E- Commerce

Electronic commerce, commonly known as e-commerce consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. ‡ Information Availability ‡ Difficult for retailers to sell over- priced goods ‡ Closer relationships between business and consumers. ‡ Intensified price competition the Impact of e-commerce or Internet is not complete for the consumers because of following reasons: ‡The penetration of internet in India is very less ‡Only technology and prices are compared ‡No authenticity of the reviews ‡Touch and Feel is important for consumer

Effect of jobs due to e-commerce
‡ Travel agency and bookshop industries fell. ‡ Car-dealership industry where online only retailing was prohibited, did not loose jobs. ‡ Customers want lower prices that bigger shops and chains , with their economies of scale can take care of. ‡ Business that caters most to the desires of customers can thrive. ‡ Small shop meeting a very specific need can have expanding market share. ‡ Net effect is : customer gets what he wants.

. ‡ A channel of technology transfer and industrial development.Foreign Direct Investment ‡ A source of capital and investment by a foreign country into a host country mainly for business purposes.

5 0 1990 1992 1994 1996 1997 1998 1999 2000 2001 2002 Year .5 3 $Billions 2.Foreign Direct Investment in India 5 4.5 4 3.5 1 0.5 2 1.

US$ 27.5 per cent.1 per cent increase in FDI flows in calendar year 2008 the highest increase across all countries even as global flows declined by 14.FDI ‡ According to the latest data released by Department of Policy and Promotion (DIPP) the FDI inflow during 2008-09 (from April 2008 to March 2009) stood at approx. .3 billion ‡ India achieved a substantial 85.

‡ FIPB Route(Foreign Investment Promotion Board): Investments falls outside the sectoral caps. 6000 million or more . ‡ CCFI Route(Committee of foreign Investment): Investments falling outside the automatic route and having a cost of Rs.Investing in India Entry Route ‡ Automatic Route: No Prior government is approval if the investment to be made falls with in the sectoral caps .

Sector Specific Foreign Direct Investment in India Sector Hotel & Tourism Private Sector Banking: Insurance Sector Telecommunication Trading Defence Retail Industry(Single Brand) Retail Industry Power Drugs & Pharmaceuticals FDI Cap 100% 49% 26% 74% 51% 49% 51% 100% 100% 100% .

which is quite lucrative .Indian Retail Industry ‡ second largest industry in India with an employment of around 8% of total India s population and contributing to around10% of the country s GDP ‡ It is estimated to touch US$ 833 billion by 2013 and US$ 1.3 trillion by 2018 ‡ A compound annual growth rate (CAGR) of 10% .

This could go further up to US$ 1.Sectors in Retail Industry Organized Sector: ‡ Approx 5% of the Indian retail market ‡ majority number of large format malls and branded retail stores. ‡ Investment in the organized retail market would be around US$ 503. at a CAGR of 40%. .2 million in 2009.26 billion in the next four to five years.

Sectors in Retail Industry ‡ Unorganized Sector: ‡ Constitutes rest 95% of retail market industry ‡ The unorganized retail industry was valued at $309 billion in 2006-07 which is expected to grow at about 10 percent per annum to reach $496 billion in 2011-12 .

Major Retailers in India: ‡ ‡ ‡ ‡ ‡ ‡ Pantaloon Tata Group RPG Group Reliance AV Birla Group ITC .

Retails Formats Available in India: ‡ Mono/Single Brand Retail Shops: ‡ Example: Exclusive Showrooms like levis etc. ‡ Multi Brand Retail Shops ‡ Examples: Big Bazaar. Reliance Fresh etc. ‡ Kirans Store: Traditional Mom and Pop Shop .

5% in 1999-2000 to 30.heavy losses to farmers ‡ 25-30 % of fruits & vegetables and 5 to 7% of food grains are wasted.6 mn mt) out of which 80% is used for potatoes .3% in 2007-08 due to inability to access latest technology. .Present scenario in food sector ‡ Inspite of 2nd largest producer in fruits and vegetables (180 mn mt) but it has a limited cold chain infrastructure (23. ‡ Bill of food subsidies is rising still there is food inflation. ‡ Intermediaries dominate the value chain hence farmers realise only 1/3 of the total price paid by final consumer. ‡ Share of unorganized sector in manufacturing has declined from 34.

Benefits of FDI in Food Sector ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ Direct buy from farmers Improved supply chain efficiency Reduced transaction cost Greater internal sourcing because of improved domestic supply chain Improved warehouses and cold storages Growth of production sector More jobs in production sector Reduction in food inflation .

Farmers have a choice and the exploitative power of the middleman is neutralized. crop insurance is provided. Communities of e-farmers developed which have access to daily prices of a variety of crops in India and abroad. the latest farming techniques. elimination of non value added activities differentiated product through identity preserved supply chains value added products traceable to farm practices e-market place for spot transactions and support services to futures exchange No. Information about weather forecasts. of e-choupals Villages covered States covered Farmers e-empowered 6500 40.choupal ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ITC trained farmers to manage the Internet kiosk.000 10 4 million Benefits: .An Example of Improved E.

53% on week ending 24th july 2010. ‡ But would like to consolidate backend of industry first through robust investment in wholesale trading. ‡ Large retail players need to step up local procurement and when the benefits get reflected in the economy. ‡ Investment only in back end is not attractive for foreign investors. they will gain acceptance both by the people and by the opposition parties. ‡ Local funding not enough we need foreign capital ‡ Rising inflation affecting the common man which 9. ‡ The economic decision-making needs to be endorsed by national consensus. . ‡ Feels that people who are opposing are overlooking the benefits that farmers are getting from the multibrand retail.Government¶s Viewpoint ‡ Government is not against allowing foreign investment in multi-brand retail.

Opposition s Viewpoint ‡ This proposal is opposed by the B.J.A. government itself proposed steps to open up this sector during its tenure ‡ Major Points of Opposition o Government has not done any organized study on the matter o It will adversely affect the self employment sector o Will result in mass unemployment o Big Players with their huge cash reserves will indulge in predatory pricing o Government is taking hasty steps in order to leverage big players both domestic and international o On the contrary it must encourage 100 million enterprises which are growing at 15% per annum .P and the left parties ‡ Even though N.D.

FDI in retailing(Country Specific) Success Story: China:  1992: Introduction of FDI (retail sector)  2001:Increase in limit(WTO)  2004:100% ownership in foreign retail stores Benefits:     Increased employment in retail 600 hypermarkets opened between 1996 and 2001 Increase in small retail outlets Outsourcing market hub. .

Thailand A Short run failure case: Causes of failure :  Improper timing  Lack of protection to domestic players  No investment caps Adverse effects:  Marginalization of local retailers  Shutdown of Local players  Adverse impact to other sectors Positive Long Run Benefits:  Development of Organized retail  Growth of export .

Our Recommendations ‡ ‡ ‡ ‡ Indian economy should be opened to FDI in multi brand retail Initially FDI limit be capped at 49% Initially it must be restricted to metros only After studying its affect on the market and the supply chain we can further increase the cap and open it for rural India .

Just like we cannot ask a man to ride a bicycle when motorcars are being used worldwide ‡ We feel that the point of unemployment is being leveraged to much by the opposition parties ‡ Many of the unorganized enterprises have their niche market and wont be affected. For example the chaiwallas Additional benefits o At present there are domestic players in this segment and their presence have not affected unorganized sector in a big way o New opportunities will emerge in the area of food processing o There will be boom in sectors such as real estate and IT o Better working conditions for people employed in retail sector o Will help in solving social problems such as child labor o Organized retail will be much more accountable for its services plus quality checks will be easier ‡ .Justification We cannot restrict today¶s consumer.

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