International Buss

FDI IN RETAILING

GROUP MEMBERS 1. 2. 3. 4. 5. 6. 7.

SHRUTI GAVANDI KAPIL GIDWANI PRIYESH JOSHI ANWAR KAZI ZUBAIR KHAN PRACHI RAWLE DEEPAK SAUNDH

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Agenda Retailing : An overview Evolution of Indian retail Categories of Indian retail The changing Indian Consumer FDI in Indian retailing Why FDI ? FDI POLICIES Recommendations ? Conclusions

Retailing: An overview

An overview

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Retailing  World’s largest private industry US$ 6.6 trillion sales annually

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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

Evolution of Indian retail Historic/Rural Reach

Traditional/Perva sive Reach

Government Supported

PDS Outlets Khadi Stores Cooperatives

Weekly Markets Village Fairs Melas Source of Entertainmen t

Modern Formats/ International

Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls

Convenience Stores Mom and Pop/Kiranas

Neighborhood Stores/Convenie nce

Availability/ Low Costs / Distribution

Shopping Experience/Efficie ncy

Categories of Indian retail 

Indian retail 

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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

The changing Indian consumer 

Indian consumer

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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 population  Growing at a pace of over 10%* per annum over last decade Affordability growth  Falling interest rates  Easier consumer credit  Greater variety and quality at all price points

The changing Indian consumer

Indian consumer

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The urban consumer  Getting exposed to international lifestyles  Inclined to acquiring asset  More discerning and demanding than ever

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No longer need-based shopping  Shopping is a family experience Changing Mindset  Increasing tendency to spend  Post Liberalization children coming of age 100 mn 17-21 year olds*. Tend to spend freely. Greater levels of education

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Growth factors

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Growth factors

Growth determining factors  Government Policy  Infrastructure development  GDP growth  Employment generation and job creation In several new sunrise industries Implies greater purchasing power

FDI in Indian retailing

Current FDI

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Metro Group of Germany  Cash-and-carry wholesale trading  Proposal faced strong opposition

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Entities established prior to 1997  Allowed to continue with their existing foreign equity components.  No FDI restrictions in the retail sector pre-1997  Foodworld  51:49 JV between RPG and Dairy Farm International,  Leading food retailer in India now  Mc Donalds

International retailers in India: Strategies 

How they are present 

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

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 brand Swarovski, Hugo Boss

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Wholesale trading  Cash and Carry operations  100% FDI permitted  Metro Cash n Carry

How they are present

Why FDI?   

Benefits of FDI

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Improve competition Develop the market Greater level of exports due to increased sourcing by major players Young Demographic Profile- 54% population below 25years Abundant availability of Skilled Human Resources Adequate natural resources and raw materials Large and growing domestic market

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 FDI

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Better lifestyle Greater level of wages paid by international players usually  More product variety  Newer product categories  Economies of scale to help lower consumer price  Increased purchasing capacity of consumers 

Why FDI? 

Manpower and skill development Through retail training and  Greater managerial talent inflow from other countries 

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Tourism Development 

Benefits of FDI 

Investment in whole supply chain 

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A strong retailing sector boosts tourism as seen from the experience of Singapore and Dubai Improved product basket from India for exports

Long term benefits Up-gradation of agriculture  Development of efficient medium size industries 

small

and

FDI POLICY

Services Sector- Caps 26 %cap in Print media: Publishing newspaper and periodicals dealing with news and current affairs; and in Insurance. 49 %in Broadcasting; Air transport services and Stock Exchanges 51%in single brand product retailing 74% in Telecommunication services; ISP with gateways, radio-paging, end-to-end bandwidth; Establishment and operation of satellites; and Private sector banks AGRICULTURE- FDI is not allowed in agriculture and plantation activities except tea plantation. In the tea sector FDI is allowed up to 100% with prior Government approval REAL ESTATE -FDI is not permitted in Real Estate business i.e. buying and selling of properties.

100% FDI IN INDIAN RETAIL INDUSTRY

Your Perception??!

RECOMMENDATIONS 

The recommendations for India are, * Permit FDI in phases (first allow for 49 percent, after some years 74 percent, based on the results 100 percent). * Invest in supply chain infrastructure * Grant industry status to retail business * Ensure flexibility of labor laws.

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