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Retail
Indian retail
Why FDI ?
How FDI ?
Recommendations
2
Agenda
Retailing : An overview
Indian retail
Why FDI ?
How FDI ?
Recommendations
3
Retailing: An overview
Retailing
World’s largest private industry
Indian retailing
An overview Largest employer after agriculture -
8%* of population
Highest outlet density in world
Around 12 mn outlets
Long way to go
*www.etretailbiz.com/dec2002
4
Retailing: An overview
Wal-Mart
Topmost global Fortune 500
company(3 Consecutive Years)
Annual Sales of over US$ 250 bn
Fortune 100
9 Retailers
Indian retail
Why FDI ?
How FDI ?
Recommendations
6
Evolution of Indian retail Modern Formats/
Historic/Rural Traditional/Perva Government
International
Reach sive Reach Supported
Exclusive Brand
Outlets
Hyper/Super
Markets
Department Stores
Shopping Malls
PDS Outlets
Khadi Stores
Cooperatives
Convenience
Stores
Mom and
Pop/Kiranas
Weekly
Markets
Village Fairs
Melas
Source of Neighborhood Availability/ Shopping
Entertainmen Stores/Convenie Low Costs / Experience/Efficie
t nce Distribution ncy
7
Evolution of Indian retail
Informal retailing Sector
Typically small retailers.
Evasion of taxes
8
Categories of Indian retail
Corporate Houses
Tatas: Tata Trent
Rahejas(ShoppersStop),
Indian retail Hiranandani(Haiko), DLF(DT
cinemas) etc.
Dedicated brand outlets
Nike, Reebok, Zodiac etc
Multi-brand outlets
Vijay Sales, Viveks etc
Manufacturers/ Exporters
Pantaloons, Bata, Weekender
9
Classifying Indian retail
Modern Format retailers
Supermarkets
(Foodworld)
Hypermarkets (Big
Bazaar)
Department Stores (S Stop)
Stores
Kiosks
Street Markets
10
Large Indian retailers
Hypermarket
Big Bazaar
Giants
Shoprite
Star
Department store
Lifestyle
Indian Pantaloons
retailers Piramyds
Shoppers Stop
Trent
Entertainment
Fame Adlabs
Fun Republic
Inox
PVR
11
Agenda
Retailing : An overview
Indian retail
Why FDI ?
How FDI ?
Recommendations
12
The changing Indian consumer
Greater per capita income
Increase in disposable income of
middle class households
20.9%* growth in real disposable
income in ’99-’03.
Growing high and middle income
Indian population
consumer Growing at a pace of over 10%* per
price points
13 †FromEuromonitorRetail Survey
The changing Indian consumer
The urban consumer
Getting exposed to international
lifestyles
Inclined to acquiring asset
Changing Mindset
Increasing tendency to spend
of age
100 mn 17-21 year olds*. Tend to
spend freely.
Greater levels of education
*DatafromNCAER
14
Anticipated growth
Market size
Current market size is roughly US$
286 bn*
96% of the 12 Million stores are less
rise by 24-49%**
Formal and modern format retailing
15 **FromEuromonitorRetail Survey
Industry Low
dynamics
domestic competition
Because of fragmented nature of
industry
Industry retailing
dynamics Moderate entry barriers for
organized retailing
16
Real estate issues
Highly distorted real estate market
Pro-tenant laws
Zoning laws
to state
Non-availability of government land,
owner in country
Urban Land Ceiling act is archaic
17
Growth factors
Infrastructure development
18
The Indian advantage
India ranked 5th in the Global A.T
Kearney Retail Development Index
Second only to China in Asia
markets studied
Advantage Implies lower barriers of entry
India for global players
Considering tremendous market
19
Agenda
Retailing : An overview
Indian retail
Why FDI ?
How FDI ?
Recommendations
20
FDI in Indian retailing
Current Indian FDI Regime
FDI not permitted in retail trade
(simultaneous commencement of
investment in manufacturing
facility required)
21
FDI in Indian retailing
Metro Group of Germany
Cash-and-carry wholesale trading
Farm International,
Leading food retailer in India now
Mc Donalds
22
International retailers in India:
Strategies
Franchise
International company gives name
retail in India
23
International retailers in India:
Strategies
Distribution
International company sets up local
distribution office
Supply products to Indian retailers
to sell
Also set up franchised outlets for
How they
are present brand
Swarovski, Hugo Boss
Wholesale trading
Cash and Carry operations
24
Agenda
Retailing : An overview
Indian retail
Why FDI ?
How FDI ?
Recommendations
25
Why FDI?
Improve competition
Develop the market
Greater level of exports due to
increased sourcing by major players
Sourcing by Wal-Mart from China
Benefits of
improved multifold after FDI
FDI permitted in China
Similar increase in sourcing
observed for Metro in India
Provides access to global markets
26
Why FDI?
Investment in technology
Cold storage chains solve the perennial
problem of wastage
Greater investment in the food
processing sector technology
Better operations in production cycle and
distribution
Benefits of Better lifestyle
FDI Greater level of wages paid by
international players usually
More product variety
27
Why FDI?
Manpower and skill development
Through retail training and
Greater managerial talent inflow from
other countries
Tourism Development
A strong retailing sector boosts tourism
Benefits of as seen from the experience of
FDI Singapore and Dubai
Investment in whole supply chain
Improved product basket from India for
exports
Long term benefits
Up-gradation of agriculture
Development of efficient small and
medium size industries
28
Benefits to the government
Greater Consumer
Greater Per
Spending due to
Capita Income
economic boom
GDP Growth
Reduced Tax
Evasion
29
BenefitsIncrease
to the
government
employment levels
FDI would result in market growth
and expansion
Employment generated at various
levels
Increased consumer demand implies
employment generation across the
value chain
Benefits to Does not need very high skill sets
govt. Needs high school graduates and
other similar skill levels
Currently this is a majorly
unemployed demographic group
Boom in employment
Similar to job generation in ITES
industry
On a much larger scale
30
Agenda
Retailing : An overview
Indian retail
Why FDI ?
How FDI ?
Recommendations
31
How FDI ?
FDI should be allowed in stages
Initial stages: 26% FDI
2 yrs
32
Agenda
Retailing : An overview
Indian retail
How FDI ?
Recommendations
33
FDI permitted in 1992. 40 foreign
Case study : Chinese retailing
0
22
5 FDI in retail
150 allowed
75
7 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0
8 0 5 0 1 2 3 4 5 6 7 8 9 0 1 2
Years
35
China: The effect of FDI
Type No. of stores in No. of stores in
1996 2001
Traditional 1,920,604 2,565,028
Convenience 18,091
Hypermarkets 593
36
Employment in retailing is
increasing
Employment in Retailing
60 8.00%
7.00%
50
% of Total Labor
wholesale (Mn)
Employment in
6.00%
Retail and
40 5.00%
force
30 4.00%
3.00%
20
2.00%
10 1.00%
0 0.00%
90 91 92 93 94 95 96 97 98 99 00 01
Year
Employment %
total*
Carrefour
Has 54 stores as on date
industry
Retailing in China has grown at a
retailers
39
Agenda
Retailing : An overview
Indian retail
Why FDI ?
How FDI ?
Recommendations
40
Recommendations
Grant industry status to retail
Permit FDI in Retail in phases
Invest in supply chain infrastructure
Ease distribution – infrastructure
creation, octroi
Recommend
Ensure single window clearance for
retail chains
ations Organize market for real estate
Ensure proper rent laws
41
THANK YOU
42