LACONIC’S

SHIVANGI GUPTA

VARUN DUBEY

SHRUTI GARG

ISSUES FOR DISCUSSION

• RETAIL INDUSTRY: AN OVERVIEW• FDI IN RETAIL POLICY PERSPECTIVE• GLOBAL GIANTS IN INDIA• MYTHS AND REALITIES• RECOMMENDATIONS

RETAIL INDUSTRY : AN OVERVIEW

and their spending power

Indian retail sector today is valued at $450 billion, and is increasing day by day due to its increasing middle class population and their spending power .

Indian retail sector has two parts:OrganizedUnorganizedOrganized sector which forms around 20 -30

% in other countries . In India it forms only about 6% while rest is all unorganized consisting of  small retailers

US

Taiwan

Malaysia

Thailand

Indonesia

China

India

0 20 40 60 80 100 120

organisedunorganised

Organised vs Unorganised Retail at Global Level

Introduction to Modern Retail

Weekly marketVillage melas

Kirana storesConvenience store

Government stores

Super marketsHyper marketsBrands outletsmalls

Indian Retail Sector• GRDI Position : 3rd

• Size : $ 400 billion

• Growth Rate : 13%

• GDP contribution : 12%

• Major sector : Food and Grocery

• Employment : 2nd largest industry

(35.06 million)

• Types: Organized ( 5%)

Unorganized ( 95%)

Format Description Retailers

Hypermarkets Offering basket of product Spencers, Big bazaar

Cash and Carry Bulk-buying requirement Bharti-wal-mart

Departmental stores Large layout, Wide merchandise mix Lifestyle , Globus

Supermarkets Household product as well as food as integral part of the service

Apna bazaar , food bazaar

Shop-in-shop Shops located in shopping malls Navras ( big bazaar)

Specialty stores Focus on individual product type Brand Factory

Category killers Particular segment The LOFT

Discount stores Branded product at discounted prices

Subhiksha, levi’s outlet

Convenience stores Small Retail stores In and out

Major Indian Retailers : Categories

FDI IN RETAIL POLICY PERSPECTIVE

FDI Policy Initiatives

• 1991- FDI allowed selectively up to 51% in priority

sectors.

• 1997-FDI allowed up to 100% in sectors like

mining, manufacturing.

• 2000-06 FDI allowed up to 100% in specified sectors.

FDI limits increased.

Procedures further simplified

• The top 3 Indian Regions attracting the highest FDI.

Mumbai, Delhi and Karnataka.

Account for nearly 62% of the total FDI.

Why Global Retailers Look Up to India?

Incentives attract FDI.

Market size and potential are sufficient inducers.

Tax breaks, import duty exemptions, land and power

subsidies, and other enticements.

Global Giants in India

Wal-Mart Wal-Mart has emerged as one of the largest

corporations in the world, and definitely the largest in retail.

In May 2009, Wal-Mart was ready to open its first store in India. The reason for Wal-Mart’s entry in India was clear – The Indian middle class.

‘Wal-Mart’ has a turnover of $ 256 bn. And is growing annually at an average of 12-13%. In 2004 its net profit was $ 9,000 mn. It had 4806 stores employing 1.4 mn persons. Of these 1355 were outside the USA. The average size of a Wal-mart is 85,000 sq.ft and the average turnover of a store was about $ 51 mn.

Myths• Prices of different items are less here.• Corporate retail is throwing away middlemen.• They are creating employment. The employment potential projected

is 2 million jobs.• Farmers are getting better deal. Corporations are friends of farmers

and consumers.• Corporate retail sell fresh.• Corporate retail is promoting local economy.

Myths and Realities about the Global Giants arrival to India

• Corporate entry will make the supply chain more efficient. They are more scientific than the existing system.

• There is huge consumer demand for corporate retail.• There is room for all, as Indian economy is growing at an enormous

pace.• Corporation led shops sell cheap and consumers save money

shopping there.

Realities• The rates at which the vendors sell are less as those in the

corporate retail shops.• They are becoming the new mega middlemen and creating

monopolies by becoming the wholesaler, distributor and the retailer.

• They are robbing livelihoods many more times then the number of jobs they are going to create. For creating 2 million jobs they are going to destruct 40 million livelihoods in retail sector. Corporations are buying from existing mandis and not straight from farmers at this point of time, so there is no question of farmers getting a better deal.

• The hawker sells much fresher than any of these shops. Long distance supply chain and refrigeration means stale fruits and vegetables.

• They have destructed local economy wherever they have gone, and are doing the same in India.

• The supply chain gets more centralized, and the average distance travelled by food increases manifolds.

• The corporations are pushing the agenda, never have people in India demanded for corporation led retail.

• The corporate retail chains cannot prosper without killing the small businesses.

Lifestyle plans to have more than 50 stores across India by 2012-13.

Timex India will open another 52 stores by March 2011 taking its total store count to 120

Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million to add up to existing 2.4 million sq ft retail space.

Shoppers Stop has plans to invest Rs250 Crore to open 15 new supermarkets in the coming three years.

Future Investment

INDIAN

• Pantaloons• Reliance• Bharti retail• RPG• Lifestyle• K raheja• Subhiksha• Piramyd• Trent• Vishal group

• Tesco• Walmart• Metro• Carrefour• B&Q• Target

GLOBAL

RECOMMENDATIONS The Government and RBI need to evolve suitable

lending policies that will enable retailers in the organized and unorganized sectors to expand and improve efficiencies.

National Commission must be established to study the problems of the retail sector and to evolve policies that will enable it to cope with FDI– as and when it comes.

The proposed National Commission should evolve a clear set of conditionalities on giant foreign retailers on the procurement of farm produce, domestically manufactured merchandise and imported goods.

Entry of foreign players must be gradual and with social safeguards.

In order to address the dislocation issue, it becomes imperative to develop and improve the manufacturing sector in India.

..Our Conclusion

Let the liberalization be in steps rather than being a

leap.

FDI