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Fdi in retail ppt sector
1.
2. •FDI in Retail – Policy Perspectives.
•Retail Sector – An Overview.
•FDI Policy in Retail - Opportunities & Challenges.
•Emerging Human Resource Challenges.
•What lies ahead ?
Issues for Discussion
3.
4. The commitment of money or
capital to purchase financial
instruments or assets in order to
gain profitable returns.
5. Investment done by citizens and
government of one country (home
country) invest in industries of
another country (host country).
Foreign
Investment
through
Foreign
Direct
Investments
Foreign
Institutional
Investors
7. • 1991- FDI allowed selectively up to 51% in priority
sectors.
• 1997-FDI allowed up to 100% in sectors like mining,
manufacturing.
8. • 2000-06 FDI allowed up to 100% in specified sectors.
FDI limits increased.
Procedures further simplified
• The top 3 Indian Regions attracting the highest FDI.
Mumbai, Delhi and Karnataka.
Account for nearly 62% of the total FDI.
9. By
Target
• Mergers and Acquisitions
• Horizontal FDI
• Vertical FDI.
*Backward Vertical FDI
*Forward Vertical FDI
By
Motive
•
•
•
•
Resource-Seeking
Market-Seeking
Efficiency-Seeking
Strategic-Asset-Seeking
12. Incentives attract FDI.
Market size and potential are sufficient inducers.
Tax breaks, import duty exemptions, land and power
subsidies, and other enticements.
13. FDI inflows from
2000-10 crossed
$300 billion
FDI inflows from
August 1991 to
April2010 were
$134.6 billion.
14.
15.
16. GRDI Position : 3rd
Size : $ 400 billion
Growth Rate : 13%
GDP contribution : 12%
Major sector : Food and Grocery
Employment : 2nd largest industry
(35.06 million)
Types:
Organized ( 5%)
Unorganized ( 95%)
17. •
Corporates are increasingly coming into this sector.
•
Demand of branded goods on a large scale.
•
Demand of new and varied products.
•
High quality product is preferred .
•
Varied window display.
•
E-tailers increase the presence.
18. Format
Description
Retailers
Hypermarkets
Offering basket of product
Spencers, Big bazaar
Cash and Carry
Bulk-buying requirement
Bharti-wal-mart
Departmental stores
Large layout, Wide merchandise
mix
Lifestyle , Globus
Supermarkets
Household product as well as food
as integral part of the service
Apna bazaar , food
bazaar
Shop-in-shop
Shops located in shopping malls
Navras ( big bazaar)
Specialty stores
Focus on individual product type
Brand Factory
Category killers
Particular segment
The LOFT
Discount stores
Branded product at discounted
prices
Subhiksha, levi’s
outlet
Convenience stores
Small Retail stores
In and out
19. Retail Segment
Percentage holding
in sector
Major retailers
Food and grocery
63%
Reliance fresh, Café
brio, food bazaar
Clothing, textile and
fashion
9%
Westside, shoppers
stop, globus
jewellery
5%
Tanishq
Catering services
5%
IRCTC
Consumer durable
4%
Viveks, vijay sales,
Croma
pharmaceuticals
4%
Piramal group
Entertainment
3%
Bowling co.,
Furnishing, utensils
3%
Hometown, Tangent
Concept
Mobile handsets
2%
The mobile store,
20. • One of the world's largest industries exceeding US$ 9
trillion.
• Dominated by developed countries.
• 47 global fortune companies & 25 of Asia's top 200
companies are retailers.
• US, EU & Japan constitute 80% of world retail sales.
21. • Retail trade in Europe employs 15% of the European
workforce (3 million firms and 13 million workers).
• The world’s population is poised to expand 50% by 2050.
The world currently comprises of 78% poor, 11% middle
income and 11% rich.
27. India
China
Focus on Services
Focus on Industry
High labor cost
Low Labor Cost
Home grown Capital
FDI
Old technology
Adaptability to Latest
technology
Democratic Government
Communist Government
28.
29.
30. INDIA
•A large emerging market .
Increase in disposable income of a family.
70 mn Indians – salary of $18,000.
Rise to 140 mn by 2011.
Consumer spending power increased by 75% in
last 3 years.
The per capita income in 2009–2010 has more
than doubled to US$ 849 from US$ 348 in 2000–01.
32. •Increase in consumer class.
Consumer class will grow
from 50 million at present to
583 million by 2025.
With more than 23 million
people taking their place
among the world’s
wealthiest citizens.
Upper class
Middle class
Lower class
33. •Wide demographics -- average age of 25 yrs.
•Brand consciousness.
60 % of population below age of 30.
Awareness through World Wide Web.
•Changing consumer mindset.
Focus shifting from low price to convenience, value
and a superior shopping experience.
•Small Basket Size
Shaping of Consumption
36. •Easy consumer credit.
EMI & loan via credit cards -easy for Indian consumers to
afford expensive products.
For instance, Casas Bahia’sBrazil.
Note: BOP C.K.Prahalad.
Upper class
Middle class
Lower class
37. •Employment generation.
Second-largest employer after
agriculture.
Retail trade employing 35.06 million.
Wholesale trade generating an
additional employment of 5.48 million.
Additional
1.6 mn
jobs .
38. •Technology
Better use of resources and
goods.
Wastage and Storage problems will be
resolved.
Efficient logistics, production, and
distribution channels.
Digital records.
41. •FDI in Retail sector will resolve problems
regarding foreign exchange in India.
•The life-long basic needs will keep on
driving the Retail Industry.
45. • Major challenge faced by Organized retail sector:
In Retail, over 70 per cent of the labor force in
both sectors combined (organized and unorganized)
is either illiterate or educated below the primary
level.
• Labor Laws
46. • A strong competition from mom and pop shops:-
Easily accessible & approachable.
Provide services like Free home delivery and goods on
credit.
They change consumer focus.
49. FORMAT
AVERAGE SIZE
Convenience Stores
800 sq. feet
Discount Stores
1000 sq. feet
Category Killers
8000 sq. feet
Specialty Stores
Single-category
Shop-in-Shop
Within Large malls
50. FORMAT
AVERAGE SIZE
Supermarket
Large in Size
Typical in layout
Department Stores
10,000 – 60,000 sq. feet
Cash and Carry
75,000 Sq. feet
Hypermarkets
50,000 – 1,00,000 sq. feet
51. • Market power is in hands of unorganized retail.
Unorganized
Organized
•95%
•5%
• Potential of Indian Market is US$ 200 billion whereas India
is just earning its 3%.
53. In India every year there is pilferage of US$ 65 billion
whereas in USA it is just 1-2%.
Due to lack of proper storage infrastructure postharvest losses of farm produce is Rs. 1 trillion cr.
annually.
54. In terms of corruption India stands at 85th position.
Because of paper work, corruption is present along the
entire supply chain.
In India, there are additional 2-3 intermediaries as
compared to USA.
i.
They dominate the value chain.
ii.
They flout mandi norms & their pricing lacks
transparency.
55. India is still in developing stage in installing and
managing an effective IT system especially in rural areas
which hampers the overall growth of organized retail
sector.
56. Banks are reluctant to finance retailers because of falling
demand of organized retailers in India as it has witnessed
failure of many stores like Spencer's, Subhiksha, etc.
57. • Taxation laws in India favors only small retail businesses.
• Implementation of non-uniform VAT across states.
• Octroi and entry tax in some states.
58. • No Automatic Approval for FDI- Only 51% FDI is
allowed to one brand shops in Indian retail sector.
• Complications in issuance of licenses like a hypermarket
in Mumbai must apply for 29 unique licenses & then when
it has to come up with second store it has to apply for same
29 licenses all over again.
61. • Indian retail sector :
Employs 8% (35 million)of the working population.
Could yield 12 to 15 million retail jobs in the coming
five years.
• Out of which organized segment is about 0.3 million.
• Retail sector grew at 9.4% on real terms & 15.4% on
nominal terms.
70. Level
Skills Required
Skills Gap
Senior Manager/
Manager
•Availability
of merchandise.
•Maintenance
•Design/modify the
logistic schemes.
• Negotiation with
warehouse owners.
•Availability of
experienced Logistics
personnel is a key
challenge
Marketing
Manager/Sr.
Marketing
Manger/
Marketing
Officer
• Knowledge of data
analysis.
•Understand customer
behavior.
•Coordinate with media
agencies.
• Ability to understand
•Communication
71. Complexity/Technical Nature of Product
Nature of Supply Chain
Level of
Customer
Involvement
Changes in the Product Nature/ Type
Price Segment(Luxury, Mass market etc.
Intensity of Skill Requirement
Store
Characteristics
78. FDI can be a powerful catalyst to spur competition in the
retail industry.
It can bring about:
Supply Chain Improvement
Investment in Technology
Manpower and Skill development
Efficient Small and Medium Scale Industries
Increase in exports
79. Lifestyle plans
to have more
than 50 stores
across India by
2012–13.
Shoppers Stop
has plans to
invest Rs250
Crore to open
15 new
supermarkets
in the coming
three years.
Pantaloon
Retail India
(PRIL) plans to
invest US$
77.88 million
to add up to
existing 2.4
million sq ft
retail space. .
Timex India will
open another
52 stores by
March 2011
taking its total
store count to
120
80.
81. • Investment into warehouse and cold storage chain will
result in significant efficiency on supply chain.
• Farmers benefited through direct marketing and contract
farming programme.
• Improves farm production through modern techniques.
• Increasing availability of low interest credit for farmers.
82. Expected Growth
1.4
1.3
CAGR
10%
1.2
1
0.83
0.8
0.6
0.4
0.59
0.35
0.2
0
2008 2011 2013 2018
• In the last four year, the
consumer spending in India
climbed up to 75%.
• By the year 2013, the
organized sector is also
expected to grow at a CAGR of
40%.
• The total number of shopping
malls is expected to expand at
a CAGR of over 18.9 per cent
by 2015.
83.
The initial cap on investment could be pegged at 49%.
FDI should be leveraged to create back-end infrastructure.
FDI will be a powerful driver to curb inflation.
84. ?????
To develop our rural sector ,should
conditionality’s be put on the FDI funded chains
relating to employment?
For example, should we stipulate that at least 35%
of the jobs in the retail outlets should be reserved
for the rural youth?
86.
Industry experts predict that the
next phase of growth in the
retail sector will emerge from
the rural markets.
By 2012 the rural retail market
is projected to have a total of
more than 50 per cent market
share.
Apparel, along with food and
grocery, will lead organised
retailing in India.(RNCOS)
87. ?????
What additional steps should be taken to protect
small retailers?
Should an exclusive legal and regulatory framework
be established to protect their interests?
88.
National legal framework cannot be effective.
Hamper growth in retail sector.
Incentives directly to benefit small retailers.
89.
Restrict the number of stores that can be operated in a city.
Allow access to the small retailers to the stores through
special windows.
Varied window displat : now a days retailers know that if your product is dosplayed properly acc. to the culture of the state you are operating in , will definaltey help you
Count the country and then speak on the 4 things showed here
This is not all there is still more
In 2881, India had the highest shop density in the world, with 11 outlets for every 1,888people.. The high density restricts their scope of expansion, and thereby ofupgrading. This also means that, except in the case of severely segmented markets, thissector stands little chance of competing against large retailing corporations operatingwith economies of scale.
It will bring out many positive changes i.e. improvement in supply chain management. It is noticed that 35-40% of the agriculture produce perishes every year due to poor infrastructure in India and there are only 6522 cold storages in India mainly used for potatoes.Investment in technologies and infrastructure by the retail corporations will act as a boon for our economy.These org will come in with technical know how and expertise and will train indian manpower and hone their skills as suitable for the industry.Moreover small players who have already been working with Internationalchains like Wal-Mart/Carrefour in India have benefitted a lot by manufacturing their private label products & also showcasing ourproducts in their stores by reaching end consumer directly at competitiveprices which would otherwise launching and building a new brand is a task in itself.It is understood that MNC that invest in retail in india would also source indian goods to their international outlets in a big way, thus provide a boost to indian exports. Indian retail chains would get integrated with global supply chain since Fdi will bring in technology, quality standards and marketing.
technological know how, soil quality improvement, pesticide and fertilizer usage,grading, sorting, capabilities and increasing availability of low interest credit forfarmers.
After observing the opportunities and challenges, the views of different org. and the benefits that are likely to take place in indian economy..the panel recommends that fdi in multi brand retail should be allowed but a cap of 49% should be imposed to protect the interest of small and medium size retailers and give them a breathing space to adjust themselves to the new environment and also work to bring in their competitive advantage. China opened the fdi 49% in 1992 and has been immensely benefitted due transfer of technical know how and increased exports there are currently appx 40 foreign players contributing to org retail sector. Now, its time for india to open the borders and be benefitted by the retail growth.A major proportion of initial FDI should be invested in developing back endinfrastructure. For e.g. the foreign partners need to tell the total amount thatthey will be investing in next five years. Out of these atleast 80% of the FDIhas to be made in initial three years.We talked of large percentage of agriculture produce getting wasted annually. Well investment in technology and supply chain will surely prevent such wastages consequently curb the supply caused inflation which is currently hovering around 15.46%.
It is well noted that urban migration has created a significant excess of labour in India's largeand medium-sized cities. Retail jobs can offer a viable career opportunity for the urbanunemployed who may lack in formal education and training, just as they can for those inrural areas. Rather than stipulating employment conditionalities that may obstructemployment generation in urban areas, alternative incentive structures may be used toencourage companies to train and employ youth in the areas in which retail outlets arelocated - both rural and urban.Additionally, if incentive structures or conditionalities are imposed, they should be mandatedupon both domestic and foreign funded retail chains equally.Furthermore, it is being discussed that retailers should be restricted to larger citiesof 10 lakh or more. This point is in direct conflict with a stipulation requiring the hiring ofrural youth, who will likely be unable to travel to their place of employment in a consistent,cost-effective manner.
And u can well see difference in the share of spending in these 3 categories by rural and urban households.
Retail investments and operations are typically executed with local and regionalconsiderations in mind, so a national legal framework cannot truly be effective. State andlocal licensing requirements are sufficient to protect small retailers, and otherwise regulatethe industry.Implementing new regulations will likely hold back growth in this sector, as well as weaken itsAttendant benefits on SME suppliers, consumers and supply chain investment. Rather thanimpose such regualtion, the government may consider policies and incentives that directlybenefit small retailers. These incentives can include, for example, access to low-cost capital,training on quality and technical standards, and infrastructure investment in their ownbusinesses.