The retailer

The retailer 

EY’s publication in consumer 

products and retail sector 

April - June 2015

Foreword 

Dear reader, 

We are delighted to present the April-June 2015 edition of The retailer, our quarterly publication in the 

consumer products and retail sector. 

In the first article, we have provided an overview of Goods & Services Tax (GST), which is one of the 

most significant tax reforms in India’s tax history, and highlighted key business considerations for GST 

readiness. 

The second article provides a perspective on franchising in traditional segments in health care, taking 

alternate therapies as an example. The article highlights possible models, which these businesses could 

evaluate to expand their offering. 

Our third article is a snapshot of our annual Enterprise IT Trends and Investments Survey titled “SMAC 

3.0: Digital is Here” and covers the journey of the Social, Media, Analytics and Cloud (SMAC), areas that have been 

the latest buzzwords among IT strategists. 

Finally, we continue our featured section, the “Innovation board”, where we aim to present snapshots of recent innovations, which 

have emerged in the Indian and global luxury market. 

We hope you enjoy reading this issue of the retailer and look forward to your valuable comments and feedback. 

Pinakiranjan Mishra 

Partner and National Leader, Retail and Consumer Products 

EY, India 

Celebrating six years of The retailer

Contents 

ABC of GST and the key business considerations 04 

Franchising opportunities in alternate therapy healthcare services - perspectives 12 

Summary: SMAC 3.0: Digital is Here 18 

Innovation board 24 

Involve yourself: 

We look forward to hearing your feedback and suggestions. 

To contribute to editorial content, please contact Ashish Kakwani 

T: +91 22 6192 0423 

E: ashish.kakwani@in.ey.com

1 

ABC of GST and the key 

business considerations 

What is GST? 

The Goods and Services Tax (GST) is expected to be the most significant tax, or more so, business transformation reform in the 

fiscal history of India. It is likely to impact prices, business processes, investments and profitability in all segments of the economy. 

GST is a comprehensive tax levied on manufacture, sale and consumption of goods and service at a national level. Under GST there 

will be no difference between goods and services. Only the final consumer will bear the tax on value addition at every stage from 

producer/service provider to the retailer. It tries to eliminate indirect taxes and mitigate cascading or double taxation issues and 

leads to a common national market, with elimination of state boundaries. 

Evolution of GST 

Budget 2006-07 – 

FM proposed 

introduction of 

GST from 

April, 1 2010. 

Empowered 

Committee of 

State Finance 

Ministers 

constituted 

Joint Working 

Group in 

May, 2007 

EC finalized its views on 

broad GST structure – 

consensus on Dual GST 

(Central and state GST), 

separate legislation, levy 

and administration. 

First 

Discussion 

Paper on 

GST was 

released 

by EC. 

Constitution 

Amendment 

Bill to enable 

roll out of GST 

was tabled in 

Parliament. 

. 

EC rejected 

Central Govt’s 

proposal to 

include 

petroleum 

products under 

GST in 

Nov, 2013 

2006 

2007 2008 

2009 2013 

2011 

2007 

2007 

2008 

2009 

2013 

2014 

Phasing out of 

CST began 

from April, 

2007 with the 

reduction . in 

CST rate from 

4% to 3%. 

Study Paper on 

GST authored by 

Dr. Parthasarathy 

Shome was 

released. 

CST rate was 

further reduced 

from 3% to 2% 

in June, 2008 

The 13th 

Finance 

Commission 

released its 

Report on GST 

in Dec, 2009 

Standing 

Committee on 

Finance tabled 

its Report on 

GST Bill in 

August, 2013 

June 2014 - 

Passed in Lok 

Sabha ( 

awaiting Rajya 

Sabha approval 

Source: EY analysis 

4 | The retailer

GST is a need of the hour 

The need to implement GST arises from the inherent complexity in the existing tax system in India. GST is needed to simplify the 

existing complex tax structure; minimize the cascading effects of double taxation, streamline interstate transactions and make doing 

business in India easier for Indian as well as multinational companies (MNCs). 

Why is GST needed? 

Double taxation 

Interstate transactions 

International standards 

• Elimination of cascading effect of taxes at 

various stages 

• Tax computation to become simpler in 

cases where value of goods and services 

need to be split for separate taxation 

• Full input tax credit possible at the Central 

and state level 

• Smoothen the tax structure and make tax 

return filing less cumbersome 

• Ease in getting full input tax credit 

• Will streamline compliance and 

administrative procedures across states, 

and between states and the Center 

• Reduce administrative costs and help 

develop a common national market 

• Doing business is likely to become easy 

and boost overall economic growth 

• GST – an international standard 

• Important factor in investment decisions 

for MNCs 

• Non-implementation of GST – a major 

disadvantage for India vis-à-vis other 

destinations with GST 

• Would help attract more FDIs and FIIs 


Why GST since VAT is there? 

GST is a destination-based consumption tax (similar to VAT). VAT was implemented first in 2005. Despite the success of VAT, there 

are still certain shortcomings in its structure, both at the center and the state level. 

Shortcomings of VAT 

Center 

State 

Inter-state 

• Input credit is available only on the excise 

duty paid on raw material. 

• No input credit is paid on other taxes and 

duties on post-manufacturing activities. 

• Although, there is CENVAT, other taxes, 

e.g., surcharges, additional customs 

duties is not included. 

• Services are taxed selectively and only at 

the center; input credit on service tax paid 

is allowed only to a limited extent. 

• States charge VAT on the excise duty paid 

to the Center. 

• CENVAT is allowed on goods remains 

included in the value of goods to be taxed. 

• Many states still charge various indirect 

taxes, such as luxury tax, entertainment 

tax, and there is no input tax credit in case 

of CENVAT paid on certain items. 

• Inter-state tax (CST) is levied on interstate 

transfer of goods. There is no 

provision for input credit on CST. 

Manufacturers producing goods in one 

state and distributing them in other 

states, end up paying taxes in each state. 


The retailer | 

5

GST framework 

India plans to implement a dual GST system where central GST 

(CGST) and state GST (SGST) can be levied on taxable value of a 

transaction. 

GST/ VAT Global Scenario 

• More than 140 countries already implemented GST 

• Majority of the countries have single GST 

• Standard GST rate in most countries ranges between 15%–20% 

• All sectors taxed with very few exceptions/exemptions 

• Full tax credit on inputs 

• Canada and Brazil have dual GST 

Direct taxes, such as income tax, corporate tax and capital gains 

tax will not be affected by GST. 

Implementation of GST aims to have a pan-India tax rate; 

however, it is still a long way before India reaches that stage. 

Under the proposed dual system, both Center and states will 

continue to levy taxes on goods and services. The tax rates will 

be mutually agreed upon by both the Center and states, and will 

fall within the decided range. The businesses will have to pay 

taxes to separate accounts for CGST and SGST. 

In case of interstate transactions, interstate-GST (IGST) will 

be levied; the Center would levy IGST, which would be CGST 

plus SGST. The interstate seller will pay IGST on value addition; 

the seller will get full credit on input tax under IGST, CGST and 

SGST, as applicable. The Center will collect IGST from the seller 

state and transfer it to the buyer state. 


The existing taxes will be subsumed under CGST or SGST; 

however, there are a few exemptions. 

Tax structure under GST 

Central GST (CGST) 

Taxes subsumed 

State GST (SGST) 

Taxes excluded 

Excise duty State VAT Duties on petroleum 

products (aviation 

fuel, diesel and 

petrol) 

Additional duties of 

excise 

Additional duties of 

customs 

Special additional 

duties of customs 

Service tax 

Cesses and 

surcharges 

Central Sales Tax 

Luxury tax, 

Entertainment tax 

Entry tax 

Taxes on lotteries, 

gambling and betting 

State cesses and 

surcharges 

Excise duty on 

tobacco products 

Taxes on alcoholic 

beverages/products 

Purchase tax, stamp 

duty 

Vehicle tax, property 

tax 

Electricity duty 

Quick facts about GST 

What will be taxed? 

• All good and services 

(except the exclusions) 

• Imports 

• Exports are exempted with 

zero rate 

When will be taxed? 

• Destination based — final 

consumer bears the tax 

• Seller/service provider 

pays tax only on the value 

addition; gets full input tax 

credit 

Who will be taxed? 

• All manufacturers, traders/ 

dealers, importers/ 

exporters and service 

providers 

• Small business/traders 

below a threshold are 

exempted 

What will be the tax rate? 

• Two-rate tax structure — 

reduced rate for necessary 

items; standard rate for 

other goods 

• Services will have a single 

rate under CGST and SGST 

• Special rate on precious 

metals 

• Revenue neutral rates (rates 

at which tax collection will 

be same in old and new 

regime) are yet be finalized 




Overall impact of GST is anticipated to 

be positive …. 

GST, at a broad level, is expected to be beneficial to all 

stakeholders — corporate entities, consumers, government and 

overall economy. 

GST impact on various stakeholders 

Corporate entities will be benefitted by reduced tax burden and 

cost of production leading to improvement in profitability. 

Summary of key business impacts 

Sourcing 

• Interstate raw material procurement and 

transfer of goods will be easy 

• This may open opportunities to consolidate 

suppliers/vendors 

Corporates 

• Effective tax burden will 

reduce, full input tax credit 

allowed 

• Cost of production will 

reduce, profitability is 

likely to improve 

• Export competitiveness is 

likely to improve 

Government 

Consumers 

• Although, prices could 

increase significantly in 

the short term, overall 

prices are likely to decline 

in the long term 

• Consumption is expected 

to pick up 

Economy 

Distribution 

Inventory 

management 

• Regional warehouse will be closer to 

consumers to reduce cost of delivery 

• Catchment area of distributors could increase 

as state boundaries will not be a limiting factor. 

• This will lead to short routes, and reduced 

transportation costs 

• Improvement sourcing and distribution 

methods would lower in transit inventory 

• This would help manage inventory in a more 

efficient manner, lowering the working capital 

needs 

• Tax base will broaden; 

revenues will increase 

• There will be substantively 

common tax base for the 

center and states 

• Uniformity in compliance 

and administrative 

procedures are expected 

to lead to reduced costs 

• Export earnings could 

go up 

• FDI and FII inflows could 

pick up 

• Overall GDP growth will 

improve 

Pricing and 

profitability 

Cash flows 

• Reduced tax burden and production cost could 

improve a company’s flexibility to reduce 

prices 

• It will also give some headroom for margin 

expansion 

• Removal of the concept of excise duty will 

improve timing of cash flows 



Cost of production for majority of companies is likely to decline due to various factors. With the implementation of GST, the concept 

of state boundaries is expected to disappear. Companies may set up new plants at locations, which will minimize total delivered 

costs. Regional warehouses will be closer to the market to ensure shorter distribution routes. This will lead to reduced stock in 

transit and inventory. Moreover, short routes will reduce freight costs. The concept of a common nation is likely to make state entry 

checkpoints redundant and facilitate rapid clearance of goods. 


7

Other benefits for businesses 

Direct 

dispatches 

Opportunities in 

imports 

Depot Roadmap 

Savings in 

manufacturing 

CST 

Service 

tax credits 


Consumers are expected to benefit from reduced prices of goods and services, which in turn increase consumption. Improved 

demand, and simplified tax structure will help attract increased FDIs and FIIs and boost overall economic growth. At the same time 

state and Central governments are likely to benefit from a broader tax base. 

… however, there are some concerns 

Spike in inflation over the short term 

There is a risk of price hikes in the short run if tax rates are 

very high. “If rates are high, these will lead to inflation, which 

will be detrimental to consumers. The empowered committee 

had suggested a revenue-neutral rate of 27%; it should ideally 

be below 20%. Earlier studies had suggested that it should be 

between 12%–16%, if goods have to be competitively priced 

and there is no inflationary pressure,” said Harsh Mariwala, 

Chairman of Marico . 

Moreover, companies from sectors such as automobiles, 

pharmaceuticals, consumer products and food processing, 

which enjoy benefits of tax (excise, VAT, income tax) 

concessions by setting up factories in the states, which offer 

concessions, will be affected adversely by GST. Their cost of 

production could go up, in turn, leading to increased prices. 

The phenomenon of spike in inflation was observed in other 

countries where GST was implemented. In these countries, 

prices shot up in the short run. Inflation stabilized as the 

implementation gained pace and there was more clarity among 

consumers and manufacturers. In India, sharp increase in 

inflation is likely to be tricky. 


Impact of GST implementation in various countries 

Australia New Zealand Canada 

Introduction year 2000 1986 1991 

Rate(s) (%) 10 10 – initially 

12.5 – raised later 

Economic phase when introduced Sustained economic growth End of recession, subsequent 

upswing 

Price changes Short-term increase Short-term increase in prices; no 

significant long-term increase 

15 

In the middle of recession 

Short-term spike in prices; no 

significant long-term increase 

Revenue effect Revenues exceeded expectations Revenues exceeded expectations Revenues exceeded expectations 

Current account 

Slight improvement since 

introduction 

Immediate rapid improvement; 

stabilized in longer term 

Dramatic improvement since 

introduction 

Source: Tom Bolton and Brian Dollery 

Risks in GST implementation 

Disruptions in business 

operations, IT, cutover 

Loss of sale/no-clarity on 

impact on SMEs and traders 

Getting manufacturing 

strategy wrong 

Sub-optimized distribution 

leading to higher costs 

Getting pricing wrong 

Administrative procedures not 

clear (contracts/liabilities) 

Non-compliance 

Investment risks go-live 

date postponed 



9

In conclusion, a company could look at the following 8 principles while 

implementing GST. 

The implementation of GST could impact the existing processes, people and technology. 

01 

02 

03 

04 

05 

06 

07 

08 

Protect customer experience 

Reduce disruptions to day-to-day business operations 

Maximize input tax credit 

Minimize cash flow impact 

Tap on utilize technology platform to automate GST 

Produce timely GST reporting 

Ensure compliance to GST regulations 

Be GST enabled on-tme 

Process People Technology 


Nitesh Mehrotra 

Director 

Nitesh is a Director with EY’s Advisory Practice 

focusing on Retail & Consumer Products. He 

has 14 years of work experience advising 

clients on key business processes, Enterprise 

Risk Management (ERM), Governance Risk & 

Compliance (GRC), data analytics and business 

transformation. He joined EY in 2003 and is 

currently based out of Mumbai. 

Nitesh has assisted leading companies across 

Retail & Consumer Product (RCP) sector in 

India, South Africa, China, Russia, UK & USA in 

the area of business processes and operations 

transformation. 

Nitesh has been working with one of India’s 

largest FMCG companies for its GST readiness. 

Email: nitesh.mehrotra@in.ey.com 

Tel: +91 22 6192 3787 

Inputs from Nivedita Ukidwe, Strategic Market Intelligence, EY Knowledge 


11

2 

Franchising opportunities in alternate 

therapy healthcare services - perspectives 

Introduction 

India is more than a trillion dollar economy and has been one 

of the fastest growing economies over the last five years. One 

of the key factors in India’s remarkable growth story is the 

emergence of a middle class as the largest consuming segment, 

which propelled domestic consumption. 

With the economy opening up, new avenues of earning high 

levels of income have opened up for the educated and young 

middle class. This has led to this key consumer segment to have 

high levels of disposable income and purchasing parity. 

Wellness is a prominent industry, which has benefitted from 

increased consumer spends on wellness products and services. 

The wellness market in India is estimated to be around US$12– 

15 billion in 2013 and growing at a CAGR of around 15%. 

The wellness offerings in the Indian market can be segmented 

along hygiene, curative and enhancement needs of the 

consumer. Curative needs are aligned to prevent diseases, cure 

ailments and maintain a healthy lifestyle. Alternate therapy 

products and services intend to satisfy the curative/preventive 

needs of the consumer and account for approximately 20% of 

the wellness market in India. 

Overview: Alternate therapy market in 

India 

The alternate therapy market in India is estimated at US$2.5 

billion in 2013. Reduced cost of alternate therapy treatments 

and consumers’ perception of alternate medicine causing fewer 

side effects than allopathic medicine have generated widespread 

acceptance of alternate therapies among the large cross-section 

of the population. 

Ayurveda is the most widely accepted form of alternate therapy 

today among Ayurveda, Yoga and Naturopathy, Unani, Siddha 

and Homeopathy (AYUSH) segments. 

Alternate therapy product space is more evolved and organized 

than services currently. The service delivery market in alternate 

therapy is fragmented. Retail clinic health care services are 

riding high on acceptance particularly in Ayurveda. However, 

presence of trustworthy brands delivering high quality yet costeffective 

consumer experience is limited in the Indian market. 

Therefore, there is a significant opportunity in the alternate 

therapy services space given rising consumer awareness on the 

side effects of allopathic medicine and growing propensity to 

shift from curative to preventive health care. 

Alternate therapy market size (value) in 2013 

2% 1% 

25% 

Ayurveda 

Homepathy 

Unani 

Others 

72% 


Alternate therapy services: significant 

growth options exist 

Types of alternate therapy service offerings 

Basic offering 

Alternate therapy clinics offering various services are present 

across the country, except the eastern region where the 

concentration of such clinics is low. 

Consultation + counselling 

Product retail 

Some of the players offering such services include: 

Illustrative list of players with pan-India presence: Patanjali, 

Himalaya, Ayurvita Healthcare, Dr. Batra’s, Jiva Ayurveda etc. 

Illustrative list of players with local presence: Baidyanath, 

Dabur, Zandu, Star Homeopathy, Charak etc. 

Diagnostics 

Value-added offering 

Wellness services 

Jammu & Kashmir 

Himachal Pradesh 

Punjab 

Haryana 

Uttarakhand 

Delhi 

Rajasthan Uttar Pradesh 

Bihar 

Gujarat Madhya Pradesh 

Jharkhand 

West Bengal 

Chhattisgarh 

Odisha 

Maharashtra 

Andhra Pradesh 

Goa 

Karnataka 

Kerala 

Tamil Nadu 

Assam 

NE states 

Alternate therapy clinic penetration 

Low Medium High 

Patanjali is the leading organized player in alternate therapy 

services with close to 1,000 clinics across India. It is followed 

by players such as Himalaya and Dr. Batra’s in terms of 

penetration. Additionally, there are a large number of 

unorganized clinics in the South, particularly in Kerala. 

Players engaged in alternate therapy clinics are increasingly 

moving toward value-added service offerings to charge a 

premium. Wellness services based on regimental therapies is a 

growing offering segment in clinics helpful in attracting SEC A 

and B consumers. 

Case study for a player focused on value added offerings 1 

Jiva Ayurveda is a Haryana-based company, which provides 

ayurvedic treatment for chronic and lifestyle diseases through 

25 Centers across India. 

• It focuses on chronic diseases such as joint pain, stomach 

problems, diabetes, mental disorders, liver and skin diseases 

and infertility. 

• It can be differentiated by its focus on treatments offered 

and custom-made medicines for each patient at a price point 

of INR1,000–1,200 per month. 

• It reaches out to more than 25,000 patients every month 

through its tele-medicine center and clinics. 

• There are more than 300 Ayurvedic doctors and consultants 

providing telephonic consultations to patients across 1,200 

cities and towns across the country. 

1 Company news reports 


13

Business models for alternate therapy services 

Alternate therapy clinics are operated in various models though franchisee route is most preferred for scaling up operations. 

Linear 

Characteristics Prevalence Examples 

Company owned 

company operated 

(COCO) 

• Company owns and sets up clinic 

• Company manages operations and 

bears manpower costs 

• Moderate 

• Jiva Ayurveda 

• Himalaya 

Franchisee owned 

franchisee operated 

(FOFO) 

• Franchisee owns and sets up clinic 

• Franchisee manages operations 

• Company typically bears manpower 

• High 

• Patanjali 

• Ayurvita 

• Dr. Batra 

Hybrid 

Company owned 

franchisee operated 

(COFO) 

• Company owns and sets up clinic 

• Franchisee manages operations 

• Low 

• Dr. Batra 

Franchisee owned 

company operated 

(FOCO) 

• Franchisee owns and sets up clinic 

• Company manages operations and 

bears manpower costs 

• Low 

• Himalaya 

Patanjali and Dr. Batra’s seem relevant examples for growth 

of alternate therapy clinics through the franchisee route. Both 

players could ramp up to a sizeable extent across the country 

due to adoption of the franchisee–owned, franchisee-operated 

model. 

Inherent advantages of the franchising option include 

• Scalability within a short timeframe and efficiently 

• Franchisees are aware of the local sensitivities and can 

provide constant inputs to business 

• Reduced investment commitment needed as franchisees 

share the investments 

However, franchisee–owned, franchisee-operated model 

presents several challenges and bottlenecks 

• Channel conflicts arise due to price competition among 

channel partners including franchises 

• Brand name of the company can be diluted by franchisee 

activities 

• Franchisees do not share the long-term vision of the brand 

• There could be integrity issues with the franchisee entering 

a competing businesses and distribution/ re-sale of goods to 

other retailers 

• Increased expected ROI for the player 


Strategies to develop a successful franchisee model in alternate therapy services 

Some of the key learnings and ideas from industry reveal that franchisee management needs continuous focus for success. 

Linear 

What should the franchisee business model be? 

How do we ensure that we select the best franchisees to join the venture? 

What should the terms of trade be? 

What are the risks we face in the franchising business and how do we mitigate them? 

What operational changes will we have to make for the business? 

How do we ensure the consumer gets the same experience at the company as well as franchisee store? 

How should financial and operational responsibilities be split between the company and the franchisee? 

In order to answer the key questions for a franchisee model, 

there are some imperatives that a player needs to adopt. These 

are: 

• Designing a sound franchisee business proposition: Provide 

a clear and transparent view of the short to long-term 

opportunity to a prospective in terms of investments, ROI, 

responsibilities franchisee will have to take up, key risks and 

losses in worse-case-scenario and monetary as well as nonmonetary 

support. A pre-requisite would also be to identify 

the right franchisee partner through stringent selection 

criteria. 

• Development of a franchisee management program: This 

includes creating a dedicated team to assist and engage with 

partners to monitor franchisee performance and profitability. 

Typically, this also includes supporting the partner in store 

launch, training, marketing and system support. 

• Aligning franchisee performance and compensation to 

company goals: This includes creating a clear view on 

franchisee operational parameters such as lease agreement, 

credit policy, product returns, SLOB management and 

termination policy. Defining a transparent terms of trade 

related to revenue, capital and operating expenses is critical 

for success. 

• Designing robust systems and processes: Processes need to 

be defined for recruitment and selection of partner to closure 

so that standardization is ensured across clinics for various 

services. This includes processes related to recruitment 

and selection, onboarding, goal setting and performance 

monitoring and lastly consolidation and closure. 

• Ensuring manpower quality: Hiring of manpower by 

franchisee partners need to be monitored as the service 

delivery is affected by the quality of hiring. Practitioner 

selection and training is a critical success factor for ensuring 

seamless and standardized operations across partners. 


15

Conclusion 

Alternate therapy services 

through a franchisee model 

thereby present significant 

opportunities for a company 

intending to scale up 

efficiently and rapidly. 

Companies that adopt some 

of the right strategies can 

expect to benefit significantly 

from the untapped potential 

of the segment over the next 

five years. 

Inputs from Gaurav Goyal 


Ravi Kapoor 

Director 

Krishnaprasad M 

Senior Manager 

Ravi is a Director with the Performance 

Improvement practice of EY India. He 

has over 15 years of work experience, 

out of which he has spent 8 years in 

the consumer products & and financial 

services sectors with organizations 

such as Colgate Palmolive, PepsiCo and 

ICICI Bank. 

He has advised several local & and 

MNC consumer companies in the Indian 

market and has assisted in, developing 

their growth strategy strategies and 

transforming their supply chain, and 

sales and distribution functions. 

Email: ravi.kapoor@in.ey.com 

Tel: +91 22 6192 1595 

Krishnaprasad is a Senior Manager 

in Advisory practice and is based out 

of Mumbai. He holds an MBA degree 

from SP Jain Institute of Management 

& Research, Mumbai and has about 

9 years of work experience. He has 

been with EY for 2 years, prior to 

which he spent about 7 years in 

Sales Operations and Distribution 

Management in the FMCG sector & 

alternate therapies. Krishnaprasad 

has led several engagements on value 

chain assessment and designing of 

go to market strategy in the Indian 

market. 

Email: krishnaprasad.m@in.ey.com 

Tel: +9122 6192 3165 

Inputs from Gaurav Goyal, Senior Consultant 


17

3 

Summary: SMAC 3.0: Digital is Here 

Digital growth in India has shown a significant increase among 

organizations and has considerably affected the consumer as 

well as the services market. Our annual Enterprise IT Trends 

and Investments Survey titled “SMAC 3.0: Digital is Here” 

covers the journey of the Social Media, Analytics and Cloud 

(SMAC), areas that have been the latest buzzwords among 

IT strategists. The survey, which was aimed to capture key IT 

priorities and initiatives taken by organizations across various 

sectors, provided meaningful insights from the 267 CIO’s who 

responded. The results clearly highlight that the direction of 

the respondents’ current and future plans align with the “Digital 

India” story. 

Cyber security 

petrol pump 

IDS 

AES 

2010 

Social data mining 

Journey to 

SMAC 3.0 

2013 

Start 

Social 

1.0 

BYOD 

IT 

IT 

Mobility 

1.0 

Analytics 

Analytics 

1.0 

Virtualization 

ERP 

Managed services / Outsourcing 

RULES 

Whichever 

sector 

you belong to. 

SMAC will 

impact you 

Trojan 

Cloud 

1.0 

One wrong throw 

of the die 

can take you off your 

planned route 

Information 

breach 

Cyber- 

Warfare 

Private cloud 

Cloud 

2.0 

Big data 

Enterprise 

mobility 

Analytics 

2.0 

Monetary 

loss 

Brand 

damage 

Legal 

expense 

Insider 

Attack 

You are 

here 

$$$ 

Impact of Cyber Breach 


This year’s survey brings good tidings for the Indian CIO with 

an optimistic outlook, interesting trends and a view toward the 

journey to SMAC 3.0. The report highlights the journey of the 

CIO from the predominant SMAC technologies in 2010 (SMAC 

1.0), covering the trends observed in the recent past (SMAC 

2.0) to the futuristic ones, which will define the ever-increasing 

role of IT in the organization (SMAC 3.0). Let us take a brief look 

at the individual components of SMAC and how each one has 

evolved specifically for the retail and consumer products sector. 

Virtual reality 

Wireless HUB 

Cyber security 

petrol pump 

DLP 

APT 

Periodically refill 

your cyber defense 

solutionsto be ever 

ready for a cyber attack 

Future 

of IT 

3D Printing 

IT IT IT IT 

Hootsuite 

Social 

2.0 


Internet of 

Things 

Mobility 

2.0 

Universal Remote 

SMC 

Social media 

CRMS 

Web 

service 

Unified enterprise 

platform 

Customer 

analytics 

Private 

Hybrid 

Public 

Future 

Social 

3.0 

Mobility 

3.0 

Analytics 

3.0 

Cloud 

3.0 

IT IT IT IT IT IT 

With the evolution 

of IT, your outsourcing 

partner holds a vital key 

to your future sucess 

WILD CARD 



19

Social Media – Shopping while Surfing, The next Big Bazaar? 

Social Media describes a shift in how people discover, read and 

share news, information and content. 

It fosters the human connection by transforming a monolog 

(one-to-many) into a dialog (many to-many). Social media tools 

make it easier to create and distribute content, and discuss 

the things we care about. The use of social media is growing 

at breakneck speed. According to Mediavision, as of 2014, 

there are 1.32 billion active Facebook users and more than 1 

billion YouTube users. The spontaneity and pervasive influence 

of social media have transformed the relationship between 

companies and their customers, employees, suppliers and 

regulators. 

This is highlighted by our survey results, which indicate that 

74% of the respondents from the Retail and Consumer Products 

sector agree that social media has been really effective 

in engaging with customers and enhancing collaboration. 

Furthermore, 16% of the respondents feel that they will accrue 

benefits in the coming years. 

Social media has evolved a long way from its original concept 

of connecting people all over the world. It has transformed 

the way we communicate with strangers and friends alike and 

has become a new platform where brands are marketing their 

products to reach out to their consumers. 

This sphere of social media/Customer Relationship Management 

(CRM) technology is fast evolving and is likely to change the 

way companies deal with their customers. Futuristic CRMs will 

be able to produce trends for all those connected to you via 

advanced preference analytics algorithms. These devices will 

be able to clearly demarcate the difference between “data of 

interest” and “redundant data”. They will also increase the 

coverage of individuals for whom advertising products can be 

garnished based on the customer’s preferences. 

74% 

of the respondents agree that social media has been really 

effective in engaging with customers and enhancing collaboration 

# # # # 

Mobility: If you don’t shift, are you going to be rendered immobile? 

It is estimated by Gartner that 1 billion smartphones will be 

added by 2014 and will grow 2.9x between 2011 and 2016. 

Mobile devices will reach 2,027m in number and by 2015, 

mobile app development projects will outnumber native PC 

projects by a ratio of 4:1. 

Our survey results indicate a similar progression where 60% of 

the Retail and Consumer products CIO’s plan to spend on “new 

technologies” as compared to “business as usual” with mobility 

being one of them. This is further evidenced by our survey 

results, which indicate that 89.5% respondents mentioned 

that they have budgeted for mobility in the current financial 

year. This is a fairly large number of respondents keen on the 

advancement of mobility in their organizations. 

Emerging technologies, such as mobile payments, peer-to-peer 

payments, and mobile apps, are creating a mobile ecosystem. 

The last decade has seen a significant increase in the usage of 

mobile devices, which led the top management of customercentric 

companies to introduce the idea of using individual 

mobile devices to manage the work efficiently, bringing in 

the concept of bring your own device (BYOD). This was soon 

followed by Enterprise mobility, which allowed workers to 

perform their business tasks using their mobile devices from 

anywhere outside the workplace. The next big step is the 

collaboration of organizations with cloud service technologies to 

enable users to work on their mobile devices, irrespective of the 

type of device, the platform on which the device runs, and the 

type of connectivity available. 

89.5% respondents 

mentioned 

that they have 

budgeted for 

mobility in 

the current 

financial year. 


Analytics: stretching your customer reach using analytics 

Analytics has evolved from providing statistical outputs 

for creating trends to predictive analytics, which filters out 

information from substantial existing datasets to identify 

patterns and predict future outcomes. The next level of analytics 

awaited is prescriptive analytics, which will help gain an insight 

into the lives of customers, understand their lifestyles, interests 

and behaviors, and provide them appropriate products or 

services that they need. 

According to EY’s “The DNA of the CIO survey”, 60% of CIOs 

think they add strong value to their businesses by enabling 

analytics to make fact-based decisions. Evolving companies with 

an equal focus on sales as well as margins have categorized 

data analytics as “somewhat important.” This shows that some 

CIOs are still slightly skeptical about unstructured data, which 

is driving the back end of operational excellence. The survey 

confirms this — with 53% of CIOs from the Retail and Consumer 

products industry considering analytics to be very important and 

32% of CIOs believe that analytics is somewhat important for 

their organization. 

52.63% 

respondents 

categorized analytics 

as very important 

Cloud – The Highway or the “Cloud Way” 

Cloud computing started off as a public cloud where cloud 

infrastructure is made available to the general public or a large 

industry group and is owned by an organization selling cloud 

services. Private cloud soon arrived where cloud infrastructure 

is operated solely for an organization. The next step in cloud 

computing is a hybrid cloud. A hybrid cloud is a composition 

of two or more clouds (private or public) that remain unique 

entities but are bound together by standardized or proprietary 

technology that enables data and application portability (e.g., 

cloud bursting for load balancing between clouds). 

The survey results show an interesting trend indicating 

that investment in cloud computing is delivering a range of 

benefits, including a shift from capital-intensive to operational 

cost models, reduced overall cost, increased agility, reduced 

complexity and increased security. 

Of the respondents from the Retail and Consumer Products 

sector, 63% agreed that they are reaping the benefits of 

investments made in cloud-based technologies. Furthermore, 

57% of the respondents plan to spend anywhere between 1% 

and 25% on new technologies, including cloud and another 41% 

plan to spend more than 25% on new technologies. 

63.2% 

respondents agreed that cloudbased 

technologies have given them 

significant benefits 


21

Cybersecurity: act before you get hacked 

Advanced technologies (cloud, big data, mobile, social media, 

etc.,) offer new capabilities and benefits, but they also introduce 

new risks. Different technologies are being introduced every 

day, often outpacing the ability to properly assess associated 

risks. We have seen that cybersecurity is a global concern. 

According to EY’s Global Information Security Survey (GISS), 

.37% of respondents say that real-time insight on cyber risk 

is not available. With organizations increasingly relying on 

digitized information and sharing considerable amounts of data 

across the globe, they have become easy targets for different 

forms of attack 

New business models rely heavily on global digitization, making 

the attack much broad based, and exposing gaps in security, 

especially through the use of cloud, big data, mobile and social 

media. For example, cloud-based services and third-party data 

storage and management open up new channels of risk that did 

not exist previously. 

The survey results reveal that 74% of the respondents from 

the Retail and Consumer Products feel that as a cybersecurity 

solution, a mix of preventive and detective solution is required. 

73.7% 

of survey respondents mentioned they will invest 

in both preventive and detective technologies 

Managed Services: do “IT” for me 

We are in an era of targeted cyberattacks on various 

organizations. The threat landscape consists of highly capable, 

determined adversaries who target organizations to steal 

information, steal money and compromise critical business 

services. 

Traditional security can no longer be solely relied upon to thwart 

the efforts of a highly capable and determined adversary. 

Early detection and smart response require network and endpoint 

visibility, monitoring rules to identify attack indicators, 

enhanced business context, and the ability to apply resources 

appropriately. Here, the concept of managed services with 

highly mature, 24*7*365 monitoring and incident response 

capabilities comes into picture. 

The survey results reveal that 56% of the CIO’s from the Retail 

and Consumer products will opt for a managed/outsourcing 

services model, which is at least 10% more than the average 

43% of the respondents from all sectors who will opt for a 

managed/outsourcing services model. 

respondents have opted for managed or outsourcing services model 

73.7% 


Nitin Mehta 

Director 

Sneha Gandhi 

Senior Manager 

Nitin Mehta is a Director with EY Advisory and 

focuses on IT Risk and Assurance. He joined EY in 

2005 in Philadelphia, US, and relocated to Mumbai, 

India, in June 2007. He has more than 17 years’ 

experience in business process and IT risk advisory 

in India, the US and the Middle East. Nitin is an 

engineering graduate and has a Master’s degree in 

management studies. In addition, he is a certified 

Information Systems Auditor (CISA) and a Certified 

Information Privacy Professional (CIPP). 

Nitin primarily focuses on IT risk and assurance 

services in the consumer products and life 

sciences sectors. He has extensive experience 

in understanding complex information systems, 

assessing business and IT risks, and formulating 

control and governance frameworks. His areas of 

competence include information security, business 

continuity, application risks and controls, and IT 

governance. 

Email: nitin.mehta@in.ey.com 

Tel: +91 22 6192 1298 

Sneha is a Senior Manager with the IT Risk and 

Assurance (ITRA) service line within the Advisory 

Practice of Ernst and Young LLP. She has diversified 

experience across industries such as industrial 

products, chemicals, life sciences, automotive, 

financial services, FMCG, consumer product and 

technology. 

She has more than eight years of experience in 

the IT industry, which includes a hybrid experience 

in Information Risk Consulting, security audits, 

designing and implementing security and network 

solutions and internal audits. As part of EY, she has 

lead multiple engagements that include ISO27001 

framework development, data migration review, 

internal audits, IT roadmap development, PCI-DSS 

reviews, IT due diligence, Software Development Life 

Cycle review, ISAE3402/ SSAE16 engagements, 

Business continuity management review, Sarbanes 

Oxley readiness assistance etc. 

Email: sneha.gandhi@in.ey.com 

Tel: +91 22 6192 1905 

Inputs from Harshil Shah (Consultant), Bhagyesh Vora (Associate Consultant), Sunit Vyas (Associate Consultant) 


23

4 

Innovation board 

1 

Amazon tie-ups 

with kiranas 

Amazon India has been looking at new ways 

to bring kirana stores online. Now, the 

company has launched a new platform called 

Kirana Now. The new platform will let kirana 

stores upload their catalogs online. The 

deliveries are expected to take an hour or 

two, and will be taken care of by Amazon, the 

kirana owners and other third-party logistical 

companies roped in for this initiative. This 

initiative is expected to cater to the customer 

need of speedy delivery of grocery products. 

http://www.tehelka.com/amazon-tie-ups-with-kiranastores/, 

Link accessed on: 29May 2015 

2 

P&G’s open 

innovation strategy 

“Connect + Develop” the new initiative of P&G, collaborates with 

individuals and companies around the world to develop innovative 

ideas and products. Open innovation at P&G works both ways (inbound 

and outbound), it includes considerably more than technology, i.e., 

from trademarks to packaging, marketing models to engineering, and 

business services to design. There is a global business development 

team dedicated to empowering this initiative, searching for innovations, 

working with prospective partners and directing innovations through 

the company and into the market. Recently it partnered with MonoSol 

of Indiana to revolutionize the laundry category by launching Tide Pods. 

This partnership was done with the objective of better product offering 

for customers, now the cleaning solution dissolves completely with no 

residue in a range of water temperatures, from hot to cold. 

http://www.pgconnectdevelop.com/home/pg_open_innovation.html Link assessed on: 15 

May 2015 

3 

Cadbury invests in real-time 

multi-channel advertising 

Cadbury invested £7.5 million in a campaign to launch its new Cadbury Dairy Milk Ritz and Lu products. As part of the 

“Moment of Joy” drive of the confectionary department of Cadbury, a seven-week campaign was launched focusing on 

driving the awareness and understanding of new snacking products. Majority spends and activity was focused during the 

afternoon time, i.e., “tea break moment” with a television advertisement and its digital version on YouTube and its Facebook 

page. The two product launches have proved to be of significant success, with a hit value of £500 million at the end of last 

year, and reported a great response to its real-time marketing. The company plans to continue its investment in real time 

marketing in television, digital and social media space. 

http://www.thedrum.com/news/2014/02/27/cadbury-invests-75-million-ad-campaign-biggest-innovation-2014 Link accessed on: 15 May 2015` 

“Automobile, logistics companies to reap 

rich GST dividend,” http://www.businessstandard.com/article/economy-policy/ 

automobile-logistics-companies-to-reaprich-gst-dividend-114121800921_1.html, 

accessed on 11 May 2015 

“An Empirical Note on the Comparative 

Macroeconomic Effects of the GST in 

Australia, Canada and New Zealand, 

by Tom Bolton and Brian Dollery,” 

http://www.une.edu.au/__data/assets/ 

pdf_file/0006/67947/econ-2004-17.pdf, 

accessed on 11 May 2015 

Other references 

“Reaping the GST opportunities,” http://www.sclc.in/pdf/india-after-gst-presentation/Godrej-Consumer-Products. 

pdf, accessed on 11 May 2015 

“India’s Goods and Services Tax – A Primer,” http://www.stcipd.com/UserFiles/File/Indias%20Goods%20and%20 

Services%20Tax%20%20A%20Primer.pdf, accessed on 11 May 2015 

“Towards the GST, An Approach Paper, April 2013,” http://www.ficci.com/spdocument/20238/Towards-the-GST- 

Approach-Paper-Apri-2013.pdf, accessed on 11 May 2015 

“Officials race against time to roll out Goods and Service Tax Network,” http://articles.economictimes.indiatimes. 

com/2015-03-13/news/60086016_1_gstn-services-tax-network-tax-regime, accessed on 11 May 2015 

“The brand value of GST,” http://www.livemint.com/Opinion/X0vBTWlmE8rbeKJcizQWrI/The-brand-value-of-GST. 

html, accessed on 11 May 2015 


Notes 


25

Notes 


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27

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