Bridging the Gaps: Enabling Technology Adoption for Long-Tail Indian Retail
In our fourth blog, we explore several perceptions and misconceptions that retailers hold about adopting technology and identify principles and potential solutions that might help bridge this gap
In the bustling landscape of India's retail sector is a paradoxical situation. The abundance of advanced technology tools coexists with a relatively low adoption rate, especially among long-tail retailers. On one hand, India's tech industry has rapidly evolved, offering a plethora of software solutions designed to streamline in-store operations, enhance customer experience, and boost the overall efficiency of the retail business. From inventory management systems, and bookkeeping to digital payment platforms there is a wide array of tools available that cater to the diverse needs of retailers.
However, the uptake of these solutions among long-tail retail remains low due to several factors. One such reason is the perception of technology as complex, expensive, or beyond immediate requirements. The perceived effort and disruption during implementation, coupled with concerns over affordability and technical knowledge, often deters adoption among smaller retailers.
This blog is the fourth in our series on digital solutions for Indian retail businesses, for better comprehension of the ideas presented, we recommend reading blogs one, two and three. In the previous blog, we covered the instances across the five stages of a retail business’ journey where technological solutions are used and instances where manual interventions persist. We concluded with the perceived advantages of the tools among the retailers who use tech for business. This time around, we take a closer look at the retailers who do not use technological solutions and what might motivate adoption among them.
When it comes to embracing technology, small retailers often approach the concept with measured enthusiasm. The barriers of cost, effort, and trust cast looming shadows over the potential advantages that digital tools can offer. In this blog, we'll delve into these challenges by way of the popular misconceptions and perceptions among retailers when it comes to adopting technology. Building upon these perceptions we explore principles and potential ideas for digital solutions that could pave the way for Indian retailers, regardless of scale to embrace technology more confidently in the future.
Factors Hindering Retail Technology Adoption Among Certain Retailers:
Smaller retailers tend to find the concept of using software daunting. They anticipate them to be expensive, complex, and time-consuming therefore deeming the tools as ‘not meant for them’. Here are a few common misconceptions among smaller retailers when it comes to technological retail tools.
1/ Lack of Personalisation:
The inability of standardised software to cater to unique workflows dissuades small businesses. They prefer manual methods that can be tailored to match their specific operational needs.
“Items we sell vary extensively, month on month. What you might see today might never be supplied again. It is difficult to track these even on a ledger. Making entries for each item and tracking the inventory on software will be a nightmare”
- Arif, Manager at a Crockery Store
Most on-premise tools are not personalisable and come with a one-size-fits-all approach. Some retailers who own the software pay a fixed premium every year, and yet only use a miniscule part of the available features. This is because they find advanced actions such as accounting too complex to fathom.
“I believe these tools are not made for retailers like us who deal in so many unique designs”
- Hameed, Owner of a Hijab Store
The ideal product in such scenarios would be a modular tool that the retailer can personalise based on their needs and pay-per-use.
How can we change this perception?
This perception is prominent in the supply chain and inventory management stage. While retailers recognise the potential benefits of digitization in stock-keeping, they find existing technology complex to adopt due to the non-standard nature of their inventory.
2/ Time-Effort > Benefits
Small merchants sometimes perceive the time and effort required to learn and adopt new technology outweigh its potential benefits. Therefore, they may not see the value in making the switch.
“I’m aware of software like Tally for this purpose but I don’t use it. It is costly and not useful for someone of my scale. There is a need to set up additional infrastructure like a barcode scanner. There is also the time cost of entering stock into the computer, and training my staff to use the software”
- Suresh, Owner of a Luggage store
Many of the software tools available in the market pride on diverse functions and specialisations. For instance, some features that are integrated into the software like reporting, analytics, inventory zoning and other integrations can sometimes appear overwhelming and beyond the reach of a small retailer’s operational capacity. As a consequence, they opt for manual methods that they perceive to be manageable and well-suited to their current needs.
“Initial set up of the software and feeding in all the stock data is manual intensive & time-consuming. Especially when it comes to books I have to input each with their ISBN number. For this reason, I don't see the benefit in investing this much time & money into the software, whereas a book is much faster and simpler”
- Kanimozhi, Owner of a Book Shop
The retailer’s choice to rely on a manual approach is often rooted in a pragmatic evaluation of time and effort. Small retailers, already juggling numerous responsibilities, may be wary of dedicating significant time to learning and adapting to new technology. The perceived learning curve, and the potential disruptions during implementation, can seem daunting, especially when weighed against their immediate priorities.
How can we change this perception?
Retailers perceive that the time and effort required to learn and implement the software outweigh its benefits in areas like digitisation of the inventory and bookkeeping. Notorious for causing disruption in the business during the initial implementation, the software available for the aforementioned stages makes the retailers think twice before signing up for the tools.
3/ Lack of Trust
Small retailers are often sceptical towards technology. But the weight of cost and effort tends to loom large even before contemplating trust.
Although the lack of trust in software solutions isn't immediately apparent in this segment, a deeper examination reveals a more intricate narrative. Unlike the other segments where trust is one of the primary barriers to technology adoption, in our conversations with retailers we have uncovered that the looming factors of cost and effort, take precedence over any consideration of the tools’ trustworthiness. The mere notion of venturing down the road of software adoption is met with hesitation due to the considerable investment, both in terms of finances and time before they could even arrive at the factor of trustworthiness.
“I was approached by mSwipe, for POS, Inventory and Invoicing solutions. I have not seen the brand in action before, and assuming it might be just as expensive and time-consuming as an on-premise tool, I didn’t go for it”.
- Suresh, Owner of a Luggage store
Despite the appearance of being trustworthy, technological tools have often remained beyond the grasp of small and medium retailers. Their apprehensions are further fuelled by past experiences, contributing to a sense of caution.
“About a year ago we were approached by a small e-commerce application. We realised that the tool required extensive manual effort from our end to digitise the inventory, even after paying a hefty onboarding fee. We still haven’t been able to use the tool. Now I no longer trust anyone”
- Kanimozhi, Owner of a Book Shop
How can we change this perception?
One of the areas where mistrust is pronounced is Bookkeeping & financial management. As these stages involve the retailer revealing the business’ cash flow data, they might be apprehensive that one misstep on their part might cause them significant financial loss.
4/ Lack of awareness
Some small business owners perceive software solutions to be inflexible due to a lack of awareness. They fear that in uncertain times and volatile market conditions, allocating funds to an inflexible software solution might be a sunken cost.
“It might become a financial burden in times of uncertainty. A rented shop has no guarantee and I’m apprehensive of pumping my money into a space that I might have to vacate”
- Hameed, Owner of a Hijab store
Some retailers think that the tools might become a sunken cost in turbulent times. Their understanding is that the tools work better when the business is foolproof in its own establishment, allowing them space to experiment safely. Most often, this cautious approach points towards unawareness.
“I’m aware of the tools available for me. They are all expensive to set up and require a personal computer”
- Jamal, Owner of a Footwear store
Many small retailers remain oblivious to the existence of newer, affordable, potentially more flexible products in the technology landscape. Their familiarity is often confined to tools that have stood the test of time and have been used by their peers for years. Unfortunately, these established options come with a price – both in terms of financial and infrastructural demands such as computers, barcode scanners and the entire suite of tech accessories.
Even some of the retailers who use the on-premise software expressed their qualms about the tools being expensive and ridden with complex features that are difficult to use. They however are not willing to change over to a more cost-effective solution due to the amount of money and time they have already invested in setting the systems up and training the staff.
“I had considered switching over to a cloud computing tool like Zoho but I decided against it. I have trained all my staff to use Tally. Switching to a new tool means that I have to train them all over again”
- Fawaz, Partner at Hardware Store
How can we change this perception?
In a vast and diverse country like India, disseminating information about tech solutions to every corner can be a daunting task, resulting in missed opportunities for retailers who remain unaware of the possibilities.
5/ Resistance to Change
Due to personal constraints, many small merchants shy away from digital technology. They consider it costly to implement and sustain, leading them to opt for more familiar manual methods.
“I don't see the benefit in investing this much time & money into the software, whereas a book is much faster and simpler” She added, “If there was a tool that was specifically for books, I might consider using it”
- Kanimozhi, Owner of a Book Shop
Many retailers, particularly the older establishments, have deep-rooted business methods that have stood the test of time. The inertia to change these established routines can be formidable, even in the face of potential benefits.
“I'm not educated. I cannot even use a keyboard. Plus, we are used to a set way of working ”
- Mukesh, Owner of a hardware store
The resistance towards change is three-fold.
The retailers who have smaller businesses consider the switchover as unnecessarily complicating a simple step - writing down with a pen on paper.
Some retailers, after a pragmatic time-effort analysis, decide to stick to manual methods that are manageable and well-suited to their current needs. They are wary that the time taken to train themselves and their staff might eat into their operational efficiency.
Most of these retailers have a chartered accountant on a retainer basis to help them digitise these handwritten bills, and file GST or yearly tax returns.
Even among the retailers who already own on-premise software, some use only the inventory tracking and invoicing aspects. They either allow access to their software or send their invoices either as print or email to the chartered accountant for bookkeeping and taxation purposes. Thus establishing the chartered accountant’s office as a paramount cog in the retail fabric.
How can we change this perception?
Product developers can learn from the existing innovations in the market where the perceived advantage of technology acts as a viable reason for conversion. For example, many retailers have adopted the soundbox technology, although it comes at a subscription cost. This is because the retailers have realised the advantage of having a sound box i.e., getting the confirmation of payment status when the owner is not around or is busy attending to other customers to check their SMS.
Similarly, with value-added services such as logistics apps, the adoption is high due to the perceived benefit of customer satisfaction, leading to loyalty.
6/ Reliance on an accountant:
The significance of personal relationships in Indian business culture leads some merchants to value in-person interactions. They believe manual processes foster these relationships more effectively.
“I have a chartered accountant who sends someone every month to collect the bills. His accountants digitise my handwritten bills. He also does my annual audit”
- Abdul, Owner of a Toyshop
Observing the retailers’ responses for reluctance to adopt technology stems from their lack of tech and financial savviness. It is easier for a busy retailer to make quick notes of the sales or input, and share these notes with an accountant, rather than learning the necessary skills. The accountant then digitises these bills and invoices for a fixed commission every month.
“I have a computer but I don’t know how to use it. My auditor sends an accountant once a week to digitise my handwritten bills. He takes my credit notes, purchases invoices etc., and uses the computer in the back of the shop. He also files the GST every month”
- Shyam, Partner at an Electrical store
The symbiotic relationship between retailers and their accountants:
In a lot of cases, the auditor has been grandfathered into the business since its inception. It is notable that some retailers have consulted with their auditors for advice and assistance all the way from the inception and registration of the business.
As per the government norms, it is mandatory for any business to conduct a statutory and in some cases tax audit every year. While accountants manage the day-to-day financial operations of the business, chartered accountants provide an objective assessment of a retailer's financial integrity, compliance, and risk management during the yearly audits. Therefore, it is understandable that the retailers maintain a business relationship with the auditors’ office all through the year.
The Role of an Accountant in the Retail Journey
How can we change this perception?
Tools can help retailers gain partial autonomy by simplifying invoicing and other straightforward tasks while still having access to expert assistance for complex matters. Many of the retailers who have software with accounting features included in them, shy away from using the features due to its sheer complexity.
Where does the highest prevalence of challenges lie among the retail stages?
As we can observe from the chart above, there's a higher lack of trust in tools that help in the inception as well as the bookkeeping and financial management phase. This could be due to the amount of personally identifiable and financial information the retailer needs to divulge. These very stages, along with regulation and compliance see the highest reliance on accountants and auditors as well.
The manual efforts involved in onboarding as well the absence of personalised solutions, render the time and effort required to adopt supply & inventory management seem loftier than the potential benefits they bring to the business. Meanwhile, the novelty of available products and their niche offerings, results in higher degrees of unawareness of tools that help the retailers with tasks in the inception stage and the various value-added services available in the market targeted for retailers.
Way forward:
The world of technology solutions remains largely uncharted for small retailers. Across many instances, the retailers were unaware of the existence of products and features that could benefit them. Such insights could be utilised by the software providers to delve deeper into the reason for the lack of awareness and address the gaps in marketing efforts.
We advocate comprehensive research to understand behaviours, preferences, and challenges that are shaping Indian the retail landscape. A principle-first approach is crucial to crafting user-friendly, affordable software that addresses the retailers' and unique needs.
Even during product usage, software and tool developers can help bridge the gap by engaging with retailers to understand their aspirations and employing these insights into marketing efforts that amplify adoption. Regardless of their scale, if a retailer is willing to improve their efficiency and by way of it improve their business volume, they should be able to access a bouquet of à-la-carte tools tailored to their budget and business needs.
By addressing the nuances of affordability, education and awareness, technology can boost innovation and efficiency, fuelling India's retail sector growth. There are many software solutions available for enterprise and large retail players at a premium. In a country like India with 97% of retail in the unorganised sector1, software providers will be able to enter new markets that were erstwhile technologically underserved. This can be achieved by offsetting lower margins from long-tail retail through the premiums charged to enterprise customers. Our next blog in this series will present possible fintech solutions beyond the ubiquitous UPI, that could benefit the merchant, suppliers as well as customers.
All artworks are designed by Himanshi Parmar and Rajashree Gopalakrishnan.
Formative research conducted by Rajashree Gopalakrishnan and Vinith Kurian
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