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12/10/12 Retail Sector in India Some Factual Data
Retail Industry : one of the pillar of Indian Economy 15% of GDP More than $550 billion market Main Strength is India’s Population 96% of owner manned stores, 4% of large convenience stores India's retail and logistics industry, organized and unorganized in combination, employs about
51 percent investment in a single brand retail outlet • • • • . FDI in cash and carry (wholesale) with 100 percent ownership was allowed . open market economic policies were adopted. In 1997.12/10/12 RETAIL SECTOR CONDITION AFTER 1991 • Post liberalization. Retail trading is prohibited except for ‘single-brand’ retailing. FDI encouraged in various sectors including the Retail Sector.
Mandatory Conditions • 12/10/12 The minimum investment required for entering the sector should be $100million. 50 % of investment should be set aside for building backend infrastructure such as cold storage chains and warehouse. • • • . Can only be in the city of minimum population of 1 million. At least 30% of their requirements must be met from Indian SME’s.
Mandatory Procurement of Products 12/10/12 from Small Scale Sectors: Ø At least 30% of the procurement of manufactured / processed products shall be sourced from 'small industries' which have a total investment in plant & .
This is an important factor contributing to spiraling inflation.Supply Chain Infrastructure12/10/12 & Distribution System • Current pathetic condition of supply side channels of the existing un/organized retail industry as well as Government-run Public Distribution System. • ...
. With grains rotting away / eaten by mice.. .Public Distribution System (PDS) is 12/10/12 almost defunct.
Disparity of penetration in urban and rural India.Expectations from Industry • 12/10/12 Indian retail industry and food processing industries welcomes FDI policy. ▫ • • Metros: 20 to 25% Pan-India: 4% ▫ . Industry Specialist prefer step by step approach.
.Public/Consumer Expectation Positive • 12/10/12 Operational Efficiencies Better quality Best Deal True Globalization • • • Negative • Confusion about effect of FDI on employment.
Carrefour is about to finalise lease deals across 10 to 12 sites in the country to open cash-and-carry (wholesale) outlets. French retail chain. • • .Current Developments-1 • 12/10/12 DLF in partnership with Claire’s has plans to open 75 retail stores in next 5 years. GSK Consumer Healthcare (GSKCH) has made a debut into Indian breakfast cereal market by launching oats cereal under its flagship brand ‘Horlicks'.
intends to tap Indian packaged food industry and achieve sales of US$ 85 million in the first year of operations in the country Oral and dental hygiene products manufacturer Colgate Palmolive has decided to invest Rs 200 crore (US$ 38. in joint venture with Indian basmati rice brand Kohinoor Foods.Current Developmets-2 • 12/10/12 US FMCG giant McCormick.52 million) to establish a greenfield facility at an upcoming industrial estate in Sanand which is being developed by state-run Gujarat Industrial Development • .
Suspend of Policy • 12/10/12 Subject of fierce opposition from several political parties in India. primarily to protect producers and the "kirana" store industry. 2011. Monopolistic and predatory pricing strategies of large retailers. many of which were pushing strongly for a reversal of the proposal. the Indian government announced the suspension of those proposals until a further consensus is built domestically • • . On December 7.
STRENGTHS Click to edit Master subtitle style 12/10/12 .
A remarkable inflow of FDI in various industrial units in India has boosted the economic life of country. even if demand increases. • Reduction in inflation. • Employment and skill levels. Employees get exposure to globally valued skills.12/10/12 • Economic growth.FDI has also ensured a number of employment opportunities by aiding the setting up of industrial units in various corners of India. production in the country has increased production ensures stable prices.With the inflow of foreign capital .The maximum amount of the profits gained by the foreign firms . • Linkages and spillover to domestic firms.
Overall. • Helpful export Promotion. Foreign capital has therefore been instrumental in promoting exports. . on the condition that they would export certain percentage of their production. • Increased competition . can gain a greater foothold in the world economy by getting access to a wider global market.many foreign companies are allowed to install their units in India. which invites FDI.Companies will also have to improve their processes and products in order to stay competitive in the market.• 12/10/12 Integration into global economy .A developing country like India. FDI improves the quality of a products and processes in a particular sector.
FDI serves as venture capital and thus make up this deficiency. development has taken place in basic industries and risky ventures like iron and steel. energy generation etc. As the result of foreign capital.private entrepreneurs do not like to invest in basic industries and new ventures where the elements of risk is great. coal. the foreign capital has borne the pioneering risk. oil exploration. .12/10/12 • Availability of risk capital.
12/10/12 Opportunities .
Indian Retail giants can get rid of their debts. Investments and improvement supply chains and warehousing. There will be greater choice for Indian consumers. Reduce wastage of farm produce to less than half. Farmers will be paid more as middlemen could be removed. in the • • • • • .• Expected to create 10 million 12/10/12 in 5 jobs years.
and distribution. 12/10/12 Franchising opportunities entrepreneurs. Fill gaps in a company’s product lines in a global industry. Increased efficiency. production. Cost reduction in areas such as R&D.• Provide better value to end consumers. Gain a foothold in a new geographic market for local • • • • • .
Retail Sector poised for phenomenal growth 12/10/12 .
12/10/12 WEAKNESS .
• • Walmart. worth USD 400 billion i. Its coming to India will pose a direct threat to the 40 million Indians who are employed in retail sector.who wins is anyone’s guess. equal to the business of entire Indian retail market. employs only 2.e.1 million people worldwide.12/10/12 Weakness-1 • Approval of states. . Promise of employment proved false. Kirana stores Vs Retail giants.
Hence these companies have to establish their shops outside city limits • .12/10/12 WEAKNESS-2 • The argument that foreign players will improve the supply chain for farm produce is bogus. There is Zoning system also. Examples of Thailand. In Japan Big companies have to discuss with small traders. Comparison between India and China is misplaced.Big companies have seen growth of 40% • • Other countries Indonesia and Malaysia have established zones within which these foreigners can do trade. They are only required to create storage facilities and cold chains.
12/10/12 Threats .
Global retail giants will resort to predatory pricing to create monopoly/oligopoly. Mass unemployment will widen the gap between the have’s and have not's. • • • • .12/10/12 Threats -1 • Rent for retail space will go up. Domestic Industry will suffer. The companies will sell internationally procured products. Once established these retail giants will become a power house in itself and affect the economic structure of the country.
Threats -2 • 12/10/12 • • • • Fragmented markets and Consolidated markets.with a shop in each area the retail small shopkeepers will be put to heavy loss. Slowly the local shops will start closing down. Between 1970-80 in Europe about 4 lakhs Retail shops were closed. International retail does not create additional markets. it merely displaces existing markets. . Big fish eating small fish. Competition shall be limited to Big Retail Houses Chain of retail outlets.
v In countries where they have established their market share is 12/10/12 Name of Country % of Market Share America 80% England 80% Western Europe 70% Brazil 40% Thailand 40% Korea 35% China 20% Malaysia 20% India 3% .
CONCLUSION • 12/10/12 Retailing in India is one of the pillars of its economy. a sector which employs 40 million Indians (3.3% of Indian population). Pros and cons of FDI in retail to be weighed wisely Common man and not the retailing giants to be the primary beneficiaries Retail Sector will shape India's future • • • .