Despite global retail experiencing a consumption slow-down, India's retail market is in a shining spot and well on the path to hitting the one Tn dollar mark by 2027. The explosion of data in recent years has pushed advanced analytics, and AI to the forefront of technology in the retail industry, allowing retailers to collect, analyze, and interpret vast amounts of data to enhance the overall customer experience and make more informed decisions.
Boston Consulting Group (BCG) and Retailers Association of India (RAI) have jointly published a report titled "400 Bn rupee EBITDA Opportunity with Advanced Analytics and AI in Retail," which offers a comprehensive look at the potential opportunity in the Indian context. The report highlights innovative ways in which retailers globally leverage advanced analytics and AI across the value chain to unlock value. It also sheds light on the maturity level and extent of the current adoption of advanced analytics and AI by Indian retailers, providing a roadmap for Indian retailers on how to get started, the right approach, capabilities, and partnerships needed to ensure successful adoption and value realization.
"Advanced analytics and AI have transformed retail globally, and enabled many large retailers to leapfrog the competition and build differentiation. Indian retailers also recognize this opportunity and are optimistic about the potential of advanced analytics and AI to create value. If leveraged well and at scale, Indian retailers can unlock INR 400Bn incremental EBITDA with advanced analytics and AI over the next five years," stated Abheek Singhi, managing director and senior partner, BCG.
The report also highlights the varying relative importance of use cases across different retail sub-sectors and illustrates select examples of global retail leaders that have successfully adopted advanced analytics and AI to solve critical business challenges and demonstrated significant value. Additionally, it captures the key learnings from the journey of these global retail leaders that can serve as a guiding point for Indian retailers.
Although there has been increasing focus on advanced analytics and AI in India, the report notes that there is significant headroom for improvement across dimensions. Nevertheless, Indian retailers have already created a significant impact with analytics and AI, driving growth and profit objectives through multiple use cases across the retail value chain. Large brick-and-mortar players and digital-first retailers have deployed analytics use cases across the value chain, while mid-size retailers have taken a pragmatic approach with a few high-impact ones.
Deploying a balanced approach between in-house and external resourcing will be crucial for Indian retailers to effectively execute the long-term transformation. While India currently lags behind multiple Asian countries in advanced analytics and AI maturity, particularly in technology, people & skills, and data governance, there are enough and more Indian retailers who are truly disrupting the retail industry and creating huge value by leveraging advanced analytics.
"We are seeing a wide spread of use cases being adopted by Indian retailers across the value chain. We have seen in our work that it is important to adopt an approach of starting small and scaling iteratively. A successful transformation needs more focus on managing people and processes rather than just different algorithms or technologies. Analytics transformation journey, if executed well, will yield enough benefit during its ignition phase to fund the next level of acceleration" explained Namit Puri, managing director and partner, BCG.
"Personalisation, accuracy, speed, and anywhere retail is expected in the modern age. Retailers who can utilize AI effectively will be the winners as we go forward. There is a significant capability for retailers to be more accurate and many of the retailers are on the path, and a war footing. Consumers can expect better standards of retailing as days go by, and also a much better offering of merchandise and services," opined Kumar Rajagopalan, chief executive officer, Retailers Association of India (RAI)
Finally, the report also covers a roadmap for Indian retailers, including how to get started, the right approach, capabilities, and the type of partnerships needed to ensure successful adoption and value realization. The retail players must build the necessary capabilities required for advanced analytics and AI adoption to realize their full potential. Change management is the most critical component of this journey and needs way more attention from leadership than algorithms and technology. A strong foundation for the transformation journey requires a cohesive approach towards Data, Tech, and People and processes with change management embedded in the ways of working to deliver sustained value creation.