Retail off shoring to take a leap

Everyone knows that India’s retail sector is poised to take off and will be among the top five retail markets in the world in the next 10 years. But that is only one part of the big story. For making the most of the retail boom worldwide is another sunshine sector that is the IT and ITeS. While global retail chains are chalking out their India plans, Indian IT firms are quietly providing them back office and other core support from here.

Most top retail chains are either outsourcing their work to third parties in India or opening captive centers in India. And it’s been happening for sometime now. For example, UK-based chain Tesco, has set up a back office Hindustan Service Centre in Bangalore with a headcount of 2,000 people. Target, a US-based retailer has a captive centre in Bangalore and plans to expand it. Marks & Spencer, Sainsburys, Best Buy all have outsourced their work to India.

Studies forecast, as retail business gathers momentum, retail will double in the next couple of years. Research done by Everest Group reveals, the global IT and BPO spend by retail firms is worth over $10 billion per annum as of now.

Nearly 75% of this relates to IT and the rest 25% is contact centre, HR, finance and accounts, procurement etc.

Already, business worth $1.5 to $2.0 billion is being off shored to India. Companies like Infosys, TCS, Wipro, Satyam, and Cognizant see 6-12% of revenues coming from retail outsourcing services. This translates to over $1 billion per annum and this is growing.

Retail outsourcing spending on IT and BPO is growing rapidly. The volume and value of contracts globally grew at over 20% over the last few years. And Indian firms too could continue to see their revenues grow from retail IT and BPO increase.

According to ValueNotes, a Pune-based research firm, traditionally, retailers started by outsourcing their IT functions to India but gradually they have embraced BPOs as well. Typically, a retailer looks at improving the level of customer satisfaction, which means offering better service to the customer while keeping expenses under check. Amongst the BPO services, customer relationship management is the most commonly outsourced function.

With growing competition, retailers are adding newer channels to sell their products, she explains. The accent of outsourcers to stay ahead of competition will accelerate off shoring in the retail space.

Besides offering HR, finance and accounting services, Indian ITeS companies are now also doing a lot of research and analysis-based work. They provide retailers an insight into buying patterns of shoppers, give information about products, pricing and distribution. KPOs like Evalueserve, Manthan and Integrated Retail are offering retail analytics, which include merchandise planning, training, supply chain management. Top Indian retailers could learn a few things from the retail outsourcing experience of international players.