Role of FDI in Retail Sector

A Role of FDI in Retail Sector
1
A Project Report on
ROLE OF THE IN INDIAN RETAIL SECTOR
Submitted In partial fulfilment of the requirement for the award of the degree
Master of business Administration Retail of nation on Management
Sikkim Manipal University
By: NISHANT SINGH
1302003023
Under the guidance of
MR GAGAN DHARWAL
SMU
2014-2015

2
CERTIFICATE
THIS IS TO CERTIFY THAT THE PROJECT REPORT ENTITLED
ROLE OF THE IN INDIAN RETAIL SECTOR
Submitted In partial fulfilment of the requirement for the degree
Master of Business Administration
Of
By
NISHANT SINGH
Registration No. 1302003023
Centre Code 03337
LC Co- Coordinator
(Signature)

3
EXAMINTER’S CENTIFICATION
THE PROJECT REPORT OF
NISHANT SINGH
ROLE OF THE INDIA RETAIL SECTOR
Is approved is Acceptable in Quality and Form
Internal Examiner External Examiner

4
DECLARATION
I hereby declared that this project report entitled dissertation titled ‘Role of FDI in retail sector’
submitted to Sikkim Manipal University, India, in partial fulfilment for the award of Master of Business
Administration degreehasbeenpreparedbyme duringyear2014-2015.
Place :
Date :
NISHANTSINGH

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6
INDEX
Abstract
1. Introduction
2. Review of Literature
2.1 Determinants of FDI Policies in India.
2.2 Consumer Behaviour and Factors Affecting Retail Store
Choice.
3. Policy Framework of Retail FDI in India
3.1 Single Brand product retail trading.
3.2 Present entrance routes for the Foreign Investors.
3.3 Present Position of FDI in India.
3.4 Challenges and Opportunities of FDI in Retail Sector.
4. SWOT Analysis of Open FDI Policy
4.1 Strengths.
4.2 Weaknesses.
4.3 Opportunities.
4.4 Threat.
5. Conclusion
6. Recommendations
7. Bibliography

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Abstract:
In the post-liberalization period, changes in the consumer purchase
behaviour are seen with growing liberalization, rise in per capita income,
GDP and explosion of brands. This rise in large base of consumers has been
an attraction for big global retailers and major domestic corporate sector to
invest in modern retail sector in India. This unprecedented rise in multiple
brands has given Indian consumers a wider choice of products and ample
opportunities to take advantage of in the present scenario. The retail
industry is expected to grow at a rate of 14% by 2013. The first step
towards allowing Foreign Direct Investment in Retail was taken in the year
2006. Subsequently the government of India has allowed 100% FDI in single
brand retail to give consumers greater access to foreign brands, with the on-
going debate whether it should be allowed in multi-brand retail or not. With
emergence of new ways like E-retailing, Indian retail sector is growing at a
faster rate along with the employment potential. The retail landscape is
showing a marked change, along with changes in the strategies of retailers
towards the suppliers so as to get the best advantage. With the rapidly
changing retail scene, India is soon going to be one of the fastest growing
regions having great potential. The objective of the present paper is to
analyse the impact of the present retail FDI policy on Indian consumers and
economy using SWOT analysis. The analysis reveals that it will have a
positive impact on the growth of Indian economy as a whole.

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1. Introduction:
Foreign Direct Investment, or FDI, is a measure of foreign ownership of
domestic productive assets such as factories, land and organizations.
Foreign direct investments have become the major economic driver of
globalization, accounting for over half of all cross-border investments. It is
cross border investment, where foreign assets are invested into the
organizations of the domestic market excluding the investment in stock. It
brings private funds from overseas into products or services. The domestic
company in which foreign currency is invested is usually being controlled by
the investing foreign company. Eg. An American company taking major
stake in a company in India. Their ROI is based on the performance of the
project.
Retail is the sale of goods to end users, not for resale, but for use and
consumption by the purchaser. The retail transaction is at the end of the
supply chain. Manufacturers sell large quantities of products to retailers, and
retailers sell small quantities of those products to consumers. Thus, retailing
is the last link that connects the individual consumer with the manufacturing
and distribution chain. The retail industry in India is divided into organized
and unorganized sectors accounting for Rs. 350 million of total revenues.
Organized retailing refers to trading activities undertaken by licensed
retailers, that is, those who are registered for sales tax, income tax, etc.
These include the corporate- backed hypermarkets and retail chains, and
also the privately owned large retail businesses. Indian retail is dominated
by a large number of small retailers consisting of the local kirana shops,
owner-manned general stores, chemists, footwear shops, apparel shops,
paan and beedi (local betel leaf and tobacco) shops, hand-cart hawkers,
pavement vendors, etc. which together make up the so-called "unorganized
retail" or traditional retail. The last few years have witnessed the entry of a
number of organized retailers opening stores in various modern formats in
metros and other important cities. Unorganized retailers normally do not pay
taxes and most of them are not even registered for sales tax, VAT, or
income tax.
India, over the latter half of the previous decade, has been one of the most
wanted and desired destinations for investors across the globe and is being
considered as one of the world’s most lucrative retailing destinations. It is of

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late often being hailed as one of the sunrise sectors in the economy. The
retail sector in particular has received a constant buzz and excitement
surrounding government policy to reframe and revisit the policy framework.
India's retail sector is on its way of modernisation. Traditional markets are
making way for new formats such as departmental stores, supermarkets and
specialty stores. Westernized malls can be seen fast appearing in metros and
tier-II cities, introducing the Indian consumer to an implausible shopping
experience. There is an unprecedented growth in organized retailing
business in recent years and is expected to grow further at a much faster
rate. Major players like large industrial houses and MNCs have entered this
area and they have expansion and collaboration plans with big Indian
partners, owing to the nature of Indian retail market. There is a major
division on the opinion on the impact of the growth of organized retail in the
country. But there is no doubt on the role that FDI can play in
supplementing domestic resources and in ensuring employment generation
in the development of an economy. Nevertheless, still there is an elongated
way to go before Foreign Direct Investment (FDI) in Indian Retail can be
realized in its totality.
There are three different forms through which retail trade is carried
out in India, namely:
Mono/Exclusive/Single
Brand Retail
Shops
Multi-branded Retail
Shops
Convergence
Retail Outlets
Exclusive Showrooms either
owned or franchised out by
the manufacturer. A
complete range of all the
products manufactured by
the said manufacturer
under one brand name.
In these kinds of stores,
almost all brands are
available for a single
product type with this
consumer will have wide
choice for the kind of
product he is willing to
buy.
These kinds of
products have
almost all kinds of
products, required
by a consumer, in
them.
The focus is on the brand
name as now a day’s people
buy images, not the
products.
The focus is on the
diverse nature of
product.
The focus is on the
diverse nature of
consumer needs.

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e.g.: Exclusive showroom /
franchise
outlets of Samsung, Nokia,
Liberty, etc
e.g.: Shoppers Stop,
Croma, Max, etc.
e.g.: Shoppers
Stop, Croma, Max,
etc.
e.g.: Big Bazaar, In
& Out, Subhiksha,
Grand India
Bazaar, etc.
The long awaited decisions of ease in FDI framework which was kept in cold
storage was declared with this hope that FDI inflows will go up at an
unprecedented levels. There was a global melt down of the world economy
because of international factors. AT Kearney, the well-known international
management consultancy firm annually ranks emerging market economies
based on more than 25 macroeconomic and retail-specific variables through
their Global Retail Development Index (GRDI). In its 2011 edition, it has
ranked India fourth indicating that the country is one of the most attractive
markets for global retailers to enter. It has made India the cause of a good
deal of excitement and the cynosure of many foreign eyes.
The 2012 A.T. Kearney FDI Confidence Index® examines future prospects
for FDI flows as the world seeks to recover from the global recession and
continued economic uncertainty in Europe and the United States. China,
India, and Brazil occupy top three positions, and Southeast Asia, with its
large and growing consumer base, makes a strong showing: Indonesia,
Malaysia, Singapore, Thailand, and Vietnam all hold high rankings see figure
(1) in Annexure. These kind of global reports give lot of confidence in
relation to India as a global destination as evidenced by the report, 2012
A.T. Kearney FDI Confidence Index. “Economic Survey 2010-11, tabled in
Parliament on February 25, had this to say about the retail sector:
"Permitting FDI (foreign direct investment) in retail in a phased manner
beginning with metros and incentivizing the existing retail shops to
modernize could help address the concerns of farmers and consumers. FDI
in retail may also help bring in technical know-how to set up efficient supply
chains which could act as models of development and easing of the retail
ban would give a big boost to FDI flows into India, which have been
declining the past couple of years”. Retailers ought to take cognizance of the
fact that both back-end and front-end operations require investment and
hence, need to be developed in a manner appropriate with their overall
business operations. Allowing the FDI in retail sector is lined with greater
challenges, for both existing and potential market players alike. To meet the
challenge retailers have to adapt to the new market realities, galvanize its

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supply chains, leverage the core competencies and tactically counter its
competitors in a competitive way.
There is a huge untapped opportunity in the retail sector, thus having
immense scope for new entrants, driving large investments into the country.
A good talent pool, huge markets and availability of raw materials at
comparatively cheaper costs are expected to make India lead one of the
world's best retail economies by 2042. The industry is also slated to be a
major employment generator in future. The total retail sales in India will
grow from US$ 395.9 billion in 2011 to US$ 785.1 billion by 2015, according
to the BMI India Retail report for the third quarter of 2011 The objective of
the present paper is to deeply analyse the recent FDI policy in retail sector
of India i.e. to discuss its recent legal framework and provisions, forms,
conditions, impact, strengths and weakness in view of changing dynamics of
Indian retail landscape. The paper is divided into following sections; present
section i.e. section I gives the basic insights of FDI in retail sector giving all
the details about it relating to its conditions and forms and also about the
changing image of India as a global destination. Section II gives brief review
of literature followed by legal framework in Section III. Section IV gives the
details of SWOT analysis of retail FDI in India .Followed by conclusion
entailed in the next Section. Section VI gives the details of references used
in the study.

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RETAILING FORMAT IN INDIA
Malls:
It is the largest form of organized retailing today. They are located mainly in
metro cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to
7,00,000 sq ft and above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all under a common
roof. Examples include Shoppers Stop, Piramyd, and Pantaloons.
Specialty Stores:
Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer
Crossword, RPG's Music World and the Times Group's music chain Planet M,
are focusing on specific market segments and have established themselves
strongly in their sectors.
Discount Stores:
As the name suggests, discount stores or factory outlets, offer discounts on
the MRP through selling in bulk reaching economies of scale or excess stock
left over at the season. The product category can range from a variety of
perishable/ non-perishable goods.
Department Stores:
Large stores ranging from 20000-50000 sq. ft, catering to a variety of
consumer needs. They are further classified into localized departments such
as clothing, toys, home, groceries, etc. Departmental Stores are expected to
take over the apparel business from exclusive brand showrooms. Among
these, the biggest success is K Raheja's Shoppers Stop, which started in
Mumbai and now has more than seven large stores (over 30,000 sq. ft)
across India and even has its own in store brand for clothes called Stop.
Hyper marts/Supermarkets:
Large self-service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These
stores today contribute to 30% of all food & grocery organized retail sales.

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Super Markets can further be classified in to mini supermarkets typically
1,000 sq ft to 2,000 sq ft and large supermarkets ranging from of 3,500 sq
ft to 5,000 sq ft. having a strong focus on food & grocery and personal sales.
Convenience Stores:
These are relatively small stores 400-2,000 sq. feet located near residential
areas. They stock a limited range of high-turnover convenience products and
are usually open for extended periods during the day, seven days a week.
Prices are slightly higher due to the convenience premium

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2. Review of Literature:
2.1 Determinants of FDI Policies in
India:
There are many studies which have identified technology, labor skills and
infrastructure as the major determinants of foreign investment. These
factors are very important to explain the patterns and trends in the
geographical structure of FDI at the world capita income, in relation to
outbound as well as inbound FDI ( Hummel’s and Stern, 1994).The
incentives announced by the exchequer is also very important in formulating
and analyzing the corporate strategies of international location, also
institutional, historical and cultural factors should be embedded in overall
analyzing and framing of policies ,as these factors should not be ignored as
they influence the investor’s location related decisions (Martin and
Velazquez, 1997).Whether tariff rate, exchange rate and tax rate are
significant for FDI was tested in a study by Aqeel and Nishat (2004).In the
study it was revealed that these policy variables were responsible for
drawing FDI and it determined the growth in Pakistan and also showed the
positive impact of reforms in Pakistan. On many variables affecting FDI have
been examined, a set of descriptive variables were examined by several
studies like (Chakraborty, 2001) and were found to be significant. Some
studies have also analyzed the variables like market size and differences in
factor costs and were also found to be significant in determining the FDI
location as these are very important in determining the market economies
and they cannot be achieved and exploited till the time market achieves a
certain size. (Markusen and Maskus, 1999).The most important measures
used in many studies are GDP, GDP per capita and growth in GDP.

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2.2 Consumer Behaviour and Factors Affecting Retail Store
Choice:
There are many studies on Indian consumers, which reveal the shopping
behaviour of Indian consumers. Various parameters are included in their
studies like level of income, education, and international exposure
(Ramachander 1988), gender and age (Sinha, et al. 2002) and distance
from the store (Sinha 2003). As far as shopping behavior of Indian
consumers across different retail outlets, traditional outlets are preferred
mainly because we have a large chunk of middle class consumers who are
very good bargainers while modern outlets are preferred because they link
entertainment with shopping and now-a-days it’s a customer delight to go
out for shopping and entertainment together (Sinha 2003).There are
number of studies which are done taking many parameters which affect the
choice of retail store these are product quality, goodwill ,lower prices, better
shopping experience, availability of product, play area ,parking facility,
whereas on the other hand proximity to residence, easy availability of credit,
,convenient timings, possibility of bargain, etc are a few paybacks of
traditional outlets as mentioned by a study done by Joseph and
Soundararajan 2009. It is a complete myth that big retail outlets are high-
priced; there is empirical evidence to this fact and they the level of savings
depends on the type of retail format – it is more for discounters and
supermarkets, and less for hypermarkets. The main advantage of this
transition of modernization of retail stores is the consumer as they get the
best and wide choice, discounted prices and they are the focus point of
strategies formulated by the strategist as regard their retention plans. All
the policies are formulated keeping many factors into considerations like
their likes and dislikes dynamics, their buying behavior psychology, what
factor motivate them to buy. Domestic players are selectively growing in
India postponing aggressive expansion plans, adding stores judiciously and
shifting gears to tier 2 and 3 cities. Aditya Birla Group plans to open about
100 supermarkets and 10 hypermarkets by mid-2011. Spencer's is expected
to add up to 25 hypermarkets through 2012. Reliance Retail, India's
organized retail leader, plans to open 150 Reliance Trends apparel and
accessories stores in the next year.
Large Indian players like Reliance, Ambanis, K Rahejas, Bharti AirTel, ITC
and many others are making significant investments in this sector leading to
emergence of big retailers who can bargain with suppliers to reap economies

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of scale. Rise in retail modernize India and facilitate rapid economic growth.
This would help in efficient delivery of goods and value-added services to the
consumer making a higher contribution to the GDP. The Indian Retail growth
can be attributed to the several factors including
 Demography Dynamics: Approximately 60 per cent of Indian
population below 30 years of age.
 Double Incomes: Increasing instances of Double Incomes in most
families coupled with the rise in spending power.
 Plastic Revolution: Increasing use of credit cards for categories relating
to Apparel, Consumer Durable Goods, Food and Grocery etc.
 Urbanisation: increased urbanisation has led to higher customer
density areas thus enabling retailers to use lesser number of stores to
target the same number of customers. Aggregation of demand that
occurs due to urbanization helps a retailer in reaping the economies of
scale.
 Covering distances has become easier: with increased automobile
penetration and an overall improvement in the transportation
infrastructure, covering distances has become easier than before. Now
a customer can travel miles to reach a particular shop, if he or she
sees value in shopping from a particular location.
Kaur and Singh (2007) revealed an interesting fact that was revealed that
children are becoming key decision-makers in household purchases. There is
a gap in these studies as they haven’t corroborated on the implication of the
existing policy on consumers.

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3. Policy Framework of Retail FDI in India:
India had to open retail sector being a signatory to World Trade
Organization’s General Agreement on Trade in Services, which include
wholesale and retailing services. There were many apprehensions towards
opening of this sector .Various reasons were there for this like fear of job
losses, procurement from international market, competition and loss of
entrepreneurial opportunities. However, the government in a series of moves
has opened up the retail sector slowly to foreign sector. In 1997, FDI in cash
and carry (wholesale) with 100 percent ownership was allowed under the
Government approval route. It was brought under the automatic route in
2006. 51 percent investment in a single brand retail outlet was also
permitted in 2006. FDI in Multi-Brand retailing is prohibited in India. The
Government of India has reviewed the extant policy on FDI and decided that
FDI, up to 100%, under the government approval route, would be permitted
in Single-Brand Product. Accordingly, the following amendment is made in
'Circular 1 of 2012- Consolidated FDI Policy', dated 10.04.2012, issued by
the Department of Industrial Policy & Promotion (DIPP)
3.1 Single Brand product retail
trading:
(1) Foreign Investment in Single Brand product retail trading is aimed at
attracting investments in production and marketing, improving the
availability of such goods for the consumer, encouraging increased sourcing
of goods from India, and enhancing competitiveness of Indian enterprises
through access to global designs, technologies and management practices.
(2) FDI in Single Brand product retail trading would be subject to the
following conditions:
(a) Products to be sold should be of a 'Single Brand' only.
(b) Products should be sold under the same brand internationally i.e.
products should be sold under the same brand in one or more countries
other than India.

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(c) 'Single Brand' product-retail trading would cover only products which are
branded during manufacturing.
(d) The foreign investor should be the owner of the brand.
(e) In respect of proposals involving FDI beyond 51%, mandatory sourcing
of at least 30% of the value of products sold would have to be done from
Indian 'small industries/ village and cottage industries, artisans and
craftsmen'. 'Small industries' would be defined as Retail Trading, subject to
specified conditions, as industries which have a total investment in plant &
machinery not exceeding US $ 1.00 million. This valuation refers to the
value at the time of installation, without providing for depreciation. Further,
if at any point in time, this valuation is exceeded, the industry shall not
qualify as a 'small industry' for this purpose. The compliance of this condition
will be ensured through self-certification by the company, to be
subsequently checked, by statutory auditors, from the duly certified
accounts, which the company will be required to maintain.
(3) Application seeking permission of the Government for FDI in retail trade
of 'Single Brand' products would be made to the Secretariat for Industrial
Assistance (SIA) in the Department of Industrial Policy & Promotion. The
application would specifically indicate the product/ product categories which
are proposed to be sold under a 'Single Brand'. Any addition to the product/
product categories to be sold under 'Single Brand' would require a fresh
approval of the Government.
(4) Applications would be processed in the Department of Industrial Policy &
Promotion, to determine whether the products proposed to be sold satisfy
the notified guidelines, before being considered by the Foreign Investment
Promotion Board (FIPB) for Government approval.

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Retailers in India:
Retailer Stores
Pantaloon Retail Big bazaar, Food bazaar , Hometown, furniture
bazaar,
collection-I,e-zone,
shoefactory,Depot,Futurbazaar.com,Bowling co.
K Raheja Group Shopper's Stop, Crossword, Homes stop,
Mothercare.
Tata Group Westside, Star India Bazaar, Croma, Titan, Tanishq.
RPG Group Foodworld, Spencer's, Music World
Landmark Lifestyle, Home Centre, Landmark International,
Max Retail,
Funcity
Piramal Group TruMart, Priamyd Megastore
Reliance Reliance Hyper-mart
Aditya Birla Group Louis Phillipe, Van Heusen, Allen Solly, Peter
England,
Trouser town

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3.2 Present entrance routes for the Foreign
Investors:
In view of the restrictive entrance policies for the foreign investors in the
retail sector, they followed one or more of the following routes to expand
their business in India:
A. Franchise
Agreement
B. Cash and
Carry
Wholesale
Agreement
C. Strategic
Licensing
Agreement
D. Manufacturing
and
Wholly-owned
Subsidiary
It is an easiest track
to come in the Indian
market. In
franchising And
commission agents’
services, FDI (unless
otherwise prohibited)
is allowed with the
approval of the
Reserve Bank of India
(RBI) under the
Foreign Exchange
Management Act.
This is a most usual
mode for entrance of
quick food bondage
opposite a world.
Apart from quick food
bondage identical to
Pizza Hut, players
such as Lacoste,
Mango, Nike as good
as Marks as good as
Spencer, have
entered Indian
marketplace by this
route.
100% FDI is
allowed in
wholesale
trading which
involves Building
of a
large
distribution
Infrastructure to
assist local
manufacturers.
The
wholesaler deals
only with
Smaller retailers
and not
Consumers.
Metro AG of
Germany was
the first
significant global
player to enter
India through
this route.
Some foreign
brands give
exclusive licenses
and distribution
Rights to Indian
companies.
Through these
rights, Indian
companies can
either sell it
through their own
Stores, or enter
into shop-in-shop
arrangements or
distribute the
brands to
franchisees.
Mango, the
Spanish apparel
brand has
entered India
through this route
with an
agreement with
Piramyd, Mumbai,
SPAR entered into
a similar
agreement with
The foreign brands
such as Nike,
Reebok,
Adidas, etc. that
have
wholly-owned
subsidiaries in
manufacturing are
treated as Indian
companies and are,
Therefore, allowed to
do retail. These
companies
have been
authorized to sell
products to Indian
consumers By
franchising, internal
distributors, existent
Indian retailers, own
Outlets, etc. For
instance, Nike
entered through an
exclusive licensing
agreement with
Sierra Enterprises
but now has a wholly
owned

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3.3 Present Position of FDI in
India:
The table 1 in annexure shows total amount of FDI inflows from April 2000
to January 2012 to 204.07 crores/44.45 US Dollars, with a % of 0.03with
respect to total FDI inflows. The Indian government is very much aware that
people of India are becoming brand-conscious, there is a large market,
growing consumerism, and increasing disposable income .All these factors
can give a big push to this sector and can help in achieving sustainable high
economic growth. It also wants to develop India as an outsourcing hub for
foreign retailers. Supporters of FDI in retail have argued that it will lead to
better supply chain management and reduce inflation in the economy.
Radhakrishna
Foodlands
Pvt. Ltd
subsidiary, Nike
India
Private Limited.

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Organized Retail Currently Accounts for 5% of India’s Retail Market
• With an anticipated $ 50 Billion in fresh investments over next 10
years, modern retail will show impressive CAGR > 25%

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3.4 Challenges and Opportunities of FDI in Retail
Sector:
There are linkages and relation between important parameters like between
economic development, rise in per capita income, growing consumerism,
proliferation of branded products, and retail modernisation. With high
economic growth, there is rise in per capita income which in turn changes
the consumption pattern. With the persistence of globalisation and
liberalisation various international brands enter the domestic market. There
is amplification of awareness level of Consumers as they lean to experiment
with different international brands. The proliferation of brands leads to
increase in retail space. Thus, retail modernisation is an essential part of the
development process.

24
Despite the present FDI restrictions, a number of studies such as A.T.
Kearney (2011), McKinsey & Company (2007) and A C Nielsen (2008)
predict that modern retail will continue to witness double-digit growth in
India. The Indian market is unsaturated and A.T. Kearney 2011 has pointed
out that it is the right time for global retailers to enter the Indian market.
4. SWOT Analysis of Open FDI Policy:
In any strategic planning process, two factors namely internal and external
Environmental factors play an important role. A thorough scan of these
factors is important for further planning. The environmental factors, which
are internal to the retail sector, can be classified as strengths and weakness.
The factors, which are external to the sector, can be classified as
opportunities and threats. The strategic analysis of environmental factors is
referred as SWOT analysis.
This analysis provides the information that is helpful in understanding the
retail sector resource mobilization and capabilities to the competitive
environment in which it operates. Finally, this will be an instrumental in
formulation of strategies for future growth and development of the sector.
4.1 Strengths:
 Boost up competition: Welcoming the FDI in retail industry can
prove advantageous for India as it increase the competition in retail
chain at domestic level. The competition always demands the
innovation and differentiation and the out result of these two is the
quality goods. As the competition increases, the competitor is
compelled to serve quality of goods at competitive at reasonable price.
 Benefits to farmers: In most cases, in the retailing business, the
intermediaries have dominated the interface between the
manufacturers or producers and the consumers. Hence the farmers
and manufacturers lose their margins as the major share is eaten up

25
by the middle men. This issue can be resolved by FDI, as farmers
might get contract farming where they will supply to a retailer based
upon demand and will get good cash for that, they need not to search
for buyers.
 Benefits to consumers: Consumer will get assortment of products at
squat prices compared to market rates, and will have more options to
get international brands at one place. because of competitive prices,
and will improve the standard of living of the consumers
 Generate Employment opportunities: Bharti Walmart, a joint
venture between Bharti Enterprises and Wal-Mart Stores, will open a
training centre at Jalna in Maharashtra on a public private partnership
basis, according to a press note released on April 27, 2012. Bharti
Walmart currently runs three such training centers under the PPP
model in Amritsar, Delhi and Bangalore, and three training centers at
its modern wholesale stores in Zirakpur, Jalandhar and Ludhiana. The
domestic retail sector is growing fast providing growth opportunities.
However, the industry lacks the talent pool with required skill sets to
leverage this huge potential. Bharti Walmart training centers aim to
bridge this gap by imparting training in various aspects of retailing to
under-privileged youth making them employable in the retail sector
 Efficient Banking Services: Efficient and customized services of
bank’s today, is a result of effective competition which increases only
after the foreign players were welcomed in arena
 Large scale investments: It has also contributed to large scale
investments in the real estate sector with major national and global
players investing in devolving the infrastructure and construction of
the retailing business.
 Increased Purchasing power: Large domestic market with an
increasing middle class and potential customers with purchasing
power.
 Ranked second in Global Retail Development Index of 30 developing
countries drawn up by AT Kearney and hence considered as a potential
sector.
 The annual growth of departmental stores is estimated at 24%
which will add to substantial surge in the country’s overall economic
development.

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4.2 Weaknesses:
 Lack of 'Industry' status, thereby creating financial issues for
retailers: The retail sector in India does not enjoy the status of an
"Industry”, thereby making difficult for the retailers to raise funds for
the expansion projects as it is easier to access the flow of funds with
that status.
 Lack of Infrastructure: Lack of infrastructure in the retailing chain
has been one of the major issues of concern which has led the process
to an incompetent market mechanism. For example, in spite of India
being one of the largest producers of vegetables and fruits, lack of
proper count of cold storages has significantly affected the selling of
these perishable items. FDI might help India overcome such issues by
channelizing the resources in the right manner.
 Catering to high end customers: This will mainly cater to high-end
consumers placed in metros and will not deliver mass consumption
goods for customers in villages and small towns.
 Volume of sales is very low: The volume of sales in Indian retailing
is low. India has largest population in the world and a fast growing
economy.
 Rising retail real estate rentals: The rapid development of retail
sector is the sharp improvement in the availability of retail space. But
the current surge in property prices, retail real estate rentals have
escalated significantly, which may render a few retailing business
houses unavailable. Retail companies have to pay high rentals which
are block the profits.
 Small size outlets: Small size outlets are also one of the major
weaknesses in the Indian retailing. More than 96% of the outlets are
lesser than 500 sq.ft and are also smaller than those in the developed
countries.
 Inadequate merchandise mix: Retail chains are not settled down as
on date with proper merchandise mix for the mall outlets. Retailing
today is not about selling at the shop, but also about researching and
surveying the market, offering choice, competitive prices and retailing
consumers; hence there is a long road ahead.

27
4.3 Opportunities
 Improvement in quality standards: The inflow of FDI in retail
sector is bound to pull up the quality standards and cost-
competitiveness of Indian producers in all the segments and hence
India will significantly flourish in terms of Consumer Expectations.
 Improving Distribution and Warehousing Technologies: The
technical know-how from global firms, such as warehousing
technologies and distribution systems, will lend itself to improving the
supply chain in India, especially for agricultural produce.
 Attractive Market: Global retail giants take India as key market .It is
rated fifth most attractive retail market. Indian retail industry has
come forth as one of the most dynamic and fast paced industry with
several players entering the market. The organized retail sector is
expected to grow stronger than GDP growth in the next five years
driven by changing lifestyles, increase in income, purchasing power
and favorable demographic outline. Food and apparel retailing are key
drivers of growth.
 There will be more organization in the sector. There are
numerous empirical evidences across globe relating to massive
increase in the employment opportunities as the sector grows after the
reforms were initiated in countries like US and China. India is likely to
experience the same situation in this liberalized and open regime of
FDI in retail sector in India. It can become one of the largest industries
in terms of numbers of employees and establishments. Once the
concept picks up, due to demonstration effect, there will be an overall
up-gradation of domestic retail trade.
 Rural retailing is still unexploited Indian market and could act as an
opportunity for the giants to venture into the retail market.
 Promotes Healthy competition check on inflation: Retail giants
such as Wal-Mart, Carrefour, Tesco, Target, Metro, Coop and 350
other global retail companies are already having operations in many
countries for over 30 years. Contrary to a view prevailing across the
globe that these MNCs will become a source of monopolies, rather they
have managed to keep a check on the food inflation through their
healthy competitive practices and giving variety and reasonably priced
products to the customers.
 More transparency compared to traditional Mandi systems: The
intermediaries operating in the Indian system are not adhering to
transparency in the system relating to their price strategies. According
to some of the reports, an average Indian farmer realize only one-third

28
of the price, which a final consumer pays, but there will be more
rationality and transparency in the pricing policies of theses MNCs.
 Eviction of Intermediaries and directly benefitting the farmers
and producers at large: The prices of the commodities will be
automatically checked. For example, according to the Business
Standard, Walmart has introduced "Direct Farm Project" at Haider
Nagar near Malerkotla in Punjab, where 110 farmers have been
connected with Bharti Walmart for sourcing fresh vegetables directly.
These strategies will benefit unswervingly the farmers and producers
at large in respect of realization of true prices evicting the
intermediaries.
 Quality Control and control over leakage and wastage: There are
number of issues relating to malpractices and inefficiencies of the
traditional system by which children are not able to get the proper
food (malnourished), there are losses, food gets rotten in the transit
etc. To correct this system and make available cheap product with
good quality is an important step in their (MNC) endeavor, which is
possible by open FDI as Cost-cautious and highly competitive retailers
will try to avoid these wastage and looses and it will be their endeavor
to make the products available at lowest prices, hence making food
available to the weakest and poorest segment of Indian society which
is the need of today.
 Heavy flow of foreign capital will help in building up the
infrastructure for the growing population: India is a capital deficit
country with big challenges of growing population, developmental
needs and with its present budgetary deficit cannot satisfy the growing
needs (schools, hospitals, transport, and infrastructure) of the ever
growing Indian Population. Hence foreign capital inflow will bridge this
gap and will enable to create a heavy and good capital base.
 Sustainable development and regulated system: There will be
sustainable development and many other vital economic issues will be
focused upon like child labor, overtime, not taking of their welfare.
These issues will not have any room in this transparent open system
as contract between the employer and worker will evict corruption
from grass root level and will control black money.

29
4.4 Threat:
 Massive Job Losses: Indian economy is a developing economy and
the level of development is not as desired. Due to paucity of
infrastructure resources in Indian economy, there is a direct threat
from big giants like Wal-Mart, which will compel current independent
stores to close which will directly lead to massive job losses, as their
level is very high, fully automated which need very few people to
operate. This will lead to massive job losses; also since the Sector is
unable to employ retail staff on contract basis, this becomes a biggest
threat for the Indian economy.
 Sustaining of loss strategy: Another challenge and threat Indian
companies perceive is the sustaining of the loss by initially lowering
the price to penetrate the market and this is a very usual policy
adopted by these big players. They can afford to lower the prices in
initial stages in order to knock-out the competition and become a
monopoly and later on raise the prices like was done by Pepsi and
Coke.
 Inequitable Competition: It would lead to very inequitable
competition and eventually result in large-scale exit of domestic
retailers, especially the small family managed outlets, leading to large
scale displacement of persons employed in the retail sector. Further,
as the manufacturing sector has not been growing fast enough, the
persons displaced from the retail sector would not be absorbed there.
 Repatriation of profits outside India: India doesn't need foreign
retailers, since home grown companies and traditional markets may be
able to do the job. Just like in BPO industry, work will be done by
Indians, profits will go to foreigners hence is not viable solution for
Indians. We cannot ever forget the example of East India Company. It
entered India as a trader and then took over politically.
 Persistence of Political inconclusiveness of issues: There is still
no consensus made by government .In a politically and culturally
diverse country like India, within no time every economic issues turns
out to become a political issue and there is a persistence of
inconclusiveness on the issue.
 Offensive public opinion: There are strong apprehensive comments
and action seen by the proliferation of these stores. A Wall Street
Journal article reports that in Uttar Pradesh, Uma Bharti, a senior
leader of the opposition Bharatiya Janata Party (BJP), threatened to
"set fire to the first Wal-Mart store whenever it opens;" with her
colleague Sushma Swaraj busy tweeting up a storm of misinformation

30
about how Wal-Mart allegedly ruined the U.S. economy. With these
offensive comments to develop a consensus is a most challenging job
by government of India.
 Immature, undersize and nascent stage of India retail sector:
Another concern of Government of India is that the Indian retail
sector, particularly organized retail, is still immature, undersized and is
in a nascent stage and that, therefore, it is important that the
domestic retail sector is allowed to nurture and strengthen first, before
fully opening this sector to foreign investors.
 Monopolistic tendencies and unnatural price trends: Another
concern is that the global retailers would conspire and exercise
monopolistic power to raise prices and monopolistic (big buying) power
to reduce the prices received by the suppliers.
 Asymmetric growth of cities: It would lead to asymmetrical growth
in cities, causing discontent and social tension elsewhere. Hence, both
the consumers and the suppliers would lose, while the profit margins
of such retail chains would go up.
 Labor rules and regulation are also not followed in the organized
retails.
 Lack of uniform tax system for organized retailing is also one of the
obstacles.
 Inadequate infrastructure is likely to be an obstacle in the growth
of organized retails.

31
RELIANCE FRESH
History of Reliance Fresh
Post launch, in a dramatic shift in its positioning and mainly due to the
circumstances prevailing in UP, West Bengal and Orissa, it was mentioned
recently in news dailies that, Reliance Retail is moving out of stocking fruits
and vegetables[. Reliance Retail has decided to minimise its exposure in the
fruit and vegetable business and position Reliance Fresh as a pure play super
market focusing on categories like food, FMCG, home, consumer durables, IT
and wellness, with food accounting for the bulk of the business.
The Company may not stock fruit and vegetables in some states. Though
Reliance Fresh is not exiting the fruit and vegetable business altogether, it
has decided not to compete with local vendors partly due to political
reasons, and partly due to its inability to create a robust supply chain. This
is quite different from what the firm had originally planned.
When the first Reliance Fresh store opened in Hyderabad last October, not
only did the company said the store’s main focus would be fresh produce like
fruits and vegetables at a much lower price, but also spoke at length about
its “farm-to-fork’’ theory. The idea the company spoke about was to source
from farmers and sell directly to the consumer removing middlemen out of
the way.
Reliance Fresh, Reliance Mart, Reliance Digital, Reliance Trendz, Reliance
Footprint, Reliance Wellness, Reliance Jewels, Reliance Timeout and Reliance
Super are various formats that Reliance has rolled out.
In addition, Reliance Retail has entered into an alliance with Apple for
setting up a chain of Apple Specialty Stores branded as iStore, starting with
Bangalore
The Reliance Retail had to face various difficulties before the launch of
Reliance fresh, because of the various circumstances prevailing in Orissa,

32
West Bengal and UP, along with the news focusing on the dearth of
vegetables and fruits stocks.
The retail business of Reliance then minimized its exposure in vegetable
and fruit business, as a result established Reliance fresh positioning a pure
super market play focusing on various categories like IT, consumer durables,
home, FMCG and food.
The retail company of Reliance may not supply the vegetables and fruits in a
few states, the Reliance Fresh decided to not to race with local wholesalers
partly because of the political reasons as well as its incapability to maintain a
healthy supply chain
VISION Of RELIANCE RETAIL
Growth through Value Creation
With a vision to generate inclusive growth and prosperity for farmers,
vendor partners, small shopkeepers and consumers, Reliance Retail Limited
(RRL), a subsidiary of RIL, was set up to lead Reliance Group’s foray into
organized retail.
Since its inception in 2006, Reliance Retail Limited (RRL) has grown into an
organisation that caters to millions of customers, thousands of farmers and
vendors. Based on its core growth strategy of backward integration, RRL has
made rapid progress towards building an entire value chain starting from the
farmers to the end consumers.
Reliance Retail continued to expand presence of its value and specialty
formats. During the year, Reliance Retail opened 90 new stores spanning
across 'value' and 'specialty' segments. In-store initiatives, wider product
choice and value merchandising enabled the business to achieve robust
growth during this period.
Its presence in the optics business is in partnership with Grand Vision. 51
new stores were added during FY-11 taking the total presence to 100 stores
across key markets in the country. The retail chain offers single brand
optical products including Vision Express frames, lenses, contact lenses,
sunglasses, solutions and accessories.
For the very first time, consumers in India got the opportunity to experience
Hamleys, which is considered to be the world's most wonderful toy shop.
The brand was launched in India with opening up of 2 stores during the

33
year. iStore by Reliance Digital is a one-stop-shop for all Apple products and
services.
Reliance Brands also announced exclusive licensing arrangement with two
leading international brands:
Steve Madden, a leading designer, wholesaler and retailer of fashion
forward footwear and accessories for women, men and children.
Quiksilver, a leading outdoor sports lifestyle company to launch their core
brands 'Quiksilver' and 'Roxy'.
Across India, Reliance Retail serves over 2.5 million customers every week.
Its loyalty programme, "Reliance One", has the patronage of more than 6.75
million customers.
A subsidiary of Reliance Industries of India that is headed by Mukesh
Ambani, Reliance Fresh is primarily a supermarket that strives to provide all
the essential household commodities under one roof.
In addition to fresh fruits and vegetables, the store also sells staple food
items, dairy products, packaged food products, baby products, electrical
goods, and the like.
The size of a typical Reliance Fresh store varies between 3,000 and 4,000
square feet, and it can easily cater to an area of 2 to 3 Kms in its vicinity.
In the present day, there are 560 outlets of Reliance Fresh across the
country, and in the next 4 to 5 years the company plans to invest Rs.
25,000 crores in this venture.
BACKGROUND
Reliance Fresh a convenient store format, is governed by the Mukesh
Ambani and is the most important part of Reliance Industries retail Business.
Reliance Ltd. has planned to invest more than Rs.25000 crores in the retail
division.
It also comprises more than 560 reliance fresh stores all over the country.
The outlet sells fresh fruits, staples, dairy products, fresh juice bars,
groceries and vegetables.
A distinctive Reliance Fresh outlet is around 3000 to 4000 sq. feet and
accommodates catchment area of one to three Kilometres.

34
The super marts will sell fresh fruits and vegetables, staples, groceries,
fresh juice bars and dairy products and also will sport a separate enclosure
and supply-chain for non-vegetarian products. Besides, the stores would
provide direct employment to 5 lakh young Indians and indirect job
opportunities to a million people, according to the company.
The company also has plans to train students and housewives in customer
care and quality services for part-time jobs.
The company is planning on opening new stores with store-size varying
from 1,500 sq ft to 3,000 sq ft, which will stock fresh fruits and vegetables,
staples, FMCG products and dairy products.
Each store is said to be within a radius of 1-2 km of each other, in relation
to the concept of a neighbour store.
However, this is only the entry roll-out that the company has planned.
Bangalore is said to have 40 stores in all by the end of the year.
In a dramatic change due circumstances prevaling in UP, West Bengal and
Orissa, It was mentioned recently in News Dailies that, Reliance Retail is
moving out stocking.
Reliance Retail has decided to minimise its exposure in the fruit and
vegetable business and position Reliance Fresh as a pure play super market
focusing on categories like food, FMCG, home, consumer durables, IT,
wellness and auto accessories, with food accounting for the bulk of the
business.
The company may not stock fruit and vegetables in some states, Orissa
being one of them.
Though Reliance Fresh is not exiting the fruit and vegetable business
altogether, it has decided not to compete with local vendors partly due to
political reasons, and partly due to its inability to create a robust supply
chain.
This is quite different from what the firm had originally planned. When the
first Reliance Fresh store opened in Hyderabad last October, not only did the
company said the store’s main focus would be fresh produce like fruits and
vegetables at a much lower price, but also spoke at length about its “farm-
to-fork’’ theory. The idea the company spoke about was to source from
farmers and sell directly to the consumer removing middlemen out of the
way.
Reliance may exit some businesses if the business does not increase by
March 2008.

35
OBJECTIVES
The chief objective of Reliance Fresh stores is :-
1) To provide customers first-rate household products at affordable rates.
2) At the same time, the company spares no effort to safeguard the interest
of the farmers and manufacturers.
3) The producers get a chance to sell their products directly to the
merchandiser, and that too at the best price.
Thus, it is a win-win situation for all, the merchandiser, producer and
consumer.
CORPORATE SOCIAL RESPONSIBILITY
Today when most of the companies are busy in making profits by any
means, there are few ones who are focused to return this society, a part of
what they have earned through this society. Reliance retail is one of them.
Following efforts of reliance retail are aimed at benefiting the society making
reliance socially responsible:
1) Reliance Retail aims at in society. They are planning to train students
from corporation schools and schools run by NGOs and they consider this as
a part of their corporate social responsibility
They will take students on an employment basis and pay them a stipend
during the course period in return they are planning to charge a "small fee"
from those who want to join the course "as we want to bring in some
discipline and regularity among the students", and will reimburse that once
they are inducted into service.
2) Farming in India is highly fragmented and subject to harsh climatic
conditions: once harvested, it is very difficult to keep fruits and vegetables
fresh.
To secure high quality, Reliance Retail is directly sourcing fresh agricultural
produce from thousands of farmers from villages through Collection Centres.
With this concept, Reliance has built a business model generating shared
value that links the company supply chain more closely to poor farmers in
Indian villages. Reliance is providing a guaranteed market for the farmers’
produce, reducing transaction costs and training the farmers in better and
sustainable farming practices.
This initiative results in higher income and upgrading of skills for the
farmers, and reduced spoilage of produce (up to 35 percent) and better
quality products for Reliance retail stores.

36
Growth of Reliance Fresh
The first ever a Reliance Fresh store was established in Hyderabad,
wherein the company, mainly focused on the fresh produced vegetables and
fruits at comparatively low price along with an introduction of farm to fork
theory.
This was the idea, which was anticipated by the company was to take the
supply direct from the farmers and then sell straightaway to the consumers
removing the middle-men off the beaten track. Reliance introduced several
formats in the marketplace to cater to needs of common people, which
includes Reliance Fresh, Reliance Super, Reliance Footprint, Reliance
Timeout, Reliance Jewels, Reliance wellness, Reliance Mart and Reliance
Digital, to name a few.
In addition to this, the Reliance Retail also entered into a treaty with
Apple, which is a leading Information Technology company, to set up a
series of Apple Specialty Outlets branded as IStore, with its first ever store
in Bangalore.
With an idea to produce inclusive prosperity and growth for farmers,
consumers, small shopkeepers and vendor partners, Reliance Retail was set
up in order to lead the foray of Reliance Group into an organized retail.
NEWS ARTICLES ON RELIANCE FRESH
WHEN RELIANCE FRESH OPENED
Monday, Nov 06, 2006 , Financial Express : Reliance Retail, the 100%
subsidiary of Reliance Industries, on October 28 unveiled Reliance Fresh, the
first of its multi-format retail foray involving an investment of Rs 25,000
crore. Reliance Fresh is the company’s brand for neighbourhood fresh food
outlets. It will also sell kitchen equipment and other edibles. Besides, it has
planned hypermarkets, supermarkets, discount stores, department stores,
convenience stores and specialty stores, to be unveiled shortly. The next
stop for Reliance Retail will be Ahmedabad, where the company will launch
an outlet on December 28, the birthday of RIL founder Dhirubai Ambani.
After that, it will move to West Bengal and Punjab, followed by simultaneous
launches in Delhi and Mumbai. “These stores, ranging from 2,000 to 5,000
sq feet, will provide customers with a variety of fresh fruits, vegetables,

37
staple foods and other products in a world-class ambience,” said Gunender
Kapur, president, foods business, at the unveiling ceremony.
The strategy is to open one Reliance Fresh store in a radius of three to four
km to serve 1,000-2,000 families. This means about 30-40 stores in the
major metros. The air-conditioned stores recorded combined sales of Rs 22
lakh on the inaugural day itself. Reliance Fresh is selling vegetables and
fruits sourced from farmers through the company’s agri hubs.
FOUR WEEKS AT RELIANCE FRESH
Reliance Fresh has opened up retail supermarkets selling fruits and
vegetables in major cities of India. A few days ago, we visited the local
Reliance Fresh supermarket in New Friends Colony and this is what we
observed -
1. Range of Products - Regular vegetables, fruits, Reliances' own brands of
packed pulses, Maggi products and Pepsi.
2. Prices - The price was marked in paisas just like at American stores. For
example - Potatoes were priced at 5.90 per kg while onions were 15.90 per
kg. Yeah right, what difference does 10p make?
3. Comparable Cost - The rate of vegetables like onions and potatoes were
10p less than that of local vegetable sellers. The rate of other products was
however much higher than they should have been. Seems like Reliance
Fresh applied the same strategy that McDonalds uses to attract customers –
ice cream for Rs. 7 and Cola for Rs. 20.
4. Customer Service - The staff in red shirts were mainly checking to see if
people were shoplifting and didn’t seem to know much about the products or
company. The guards kept yelling at everyone to have their bags checked
before leaving.
5. Checking Out - There was a long queue that moved very slowly. VAT or
value added tax was added to the bill which increased the cost of the
vegetables just bought.
6. Parking - Absolutely zero parking. The guard was yelling at local rickshaw
pullers to move away from the entrance.

38
7. Customers - were middle class folk from my apartment block. They kept
touching and turning around each vegetable before selecting them just like
they do at the regular vegetable sellers. This looked really out of place and
added to a huge crowd
Reliance eyes retail JV with Marks & Spencer
Reliance Industries chairman Mukesh Ambani’s deal-making spree to get the
best domain expertise in the retail sector is poised for the big one now.
Reliance Retail (RRL), is locked in ‘substantial’ discussions to float an equal
joint venture with iconic UK fashion retailer Marks & Spencer (M&S) for
apparel, gourmet food and cafes, multiple sources said.
The deal, slated to be clinched in the next three weeks, would see the UK
retailer bringing in new formats like food and cafes into India. M&S’ core
business — apparel and lingerie — is already operational in the country.
According to a source close to the deal, the gourmet food format is likely to
be integrated with Reliance Fresh “wherever possible,” (upmarket localities)
as a shop-in-shop format. This would help M&S get immediate scale in food
business. There are 491 Reliance Fresh stores that sell food, FMCG and fruits
and vegetables and this figure is likely to touch 1,400 by the end of next
fiscal.
“The implications of this particular JV are much deeper. It’s much more
holistic in nature and therefore taking long to seal,” the source added. The
$16-billion M&S, operating in the country through a franchisee arrangement
with Planet Retail since 2001, is in the midst of charting a new India strategy
aimed at accelerating expansion in the domestic market. It recently slashed
prices by 20% to attract more footfalls in the stores and taking prime space
in malls to open more stores
Reliance Retail ties up with UK's Wincanton for back-end biz
NEW DELHI: After having signed up at least half-a-dozen partnerships for
specialty formats, Reliance Retail is now entering into a joint venture with
leading European supply chain specialist Wincanton for its food and grocery
and hypermarket businesses.

39
The synergy would enable Reliance to efficiently run its critical back-end
operations, which essentially include warehousing of goods and transporting
them to stores on time.
The latest move by India’s largest corporate house, which jumped on the
retail bandwagon two years ago by promising to do everything on its own,
seems to suggest that it now needs a partner for almost every retail
initiative.
Industry observers believe that the company has expanded very fast and
has managed to set up over 600 stores across various retail formats in less
than two years, but its supply chain is in a mess. “How get the right
merchandise to the stores on time has been its biggest problem. You’d often
not find the goods you want in Reliance’s food and grocery outlets,” said a
source.
Porter 5 force model for the existing Reliance fresh Business model
Threat of New entrants
This threat is at maximum at this point as it is most likely that government
would allow 100% FDI in single brand retail outlets which is going to further
make things difficult for Reliance Fresh
Bargaining power of buyers
This is the pressure a customer can place on a business. If there are few
buyers then they are able to dictate the terms with increasing access to
technology, increase in number of choices and customers are always
connected to each other through various social networking sites more than
ever before which make bargaining power of buyers even stronger
Bargaining power of suppliers
A company to manufacture its products requires raw material, labour etc.
This creates a buyer supplier relationship in an industry. If there are few
suppliers providing material essential to make a product then they can set
the price high to capture more profit. Again due to increase in number of
players in organized retail sector bargaining power of suppliers is also on the
rise as they have many options where they can negotiate their prices

40
Competitive rivalry within the industry is also on the rise. This describes
the competition between the existing firms in an industry. Greater the
competitive rivalry (companies providing equally good products or services)
lesser are the profit margin. With entry of foreign players it would make the
competition even more intense
Problems faced by Reliance Fresh
The following graphs are a clear indicator that Reliance Retail of which
Reliance Fresh is a major arm that Reliance Fresh is even at current state
facing problems
As the winds of economic reform have swept across the Indian economic
landscape since the 1990s, the slow pace of retail liberalisation has become
increasingly conspicuous. Most notably, foreign direct investment—freely
permitted in most sectors—continues to be banned in the retail sector, with
the exception of single-brand retailing. Now it was the turn of domestic
corporate retailers to face the heat.
The trouble began in late August 2008 , in Uttar Pradesh, India’s most
populous state, when the state government cited law-and-order problems to
order the shutdown of all stand-alone corporate retail outlets selling fruit,
vegetables and groceries. This was in response to violent protests against
new “Reliance Fresh” stores set up in the cities of Lucknow and Varanasi by
Reliance Industries, an Indian corporate giant with ambitious retailing plans.
As of mid-October, protestors against organised retail had targeted Reliance
and other corporate retailers in Uttar Pradesh, Kerala, West Bengal, Mumbai
and Orissa. Though counter-productive in terms of efficiency and
modernisation, this opposition to organised retail is easy to explain. Before
India’s recently acquired image as an economic powerhouse, it was
sometimes disparagingly referred to as a nation of small shopkeepers.
Indeed, there are currently over 12 million retailers in India, and the sector
provides a livelihood for a huge number of people. Most of these shops are
tiny family-run businesses operating with meagre capital. There is also an
enormous number of retailers selling fruit and vegetables from carts or on
the roadside. Meanwhile, Indian corporate giants such as Pantaloon Retail,
Reliance Industries and RPG Group, seeking to profit from the forces of
consumerism unleashed by economic growth and liberalisation, have been
scrambling to expand their retailing operations. Not unreasonably, small
retailers feel threatened by the big companies’ plans.

41
Competitor’s Move:
The following are the reasons for changes in Reliance Fresh’s
Strategy and some of the highlighting news articles related to the
competitor:
Future Group’s Big Bazar
Pantaloon earmarks Rs900 crore for retail space news
Leading retailer Pantaloon Retail India Ltd (PRIL) has allocated Rs900 crore
over the next three years on 9 million square feet of retail space, which it
had already booked for expansion across India for expansion.
The move by the Kishore Biyani-promoted Future Group is being seen as a
measure to ensure it had enough expansion space in the event of
multinational firms expanding their footprint into the Indian retail sector with
the entry of FDI in multi-brand, when it is allowed.
"Supply of fresh quality real estate space within large Indian metropolises is
increasingly becoming scarcer. The demand for this space is also expected to
increase significantly in the near future as more retail companies vie for this
space," PRIL said in an investor document.
The group said, envisaging the future scenario, it launched an aggressive
strategy of securing quality real estate for its future expansion plans and had
booked over 9 million square feet of retail space.
Sources say, the group had set aside Rs800-900 crore for the purpose.
Around 60 per cent of the total retail space that the group had booked would
be used to set up Big Bazaar stores.
Big Bazaar Assists Tata Motors Increase ‘Nano’ Sales
Kishore Biyani's discounted retail format Big Bazaar, which commenced the
idea of 'Sabse Sasta Din' some years back, is now selling Tata Motors
produced world’s cheapest car ‘Nano.’

42
In a new move, Tata Motors has inked a deal with Future Group to sell the
smallest car in Big Bazaar outlets.
Future group's Customer Strategy president Sandip Tarkas, who heads this
initiative at Big Bazaar satted, “There is a lot of commonality between Big
Bazaar consumers and prospective Nano buyers. Big Bazaar as a concept
appeals to the masses and with over 150 million footfalls every year, we are
trying to see how we can sell Nano, which has a similar positioning.” This is
the initial time Big Bazaar is selling a car in India. As per industry
functionaries, Big Bazaar has already sold over 450 Nanos since the trial
started a month ago.
IDBI Securities research head Sonam Udasi said, “Tata Motors may have
now realised that for a product like Nano, conventional distribution system
such as car showrooms can only help to an extent.” “Big Bazaar's customers,
mostly value conscious people, will directly fit in the profile of Nano buyers,"
Sonam added
Walmart in talks to pick up stake in Future Group's Big Bazaar
MUMBAI: At a time momentum is building to allow foreign players into front-
end retail, senior officials of the Future group and Walmart have met at least
five times in the past four months, raising the possibility of an alliance
between India's largest retailer and the world's largest retailer. If the
alliance fructifies, it could reconfigure organised retail in India.
Four executives from the two camps with knowledge of the talks confirmed
that Future Group owner Kishore Biyani visited Walmart's headquarters in
Bentonville, US, last December where he met Doug McMillon, president and
CEO of the American company. Biyani was accompanied by B Anand,
director of finance, and Damodar Mall, director of integrated food strategy at
the Future group. Since then, Hong Kong-based Leigh Hopkins, vice-
president (M&A Asia) of Walmart, has visited the Future group's office in
South Mumbai at least thrice, the latest being last week, said three of those
officials. Biyani declined comment on the talks with Walmart saying, "There
are too many issues". "There is nothing there," he added. Walmart India
President Raj Jain denied the talks. "At the moment, we are not in any
alliance talks with the Future group," he said after a long pause, carefully
measuring his words. Walmart US did not respond to an email sent last
Friday.
The meetings between the two sides could have an impact on their
respective partnerships in India — an existing one for Walmart and a
prospective one for the Future group, both of which have been beset by

43
issues. Walmart has had an equal joint venture with the Bharti group since
2006: Bharti Walmart. However, this partnership is 'non-exclusive' in nature,
which means Walmart can forge other alliances in India. Bharti Walmart
operates in the wholesale and back-end segments — the two areas in retail
where foreign players are currently allowed. Walmart, the world's largest
company with revenues of $408 billion in 2010, has reportedly been
frustrated by the joint venture's slow pace of expansion. So far, it has
opened five wholesale stores under the brand name 'Best Price Modern
Wholesale'. In calendar 2009, according to data from the Registrar of
Companies, the JV lost Rs 151 crore on revenues of Rs 198 crore.
"Maybe Bharti is not investing so much as Walmart would like it to do," said
Harminder Sahni, founder, Wazir Advisors, a boutique consultancy. "So,
there is a possibility of Walmart bringing another equity partner to ramp up."
Big Bazaar special offers for different events (Cricket World Cup)
VIJAYAWADA: With the aim of connecting cricket lovers to the ‘ICC Cricket
World Cup 2011', retail major Big Bazaar unveiled a range of merchandise at
a fashion show held on Wednesday. Ranji cricketer Swaroop unveiled the
collection during the show. Store manager K. Bhanuprakash said that lovers
of cricket around the world were gearing up for the ICC Cricket World Cup
2011 with just about 44 days to go for the start. “We are delighted to be
associated with the ICC as the authorised retailer for the World Cup
merchandise. Through our range of offerings in apparel, home and personal
care, we attempt to cement a strong relationship with our customers by
enabling them to express their appreciation and cheer for cricket by sporting
the fan look,” he said. Cricketer Swaroop said: “It has been a pleasure to be
associated with this event at Big Bazaar. I would like to invite all cricket
lovers to show their spirit for their favourite team and the player by wearing
the authorized ICC CWC 2011 fan merchandise available at Big Bazaar
stores.” Mr. Bhanuprakash said Big Bazaar offers specially designed cricket
merchandise for men, ladies and kids. The range includes sports tees, active
dry tees, track pants, shorts, sweatshirt, caps, head bands and more.
Future Group To Open 30 Big Bazaar Outlets By 2012
Future Group promoted by Kishore Biyani , which runs India’s largest retail
chain in both value and lifestyle formats, on Thursday said it plans to open
25-30 Big Bazaar outlets by June 2012, and will invest Rs 300-crore for the
same.

44
“We are planning to add 25-30 stores on the Big Bazaar front. Our target for
this year is 30 stores for Fashion at Big Bazaar and we already have 13
stores, so real estate provided we should be able to achieve our target,”
Future Group Future Value Retail Joint CEO (East & South) Sadashiv Nayak
told PTI. The Future group currently owns 152 Big Bazaar stores in the
country. “We will be investing Rs 300 crore for Big Bazaar and for the stand-
alone (Fashion) it should be another Rs 70- 80 crore,” he said on the
sidelines of Amar Chitra Katha (ACK Media) scholarship event.

45
5. Conclusion
In view of the above discussion, if we try to balance the opportunities and
prospects attached to the given economic reforms, it could be advantageous
for Indian economy once executed. The amendments made in ‘Circular 1 of
2012- Consolidated FDI Policy', dated 10.04.2012, issued by the Department
of Industrial Policy & Promotion (DIPP) will have a positive impact on the
retail industry and the country by attracting more foreign investments. With
big retail giants coming to India, it will surely improve our back-end storage
and procurement process. Once these multi-chain retailers establish
themselves, they will create infrastructure facilities, which will also propel
the existing infrastructure. This has been evident on January 11 & 12, 2012,
when the notification increasing FDI limit in single-brand retail from 51% to
100%, was announced. FDI in multi-brand retail' should also be given a
green signal as soon as possible. Keeping in view the above benefits (or
opportunities mentioned above), it is very reasonable to say that the period
for which we delay these reforms will be a loss for the Government only,
since majority of the public is in favor of this reform. The farmers will benefit
from FDI as they will be able to get better prices for their produce. The
elimination of the intermediate channels in the procurement process will lead
to reduction of prices for consumers respectively.
The regulation in the FDI Bill that 30% of the total procurement has to come
from small and medium enterprises will benefit the domestic businesses. Of
course a policy is needed to protect the small and medium market channels
from Chinese invasion. The whole economy will be benefitted including
government and people at large with the reform process. Retailers venturing
the Indian market must ensure that they have considered the opportunities
and the challenges to maximize their returns. Retailers will need to bank on
the local knowledge brought in by their partners, employees, service
providers to reduce the lead time required by them to establish operations
and get a firm place in the Indian market. There is a need for a symbiosis
approach for the welfare of the public at large.

46
8. Recommendations
Entry of foreign players must be gradual with social safeguards
Prevent diversion of agricultural land for building malls
Preparation of a legal and regulatory framework and enforcement
mechanism to ensure that large retailers are not able to dislocate small
retailers by unfair means
Stipulation that certain percentage of FDI should be spent in Logistics
Better credit availability to unorganized retailers
A Commission to ensure that
• procurement costs are fair for farmers of perishable commodities
• percentage of sourcing derives from the Indian market
• a basic price support mechanism that ensures that costs are
covered
• efficient extension services and information centres that provide
information about possible crops and best practices
• Rules on repatriation of foreign profits should be revised, to discourage
( and restrict) 100% of the profits from leaving India

47
9. Bibliography
Print Media:
 1. The Times Of India
 2. The Hindu
Electronic Media:
 1. NDTV 24X7
 2. Times Now
 3. Headlines Today
 4. CNN IBN
Internet:
1.http://www.globaljurix.com/foreign-direct-investment-retail-fdi.php
2.http://en.wikipedia.org/wiki/Foreign_direct_investment
3.http://www.fibre2fashion.com/industry-article/7/604/fdi-in-retailing1.asp
4.http://articles.timesofindia.indiatimes.com/2011-11-
29/india/30453728_1_retail-sector-small-retailers-global-retail-giants
5.http://sanjaykaul.wordpress.com/2011/12/02/10-reasons-why-fdi-in-
retail-is-a-bad-idea/
6.http://businesstoday.intoday.in/story/govt-may-announce-fdi-package-
for-retail-aviation-sector/1/187955.html

Role of FDI in Retail Sector

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