While Western retailers stayed in the West they could say “So what?”. But the kinds of deals Indian retailers are signing could create a two-pronged problem for retail in the West.
At the beginning of this week, Indian retail giant Bharti Retail announced a 10-year strategic partnership that will involve IBM providing “technology and services that will enable the consolidation, transformation and management of a comprehensive IT infrastructure”, according to the group.
Bharti wants to differentiate itself in the market with technology that will make it more cost efficient and able to get products to market quicker than its competitors.
The retailer runs the Easy Day chain of grocery stores in India’s Punjab region and has plans for a large chain of supermarkets and hypermarkets, while parent Bharti Enterprises is launching a wholesale business with Wal-Mart.
Bharti Enterprises has worked with IBM for four years already, transforming the IT platforms that its telecoms division uses with what the group’s chief information officer Dr Jai Menon describes as “unprecedented success”.
In addition, Bharti is using the supply chain IT platform of Wal-Mart as part of the franchise agreement between the two companies.
Technically advanced Western retailers such as Tesco have been used to setting the pace of innovation in this industry. But now competitors, such as Bharti, are appearing to challenge this leadership and have the benefit of little legacy technology to worry about. Western retailers could find themselves having to run if they want to enter this high growth market and keep up.
The second issue that should worry retailers, whether they themselves have eastern expansion ambitions or not, is that this new breed of retail giant is very attractive for big technology vendors to work with.
One major IT services supplier pointed out to me last week that the growth in demand for IT skills that companies like Bharti will create in the next few years, means Western retailers may find that they can’t get the support they need.
The downside of such a globalised economy, which has largely benefited UK retailers in the past decade, is that it will now bring these new competitive pressures to their doors.