CIOIN

Ushering in a new wave of retail reform, the government of India opened up the doors of its $590 billion retail industry to global retail giants, hankering to chase the retail growth story. The Union Cabinet yesterday passed a bill to increase foreign direct investment to 51 percent in multi-brand retail and 100 percent in single brand. The retail sector in India is poised for emphatic growth and the bold move is expected to be a shot in the arm for the retail industry.

The government’s move of looking afresh at relaxing the caps on FDI in the retail sector has given industry insiders a new reason to rejoice. The new wave of reforms is expected to unlock the potential of India’s retail sector. Ivano Ortis, Head-International, IDC Retail Insights declares that the regulation will bode well for the industry. International retail giants who have been eying the market for long will now enter the fray. "Global retailers have long sought greater access to the fast expanding but restrictive retail sector. But now they can bite into the pie and open up new frontiers of growth. The international players will pump in the much-required foreign investment into the country, along with technical and global best-practices," he says.

Ortis underlined that the move will have several implications for business. "Given the industry’s changing landscape there will now be an increased emphasis on sustainable/ profitable growth and assessing options for growth through collaboration. The global players will start sizing up potential partners and establish partnership with local players," he highlighted.

Arun O Gupta, Customer care associate and Group CTO, Shopper’s Stop is cautiously optimistic about the development. "It’s too early to arrive at a conclusion until we know more about the legislation. We must wait and watch," he suggests.

However, he concedes that the legislation brings good tidings for the industry. The decision will herald interesting times for the sector. It will throw open new opportunities for local retailers. It will improve their access to the knowhow and technical expertise on highly efficient backend operations and merchandising practices.

Apart from the cash push, the global players will bring in technological best practices into the industry. As the industry grows on a fast clip it will lean towards technology. And this will have significant implications for IT. "Enterprise systems will have to scale up to keep pace with the strong demand. There will be an increased role of IT in configuring and standardising the software packages for creating competitive differentiators. CIOs role will evolve into that of a change agent. He will be expected to deliver business results and not just technology," Ortis emphasizes.

Ortis admits that the long awaited move will stretch the contours of the industry. "It will create increased opportunity for cooperation among domestic retailers. Competing retailers will join forces, warehousing capacity and product design. This will drive the need for IT consolidation.

"Companies that never worked with each other will now share the business opportunity and they will have to integrate their systems. So integration and rationalisation of application software will be a top of the mind priority for CIOs," he stresses.

Echoing the sentiment Gupta says that the FDI push will generate a novel opportunity to unlock the value from customers, retailers and shareholders. The influx of deep pocketed global entrants will also ensure a steady inflow of funds and the adoption of global best practices.

"International retailers are used to working in close conjunction with their suppliers. Their ecosystem and market conditions support this practice. As they penetrate the Indian market they will implement this practice in India also. This best practice will overhaul the antiquated supply chain, release supply bottlenecks and create a win win situation for everyone by optimising the supply chain," he opines.

Gupta’s optimism is shared by Vikas Prabhu, CIO- Corporate Functions and Retail, Essar who is hopeful that move will help business pump in the much needed capital. He is enthused about the fact that the role of IT in the traditionally laggard retail sector will now expand further. It will impel the CIOs to maintain a laser sharp focus on driving efficiency and infusing agility into the systems. "In the wake of this development mobility, field force automation and pay as you use models will assume increased importance. The management will expect IT to render support in analysing sales trends, identifying consumption patterns and decoding customer behaviour," he says.