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FDI IN RETAILING

ABSTRACT

The Indian Consumer is significantly under-served and there is room for many players."

- Michael Duke, CEO, Wal-Mart

The center of economic gravity in the world today is shifting to the east, towards EasternEurope and Asia. The Asian market spanning three time zones covers over 40% of theworld's population and over 20% of the global GDP. In a growing market such as India,and as the retail pie continues to expand on the back of rising incomes and increasingconsumer expanding, there is room for everyone - like the global retail giant Wal-Martand small players like Adani or Subhiksha. The time to shift gears and accelerate the paceof retail development in India has arrived. It is now up to the Government, retailers andpotential investors to make this happen.

Plenty has been said - and an awful lot written - about mom-and-pop shops shutting downand taking with them the friendly, smiling, simple shop assistants who apparently definea part of our culture. That's what, with different details, America's "liberal" and anti-freetrade conservatives say about outsourcing to India. Do the Swadeshi Jagran Manch andits politically correct counterparts oppose outsourcing because the West is experiencingan economic-cultural hollowing out? So, hypocrisy is the first feature of those whooppose retail FDI; the second is history, or rather a lack of it. Over space and time,economic progress has involved job losses, job displacement, old skills dying out andnew markets for new skills appearing. The transition is almost never seamless and is,therefore, almost always painful for some. But if that were the argument for stoppingeconomic change, we would all still be tilling fields. The renowned Victorian Poet

Tennyson said well when he talked about change in the society -

Old orders changeth yielding place to new, So that one good custom may not corrupt theworld.

Even fifty years after Independence, policy makers continue to be xenophobic. Fears offoreign imperialism have not yet receded and continue to be a barrier for the entry offoreign enterprises.

Since 1991, a number of breakthroughs were made in liberalizing the policies for foreigninvestment; every policy decision has been influenced by foreign imperialism. Even as

the government continues to delay the decision to allow FDI in multi-product retailchains, the fast-emerging Indian retail sector is becoming widely recognized amongstdomestic entrepreneurs and investors as one of the biggest opportunities in India. Apartfrom existing players like Pantaloon, Adani, Subhiksha, etc., Reliance, Tata and Birlahave announced their intention to cumulatively invest $ 10 Billion over the next fiveyears.

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In addition, various foreign players like Wal-Mart are entering the market via a jointventure with Bharti. Morgan Stanely Research shows that India's organized retail marketis likely to grow from the current $ 4 Billion (2.1% of total relevant consumer spending)to 64 Billion (10.8%) by FY 2015.

Source: CEIC, CSO, A C Nielsen, Morgan Stanley Research; E = Morgan StanleyResearch Estimates

Competitive markets heightened customer expectation. Supply chain complexity,globalization and an evolving technology scenario are some of the challenges faced bythe Indian retail industry today. Retail is a multi-faceted industry serving marketsegments carrying diverse business needs and service requirements. Forces ofglobalization, consolidation and customization have significantly changed the traditionalretail model. Retailers today are seriously analyzing these multiple challenges whiletrying to increase sales and achieve profit targets. With retail trade expected to grow at a

robust pace in the coming years, could FDI be an effective instrument to fight theobstacles of Globalization, Consolidation and Customization? The answer perhaps, 'yes'.

Retail chains are increasingly relying on private labels to catch the gaps in their product-mix and targeting specific needs of consumers. Pantaloons, Westside, Ebony andShoppers' Stop are all increasing their range of private labels to improve their profitmargins as well as increase average bill-size. According to Govind Shrikhande, CEO of

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Shoppers' Stop, "Today, the offering of private labels is not about price. The private labelbrands are filling the missing gap in terms of both range and quality. Private labels aremore about targeting specific merchandise for youth and mature customers." Categoriessuch as women's luggage, accessories, corporate clothing, gym and yoga wear, etc., aresome of the segments that retailers are targeting. While retailers are still pricing their

private labels at a lower level, the emphasis is no longer on saving costs but ondeveloping a specialized portfolio.

Key words

01. Global value chain02. Kiosk Marketing03. Retail Revolution04. Kirana Stores05. Hyper Markets

Author - Dr.M.Ashok Kumar, Associate Professor, Sree NarayanaGuru College,KG Chavadi, Coimbatore 641 105 Email: mashk21@yahoo.co.in

Co-Author M.Saravanan, Assistant Professor, Sree NarayanaGuru College, KG

Chavadi, Coimbatore 641 105 Email: shravan.murugan@gmail.com

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