embark on the retailing journey. With the help of manufacturers, they will need to improve their own knowledge on new technologies and develop their role from mere price-based selling to an advisory function for consumers. At the same time, they would need to focus on issues of how to improve their operational efficiencies, and what kind of value added services they can provide to consumers.”

Retail formats
Currently, there are three basic retail formats prevalent in the Indian market space, which are mono-brand retail outlets, multi-brand retail shops and convergence retail shops (selling consumer durables, communication as well as IT products. Exclusive retail stores and multi-branded stores, both have their own advantages to offer. On one hand, exclusive retail stores help in establishing a strong brand identity and a much larger variety of products to offer to the consumer under one roof, whereas multi-branded stores offer ample choice among various brands to the customer. But in the Indian scenario exclusive or mono-branded outlets are a tough bargain because beyond a certain category of cities, one cannot run exclusive outlets given that they are an expensive proposition. Vendors are also increasingly looking forward to tying up with big retail chains in India having greater geographical coverage like Vishal Megamart and Big Bazaar. George Van Der Merwe, COO, Sahara Computers said, “SCEL endeavors to be a leading player offering best in class products and services focused towards each segment of the IT industry in India. We have strengthened our position in the conventional distribution channel and now, realizing the growing importance of retail chain, we are planning to invest in it. We have already demonstrated our products in two big retail malls in Delhi.”

However, barring a few leading players most of the vendors still believe that multi-branded retail outlets are more suitable for Indian scenarios. SM Ramprasad, Manager - Consumer Products, Epson said, “Multi-branded showrooms are much more advantageous for both customers as well as vendors. As far as customers are concerned they get a wider brand choice whereas vendors can garner greater visibility and customer mindshare even amidst competitive brands. Also the footfall is greater in a multi-branded set up, whereas exclusive outlets lack sheen to draw more customers.”

Future of IT retail
Analysts feel that in India the share of modern retail is likely to grow from its current two percent to 15-20 percent over the next decade. This prediction alone is an indication of the importance of retail in the overall marketing scheme of IT industry. The fact that the IT industry today is noticing with great interest is that consumers preference for shopping in a new business environment is ever increasing and today it is not limited to purchasing a product only, it is about experience and pampering by the marketers. Given this situation IT industry is gearing ahead to integrate itself with the new emerging scenario and foresee the retail boom playing a major role in developing and further maturing the 'IT market' in India. Moreover, the future of retailing has been the subject of significant speculation over recent years, particularly with the advent of direct marketing and Internet shopping. For the foreseeable future, most retailers will be faced with the challenge of attracting consumers to their store, persuading them to spend money once inside and achieving this with the most efficient retail operations. Ramanjeet Singh, Head - PC Division, Fujitsu India Ltd opined, “The future belongs to retailing. With consumers becoming more and more literate and a variety of choices available in the market, the Indian consumer will choose to buy the products after a thorough evaluation and 'touch-feel-demo' approach. In IT sector, retailing is the way to go.”

Bharadwaj pointed out, “Business practice in the Indian retailing industry has changed significantly in recent years. Retailers are becoming more sophisticated in their marketing strategies and need to understand the impact that their advertising and promotional activities are having on their retail brand. In the next few months, Indian retailers will try to make do with their current IT systems. New stores will be opened, different formats will be experimented with, and the existing IT systems will be extended, or additional licenses will be bought for IT applications. In the short term, the emphasis would be on using the existing IT resources to generate more information.”

Anjali Chaudhary (With inputs from Subbalakshmi BM in Bangalore, S Gopikrishna in Chennai and Piyali Guha in Kolkata)

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