The coming of age of niche retail has been driven by extensive tech deployment.

Retailing in India is finally coming of age. The growing popularity of niche retailing in addition to large format retails (LFR) like Shoppers Stop, Pantaloons, Westside, Lifestyle and Big Bazaar is a sure indicator of the newest trend catching up with the Indian consumers.

Booming sectors like IT, ITeS and telecom, which are driving the thriving job market in the country, have contributed to huge rise in disposable income in the hands of the middle class. This has resulted in a continuous craving for better lifestyle, comfort and convenient living. And the middle class, which constitutes the majority of the Indian urban population, now dont hesitate to shell out the extra cash to buy the lifestyle they are looking for.

Sensing the new psyche, todays retailers are increasingly becoming active in offering consumers world class experience through comfort shopping. Understanding the pulse of the Indian shopper, who is price conscious yet ready to spend if getting value for money, retailers are coming up with reasonable pricing powered with innovative schemes in addition to comfort factorin order to allure them. No doubt the Indian population is increasingly getting hooked on the modern retail environments.

There is no doubt that the Indian retail sector is on an upswing, and thers plenty of industry research reports to confirm this. According to AT Kearneys eighth annual Global Retail Development Index, the Indian retail market held the fifth position globally in 2009. In addition, Global Consultancy Northbridge Capital declared that the market size of the Indian retail sector is expected to grow from $400 bn to $700 by end of this year. A McKinsey report, The rise of the Indian Consumer Market, further estimates that the Indian consumer market is likely to grow four times by 2025. However, currently only 6% of the total Indian retail sector is organized. But it is expected to witness more and larger format malls, and branded retail stores.

Interestingly, the growth is not only limited to the metro cities. Tier-2 cities like Noida, Amritsar, Kochi and Gurgaon are observing retail growth like never before, and are emerging as the favored destination for the retail sector.

Out of the estimated $441 bn, organized retail in India contributes around 6% of the market. There was this sense of euphoric growth during 2006-07 during which many large business groups jumped on to the retail bandwagon. The economic upset that followed, however, laid to rest all such euphoria and retail was grounded even before it could take off. Almost all retailers saw diminishing footfalls and conversions. However, the last three months have seen a steady upswing and retailers believe that the worst is almost over and the industry is about to see a period of sure though slow growth.

With a booming Indian economy, there has been tremendous change in the level of growth expectations among retailers. In fact, over these years the whole of retailing has gone through drastic changes, especially when it comes to niche retail, which now has a defined characteristics and growth attached to it. Till some time back though it was difficult to define growth and market size or the structure of retail as a vertical. But it has now evolved in a manner where we can talk about specialty or niche retail as a micro vertical under retailing.

Chains such as the Bengaluru based Kids Kemp, the Mumbai books retailer Crossword, RPGs Music World, and the Times Groups music chain Planet M, are focusing on specific market segments and have established themselves strongly in their sectors. Due to its widespread product inclusion and extremely broad horizon, it is difficult to define what specialty retail is. Some would consider fashion, luxury, furnishing or footwear as specialty retail, others would consider electronic or FMCG or grocery as another; while some might consider books, cosmetics, apparel or jewellery as specialty retail. Specialty retails like these today contribute to approximately 50% of the total organized retail market in India. According to Jitesh Shetty, director, vertical solutions, Microsoft India, apparel retail has always existed and now the CDIT (donsumer Durables and IT) category is seeing a nationwide resurgence giving boost to niche retailing in India.

"It is very difficult to define specialty retail as there are a number of sub-verticals under retail. The retail industry as a whole is right now in the growth phase and in the next five years the annual growth rate is going to be about 40%. That of specialty retail would be between 40-50%," says Rakhee Nagpal, MD, Dynamic Vertical Solutions.

The niche retailers are now realizing the need for technology implementations for their business growth and expansion. More importantly, they now understand the need for integrated application that would steer their business to the next level of growth required in this world of cut-throat competition and give their business the required boost and edge. And, very important in retail, better customer service and efficient operational functionality resulting into higher customer satisfaction. Hence, technology adoption is on the rise.

IT is increasingly becoming a business enabling tool for retailers and there has been a visible change in the mentality and awareness levels among those in the business. The retailers today are also more forthcoming and aware about technology, and its use and benefits. Therefore, overall, its an optimistic transformation that this industry is witnessing, as it evolves towards a momentous growth phase. "There is tremendous opportunity attached to this sector, given that people have started to understand the importance of technology. The scope for IT is pretty huge since modern retail business functions heavily relies upon IT," says Nagpal.

According to recent studies, the Indian retail sector is expected to invest around $503.2 mn in retail technology service solutions in the current financial year. Retailing has shifted irreversibly and globally. Some markets might respond more slowly to the change (retailer or consumer demanded), but the change has happened. In many respects, customers want more meaningful engagements. Greater use of higher quality technology like business analytics can send hyper accurate marketing to customers and that is critical. This can help in analyses of the sales data, response rate data and so on, to continually refine the messaging and offers that lead to success. "We also realize that in India SaaS is helping Indian retailers to adopt IT solutions in a cost-effective way. SaaS facilitates the end customers to cut down their total cost of ownership, eliminates the need for an in-house support team, and fast-tracks the implementation process," says David Boden, senior director, retail, Oracle Asia Pacific and Japan.

According to IDC, IT applications are witnessing adoption from the start till the last mile of the business operation for most retail functions, and the key solutions being looked upon by retailers in India today are ERP/ERM solutions, supply chain management, inventory management and security solutions. Today Indian retail customers are looking for solutions which provide better insights, agility and more efficiency. In todays business environment, retailers are increasingly opting for a collaborative modus operendi, joining hands to share the loyalty view by increasing customer base. "A report from Springboard Research illustrates the transition of the India retail marketplace from a nation of shopkeepers to a rapid transformation of national retail chains and globalization. With a primary focus on supply chain and inventory management, the compelling value proposition must consider the foundation of detailed item level data accuracy (universal data cleanse) for the purpose of enabling process change on item, vendor/supplier management," informs Rajamani Srinivasan, vice president, solution engineering, SAP.

The current retail players seem to prefer solutions like CRM, BI and analytics. BI applications are complete, prebuilt and deliver intuitive, role-based intelligence throughout an organization. This application helps the retailer in understanding customer behavior, driving sales and profitability while at the same time reducing costs. These days, retailers are dependent on solutions like SCM, CRM and ERP. "Currently, IT covers each aspect of the Indian retail market and encompasses everything from social networking to ERP solutions," says Boden.

"Our solutions are extremely verticalized, addressing the needs of these niche sectors. The solution we offer as their tech partners has to be flexible in order to meet the demands of the customers," says Nagpal. "Therefore some sort of customization and change in configurations are required based on the nature of the products these stores sell or the volume and breadth of their businesses. Depending on the nature of products, the focus area becomes different," she adds.

The Indian retail market, which is the fifth largest retail destination globally, has been ranked as the most attractive emerging market for investment in the retail sector by AT Kearneys eighth annual Global Retail Development Index (GRDI) in 2009. As per a study conducted by the Indian Council for Research on International Economic Relations (ICRIER), the retail sector is expected to contribute 22% of Indias GDP by 2010.

With the rising consumer demand and a greater disposable income, the $400 bn Indian retail sector is clocking an annual growth rate of 30%. It is projected to grow to $700 bn by 2010 according to a report by global consultancy, Northbridge Capital. The organized business (specialty retail is part of it) is expected to be 20% of the total market by then. In 2008, the share of the organized retail was 7.5% or $300 mn of the total retail market.

Indias overall retail sector is expected to rise to $833 bn by 2013 and to $1.3 tn by 2018, at a CAGR of 10%. As a democratic country with high growth rates, consumer spending has risen sharply as the youth population has seen a significant increase in its disposable income. Consumer spending rose to an impressive 75% in the past four years alone. Also, organized retail (specialty retail is a part of it), which is pegged at around $8.14 bn, is expected to grow at a CAGR of 40% to touch $107 bn by 2013.

The specialty retail sector, which currently accounts for around 5% of the Indian retail market, is all set to witness the maximum number of large format malls and branded retail stores in south India; followed by north, west and the east in the next two years. Tier-2 cities like Noida, Amritsar, Kochi and Gurgaon are emerging as the favored destinations for the retail sector with their huge growth potential.

Further, this sector is expected to invest around $503.2 mn in retail technology service solutions in the current financial year. This could go further up to $1.26 bn in the next four to five years, at a CAGR of 40%.

Specialty retail is here to stay since they offer the breadth and depth of the prescribed category. As Boden points out, retailers specializing in high level of involvement categories would do better as specialty stores are designated destination shopping landmarks. IT would play critical role in this growth story and would continue to prove a vital tool in the areas of supply chain management, customer relationship management, managing business performance and driving multiple channels of sales.