competitive survey

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Specialty Retail – Global Market Opportunity for Technology and IT services companies

February 2010

For full report contact [email protected]

Snippets from Zinnov Report

mailto:[email protected]?subject=Speciality%20Retail:%20Full%20Report

Macroeconomics of Specialty Retail

IT Adoption in Specialty Retail

Competitive Scenario

Pain Points and Opportunity

Agenda

1

1

2

4

3

Our Offerings5



The specialty retail segment represents 41 percent of the retail group industry’s value; Automotive and Home Improvements lead the specialty retail segment by 49 percent and 16 percent respectively

2

Specialty41%

Grocery20%

Mass Merchandising

14%

Department Stores13%

Convenience Stores

6%Drug5%

Other1%

Retail Sector Split by Industry Vertical

Automotive, 49%

Home Improvement

, 16%

Apparel, 14%

Others, 4%

Computer and Electronics, 10%

Home Furnishing, 7%

Specialty Retail Split by Type of Product

Source: Zinnov Interviews, Secondary Research and Analysis

Global specialty retail IT market size is pegged to be USD 20.1 billion with 59 percent of it coming from North America

3

North America59%

Europe27%

Asia Pacific7%

Latin America5%

Rest of World2%

Specialty Retail IT Market by Geography (2010E)

• North American specialty retailers leadthe way in purchasing the third-partysoftware applications

• Europe represents a healthy 27% of themarket and, like North America, isrelatively mature in its purchasingbehavior

• Central American and Asia-Pacificretailers also present exciting salesopportunities and thus are makingsophisticated software choicesunencumbered, in many cases, bymassive legacy systems

• As vendors develop more effective saleschannels, build vast supportinfrastructures, and complete successfulenterprise deployments in these regions,the percentage will increase, albeit slowly

Discussion

Total = USD 20.1 billion


The Specialty Retail Software market remains primed for growth with an annual CAGR of 7.4 percent; while revenue being equally driven from licensing, custom development and maintenance

Global Specialty Retail Software Market(2006-2011)

Market Size (in USD Billion)

4

Total = USD 10.4 billion

32%

31%

33%

4%

Application Software Licence (subscription, host, SaaS)Application Software Maintenance

Implememntation/Consulting/Custom Development

2006 2007 2008 2009 2010 2011E

7.37.9 8.5

9.19.8 10.4

Distribution of Retail Sector Software Revenue (2011E)


Large companies (>1 Billion) accounts for 44 percent of the market while a sizable chunk of 15 percent comes from SMBs (< 30 Million)

5

0

2

4

6

8

10

12

Less than $30M

$30M to 250M

$250M to $1B

$1B or More

Total

1.6

1.6

2.7

4.6

10.4

Specialty Retail Software Revenue by Customer Company Size (2011E)

• The market for software sold to retailerswith $1B or more in annual revenuecontinues to represent the single largestmarket for vendors, but the midmarket isgaining ground

• Many vendors are looking to themidmarket, particularly fast-growingretailers with current revenue of $30M to$1B, for their next big sales opportunity

• Consistent with other software markets,companies with less than $30Mconstitute to 15% of the software sales,suggesting that smaller retailers areincreasingly looking to technology as akey enabler to support growth strategies

Discussion






Agenda

6

1

2

4

3

Our Offerings5



7

IT provides maximum impact to the business processes of retailers thus enabling growth of core operations

Business*

Processes

Solutions ImpactInvestment

Short Term – Low

Long Term - High

Short Term – High

Long Term - Low

Manual

Methods

Manual Methods,

Machinery and

Automation

Information

Technology

Marginal

Maximum

Core

Operations

Note: Business processes include planning and management of Workforce, Sourcing, Products, Distribution, Customer Relationships, and Finances

Growth of Specialty Retail IT adoption is creating the next wave of demand

8

Store and Cross-Channel

Operations, 33%

Consumer-Centric

Merchandising, 21%

On-Shelf Availability, 7%

Agile Supply Network, 8%

Retail Enterprise, 30%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

• With 85% of buying decisions made at the store shelf, retailers are spending aggressively to improve in-store operations

• POS software spending continues to represent the majority of store operations software purchases

• The applications in this market are designed to help retailers deliver the right product, at the right place, at the right time, and for the right price

• Merchandise planning and management applications dominate the consumer centric segment

• Perpetual inventory applications are still more widely used in specialty and apparel retailers

• Revenue from this category, which includes corporate financials, human resources, and BI systems, is second only to revenue generated by store and cross-channel operations

• Retailers are looking beyond reporting capabilities to applications that synthesize information from a wide variety of systems and analyze performance

Distribution of Retail Sector Software Revenue by Application Segment (2009)

Discussion


9

Packaged Application Services

Strategy & IT Roadmap Consulting

IT transformation and

optimization roadmap and

technical architecture

Performing readiness

assessments

Determining infrastructure

maturity levels

Recommending appropriate

capabilities

Providing necessary skills to

successfully execute

transformation roadmap

Business Process Re-engineering Services

Package Solutions

Project management

Re-engineering process

Risk Management

Product Support

Enhancement

Maintenance


Note: The analysis above just takes into account “Breadth“ of functions/processes/sub-processes offshored and not depth

Sustenance Services

Package Selection

Package

Implementation

Customization

Version Upgrades

Traditional Adoption

Recent Adoption

Packaged Application Services sub processes

10

IT Infrastructure Operations

Information Security

Peering

Gatekeeper

Firewall Intrusion

Installation and upgrade

of antivirus software

Deployment and

upgrade of anti-virus

software on user

desktops

Security Policies

Remote Access

PKI (Banking core)

ServerApplication

Services

Installing and

configuring operating

system

Fault monitoring and

management

Job scheduling/

monitoring

Performance monitoring

Service pack installation

Disk / swap/ backup

space management

Domain policies and

security management

Applications running on the

server

User account management

Clean up of file systems

Automated schema analysis

Fine tuning

Database creation and

maintenance

Partition maintenance

Database/ application

packaging and realizing

Performance tuning

Management of

network devices

(Routers / switches)

Network policy

Enforcement

Monitoring of network

traffic in LAN

Monitor VLAN

Monitor of network

servers

Bandwidth management

Management of User

access to network

Personal firewall

Application access setup

Running onsite and

remote help desks to

cater to desktop and

server issues

Remote Support

Backup

Supporting users on

desktop applications

Creation of policy of

software deployment on

user desktops

Network Infrastructure

Desktop




Recent Adoption

IT Infrastructure functions sub processes

11

Store Execution Solution

Application Development & Maintenance sub processes

Application Development & Maintenance

Enterprise Performance Management

Insights across functions

Data Visibility

Benchmarks

Data ManagementOptimization

Solutions

Data Analytics– Business Intelligence– SCM Optimization

Data Synchronization

RFID

Price Optimization

Collaborative Planning, Forecasting & Replenishment

Forecast – Sales Scientific Analysis

Gross Margin Return on Space

RFID

Optimize Assortment

Point of Sales to Point of Convergence

Demand Driven – Pull Strategy

Price Optimization

Store-Space Plans

Inventory (Over-stock, Under-stock)

Relationship Management

Responsiveness



Collaboration

Note: Application Development refers to the internally utilized applications by retailers for overall performance enhancement of the operations


Recent Adoption





Agenda

12

1

2

4

3

Our Offerings5



13

IT Adoption– Key Criterion

Cost of the Project

Technological Advancement Brand Value in the Industry

Management Expertise & Experience

Ability to integrate with Retailer’s front-end

Implementation Time

There are certain parameters which Retailers evaluate while opting for automation of their store processes


14

SalesInventory

Low Very high

Managing Recording Transacting Receiving PaymentsSourcing

• Requires manual coordination with several wholesalers and distributors

• Time consuming exercise

• Reorder levels are determined on the basis of past experience

• Demand forecasting is done manually

• Most of the recording even for retail stores using a POS merchant solution is done by manual

• Retail stores with multiple transaction points and not using a POS merchant solution generally take a lot of time for check in and check out

• Sale of goods is maintained in paperback journals and manually tracked

• Informal credit creates a cash flow problem

• Recovery of informal credit is a time consuming

Customer Pain Points

Current Methods

• Suppliers provide the materials to retail outlets at the doorstep

• Retail owner communicates with the supplier on a regular basis over mobile/telephone to order the materials

• Most Indian retail owners manage inventory manually

• There are software which provide inventory management function

• Inventory details are manually entered in most cases

• Manual methods such as using bunch of loose paper and a pen

• Transaction are currently done manually, i.e. for every article the retailer has to turn the packaged good then read the price and then write it of the paper

• Cash based payments is the prevalent way of paying to the retailer.

• There is lot of pricing negotiations that also happens at this time which further delays the process

Potential to Solve

Managing sales, Inventory and Payments are some of the major pain points for specialty retailer






Agenda

15

1

2

4

3

Our Offerings5



All major Software product companies are present in the Specialty retail market

16

IBM

SAP

Microsoft

In 2006, SAP had established an CoE( center of Excellence ) for Retail in Mumbai. Sun Microsystems, Seal InfoTech Intrax and E-Solutions are the key partner for Retail POS solution

Key Indian retailers like Reliance, Pantaloons, RPG (Spencers), Trent, Hariyali Kissan Bazaar, Godrej, ITC-IBD, Barista and Vishal Megamart are few of the SAP customers in the Indian retail space.

Companies Activities

IBM provides POS Systems, Peripheral, Self-Services , softwares and IBM Sure POS Express for SMB , which are available to credit-qualified customers only.

ShawMan POS , RetailMagik, Adrenalin are the most popular products built on IBM Express Next line products are Self Checkout Systems, IBM AnyPlace Kiosk and IBM AnyPlace 3i Infotech, Infor , SAP and Symbol are the major partners

Sage

In 2006, Sage Released Accpac ePOS 5.3 , which is a comprehensive web based POS solution for fast-paced, high-volume, multi-site retail operations. for small and mid-sized retailers in India

KLG Systel, Sage arm offer e-PoS solution at Rs s3.50 lakh for a single store set up

Microsoft Dynamics Retail Management System (RMS) offers small and mid-market retailers a complete point-of-sale (POS) solution The four Microsoft Dynamics products for business management and ERP are: (a) Microsoft Dynamics AX, (b) Microsoft Dynamics GP, (c) Microsoft Dynamics (New) and (d) Microsoft Dynamics SL.

LS Retail, HCL, Calsoft, Ignify and Dynamic Vertical Solutions are the key partners in India to provide Dynamics Solutions in ERP and Retail space

Others

Panasonic has announced the launch of three new laser multifunctional devices in India. I2 , Accelfrontline and Alibaba are the major Sales and Support vendor for Panasonic India

Epson is No. 2 in terms of market share for the overall printer market in India with a 19 percent market share as per IDC reports. Purple Infotech is the national sales Distributor for it’s POS Solution


Largely hardware manufacturers have dominated the specialty retail market

Local software companies

Service providers

MNCs

Hardware/Software providers

Local POS software Companies

Hardware and Software Providers

Service Providers

Multinational companies

Illustrative


http://www.business.act.gov.au/__data/assets/image/0004/74362/HCL_Logo.jpg

http://images.google.co.in/imgres?imgurl=http://www.itcinfotech.com/binaryfiles/logo_wh300DPI.jpg&imgrefurl=http://www.itcinfotech.com/mediakit.aspx&h=750&w=1350&sz=214&hl=en&start=1&um=1&tbnid=RiEABYOuASLFqM:&tbnh=83&tbnw=150&prev=/images?q=ITC+infotech+logo&um=1&hl=en

http://www.sagesoftware.com/index.cfm

http://www.polaris.co.in/home.htm

http://www.visiontek.co.in/index.html

Case Study: HCL Info-system

18(1) Primarily an established PC, printers and related hardware manufacturers

60

40

Market Share of POS Solutions (2007)

142,857Share of Total (%)

Company Overview: HCL Info system

• Total Company Overview: – Total Revenue: USD 2.7 Billion

– Total FTE’s: 47,000• 5,000 in India

– Geographic Presence• 17 countries• 170 cities in India with 360

services centers

• POS Business Overview: – Total Revenue: USD 50

Million– Total POS customers:

~ 300K• 400 Chains• 70K small stores• 6 for every 10 organized

retailers are HCL customers

– Distribution Network• Distributors: 100• Dealers: 200

• Partner ships • Printer

• Bar Code Scanner

• Laser Scanner

• Products • Electronic cash register ( USD 450)• Touch Screen Systems (USD 750)• Bundled POS* (USD 1,250)

• Clients**

Others

Includes software solution providers - large Indian companies such as Polaris, and small regional companies such as Marg Compusoft.

Software are focused towards Grocery Stores, Pharmacies, Apparel & Footwear, Consumer Durables, Books & Music Stores, Gifts & Accessories


http://www.metrologic.com/

http://www.symbol.com/

http://images.google.co.in/imgres?imgurl=http://www.sage-sw.com/images/logos/hcl_logo.jpg&imgrefurl=http://www.sage-sw.com/news/partnership.html&h=113&w=354&sz=14&hl=en&start=2&um=1&tbnid=kW4DuFADAQ7C2M:&tbnh=39&tbnw=121&prev=/images?q=hcl+logo&um=1&hl=en&rlz=1G1GGLQ_ENIN272





Agenda

19

1

2

4

3

Our Offerings5



In the past 7 years, Zinnov has provided globalization advisory services to over 150+ clients across geographies

Consulting Focus Areas

Globalization Strategy Opportunity Assessment

Workforce planning Global Market Insights

Go-To-Market Strategy Compensation and BenefitsBenchmarking

Operations Setup

Global Talent pool Analysis

Operations Optimization

GlobalizationAdvisory

Market Expansion Human Capital

Product Ideation/ Localization

Flexible Work force Tool

Our Market Expansion portfolio is a combination of services that help clients enter new domains and expand in the existing markets

21

Market Expansion Framework

Channel Strategy

• It includes design, development and execution of a strong distribution model for our client to help them reaching out to end customers.

• It assists our clients in penetrating the market with their product offerings at a fast pace and at economical cost.

Opportunity Assessment

• It includes complete business analysis of the viability of prospective markets or opportunity for new products in existing markets.

• It is a combination of analyzing existing market landscape and potential opportunity in addressable market.

Customer Insights

• It includes understanding the methods adopted by customers to solve their problems. Zinnov further analyze the gap between customer needs and market offerings.

• Understanding of customer pain points assists our clients in designing their product strategy.

Peer Group Analysis

• It includes analyzing industry best practices thereby providing guidelines on innovative strategies for the way forward.

• Our clients acquire a competitive edge by gaining market insights and information about key focus areas.

Business Model

Price Planning Organization Structure

Risk Mitigation

1 2

43

5 6

7 8

We assess opportunities by analyzing market landscape and identifying addressable segments

22

Assessing the “Demand side”

Assessment of spending

Evaluation of Industryverticals

•Telecom

Projection offuture spend pattern

1

•IT110

110•BFSI

•Spending by top 10 market leaders

110

2 3Revenuedistribution

Identification of marketplayers

•Company 1

Analyzing market maturity

1

•Company 2

•Company 3

2 3

Assessing the “Supply side”

•By Geography

•By Product

•By Vertical

•Introduction

•Growth

•Maturity

Drivers & Constraints

– Demand for products– Constraints for

products– Current scenario– Future Scenario– Gap Analysis

Macroeconomic Analysis

– Growth of economy– New Entrants – Infrastructure analysis– Government policies– Vertical wise analysis

Competitive Landscape

– Price point analysis– Market Penetration – SWOT analysis– Portfolio mapping– Sales Strategy– Clientele analysis– Growth Plans

Target Market Analysis

– Trends in the market– Pain Area analysis– Location analysis– IT spending– Channel Strategy– Profitability analysis

+ + +

Opportunity

Assessment1

Our exploratory methodology for various customer segments help generate vital insights

23

Customer

Insights2

Focus Group

Discussions

Customer

Segmentation

Design evaluation

framework

In-depth Interviews

/ Follow me home

• We conduct focus group discussions with customers to generate

insights about existing methods for solving their problems. It assists us

in building hypothesis and to further evaluate gap in existing product

offerings.

• We conduct exploratory studies to understand the mental, physical and

price barriers for customers to design evaluation framework. It is

designed to evaluate the unmet needs and pain points of customers.

• We segment the customers on various demographic cuts based on

preliminary insights from focus group discussions such as educational

qualification, IT literacy, age group, etc

• We conduct in-depth interviews and follow-me-home discussions with

customers across the various segments to generate in depths insights

on their unmet needs and pain points.

Key Steps Detailed Description

We analyze the peer group from a high level and then deep dive into best practices demonstrated by leaders

24

Peer Group

Analysis3

Objective

Market Share analysis

Segmentation

Key Parameters

High Level analysis parameters

Financial performance

Product/service portfolio

Business model

Key customers

Geographical presence

In-depth analysis parameters

Portfolio

Analysis

Customer

perception

Performance

analysis

Distribution

network

Innovation Quality

As a final part of the business plan, Zinnov helps define the company vision and also provide support in strategic mergers and acquisition

25

Vision

Success

Parameters

Dashboard

Trends

A 5 year visual of how Client’s

India positioning will look post

entry

Parameters on which success

will be measured

Zinnov defines a dashboard on

which Client can identify key

companies for M&A purposes

Zinnov identifies trends that

market is likely to pick up over

next 5 years

Thank You

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