FDI

in

Retail
Sector
www.studygalaxy.com

India

FLOW OF PRESENTATION
Retailing : An overview

Classification of Indian Retail sector

FDI in Indian retailing Entry routes for Foreign Retailers
Foreign Companies who want to enter Indian market

Why FDI should be permitted? Recommendations

AN OVERVIEW of RETAIL SECTOR

Retailing Worlds largest private industry US$ 6.6 trillion sales annually Indian retailing Largest employer after agriculture - 8% of population Highest outlet density in world Around 12 mn outlets Still evolving as an industry Long way to go

Generation of Employment by Retailing

7% 11% 8% 6%

12% 18% 15% 11.70%

INDIA CHINA POLAND BRAZIL USA KOREA UK MALAYSIA

*DATA OF 2008

Organized Retailing as a % of total Retailing

Country
USA WUC

Current share of org. retailing (%)

80 70

Argentina
Brazil Thailand Korea Taiwan China Malaysia Poland India
*DATA OF 2008

40
40 40 35 35 20 20 20 2

Retailing & India

Largest private industry in India 2nd Largest Employer after agriculture Contributes 10% of GDP Highest Retail outlet density in the World

Growth @ 2% (1995-2005)

Segment-wise recent trends and development in retailing

Food and grocery Textile and apparel Consumer durables Music and books Jewellery Wooden furniture Leather footwear Handicrafts Fast food chains Real estate Fuel retailing

EVOLUTION OF INDIAN RETAIL

Historic/ Rural Reach Traditional/ Pervasive Reach Government Supported Modern Formats/ International
Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls

Weekly Markets Village Fairs Melas

Convenience Stores Mom and Pop/Kiranas

PDS Outlets Khadi Stores Cooperatives

Classifying Indian retail

Modern Format retailers (organized) Supermarkets Hypermarket (3000-5000 sq ft) Department Stores (1000-2000sq ft) Convenience Stores (750-1000 sq ft) Company Owned Company Operated Traditional Format Retailers (unorganized) Kiranas: Traditional Mom and Pop Stores Kiosks Street Markets Exclusive /Multiple Brand Outlets

Categories of Indian retail

Corporate Houses Tatas: Tata Trent RPG group: Food World, Health and Glow, etc ITC: Wills Life Style Rahejas(ShoppersStop), 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

Large Indian retailers

Hypermarket Big Bazaar Giants Shoprite Star Department store Lifestyle Pantaloons Pyramids Shoppers Stop Trent Entertainment Fame Adlabs Fun Republic Inox PVR

FDI in Indian retailing

Current Indian FDI Regime FDI not permitted in retail trade sector, except in: Single Brand Products Hi-Tech items / items requiring specialized after sales service Medical and diagnostic items Items sourced from the Indian small sector (manufactured with technology provided by the foreign collaborator) For 2 year test marketing (simultaneous commencement of investment in manufacturing facility required)

Entry Routes of Foreign Retailers

Franchise International company gives name and technology to local partner. Gets royalty in return In case master franchise is appointed for region or country, he has right to appoint local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango Manufacturing Company sets up Indian arm for production Bata India. It also has right to retail in India

Entry Routes of Foreign Retailers

Distribution International company sets up local distribution office Supply products to Indian retailers to sell Also set up franchised outlets for brand Swarovski, Hugo Boss Wholesale trading Cash and Carry operations 100% FDI permitted Metro Cash n Carry

COMPANIES WHO WANT TO ENTER INDIAN RETAIL MARKET

WALMART (worlds largest turnover company) with BHARTI Italian designer GIOGRGIO ARMANI with DLF ltd.(51% share of armani) 2nd biggest retailer Frances CARREFOUR by 2009. Britains MARKS & SPENCER wants to expand in India.

WHY FDI SHOULD BE PERMITTED?

Improve competition Develop the market Greater level of exports due to increased sourcing by major players Sourcing by Wal-Mart from China improved multifold after FDI permitted in China Similar increase in sourcing observed for Metro in India Provides access to global markets for Indian producers

WHY FDI SHOULD BE PERMITTED?

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 Better lifestyle Greater level of wages paid by international players usually More product variety Newer product categories Increased purchasing capacity of consumers

WHY FDI SHOULD BE PERMITTED?

Manpower and skill development Through retail training Greater managerial talent inflow from other countries Tourism Development A strong retailing sector boosts tourism as seen from the experience of 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

CONCLUSION
FDI in retailing would surely an advantage to India and it would also help India in becoming 'developed country'. As the people also accept the retailing it will be an advantage to them also. So the government should also open the retail sector to the foreign investment, as it also serves as an employment generator.
So, 'FDI in retailing is the need of the hour'

RECOMMENDATIONS
Allow FDI in Retailing First bring foreign companies in less sensitive sector. FDI regime should be gradual Invest in supply chain infrastructure Provide retailers with easy access to finance

THANK YOU