Kirana On The Cloud

(Cross-posted on the Business World magazine)

Anaka GoFrugal Truestore Customer Cloud technology is helping small and mid-sized retailers increase their revenues and face up to the retail giants

Four years ago, Anaka Narayanan, an economics graduate working in the US, returned to India and set up her own designer clothes store in Chennai. She needed technology to make her business grow and was recommended a high-end software costing Rs 7 lakh. A chance meeting with a representative of Chennai-based GoFrugal, a company providing cloud-based technology to small and medium-sized retailers, however, helped Narayanan save some serious cash.

Cloud technology is the new buzz word. Diverse entities, ranging from retail companies to government departments have taken to it like fish to water. But cloud’s inroads into the retail industry have been bumpy. Big companies such as Reliance Retail, Bharti Walmart and Big Bazaar still work on legacy software. Small and mid-sized retailers have been wary of the technology. Some have been too cautious in using technology to understand their customers and others have been afraid of recording any financial data lest the tax authorities question them.

Thanks to GoFrugal, Anaka set up her e-commerce store on the cloud. She also had all the store’s customer data hosted on the cloud, enabling her to analyse customer behaviour. And all this, for less than Rs 50,000 per year. I need a lot of reports to tell me about garment size, the fabric that is used and the collection category on a daily basis. The report generation is just great from such technology, says Narayanan, founder of Brass Tacks Madras.

GoFrugal’s cloud-based technology helps small stores take on the larger chains. They are providing small retailers with software and data storage on a pay-as-you-go basis, saving them lakhs of rupees. The software analyses data enabling retailers to win customers and build customer loyalty.

The Kirana’s Friend

While generation- next entrepreneurs, focused on medium-sized retailers, Kumar Vembu of Chennai-based GoFrugal, is a veteran who saw a huge business opportunity in reaching out to the really small retailer or the kirana. Vembu was one of the founders of the globally renowned $100-million cloud company, Zoho Corporation. After quitting Zoho in 2005 he realized that the cloud could be used in the Indian retail industry. He spent the first few years selling on-premise software because most small retailers did not use broadband and cloud was yet to take off.

Five years ago I was sick of explaining the benefits of computerization to small retailers says Vembu, founder and CEO of GoFrugal. Times have changed since. The second-generation kirana owners are youngsters aspiring to build organized chains. GoFrugal has around 100 very small retailers with their stores data and billing systems hosted on the cloud. It has another 15,000 kiranas using its POS software.

In 2004, 70 per cent of small retailers were still working on DOS-based systems or had no technology at all, and only about 20 per cent had Windows-based systems, says Vembu. However, in the last couple of years the monthly usage model has created a buzz and word-of-mouth publicity has prompted small retailers to adopt cloud-based technologies.

The cloud gave me an opportunity to change the way I approached my retail business. My accounting, warehousing and POS were Island softwares, and were not intelligent, says Rajesh Narang, CEO of Ample, the Apple reseller, which has built a Rs 100-crore business in Bangalore in the last 15 years. He uses GoFrugal to host the database, billing, accounting and customer relationship management systems on the cloud. He is now able to get live sales reports on his iPhone and iPad for just Rs 20,000 per store per month. He has four stores now and plans to open another 20 in two years.

Sunil Bishoni has two stores selling accessories for electronic gadgets and generates revenues of close to Rs 30 lakh a year. He never used technology in the past. I don’t know what the cloud is. But it allows me to pay less for the technology and increases my sales because of better customer relations, says Bishoni. He pays Rs 1,000 per store per month to host his billing system on the cloud with GoFrugal.

GoFrugal generates $2 million in revenues annually, and so far, it has stayed away from external funding.

Catching The Customer

According to Protiviti Consulting, only 1.2 million small businesses use technology just 10 per cent of the 12 million small businesses in the country which undertake some form of billing. That is a huge market for GoFrugal. A Zinnov report says that the cloud SaaS (Software as a Service) market was around $300 million in India in 2011 and is expected to grow to $2.5 billion in five years.

ARL Parivar, the Rs 12-crore network marketing business in Delhi that handles 60 distributors and sells soaps, food items and fabric, was trying to stem the flow of spurious bills. And that is the mandate it gave GoFrugal. The cloud helped me monitor all the distributors sales online, I can monitor them by sitting in my office and there are no spurious bills generated, says Ravi Joshi, managing director of ARL Parivar.

Cloud is definitely the future but there are a few bottlenecks: For cloud to become a reality in India with retailers, the broadband speed needs to go up and costs should come down significantly to support high volume transactions at the point of sale, says Sharad Sharma, Co-Chair of Nasscom. To handle high billing, say 3,000 transactions a day, a broadband speed of at least 25mbps is required, which currently runs into lakhs of rupees. The cloud is a reality and will move in clusters which will adapt in a small way first. Something like a textile cloud in Tirupur, says Rajesh Rajan, managing consultant advisory at Price water house Coopers in Bangalore. He says that SaaS adoption will be the fastest in India.

Gofrugal is eying the global market as well. It has worked out well with a apparel POS and textile management software .

Gofrugal has strong presence in Middle-East, South Asia, West Asia, Australia, Canada, UK and growing aggressively.

There are innovations happening with new technology and hopefully, the little kirana store can survive the onslaught of the big retail chains after all.