Retail in India

Retail industry

What is retail?

Retailis thesaleof goods and services from individuals or businesses to theend-user. Retailers are part of an integrated system called thesupply chain. A retailer purchases goods orproductsin large quantities frommanufacturersdirectly or through awholesaler, and then sells smaller quantities to theconsumerfor a profit. Retailing can be done in either fixed locations like stores or markets,door-to-dooror bydelivery.Types of retailShops may be on residential streets, streets with few or no houses or in ashopping mall. Shopping streets may be for pedestrians only. Sometimes a shopping street has a partial or fullroofto protect customers fromprecipitation.

Online retailing, a type ofelectronic commerceused forbusiness-to-consumer(B2C) transactions andmail order, are forms of non-shop retailing.

French connection Retail comes from the Old French wordtailer(compare modern Frenchretailer), which means "to cut off, clip, pare, divide" in terms of tailoring (1365). It was first recorded as a noun with the meaning of a "sale in small quantities" in 1433 (from the Middle Frenchretail, "piece cut off, shred, scrap, paring").

Retail formatsForm of OwnershipStore Strategy MixNon Store OperationsIndependentChainFranchisingCooperativeConvenience StoreConventional SupermarketHypermarketSpecialty StoreDepartment StoreRetail Catalog ShowroomVending machineIn home retailingTelephone retailingCatalog retailingE RetailingConvenience Store

Convenience storesare essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases as it often works with extended hours, stocking everyday;

General store

Ageneral store,general merchandise store,general dealerorvillage shopis a rural or small townstorethat carries ageneral line of merchandise.[1]It carries a broad selection of merchandise, sometimes in a small space, where people from the town and surrounding rural areas come to purchase all their general goods. The store carries routine stock and obtains special orders fromwarehouses. It differs from aconvenience storeor corner shop in that it will be the main shop for the community rather than a convenient supplement.

Mom-And-Pop Store

Mom-And-Pop: is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder.Specialty store

A typical speciality store gives attention to a particular category and provides high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. For example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products in the respective stores.

Department store

Adepartment storeis aretailestablishment which satisfies a wide range ofdurable goodsand products to the consumer's personal and residential needs; and at the same time offering the consumer a choice of multiplemerchandise lines, at variable price points, in all product categories. Department stores usually sell products including clothing, furniture, home appliances, toys, cosmetics, gardening, toiletries, sporting goods,do it yourself, paint and hardware and additionally select other lines of products such as food, books, jewellery, electronics, stationery, photographic equipment and baby and pet needs. Certain department stores are further classified asdiscount storesSupermarket

Asupermarket, a large form of the traditional grocery store, is aself-serviceshopoffering a wide variety offoodand household products, organized into aisles. It is larger in size and has a wider selection than a traditional grocery store, but is smaller and more limited in the range of merchandise than a hypermarket orbig-box shop. The supermarkets can be anywhere between 20,000 and 40,000 square feet (3,700m2).ASDA supermarket

Hypermarket

A hypermarketis asuperstorecombining asupermarketand a department store. The result is an expansiveretailfacility carrying a wide range of products under one roof, including full groceries lines andgeneral merchandise. In theory, hypermarkets allow customers to satisfy all their routine shopping needs in one trip.

Retail in INDIARetailing in Indiais one of the pillars of its economy and accounts for 14 to 15 percent of its GDP.The Indian retail market is estimated to beUS$450billionand one of the top five retail markets in the world by economic value. India is one of the fastest growing retail market in the world, with 1.2 billion people.

Current Indian RetailIndia's retailing industry is essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the industry, and these were present only in large urban centres. India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population).

The story so far19972006201020112012The Policy - Single Brand Retail TradingEarlier:

For Single Brand Retail Trading (SBRT) sector only 51% FDI permitted subject to approvals and conditions such as:

Products should be of a Single Brand only Products to be under the same brand in one or more countries if are sold outside India Single Brand products should be branded during manufacturing The foreign investor should be the owner of the brandNow:

FDI in single brand retail trading is permitted up to 100% with Government approval

Products to be sold should be of a Single Brand only

30% sourcing is to be done from micro and small industries (investment in Plant and Machinery not exceeding US $ 1mm)

This condition will ensure that SME sector, including artisans, craftsman, handicraft and cottage industry gets the benefits of liberalizationThe Policy - Multi Brand Retail Trading

EARLIER:

FDI in Multi Brand Retail Trading was notallowed* States in favor of FDI in MBRT - Andhra Pradesh, Assam, Delhi, Haryana,J&K, Maharashtra, Manipur, Rajasthan, Uttarakhand and Daman & Diu andDadra Nagar Haveli** Back-end Infrastructure includes supply chain, logistics and warehousing butnot land and rentalsNOW:

FDI in Multi Brand Retail Trade is permitted upto 51%, subject to following conditions: Outlets to be set up - only in cities with apopulation of more than 1m (within a 10kmrange)*Minimum investment by the foreign investor -US $100mm and at least 30% of theprocurement of manufactured / processedproducts shall be sourced from 'smallindustries (investment in Plant and Machinerynot exceeding US $1million) Sourcing requirements will be checkedtogether for first five years after that on aannual basis Retail trading by means of e-commerce notpermissible At least 50% of total FDI brought in shall beinvested in back-end infrastructure** withinthree years of the induction of FDISWOT Analysis of FDI in RetailSTRENGTHS Retail is a $450bn Industry inIndia Young and dynamic manpower Highest shop density in the world High growth rate in retail &wholesale trade Presence of big industrial houseswith deep pocketsOPPORTUNITIES High employment generation inthe future Will enhance financial condition offarmers Encourage foreign capital inflows Result in increasing supply-chainefficiency Improve Logistics & InfrastructureWEAKNESSES High capital investment requiredin the retail sector (real estate) Lack of trained and educatedwork force Higher prices as compared tolocal shops Will mainly cater to high-endconsumers placed in metrosTHREATS Effect on the small retailers - localKirana stores (mom-pop stores) Long gestation period - ForeignRetailers will take a while to adaptto India and generate profits States not buying in soefficiencies expected may not beachievedGlobal Experience of FDI in Retail

INDIABRAZILRUSSIACHINAINDONESIA FDI allowed51% in Multibrand &100% inSingle Brand FDI allowed100% FDI allowed100% FDI allowed100%, upfrom 49% in1992 FDI allowed100% in 1998 Population1,210m Population205.7m Population143.1m Population1,343m Population242.3m Share oforganizedretail 5-6% Share oforganizedretail 36% Share oforganizedretail 33% Share oforganizedretail 20% Share oforganizedretail 30% Top Retailer:Future Group Top Retailer:Pao deAcucar Top Retailer:X5 RetailGroup Top Retailer:Bailian GroupCo Ltd Top Retailer:MatahariPutra PrimaSteps to Establish Presence in IndiaProposed Business ModelOutcome:- There is a possibility of a mutually symbiotic relationship between the Foreign and Indian Partner to jointly harness their capabilities and create a world-class Retailer in India, which will have the unique advantage of a being the first mover and establishing the benchmark of excellence for the IndustryOVERVIEW There is clearly an opportunity for the Domestic Giants, Kirana Stores and the Foreign Retailers to co-exist in India

The Wal-Mart model, offers every-day low pricing, but are typically in far-off locations, have a homogenous selection of products across their stores, typically need 150,000 sq feet of space and require a car to get to. India is years away from when majority of its population will have the ability to only shop at the Wal-Marts of the world. Competition will force the Kirana Stores to lift their game, become more price competitive, have a better selection of goods at lower prices and maintain proper records of customers (people will still shop there for proximity, comfort of relationship and easy credit)

Foreigners will bring to India their expertise and efficiency in retailing, they will invest capital in improving logistics and infrastructure in India (for example: Cold Storage Logistics is still almost non-existent in India) and share technology and know-how with their local Indian Partners, but will also be able to become profitable over a period of time as their brands and presence increase across the country

Hopefully, the Domestic Giants will learn the best practices from their foreign counterparts and just as in Brazil foreign retailers thrive but still a local player is the most dominant (Pao de Acucar) India will see a much more inclusive and efficient Retail IndustryINDIALand of hopes! On the whole, if India has to grow it needs capital, trainingand innovation. Yes the short-term effects of the announcedreforms will be painful, but in the long-term if they will helpmake Retail a more organized industry in India, providebetter quality goods at cheaper prices at convenientlocations, improve infrastructure and the supply chainmechanism throughout the country, provide employmentand retail sector specific training to a large population it willbe a huge boon to the nation

Foreign Retailers who are looking to make a quick profit are better off investing elsewhere. Butthose who are willing to be patient and make a more long-term bet on India, definitely have theopportunity to HIT THE BULLS EYE. India is a virtually untapped and a huge growing marketin terms of the Organized Retail Industry ($450bn industry, with only 5-6% organized retail).The foreign players who are willing to learn from their mistakes in other emerging markets andearly experiences in India, go through a careful partner selection process, understand thepolitical / legal / external hurdles and invest with a realistic time horizon truly have anunique opportunity to create win-win situations for all stakeholders. Several other sectors haveseen foreign entrants with a successful and profitable model in India (Dominos, Citigroup,Honda etc). Our view is that the FDI in Retail will unfold in a similar manner in the times to com

HAPPY SELLING!!!

The EndPrepared byWinner Pandey