Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector

SIKKIM MANIPAL UNIVERSITY

BACHELOR OF BUSINESS ADMINISTRATION

PROJECT REPORT

FOREIGN DIRECT INVESTMENT, TECHNOLOGY

TRANSFER AND TRANSFORMATION IN

INDIAN RETAIL SECTOR

ANHAD KASHYAP

Roll No. 520946586

BBA Sixth Semester

Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector

CONTENTS

S.No. CONTENTS P.No.

I ACKNOWLEDGEMENT…………………………………………….3

II RESEARCH METHODOLOGY……………………………………...4

III EXECUTIVE SUMMARY…………………………..............................5

i. INTRODUCTION..........................................................................................5

ii. IT WHITSLE BLOWING……………………………………...........6

iii. GOVERNMENT OF INDIA ON MULTIBRAND RETAIL…..................6

IV CONCEPT STRUCTURING……………………..................................8

i. FOREIGN DIRECT INVESTMENT………………………………...8

ii. TECHNOLOGY TRANSFER………………………………….......10

iii. MANUFACTURING, WHOLESELLING, RETAILING………….......13

V CURRENT SCENARIO OF RETAIL: SURVEY……………………..…16

i. CURRENT STRUCTURE………………………………………....16

ii. SURVEY: STUDY & OBSERVATIONS…………………………....17

iii. DYNAMICS OF INDIAN RETAIL INDUSTRY………………….....27

VI PROPOSED SCENARIO OF RETAIL……………………...................34

i. NEW STRUCTURE……………………...............................................32

ii. DIGITAL RETAILING…………………................................................35

iii. BENEFITS…………………………………………………….....36

VII FDI SUCCESS STORY OF CHINA…………………………………....40

IX CONCLUSION……………………………………………………......43

X ANNEXURE…………………………………………………………..44

XI BIBLIOGRAPHY……………………………………………………...46


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I ACKNOWLEDGEMENT

I am extremely thankful to Sikkim Manipal University for giving me the opportunity of working on this

highly speculated and burning topic as part of the Course Curriculum of the 3 Year BBA graduation

course.

I have been associated with the Telecom Industry for the past three years. My interest in politics and

news exposed me to this burning issue of FDI in retail. My inquisitiveness prompted me to understand

the issue and go in details of the subject.

In June 2011, a few of my friends from Dayalbagh Education Institute, Dayalbagh Agra stayed with

me in Delhi as they had to attend their summer internship with HCL Technologies at Noida. They were

given a project in which they had to look for IT solutions for Retail, Manufacturing, Logistics and Health

Care. This was the point where I had the freedom and the right platform of interacting with these young

brains. I took the issue in a more holistic manner and tried to understand and visualize the benefits of

technology transfer through foreign direct investment in retail. My intention was to understand how

technology transfer through FDI could bring about a cultural and information revolution in our country.

I attempted to apply my knowledge pertaining to Information Technology and Systems Engineering to

retail systems. It was a very different experience of working on an issue of great importance to the

nation. The learning was enormous and the experience was very special.

I hope my efforts bring structure and clarity by eradicating the chaos and speculation pertaining to the

subject.

I am thankful to Mr. Rajeev Sharma of Alcatel Lucent (GM – Supply Chain) for sharing his experience

and understanding of Logistics and Supply Chain Management with great simplicity and clarity. I would

thank Mr. Goyal (SMU Agra), Samrath Kashyap (Brother), Agam Adhaar Talwar, Kushagra Arora,

Atul Kannoujiya, Amit Harit, Puneet Gogna, Tamanna Saxena, Arshi Markan, Preeti Markan,

Murshid Salam (Program Controller, Ericsson) and T. Gurusant (A.M., HDFC Ltd.) for sharing,

discussing and debating the issue.

I specially thank my Father Mr. Vidhu Kashyap, Mother Mrs. Dayalpyari Kashyap, Grandmother Mrs.

Surat Kashyap and Grandfather Late Shri. Brij Bhushan Kashyap for their constant guidance,

encouragement and constant inputs on news and current affairs.

I thank Mr. Nandan Nilkeni, Mr. Sam Pitroda, Late. Mr. Rajiv Gandhi and Mr. Kapil Sibal for being a

great source of inspiration.

I dedicate this humble effort to my Ideal, Guru and Mentor Gracious Huzur Dr. Prem Saran Satsangi

who held my hand from time to time and showed me the optimal trajectory to truth. I pray in the Feet of

the Lord Almighty Who Has constantly showered me with His Grace, Blessings and Protection.

TRUE/COMPLETE KNOWLEDGE GIVES DISCIPLINE, FROM DISCIPLINE COMES WORTHINESS

FROM WORTHINESS ONE GETS WEALTH, FROM WEALTH ONE DOES GOOD DEEDS, FROM GOOD DEEDS ONE GETS JOY


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II RESEARCH METHODOLOGY

The research conducted for this project was exploratory and qualitative in nature. The Retail Industry

was studied in detail. The objective was to understand whether Foreign Direct Investment would in any

way help the retailers or wholesalers. Also I wanted to understand the current IT awareness in the Retail

Industry. The basic approach for the study is furnished below in the workflow.

The research commenced on April 23, 2012. A sample size of 50 retail units was covered. The sampling

technique was judgmental. The Retail vertical included Kirana shops within apartments, outside

apartments and Kiranas in central business districts. Data was collected through in depth interviews and

observation. The owner or the managers of the units were contacted and discussions were done about

their business dynamics, problems, needs and technology intervention in their business. A

questionnaire was used to aid in the interview process (Refer Annexure I).

The study continued for 28 days after which analysis and interpretation of primary data was done. MS

Excel was used to analyze the data.

Parallel to the survey, various newspapers, magazines, articles and case studies were searched and

reviewed on the internet. Special emphasis was given to information related to Information Technology,

Market Research, Foreign Direct Investment and Technology Transfer or Transfer of Technology (TOT).

At the end of the study, a new system was proposed with the advantages.

(ANHAD KASHYAP)

Roll No. 520946586

BBA Sixth Semester


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III EXECUTIVE SUMMARY

i. INTRODUCTION

The purpose of this project is to understand the Governments of India’s concern on the issue of Foreign

Direct Investment in Multi Brand Retail in India. In this effort, I have attempted to throw light on the

benefits of FDI in Retail, Technology Transfer etc. and have proposed several systems for improving our

Indian Retail System. The basic benefits of Foreign Direct Investment in retail are:

• Job opportunities

• Development of Infrastructure

• Revenue from Infrastructure

• Better Supply and Variety of Products

• Supply Chain Management Optimization

• Cost Optimization

• Transformation of the Marketing Research Industry

• Benefits to Agriculture

• International Platform for auctioning produce

• Better prices and no third party or broker interfacing

• Benefits to Government

• Revenue from Taxes

• Control over Black Marketing and Fraud

• Transparency in the system as all records would be in Digital form

• Better Market Future Forecasting due to better Market Research Primary Information

• Benefits to Retailers as they would get timely and cheap products from the new organized

wholesalers.

As India has developed its competency in the field of software, so have certain organizations like Wal-

Mart, Carrefour in fields of Supply Chain Management and Logistics. They have modern techniques of

cost and logistics optimization. They also have an international platform for auctioning farmer produce.

We can produce the competence they have, but this would require several years. Although we can

manage to get into a technology transfer mode with these organizations and become competent in a

few years. Therefore FDI in Multi Brand Retail would be beneficial for our country. We could vary the FDI

percentages with time. FDI would help us in creating jobs, help in organizing the retail market, we

would have control over black marketing, we would have a better and accurate market research

industry, and so on there are innumerous benefits. The only loss according to me in the entire cycle

would be to the WHOLESELLERS as they would be replaced with these Giant organizations. But I feel this

has to be done sometime in the future or else the situations would worsen for us and it would become

really difficult for our government to manage the mess.


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ii. IT WHISTLE BLOWING

We live in the 21st Century, the age of information. We have seen the rapid growth in the human

population in the last decade. As the population increased, so did the volume of work and with the

volume of work, increased factors like corruption, black marketing etc. which started creating disparity

in our system. To deal with such issues we have made several policing infrastructures but we need an

authentic way of whistle blowing. IT Whistle Blowing is the best and the most accurate way of getting

information related to any non-compliance within the system. Therefore we now need to speak of

making all the interactions in the Retail System digital. We need to organize the entire retail system so

that the market becomes intelligent and we are able to prevent factors like corruption and black

marketing. Basically all the disorganization in the retail system happens at the Wholesalers end and

therefore replacing the primitive wholesalers with organized giants like Wal-Mart and Carrefour would

help in organizing the Retail System and make it a Wisdom Based System from a Knowledge Based

System. In this competitive environment, we need to take necessary steps now as if we don’t, the future

where our population would hugely explode, we would not have systems in place to monitor and

control corruption, black marketing etc.

iii. GOVERNMENT OF INDIA ON MULTI BRAND RETAIL

The Government of India recently came out with a concept note on foreign direct investment (FDI) in

multi-brand retail trading. This is an emotional issue, and has been placed on the back burner by

successive governments in response to fears about its impact on small retailers, who are large

generators of employment. This fear is worthy of examination. Trade constitutes around 15% of our

gross domestic product, of which retail trade makes up at least half. The retail sector is the second

largest employer after agriculture, providing job opportunities to at least 33 million people. Few can

underestimate the importance of being circumspect with regard to any legislation that will affect so

many jobs.

The main driver for this policy seems to be the recognition that the Indian economy faces serious

supply-side constraints, particularly in the food-related retail chains. The government would like to

improve back-end infrastructure, and ultimately reduce post-harvest losses and other wastage. There is

also a general concern, highlighted by the persistence of food inflation, that intermediaries obtain a

disproportionate share of value in this chain and farmers receive only 15% of the end consumer price.

Further, there has been lack of investments in the logistics of retail chains creating inefficiencies in the

supply chain. The Indian retail industry is still at a nascent stage and modernization of retail trade is long

overdue. This policy change by the government will open up strategic investment opportunities for

global retailers. This will have a significant positive impact on all the stakeholders and will provide a

necessary fillip to the growth of the Indian economy. With entry of foreign retailers, consumers will

experience more variety of products, with improved quality. Foreign 'low-cost' big players will adopt an

integrated supply chain management system that, in turn, should help lower prices of products,

benefiting consumers at large.

FMCG companies are expected to benefit too. This would be evident through the increased volume of

sales due to wider distribution channels. Currently, FMCG companies sell 6% nationally through modern

retail outlets and 20% in metros through this channel. This number is definitely expected to scale up

with emergence of foreign retail stores. Modern retailing is likely to play an important role in increasing

the consumption of processed food items. It will also aid better understanding of consumer preferences

as it is a vital link between the processors and consumers. New markets for FMCG products could be


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developed with the growth in foreign retailers, through expansion into new formats, categories,

channels, customers, services and geographies. The industry would become more competitive with

development of the imported food and beverages market. In the processed food industry, small and

new players will be able to find ways to place their products in modern stores by producing store label

brands for them. However, there are a few challenges that the FMCG industry needs to address. Price

realization for the FMCG companies may come down as they need to bargain hard with big retail chains.

Also, private labels may pose a threat to established brands.

Second, large retail has typically succeeded where consumers have been willing to buy in large

quantities to avail volume-related discounts. In a country where the marketing ethos has been

dominated by the paisa pack, and marketers obsess about the fact that the unit outlay for a commodity

must be small for it to be attractive, another question is whether there is a willingness to make large

outlays. Undoubtedly, lower prices psychologically propel buyers to spend more than they otherwise

would. The resulting growth in private consumption creates jobs. It is not clear if this aspect has been

considered. What we must avoid is a situation similar to the one in the US, where increased

consumption does take place, but actually creates jobs in China. If we can ensure that procurement from

large-format retail takes place within India, it may have a beneficial impact on jobs.

Currently, lack of adequate storage facilities causes heavy losses to farmers. As per industry estimates,

35-40% of fruit and vegetables and nearly 10% of food grains in India are wasted annually. Though FDI is

permitted in cold chains to the extent of 100%, in the absence of FDI in front-end retail, investment

flows into this sector have been insignificant. Thus, FDI in retail would help in addressing this issue with

compulsory investment of 50% in back-end.

Farmers would also be able to secure remunerative prices. In the present dispensation, there is a

complex chain of procurement involving several middlemen. FDI in retail will create the enabling

environment and it is expected that progressive states will undertake gradual reform of the APMC

(Agriculture Produce Marketing Committees) Act.


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IV CONCEPT STRUCTURING

i. FOREIGN DIRECT INVESTMENT

A. DEFINITION

“Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in

one economy (‘‘direct investor’’) in an entity resident in an economy other than that of the investor

(‘‘direct investment enterprise’’). The lasting interest implies the existence of a long-term relationship

between the direct investor and the enterprise and a significant degree of influence on the

management of the enterprise. Direct investment involves both the initial transaction between the

two entities and all subsequent capital transactions between them and among affiliated enterprises,

both incorporated and unincorporated. “

-Organisation for Economic Co-operation and Development

“An investment made by a company or entity based in one country, into a company or entity based in

another country. Foreign direct investments differ substantially from indirect investments such as

portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange.

Entities making direct investments typically have a significant degree of influence and control over

the company into which the investment is made. Open economies with skilled workforces and good

growth prospects tend to attract larger amounts of foreign direct investment than closed, highly

regulated economies.”

-Investopedia

Foreign direct investment (FDI) is direct investment into production in a country by a company located

in another country, either by buying a company in the country or by expanding operations of an

existing business in the country. Foreign direct investment is done for many reasons including to take

advantage of cheaper wages in the country, special investment privileges such as tax exemptions

offered by the country as an incentive to gain tariff-free access to the markets of the country or the

region. Foreign direct investment is in contrast to portfolio investment which is a passive investment in

the securities of another country such as stocks and bonds.

As a part of the national accounts of a country FDI refers to the net inflows of investment to acquire a

lasting management interest (10 percent or more of voting stock) in an enterprise operating in an

economy other than that of the investor. It is the sum of equity capital, other long-term capital, and

short-term capital as shown the balance of payments. It usually involves participation in management,

joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct

investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative)

and "stock of foreign direct investment", which is the cumulative number for a given period. Direct

investment excludes investment through purchase of shares. FDI is one example of international factor

movements. Let us have a look at the type of FDI’s.

Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain

stage in a host country through FDI.


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Platform FDI is generally defined as investment and production in a host country where the output is

largely sold in third markets, not the parent or host-country markets. It is not clear how to view these

investments in the terminology of current FDI theory, where the principal distinction is between

horizontal or market-seeking production and vertical or resource-seeking investments. Platform FDI has

elements of both. Often, production is to serve a large integrating market with a branch plant as in

horizontal investments but a specific location within the region is chosen on the basis of cost

considerations, as in vertical investments

Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value

chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host

country. Whereas Horizontal FDI decrease international trade as the product of them is usually aimed at

host country, the two other types generally act as a stimulus for it.

B. METHODS

The foreign direct investor may acquire voting power of an enterprise in an economy through any of the

following methods:

• by incorporating a wholly owned subsidiary or company

• by acquiring shares in an associated enterprise

• through a merger or an acquisition of an unrelated enterprise

• participating in an equity joint venture with another investor or enterprise

Foreign direct investment incentives may take the following forms:

• low corporate tax and individual income tax rates

• tax holidays

• other types of tax concessions

• preferential tariffs

• special economic zones

• EPZ – Export Processing Zones

• Bonded Warehouses

• Maquiladoras

• investment financial subsidies

• Soft loan or loan guarantees

• free land or land subsidies

• relocation & expatriation

• infrastructure subsidies

• R&D support

• derogation from regulations (usually for very large projects)


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ii. TECHNOLOGY TRANSFER

A. DEFINITION

“Technology transfer is the exchange of technical knowledge, data, designs, inventions or trade

secrets from one organization to another organization or from one application to another

application.”

-TRsG, Inc., USA

“The transfer of intellectual property (patents, copyrights, trade secrets, know-how, etc) from the

laboratory to the marketplace. It encompasses all the various life cycles of a product, from the initial

thought through design to marketing and selling the product.”

-Office of Technology Transfer and Commercialization, USA

“Technology transfer is the process by which existing knowledge, facilities, or capabilities developed

under federal research and development (R&D) funding are utilized to fulfil public and private

needs.”

-Federal Laboratory Consortium for Technology Transfer

Technology Transfer also called Transfer of Technology (TOT) and Technology Commercialisation, is the

process of skill transferring, knowledge, technologies, methods of manufacturing, samples of

manufacturing and facilities among governments or universities and other institutions to ensure that

scientific and technological developments are accessible to a wider range of users who can then further

develop and exploit the technology into new products, processes, applications, materials or services. It

is closely related to (and may arguably be considered a subset of) knowledge transfer.

Technology transfer is the term used to describe the processes by which technological knowledge

moves within or between organizations. International technology transfer refers to the way in which this

occurs between countries. The technological knowledge that is transferred can assume various forms. It

can be embodied in goods (including physical goods, plant and animal organisms), services and people,

and organizational arrangements, or codified in blueprints, designs, technical documents, and the

content of innumerable types of training. Alternatively it can be communicated through flows of tacit

knowledge – i.e. knowledge that has not been fully codified, and remains embodied in the skills of

people.

All these forms of knowledge may vary in a further important way. At one end of the spectrum, the

transfer involved can be concerned with the knowledge for using and operating technology. At the

other end, it can be concerned with the knowledge necessary for changing technology and innovating.

In between, transferred knowledge may involve the many different kinds of design and engineering

knowledge required to replicate and modify technologies.

Moreover, in international technology transfer there is a distinction between horizontal and vertical

transfers. Horizontal technology transfer consists of the movement of an established technology from

one operational environment to another (for instance from one company to another). Vertical

technology transfer, in contrast, refers to the transmission of new technologies from their generation

during research and development activities in science and technology organizations, for instance, to

application in the industrial and agricultural sectors.


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B. GAINING ACCESS TO NEW TECHNOLOGIES

Technology transfer is an important means by which developing countries gain access to technologies

that are new to them. For example, the acquisition of foreign technologies by East Asian newly

industrialized countries, coupled with domestic ‘technological learning’ – efforts to accumulate the

capability to change technologies – have been key factors in their rapid technological and economic

development. However the ability of developing countries to use technology transfers to develop their

domestic capabilities, allowing such countries to reap the social and economic benefits of existing

technologies, have been mixed. There are wide variations between countries and between sectors

within individual countries. The disparities between – and within – developing countries in benefiting

from technology transfer suggest that the relationship between technology transfer and the

accumulation of domestic technological capability is far from straightforward. In other words, more

technology transfer does not necessarily lead to more technological and economic development.

C. TECHNOLOGICAL LEARNING CAPABILITIES

The initial emphasis in the analysis of international technology transfer, in discussions among policy

analysts up to the late 1970s, was on the costs of technology transfer, and on whether the choice of

technologies was appropriate to the local conditions in developing countries. Little attention was given

in this analysis to the absorptive capacities and domestic technological learning of those who acquired

foreign technologies – in other words, to the processes involved in assimilating imported technologies

and putting them to work efficiently. The underlying assumption seemed to be that once a technology

was acquired, its absorption and implementation took place almost effortlessly. However it is now

widely accepted that this is not the case. The acquisition and absorption of foreign technologies, and

their further development, are each complex processes that demand significant efforts from the

acquirers. Several factors contribute to this complexity. First, the acquisition and mastery of technology

are both costly and time-consuming. Second, acquired technologies often need to be adapted to local

conditions. Thirdly, technologies are not commodities that can be transferred as a complete ready-to-

use set; they also contain tacit components that are not easily codified and transmitted in written

documents, and require extensive learning efforts to be properly understood.

This increased understanding of the process of technological development has contributed to shifting

attention of academics and policy researchers from the narrow transfer of technology as such to the

technological learning efforts and mastery of acquirers.

D. THE POLICY DIMENSION AND REGULATORY FRAMEWORKS

For some, the process of technology transfer is one that can be left primarily to the operation of the free

market. But experience has shown that the process is also sensitive to ‘market failures’, such as

imbalances in bargaining power and information between sources and acquirers of technologies.

Trends in the regulations introduced to encourage trade liberalization also have implications for access

by developing countries to foreign technologies. As a result, technology transfer is often the object of

policy interventions at the international level, as well as in both developing and developed countries,

each trying to tackle these issues from different, and sometimes conflicting, angles. At the international

level, technology transfer is becoming increasingly drawn into political negotiations between

developed and developing countries, particularly those involving international agreements on trade

and environment-related issues. Provisions on technology transfer, for example, form an important part

in several multilateral agreements, such as the Agreement on Trade-Related Aspects of Intellectual


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Property Rights (TRIPS) of the World Trade Organization (WTO) and the United Nations Framework

Convention on Climate Change (UNFCCC), as well as in regional and bilateral agreements.

Policies adopted by developed countries for stimulating the transfer of technologies to developing

countries are also becoming increasingly relevant. This is because international policies on trade and

environment issues often require such countries to create incentives for the transfer of technologies to

developing countries. In this context, according to UNCTAD, 41 agencies and programs in 23 developed

countries offer incentives that directly or indirectly facilitate technology transfer to developing

countries. These measures include financing support, training, matching services, partnerships, alliances

and support for equipment purchase or licensing. However there is an ongoing discussion about the

effectiveness of existing measures. Some analysts, for example, point out that incentives are selective

and have limited coverage, and that few such programs are centrally concerned with technology

transfers. With regard to the policies of developing countries themselves, it is widely accepted that their

purpose should be to maximize the gains from technology transfer while limiting its shortcomings. But

the new international policies on trade – such as those adopted by the WTO – appear to be ambivalent

in this respect. Some aspects of the WTO regime, such as the Trade Related Investment Measures

(TRIMS), can constrain the ability of acquiring countries’ governments to act by excluding the use of

certain interventions. However the WTO regime does not rule out all types of interventions. In particular,

measures to support training, human resources development and research and development are

permitted. For developing countries, therefore, a key question is how to exploit the scope left for pro-

active policies that can create the conditions under which technology transfer can be most beneficial.

This is particularly relevant in a context of global trade liberalization, and of the new international rules

that govern this process.


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iii. MANUFACTURING, WHOLESELLING, RETAILING

MANUFACTURING

Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may

refer to a range of human activity, from handicraft to high tech, but is most commonly applied to

industrial production, in which raw materials are transformed into finished goods on a large scale. Such

finished goods may be used for manufacturing other, more complex products, such as aircraft,

household appliances or automobiles, or sold to wholesalers, who in turn sell them to retailers, who

then sell them to end users – the "consumers". Manufacturing takes turns under all types of economic

systems. In a free market economy, manufacturing is usually directed toward the mass production of

products for sale to consumers at a profit. In a collectivist economy, manufacturing is more frequently

directed by the state to supply a centrally planned economy. In mixed market economies,

manufacturing occurs under some degree of government regulation. Modern manufacturing includes

all intermediate processes required for the production and integration of a product's components.

WHOLESALING

Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to

industrial, commercial, institutional, or other professional business users, or to other wholesalers and

related subordinated services. In general, it is the sale of goods to anyone other than a standard

consumer. According to the United Nations Statistics Division, "wholesale" is the resale (sale without

transformation) of new and used goods to retailers, to industrial, commercial, institutional or

professional users, or to other wholesalers, or involves acting as an agent or broker in buying

merchandise for, or selling merchandise to, such persons or companies. Wholesalers frequently

physically assemble sort and grade goods in large lots, break bulk, repack and redistribute in smaller

lots. While wholesalers of most products usually operate from independent premises, wholesale

marketing for foodstuffs can take place at specific wholesale markets where all traders are congregated.

Traditionally, wholesalers were closer to the markets they supplied than the source from which they got

the products.

RETAILING

Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are part

of an integrated system called the supply-chain. A retailer purchases goods or products in large

quantities from manufacturers or directly through a wholesaler, and then sells smaller quantities to the

consumer for a profit. Retailing can be done in either fixed locations or online. Retailing includes

subordinated services, such as delivery. The term "retailer" is also applied where a service provider

services the needs of a large number of individuals, such as a public utility, like electric power.

Shops may be on residential streets, shopping streets with few or no houses or in a shopping mall.

Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and

mail order, are forms of non-shop retailing.

TYPES OF RETAIL OUTLETS

A marketplace is a location where goods and services are exchanged. The traditional market square is

a city square where traders set up stalls and buyers browse the merchandise. This kind of market is very

old, and countless such markets are still in operation around the whole world.


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In some parts of the world, the retail business is still dominated by small family-run stores, but this

market is increasingly being taken over by large retail chains.

Retail is usually classified by type of products as follows:

• Food products

• Hard goods or durable goods ("hardline retailers") - appliances, electronics, furniture, sporting

goods, etc. Goods that do not quickly wear out and provide utility over time.

• Soft goods or consumables - clothing, apparel, and other fabrics. Goods that are consumed

after one use or have a limited period (typically under three years) in which you may use them.

There are the following types of retailers by marketing strategy:

• Department stores - very large stores offering a huge assortment of "soft" and "hard goods;

often bear a resemblance to a collection of specialty stores. A retailer of such store carries

variety of categories and has broad assortment at average price. They offer considerable

customer service.

• Discount stores - tend to offer a wide array of products and services, but they compete mainly

on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally

retailers sell less fashion-oriented brands.

• Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled on pallets

or steel shelves; warehouse clubs charge a membership fee;

• Variety stores - these offer extremely low-cost goods, with limited selection;

• Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on

wealthy individuals).

• 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 stores: 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.

• General store - a rural store that supplies the main needs for the local community;

• Convenience stores: is 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.

• Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins.

The operating cost is comparatively less than other retail formats.

• Supermarkets: is a self-service store consisting mainly of grocery and limited products on non-

food items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be

anywhere between 20,000 and 40,000 square feet (3,700 m2). Example: SPAR supermarket.

• Malls: has a range of retail shops at a single outlet. They endow with products, food and

entertainment under a roof.

• Category killers or Category Specialist: By supplying wide assortment in a single category for

lower prices a retailer can "kill" that category for other retailers. For few categories, such as

electronics, the products are displayed at the centre of the store and sales person will be


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available to address customer queries and give suggestions when required. Other retail format

stores are forced to reduce the prices if a category specialist retail store is present in the vicinity.

• E-tailers: The customer can shop and order through internet and the merchandise are dropped

at the customer's doorstep. Here the retailers use drop shipping technique. They accept the

payment for the product but the customer receives the product directly from the manufacturer

or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and

are interested in home shopping. However it is important for the customer to be wary about

defective products and non-secure credit card transaction. Example: Amazon, Pennyful and

eBay.

• Vending Machines: This is an automated piece of equipment wherein customers can drop in

the money in machine and acquire the products.

Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what

income level they target. Other types of retail store include:

• Automated Retail stores are self-service, robotic kiosks located in airports, malls and grocery

stores. The stores accept credit cards and are usually open 24/7.

• Big-box stores encompass larger department, discount, general merchandise, and warehouse

stores.

• Convenience store - a small store often with extended hours, stocking everyday or roadside

items;

• General store - a store which sells most goods needed, typically in a rural area;

Retailers can opt for a format as each provides different retail mix to its customers based on their

customer demographics, lifestyle and purchase behaviour. A good format will lend a hand to display

products well and entice the target customers to spawn sales.


16

V CURRENT SCENARIO OF RETAIL

i. CURRENT STRUCTURE

The above diagram represents the present scenario of the retail in India. This structure basically

comprises of two relationships:

1. MANUFACTURER WHOLESALER RELATIONSHIP

Wholesalers purchase goods and products from the Manufacturers and then further distribute them

to retailers. The end interfacing to the consumer is done by the retailers. If there is disorganization

at the Wholesalers end, it becomes really difficult to detect the problems at the retailer end. In the

present scenario, the entire structure is working on a traditional non IT mechanism which needs to

be rectified. Black Marketing basically happens at the wholesalers end as we don’t have an IT

Mechanism of tracking batches of products because we do not follow an IT mechanism. In short the

current system lacks transparency.

2. WHOLESALER RETAILER RELATIONSHIP

Wholesalers purchase good and products from the manufacturer and then distribute is further to

retailers who interface with the end consumer. Pricing is one of the major problems at the

wholesalers end. Presently there is lack of an IT Mechanism for forcing price standardization as it is

very difficult manages such chaos using primitive hardcopy techniques. It is also observed that due

to lack of transparency in this relationship, during the Annual Budget release, those articles whose

prices are expected to increase are illegally stocked and wholesalers enjoy huge profits. Both the

manufacturers and retailers are unaware of these problems. Replacing traditional Wholesalers with

large players like Wal-Mart and Carrefour would help in organizing the structure and bring

transparency in the system. It would help in controlling black marketing and other market evils. In

case we bring in big players such as Wal-Mart or Carrefour in the Indian Retail System, they might

affect the wholesalers. As far as the retailers are concerned they would be benefited as they would

get products at cheap costs. Also there would be a whole new dimension of study and analysis in

the market research business. Also manufacturers would be benefited with this setup.

Manufacturer

MANUFACTURER

RETAILER

WHOLESALER

1

2

Wholesaler

Retailer

Point of disconnect or

disorganization


17

ii. SURVEY: STUDY & OBSERVATIONS

The Retail vertical is one of the highly researched verticals owing to the complexities which exist. To

some extent, over the years, it has been possible for IT companies to cater to the organised players as

they are few in number, with enough capital and infrastructure. But when it comes to catering to the

needs of the unorganised sector, the complexities increase as the segment is widely spread, with limited

disposable income and IT adaptability issues.

The study was carried out in the Kirana industry within the Retail segment. The industry was further

divided into relevant buckets of Kirana’s, Kirana’s in CBD’s (Central Business Districts), Kirana’s outside

apartment complex and those within the apartment set – up.

The area of study was the NCR. The sample size was 50 for the vertical. Rich samples from New Delhi,

Gurgaon & Noida were taken to bring out a representation from each of these geographical areas for

each of the categories defined.

The table below depicts the sample spread across the categories laid down in buckets and also the

Geographical spread. 7 Kirana’s, 25 Kirana’s in CBD’s, 6 Outside Apartment Kirana’s and 12 Within

Apartment Complexes were covered. 27 samples were taken from New Delhi, 15 from Noida and 8 were

from Gurgaon.

Buckets New Delhi Noida Gurgaon Total

Kirana 6 1 - 7

CBD 16 5 4 25

Outside

Apartment

2 3 1 6

Within

Apartment

3 6 3 12

27 15 8 50

TABLE 1.2.2: GEOGRAPHICAL SPREAD AND CLASSIFICATION INTO BUCKETS


18

A. GROWTH SCENARIO

� 20 % of the retailers surveyed were experiencing high growth rate of more than 20 %, while 46 %

experienced medium growth of 5 – 20 %.

� 67 % of the retailers within apartment complexes are growing at a rate of less than 5 %, which is forcing

most of them to start rethinking their position. In one of the apartments in Dwarka, 5 retailers had

changed within a span of 2 years.

� Out of the 10 high growth retailers, 8 of them are located in CBD’s.

� Needs, a supermarket chain across Gurgaon, is an example of how a within apartment retail outlet can

succeed. It has 25 outlets, and is integrated with a billing system.

BUCKETS

GROWTH

HIGH MEDIUM LOW TOTAL

CBD 8 12 5 25

OUTSIDE APARTMENT 1 3 2 6

WITHIN APARTMENT 1 3 8 12

KIRANA 0 5 2 7

AGGREGATE 10 23 17 50

GRAPH 1.6: GROWTH SCENARIO IN THE RETAIL SECTOR (%)

TABLE 1.2.3: GROWTH SCENARIO ACCORDING TO RELEVANT BUCKETS


19

B. HOME DELIVERY SERVICES

• 70 % carry out Delivery services to help them build and retain customers. The rest either don’t have

the resources to carry out such services, or don’t feel the need to.

• One Super Mart owner in Kendriya Vihar (within apartment) felt that not providing such a service

will force the customers to come to the shop, which will increase the probability of him purchasing

more.

BUCKETS HOME DELIVERY

YES NO

CBD 17 8

OUTSIDE APARTMENT 5 1

WITHIN APARTMENT 7 5

KIRANA 6 1

AGGREGATE 35 15

GRAPH 1.7: EXTENT OF HOME DELIVERY AS A SERVICE BEING A PREREQUISITE (%)

TABLE 1.2.3: HOME DELIVERY AS A PREREQUISITE


20

C. CREDIT SERVICES

• Only 26 % use credit as a service for customer relationship building.

• Most of them extend credit only to very well-known customers who are regulars; also they don’t like

getting into a cash crunch situation.

BUCKETS CREDIT

YES NO

CBD 6 19



KIRANA 3 4

AGGREGATE 13 37

GRAPH 1.8: CREDIT SERVICE AS A PREREQUISITE (%)

1.2.4: CREDIT AS A PREREQUISITE SERVICE


21

D. SOURCING OF SUPPLIES

• 22 % of the retailers go to the wholesalers and also receive goods from distributors, while 8 %

source their supplies from Wholesalers, whereas in 70 % of the cases the supplier comes.

• 33 % of the retailers within apartments are entirely neglected by the distributors, while 17 % do not

get adequate supplies and hence have to get the remaining supplies from wholesalers, and is

having to incur transit cost.

•

BUCKETS SOURCING OF SUPPLIES

BOTH GOES TO

WHOLESALER

SUPPLIER COMES

CBD 6 0 19

OUTSIDE APARTMENT 1 0 5

WITHIN APARTMENT 2 4 6

KIRANA 2 0 5

AGGREGATE 11 4 35

GRAPH 1.9: SOURCING OF SUPPLIES (%)

TABLE 1.2.5: SOURCING OF SUPPLIES


22

E. PROBLEM OF DEAD – STOCK

• 44 % of the retailers felt that there was a problem of Dead stock being returned.

• The manufacturers have a policy of taking back the dead stock. This was backed by the distributor

of Haldiram in Noida. He also said that the whole process takes more than 9 months, and hence it

leads to a lot of funds being blocked.

• Hence, if sold on cash basis to the retailer, and the retailer doesn’t generate as much business, he

may not take the dead stock back and forgo the business with the retailer.

BUCKETS DEAD STOCK

YES NO

CBD 14 11



KIRANA 2 5

AGGREGATE 22 28

GRAPH 1.10: PROBLEM OF DEAD STOCK (%)

TABLE 1.2.6: PROBLEM OF DEAD STOCK


23

F. IT ADAPTION

18 % of the respondents already had some kind of an IT solution in place, while 18 % said that they

would like to invest in IT, whereas 16 % said they might invest. 48 % said that they were not interested.

The retailers who were willing to invest or might invest were majorly looking at a Billing solution.

The major reason for not investing in bar coding systems even though they see benefits is that most of

them feel its an additional burden, a skilled individual will be required, or training will be needed for

managing it. Also inputting bar codes on each product is a tedious task and hence feel that, it can be

done without. Another major reason is that they feel that it will slow down the process.

BUCKETS IT ADAPTION

ALREADY USING

IT

INTERESTE

D

MAY

BE

NOT

INTERESTED

CBD 4 8 2 11

OUTSIDE

APARTMENT

4 0 0 2

WITHIN APARTMENT 1 1 3 7

KIRANA 0 0 3 4

AGGREGATE 9 9 8 24

GRAPH 1.11: LEVEL OF IT ADAPTION ACROSS BUCKETS (%)

TABLE 1.2.7: LEVEL OF IT ADAPTION ACROSS BUCKETS


24

G. ECONOMIC SEGMENTATION

According to the different needs, segmentation is done keeping in mind the investment made by the

retailers as follows:

SEGMENT INVESTMENT NO. OF RETAILERS %

LOWER LESS THAN 2 LAKH 24 48%

LOWER MIDDLE 2-8LAKHS 8 16%

UPPER MIDDLE ABOVE 8 LAKHS 18 36%

TOTAL 50 100%

The table furnished below reflects the disposable income across different segments

SEGMENT TURNOVER MARGINS (10 %)* OPERATING

EXPENSES**

DISPOSABLE

INCOME***

LOWER

(10/10)

1 - 4 LAKHS 10000 - 40000 2000 - 8000 8000 – 32000

LOWER

MIDDLE

4- 10 LAKHS 40000 - 100000 12000 - 30000 28000 –

70000

UPPER

MIDDLE

ABOVE 10

LAKHS

ABOVE 100000 40000 AND

ABOVE

60000 AND

ABOVE

*The aggregate margin is taken as 10 %.

**Operating expenses are calculated at 20 % for the Lower Segment, 30 % for the Lower middle while 40 %

for the Upper middle.

***The disposable income for each of the segments is calculated by approximation. We finally arrive at a

rough range, according to which we can assess the target segments affordability levels.

TABLE 1.2.8: SEGMENTATION ACCORDING TO INVESTMENT MADE

TABLE 1.2.9: DISPOSABLE INCOME ACROSS SEGMENTS


25

H. KEY INSIGHTS

THREAT PERCEPTION ANALYSIS

• Out of the 50 retailers surveyed, 84 % feel that they face some kind of threat in their business.

• 83 % out of the ones, who feel that they face a threat, feel the threat from organized players, while

36 % feel it from wholesalers and 29 % from other retailers.

• 19 % cited Inflation as a threat, which maybe one of the reasons for people to become more price

conscious and prefer purchasing goods of daily needs from Big Bazaars and other marts.

CATEGORY – WISE THREAT ANALYSIS

CENTRAL BUSINESS DISTRICT

• 72 % of the retailers felt that they faced a threat. 55 % of the ones who stated a threat, felt the threat

from retailers within the CBD, while 88 % feel the threat from Organized players. People from a lot

of colonies and apartments in and around CBD’s come there to purchase goods, when they run out

of stock. Also, 92 % of the stores within CBD’s do not carry out any CRM measures like maintaining a

database of frequent customers.

KIRANA

• 88 % of the retailers feel that they face some threat. 62% out of those feel it from organized sector

and 25 % from wholesalers. One of the reasons is that, they are relatively smaller players with 71 %

having invested less than INR 2,00,000. Most of them either bank on existing customers or just

accept the situation.

WITHIN APARTMENT

• 83 % of retailers within apartment complexes feel that they face a threat. 80 % out of those feel it

from organized players, 70% from Wholesalers & 30 % from retailers outside the apartment.

• The retailers within apartments feel that people do not prefer buying their monthly supplies from

them and only when they run out of stock do they turn to them. Also, they treat them as Bread,

butter, eggs & milk store.

OUTSIDE APARTMENT

• 100 % feel a threat, and all of them feel it from organized players, and 16 % of them feel it from

retailers and wholesalers.

STOCK – OUT

• 82 % of the retailers feel that they come across situations where the customer returns back without

the product that he is looking for.

• Most retailers out of these maintained the error rates at 10 – 20 %.

• Error rates can be explained as the number of times the customer has returned without purchasing

the good due to unavailability of the same.


26

• Hence, a 10 – 20 % error rate means an opportunity for solving the problem through an ICT

solution.

AGE – OLD SUPPLIER RELATIONSHIP’S

• 86 % of the retailers prefer getting their supplies from Distributors/Wholesalers, with whom they

have built good relationship overtime.

• This is majorly because of flexibility that they receive in terms of credit period, dead stock getting

replaced and lead time getting reduced and supplies being received as and when required.

STOCK GOODS ON THE BASIS OF THEIR OWN UNDERSTANDING OF DEMAND

• 94 % of the retailers surveyed did so on the basis of their own experience. The rest 6 % used both

IT and their experience for the same.

• They carry a strong feeling that they can run their business better with their own business acumen.

EARN BIGGER MARGINS FROM LOOSE – SELLING

• This scenario was seen with 28% of the sample surveyed, they felt that earn close to 15 % margins

while selling in loose compared to 8 -9 % margins in selling sealed products. This was the case in

items such as rice and flour.

• Complexity in catering to such a segment of retailers, as billing for loose items a problem.

NEED ANALYSIS

• Any solution to help increase the margins, keeping in mind the extended ecosystem.

• A simple billing system which allows the retailer to keep track of his daily sales and maintain an

account of the same.

• A solution that reduces the error rates due to stock – out.

• A feature within the solution which intimates him of products which are approaching their expiry

within the stock.

• A solution which is flexible, to accommodate billing of loose – items

CONCLUSION

The retail sector is highly disorganized. Unwillingness to adapt to IT solutions exists due to cultural

problems with retailers. IT awareness is also a big issue. Instead of sophisticated software solutions,

retailers are looking at basic and simple applications that would enhance their work. They are afraid of

adapting to complex systems. The decision to enter this vertical is a very big strategic and long term in

nature, as the market is widespread, complex and the problem of last mile recovery exists. But at the

same time, in terms of volumes it is a market which cannot be ignored. (52 % of the retailers had

already invested or were willing to invest).


27

iii. DYNAMICS OF INDIAN RETAIL INDUSTRY

A. FUTURE AND CURRENT GROWTH OF INDIAN RETAIL

India’s retail industry is estimated to be worth approximately US$411.28 billion and is still growing,

expected to reach US$804.06 billion in 2015. As part of the economic liberalization process set in place

by the Industrial Policy of 1991, the Indian government has opened the retail sector to FDI slowly

through a series of steps:

The Indian government removed the 51 percent cap on FDI into single-brand retail outlets in December

2011, and opened the market fully to foreign investors by permitting 100 percent foreign investment in

this area. It has also made some, albeit limited, progress in allowing multi-brand retailing, which has so

far been prohibited in India. At present, this is restricted to 49 percent foreign equity participation. The

spectre of large supermarket brands displacing traditional Indian mom-and-pop stores is a hot political

issue in India, and the progress and development of the newly liberalized single-brand retail industry

will be watched with some keen eyes as concerns further possible liberalization in the multi-brand

sector.

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry

is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 8-

10% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to

reach 22% by 2010. According to a report by Northbridge Capita, the India retail industry is expected to

grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20% of the total market

share. It can be mentioned here that, the share of organized sector in 2007 was 7.5% of the total retail

market.

The industry is fragmented, widely spread, complex and with the problem of last recovery exists if there

are efforts to cater to them. But at the same time, in terms of volumes, the industry cannot be ignored

and hence the Kirana’s are seen as a lucrative market. The opportunity can be tapped only if a simple

way is derived to cater to such a market space. Hence it becomes important to understand the industry

and find ways to tap the opportunity.


28

If we look at the study carried out by Zinnov Analysis, we can get a fair idea about the format – wise

break up of retail shops in 2009 – 10. More than 1700 stores fall into the category of large stores, which

is set to increase with government opening the doors for investment in the back – end of the retail

sector. Also most of these are set to be organised to a large extent. But what eventually catches the eye

is the fact that in terms of volumes, Mom n Pop stores have a base of 12 million. Also the medium store

with a number of 3 million seems an attractive destination. Also an interesting aspect which can be seen

is that, in terms of the market break – up, the urban sector has a whopping 45 %.

Also if we have a look at the sector – wise breakup of the money spent on retail according to Zinnov’s

data, more than 64.8 % is on food, beverages and tobacco, while the money spent on apparels is 7 %

and on personal health care about 7.6 %.

The data gives a decent idea about the format – wise break up of retail shops in India, with also

spending preferences.

RETAIL FORMATS

Hyper marts/supermarkets: large self-servicing outlets offering products from a variety of categories.

• Mom-and-pop stores: they are family owned business catering to small sections; they are

individually handled retail outlets and have a personal touch.

• Departmental stores: are general retail merchandisers offering quality products and services.

• Convenience stores: are located in residential areas with slightly higher prices goods due to the

convenience offered.

• Shopping malls: the biggest form of retail in India, malls offers customers a mix of all types of

products and services including entertainment and food under a single roof.

• E-trailers: are retailers providing online buying and selling of products and services.

• Discount stores: these are factory outlets that give discount on the MRP.

• Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and other small

items can be bought via vending machine.


29

• Category killers: small specialty stores that offer a variety of categories. They are known as category

killers as they focus on specific categories, such as electronics and sporting goods. This is also

known as Multi Brand Outlets or MBO's.

• Specialty stores: are retail chains dealing in specific categories and provide deep assortment.

Mumbai's Crossword Book Store and RPG's Music World are a couple of examples.

TECHNOLOGY ADOPTION

• Players increasingly deploying advanced IT tools for managing supply chain, warehousing and

logistics requirements

• Indian retail IT market was $253 million in 2006 and it is expected to quadruple to $1.07 billion by

2010.

• Small-scale retailers are also embracing IT solutions

• IBM India, Oracle and SAP are developing solutions for smaller retailers requirements, such as

merchandising solutions, store-level point of sale (POS) needs, collaboration tools and hardware

requirements, ERP solutions, E-commerce, CRM solutions, Supply Chain

• Competition (primary external influencer) is high with SAP with 27% of the share in the market,

followed by Microsoft with 14% and the Local vendors with a 19% share.

• 22 % of the Indian retailers’ shortlist IT vendors based on Strong service and support, and 17 % on

the basis of Good prices, domain knowledge of solutions, the clients business and the retail

industry.

• In China, majority of the retailers say managing or upgrading their IT infrastructure and lack of

technical manpower are two largest IT pain points affecting them.

The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833

billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%.

As the country has got a high growth rates, the consumer spending has also gone up and is also

expected to go up further in the future. In the last four year, the consumer spending in India climbed up

to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year

2013, the organized sector is also expected to grow at a CAGR of 40%.

Usage of Technology in Retail Sector


30

DRS-ICRIER’s survey gives us an idea about the usage of technology in the retail sector. If we look at

Scanning / bar coding for instance, the usage stands at 4 %, which is set to increase to 21 % with another

17 % planning to use it. In terms of penetration, electronic weighing machines have had the maximum

head way with 45 % usage with a planned use of another 15 %. Computerized billing and inventory

management solutions have a bright future as well, with people wanting to invest in them.

Also the penetration of Credit cards is less than 6 % but the bright side is that 24 % are willing to. Also

the air conditioning is also close to 10 % but has a growth possibility of 21 %.

Hence the general feel is that technology penetration is set to increase in the future and hence it makes

the vertical all the more attractive. This business opportunity will definitely be of interest to various

companies, but an insight into the industry would better equip them to cater to them.

Traditional retail dominates food,

grocery and the allied products sector,

with grocery and staples largely sourced

from “Kirana” stores and push cart

vendors. Also the total retail sales have

been going up over the past decade

consistently

Large Indian retail players have already

begun formulating strategies for the

rural retail space as it is seen as an

immense opportunity by them.

There is a large, untapped potential for

organised retail. But at the same time,

the volume of unorganised sector in a

country like India is much more and

hence the question arises as to if that

segment can be catered to.

Market is witnessing a migration from

traditional retailing to

modern/organised retailing formats,

with an explosive proliferation of malls

and branded outlets in the recent year

with immense commercialisation.

There is a large, untapped potential for organised retail. But at the same time, the volume of

unorganised sector in a country like India is much more and hence the question arises as to if that

segment can be catered to. Market is witnessing a migration from traditional retailing to

modern/organised retailing formats, with an explosive proliferation of malls and branded outlets in the

recent year with immense commercialisation.


31

Special Formats in the form of Wedding Malls, Khadi plazas, Village Malls are coming up.

• 72% of India lives in small towns & villages – Agriculture-produce is lion share of retail

and hence Reliance Retail and Aditya Birla Nuvo Group have aggressive plans for the

same.

• India is emerging as a retail sourcing hub.

GENERAL OBSERVATIONS

• The main profit determining factor is sales volume. More is the sales volume, more is the discounts

you get on purchases. Hence retailers with high sales, more retail outlets are able to lower down the

prices of their products.

• Regular communication with the distributors is essential in this business. Generally, retailers are

using mobile phones to place orders.

• Every area has a lot of retail shops. The reasons for their survival despite of high competition are

that they deal in many different kinds of products and the frequency of purchase by customers is

very high.

• 94 % of the retailers are not aware of Carrefour. The ones who are, say that the cost of transport will

itself exceed the benefits from increase in margins.

• Distributors from Big players like HUL carry portable electronic smart devices where they input

the demand of each retailer which is directly communicated to the manufacturer, who accordingly

sorts and sends the required products to the distributor.

• Retail sector is highly disorganized. There are cultural problems with retailers and if this market is

to be catered to, then it would need them to slowly bring about a cultural change.

• IT awareness is also a big issue. But rather than IT software solutions, retailers are looking at basic

and simple applications that would enhance their work. They are afraid of adapting to complex

systems.

TABLE: LIST OF HIGH GROWTH, EMERGING AND POTENTIAL CITIES


32

B. CHALLENGES FACED BY INDIAN RETAIL INDUSTRY

• The tax structure in India favours small retail business

• Lack of adequate infrastructure facilities

• High cost of real estate

• Dissimilarity in consumer groups

• Restrictions in Foreign Direct Investment

• Shortage of retail study options

• Shortage of trained manpower

• Low retail management skill

• Schemes And Offers Concealed: All retailers face the problem of schemes and offers which are

being concealed by distributors. The latest offers and discounts are not communicated to the

retailers

• Manpower Problem: There is a severe manpower problem in the industry. Manpower is majorly

required for extending the service of home delivery, but due to high attrition, it becomes difficult to

do so.

• Shrinkage Due To Shoplifting: Such a problem was felt by retailers who run their business in a

supermarket set – ups, which prompted some of them to invest in CCTV cameras.

• Space Management: Most of the retailers faced the problem of space management. This reduced

their ability to stock more SKU’s.

• Margin’s Unchanged: The retailers feel that the margins that they receive from distributors have

not increased with the increase in inflation. This has lead to reduction in their earnings.

• Problem of Updating Stock Received: Most retailers have a major apprehension that updation of

stock is a very big problem. This is why most of them who have the inclination to invest in such a

system, shy away from doing so.

• Retailers Ignored: Few retailers, especially within apartment complexes were being ignored by the

distributors, compelling them to go to wholesalers and incur transit costs.

C. FDI IN SINGLE BRAND RETAIL

While the precise meaning of single-brand retail has not been clearly defined in any Indian government

circular or notification, single-brand retail generally refers to the selling of goods under a single brand

name.

Up to 100 percent FDI is permissible in single-brand retail, subject to the Foreign Investment Promotion

Board (FIPB) sanctions and conditions. These conditions stipulate that:

• Only single-brand products are sold (i.e. sale of multi-brand goods is not allowed, even if

produced by the same manufacturer)

• Products are sold under the same brand internationally

• Single-brand products include only those identified during manufacturing

• Any additional product categories to be sold under single-brand retail must first receive

additional government approval

FDI in single-brand retail implies that a retail store with foreign investment can only sell one brand. For

example, if Adidas were to obtain permission to retail its flagship brand in India, those retail outlets

could only sell products under the Adidas brand. For Adidas to sell products under the Reebok brand,

which it owns, separate government permission is required and (if permission is granted) Reebok

products must then be sold in separate retail outlets.


33

D. FDI IN MULTI BRAND RETAIL

While the government of India has also not clearly defined the term “multi-brand retail,” FDI in multi-

brand retail generally refers to selling multiple brands under one roof. Currently, this sector is limited to

a maximum of 49 percent foreign equity participation.

In July 2010, the Department of Industrial Policy and Promotion (DIPP) and the Ministry of Commerce

circulated a discussion paper on allowing FDI in multi-brand retail. The Committee of Secretaries, led by

Cabinet Secretary Ajit Seth, recommended opening the retail sector for FDI with a 51 percent cap on

FDI, minimum investment of US$100 million and a mandatory 50 percent capital reinvestment into

backend operations. Notably, the paper does not put forward any upper limit on FDI in multi-brand

retail. Immediately following the release of this discussion paper, the shares of a number of retail

companies in India grew; domestic retail giant, Pantaloon Retail gained 7 percent on the same day,

while Shoppers Stop, an Indian department store chain and emerging retailer, gained 2.9 percent.

The long-awaited scheme has been sent to the Cabinet for approval, but no decision has yet been

made. There appears to be a broad consensus within the Committee of Secretaries that a 51 percent cap

on FDI in multi-brand retail is acceptable. Meanwhile the Department of Consumer Affairs has

supported the case for a 49 percent cap and the Small and Medium Enterprises Ministry has said the

government should limit FDI in multi-brand retail to 18 percent. In terms of location, the proposed

scheme allows investment in towns with populations of at least 10 lakh (1 million), while retailers with

large space requirements may also be allowed to open shop within a 10 kilometer radius of such cities.

Our view is that while we do expect further liberalization towards foreign investment in the multi-brand

sector, this is highly unlikely to be gazetted until after the next elections, due to be completed towards

the end of 2012. Any additional liberalization of this market will therefore depend on the political make-

up of the next government.

E. GOVERNMENT SAFETY VALVES ON FDI

There is concern about the competition presented to domestic competitors and the monopolization of

the domestic market by large international retail giants. The Indian government feels that FDI in multi-

brand retailing must be dealt with cautiously, given the large potential scale and social impact. As such,

the government is considering safety valves for calibrating FDI in the sector. For example:

• A stipulated percentage of FDI in the sector could be required to be spent on building back-end

infrastructure, logistics or agro-processing units in order to ensure that the foreign investors make a

genuine contribution to the development of infrastructure and logistics.

• At least 50 percent of the jobs in the retail outlet could be reserved for rural youth and a certain

amount of farm produce could be required to be procured from poor farmers.

• A minimum percentage of manufactured products could be required to be sourced from the SME

sector in India.

• To ensure that the public distribution system and the Indian food security system, is not weakened,

the government may reserve the right to procure a certain amount of food grains.

• To protect the interest of small retailers, an exclusive regulatory framework to ensure that the

retailing giants do not resort to predatory pricing or acquire monopolistic tendencies.


34

VI PROPOSED SCENARIO OF RETAIL

i. NEW STRUCTURE

Presently India has a completely disorganized retail market. The point at which things become disorganized

is the Wholesaler. The wholesalers or distributers act as interfaces between manufacturers and retailers. It is

observed at times when there is speculation in the market about price rise, black marketing takes place at

the wholesalers point. Government has made several policies and has put several taxes but due to an

inefficient and non-IT mechanism, the Government is not able to recover the required amount. Also,

majority of wholesalers do not accept plastic money. Majority of the dealing in the current system happens

in cash which leads to a leakage into black money. Therefore we require a mechanical system. Organized

retail giants could help in structuring the entire industry. Also UID project applications could contribute to

this system. Manufacturers invest a huge amount into market research as in the present setup they are not

having any mechanisms of getting statistics related to buyer and behavior of buyer. The clinical survey

based sampling techniques used by market research organizations are not accurate enough at times and

lead to wrong product designing. Therefore, organizing the retail system would entirely revolutionize the

field of market research as primary data could be collected digitally. A similar kind of revolution took place in

the television industry when the analog cable television was replaced by CAS or digital cable. Prior to the

change, TRP’s were measured through surveys which could not as such give accurate understanding of the

public perspective. Digital TV created a revolution as now accurate and real-time information is available

with Service Providers. Therefore, an IT mechanism could also contribute as a data asset for manufacturers.

As we see in the above diagram, the current system which is not an improving system could become

continually improving just by organizing the wholesalers. Retail giants have invested in transport and supply

chain optimization. Retailers could get attached with these giants for timely deliveries and also get products

at lower prices. Also IT applications could be developed which could bind the retailer and the retail giant in

order to make ordering, planning, replacing easy for the retailer. All the above points could indirectly benefit

the Government as it would have a more transparent retail system which would help is control black

marketing and formation of black money.

MANUFACTURER

RETAILER

UNORGANIZED

WHOLESALER

MANUFACTURER

RETAILER

ORGANIZED RETAIL

GIANT

Current System Proposed System


35

ii. FUTURE OF INDIAN RETAIL

Once we enter into a digital mode of communication in the retail system, then it would become easy to

access and make relationships of the retail database with other databases. The Government could have

good control over the entire retail system and its stakeholders including the consumer. Though it

appears to be mechanical but it has its own advantages. There are many ways of doing it. We can have a

system where the Government has a centralized system and all retailers or manufacturers or distributers

get themselves enrolled. All transactions taking place would be recorded digitally. All retailers can be

provided online barcode scanners which could simply scan the barcode and get details from some

centralized source as it is very difficult for the retailers to maintain databases. In case of false barcode

notifications, those retailers could be inspected. Fraud Analytic infrastructures could be made to keep

an eye on the transactions. Black Marketed stock could be traced with barcode and batch details.

IT Whistle Blowing is the best and the most accurate way of getting information related to any non-

compliance within the system. Therefore we now need to speak of making all the interactions in the

Retail System digital. We need to organize the entire retail system so that the market becomes

Centralized

Retail

Database

UID Database

PAN Database

Driving

Licence

Passport

SIBIL

GIS

Bar Code

Database


36

intelligent and we are able to prevent factors like corruption and black marketing. Basically all the

disorganization in the retail system happens at the Wholesalers end and therefore replacing the

primitive wholesalers with organized giants like Wal-Mart and Carrefour would help in organizing the

Retail System and make it a Wisdom Based System from a Knowledge Based System. In this competitive

environment, we need to take necessary steps now as if we don’t, the future where our population

would hugely explode, we would not have systems in place to monitor and control corruption, black

marketing etc.

Foreign Direct Investment in Retail would be a revolution in the Indian retail sector and in a long term

bring about a cultural change in the entire country. It would organize the entire unorganized retail

sector as the primitive hard copy techniques of invoicing and billing would be replaced with digital

techniques which would take Market Intelligence to the next generation. This would hugely impact the

Market Research Industry and would also provide good and accurate information to manufacturers. This

would enable the producers and manufacturers to improve their products with greater accuracy in

alignment with the consumer need.

iii. BENEFITS

A. BENEFITS OF FDI IN MULTI BRAND RETAIL

Soaring inflation is one of the driving motives behind this move towards multi-brand retail. Allowing

international retailers such as Wal-Mart and Carrefour, which have already set up wholesale operations

in the country, to set up multi-brand retails stores will assist in keeping food and commodity prices

under control. Moreover, industry experts feel allowing FDI will cut waste, as big players will build

backend infrastructure. FDI in multi-brand retail would also help narrow the current account deficit.

Additional benefits include moving away from an industry focus on intermediaries and job creation.

MOVING AWAY FROM INTERMEDIARY ONLY BENEFITS

There is broad agreement on the need to improve efficiencies in the household trade of consumer

goods. Competent management practices and economies of scale, joined with the acceptance of global

best practices and modern technology, could immensely recover systemic competence. Like their

foreign counterparts, Indian customers are entitled to receive quality products, produced, processed

and handled under a hygienic environment through professionally-managed outlets. Speculative

apprehensions that small retailers will be adversely affected are not reason enough to deny millions of

consumers access to products that meet global standards.

Furthermore, today’s intermediaries amid producers and customers add no value to the products,

adding hugely to final costs instead. By the time products filter through various intermediaries and into

the marketplace, they lose freshness and quality, and often go to waste. However, intermediaries garner

huge profits by distributing these losses between producers and customers by buying products at low

prices from producers, but selling at extremely marked-up prices to consumers. In an unbalanced

system that incorporates multiple intermediaries simply for logistics, only intermediaries benefit.

With organized retail, every intermediate step – procurement, processing, transport and delivery – adds

value to the product. This happens because it uses international best practices and modern technology,

ensuring maximum efficiency and minimum waste. Organized retail enables on-site processing,

scientific handling and quick transport through cold storage chains to the final consumer. Once modern

retailers introduce an organized model, other vendors, including small retailers, would mechanically

copy this model to improve efficiencies, boost margins and stay in business. Organized retail would


37

thereby bring more stability to prices, unlike the present system where hoarding and artificial shortages

by profiteering intermediaries push up product prices.

JOB CREATION

Despite predictions from some analysts that millions of jobs would be lost due to FDI in retail, it may in

fact be the other way around. With the entry of branded retailers, the market will increase, creating

additional employment in retail and other tertiary sectors. Given their professional approach, organized

retailers will allot some quantity of resources towards the training and development of the resources

they employ. This effect of branded retailing can already be seen with the Bharti-Wal-Mart collaboration,

which has joined forces with state governments to open training and development centers in Amritsar,

Delhi and Bangalore, preparing local youth for jobs in retail. Training is entirely free and more than 5,600

local youth have already been trained. Retail jobs don’t require higher education or highly specialized

abilities.

Various other benefits of FDI are furnished below:

• JOB OPPORTUNITIES

• REVENUE THROUGH INFRASTRUCTURE

• BETTER SUPPLY AND VARITEY OF PRODUCTS

• SUPPLY CHAIN MANAGEMENT OPTIMIZATION

• COST OPTIMIZATION

• MARKET RESEARCH TRANSFORMATION

• BENEFITS TO AGRICULTURE

• BENEFITS TO GOVERNMENT

The Indian Cabinet approved 51 per cent FDI in multi-brand retail on 24 November after intense

deliberations at different levels that extended over a year, although these reforms have since stalled.

With the clear objective of curbing inflation, the policy came with some riders to protect the interests of

neighborhood stores, farmers, and small- and medium-sized enterprises. If effectively implemented,

allowing FDI has the potential to streamline and modernize the sector through a number of ways. First,

the development would bring in foreign capital, technology and the managerial expertise of big

international retailers. Second, it would develop an efficient linkage between the back-end supply chain

and the front-end via capital investment and technological inputs, creating a proper farm-to-fork

infrastructure through direct purchase from farmers and the resultant control of intermediaries. This will

also bring about efficient movement of produce through the reduction of transit costs. Third, it

would minimize the prevailing wastage of fresh produce by improving upon the country’s existing cold-

storage facilities, transport infrastructure, warehousing technology and food-processing facilities.

Fourth, FDI should help raise farm productivity through the application of contract farming, increase

agricultural production, reduce intermediate costs, render remunerative prices to farmers for their

produce and eventually lower final food prices to consumers, thus integrating retailers into the value

chain. And fifth, it would create employment in small- and medium-sized industries and back-end

infrastructure. Despite regulatory provisions to ensure domestic competition and protect the domestic

retail industry and farmers, the policy received stiff opposition. Concerns included the possibility of

foreign entrants’ monopoly power over both farmers and consumers; predatory pricing strategies by

the new entrants; manipulation of prices for the entrants’ own benefit and a fall in income, employment

and the eventual destruction of the unorganized indigenous retail sector, which is dominated by small

family-run outlets. But it is important to remember that other countries like Argentina, Brazil, Chile,


38

China, Indonesia, Malaysia, Russia, Singapore and Thailand have allowed 100 per cent FDI in multi-brand

retail since the 1990s, with encouraging experiences. China, for one, permitted FDI in retail as early as

1992. It has since attracted huge investments in the retail sector without affecting either small retailers

or domestic retail chains. Since 2004, the number of small outlets has increased from 1.9 million to over

2.5 million in China. Employment in the retail and wholesale sectors also increased from 28 million to 54

million from 1992 to 2001. And in Indonesia, even after 10 years of opening up to FDI in multi-brand

retail, 90 per cent of business remains with small traders. The favorable experiences of other emerging

markets suggest the appropriate implementation of FDI in multi-brand food retailing, with effective

checks designed to protect indigenous small- and medium-sized enterprises, will eventually alleviate

the supply-side impediments to agricultural production. It will transform the way perishable agricultural

produce is acquired, stored, preserved and marketed and thus help control India’s persistent food

inflation.

BENEFITS OF FDI ON FARMING

Blessed by nature, India is the second largest, globally, in farm output. But a huge quantity of the

produce remains unutilized due to improper collection mechanism, inadequate infrastructure and

processing capacity. According to the official estimate, more than 70 per cent of our fruits and

vegetables perish before being consumed. Although India is traditionally an agro-based and agro-

dependent economy, the average per-hectare yield of agricultural and horticultural crops is lower than

the global average. Farm technology that is used on Indian soil hasn't yet caught up with that used by

some other countries. Banks and financial institutions are not too enthusiastic to lend to farmers, who

still depend on local money lenders, and get a raw deal in return, decade after decade. Rural moneybags

now actually play different roles during different hours of the day and night, varying from that of a seller

of farm inputs, buyer of farm produce, employer for non-agricultural tasks and, at times, even that of a

local politician. As a result of this bleak scenario, most farmers are small and poor. But the chain of

traders, right from the farm level agent, up to the wholesale market level merchant, doesn't share this

poverty with the farmers. On the other end of the value chain is the consumer. She pays a price that is a

multiple of what the grower receives. It is also much higher when compared, on the Purchasing Power

Parity basis, with what her counterpart in a developed country pays. This is the current state of affairs of

agriculture in India. How long should it continue? Many of the economic ailments of the poorer

countries have already disappeared, or are in the process of becoming extinct, as a result of the

liberalization, privatization, and globalization initiatives introduced 20 years ago. Telecommunication,

construction, IT-enabled services and audio-visual transmission are shining examples of how India is

competing with the developed countries. But agriculture has remained an untouchable fragmented

sector. Too long, we have embraced the mantra of small is beautiful. The time has come to say size

matters.

Foreign Direct Investment (FDI) in retail has the potential to give a ray of hope. It is a proven fact that

reducing a value chain results in substantially lowering the gap between what the producer receives at

one end and what the consumer ultimately pays at the other. However, some members in the middle

part of the value chain will fade away. Some others won't, but will probably earn less than before. And at

their cost, a new member, namely, a large, organized retailer will enjoy long-term financial and strategic

benefits.

Contrary to the clamor made by some political parties, unorganized retail will neither fade nor become

unviable due to the diverse nature, habits and culture of Indian consumers, even in large cities. The

main advantage of FDI in retail can be the much-desired and much-awaited reforms in the farm sector, if

the Government and the international retailers play their cards sensibly. Due to direct collaboration with

the farmer, correct marketable varieties in required quantities can be grown. Contract farming can give


39

security and cash to farmers, and pull them away from the clutches of their multi-faced money lenders. If

individual farmers are bundled together by a resourceful retailer, the group can enjoy economy of scale,

modern farm technology, and assistance in capital investment to boost yields. In fact, modernization has

become essential because rural labour has been migrating to cities rapidly. Already, farm labour is either

unavailable or too expensive.

Of course, there are serious riders. Retail houses under the FDI scheme must exhibit patience, customize

their supply chain management models to suit tricky Indian conditions, and place long-term interest

before short-term profits and quarterly results. Indian farmers have been conservative due to a variety of

historical factors and socio-cultural traditions. And now, the younger of them, must fearlessly shed the

negative attitude towards change, and participate wholeheartedly in the new process of market-driven

and technology-based farming.


40

VII FDI SUCCESS STORY OF CHINA

INBOUND FDI HAS PLAYED AN IMPORTANT ROLE IN CHINA’S ECONOMIC DEVELOPMENT

AND EXPORT SUCCESS

According to the Ministry of Commerce (MOFCOM), foreign invested enterprises account for over half of

China's exports and imports; they provide for 30% of Chinese industrial output, and generate 22% of

industrial profits while employing only 10% of labor – because of their high productivity. Evidence on

technology spillovers is more limited, but industries with higher FDI seem to have higher productivity

increases than other industries, suggesting a positive effect. Importantly, foreign investment has

catalyzed China’s economic reform. Together, these contributions have supported China in maintaining

a record-high 10 percent growth rate during most of the 1980-2010 period.

FDI POLICIES IN CHINA HAVE EVOLVED ALONGSIDE ECONOMIC DEVELOPMENT AND

STRENGTHENED INSTITUTIONAL CAPACITY

A gradual and prudent approach has been taken in the process of liberalization. When market

institutions were not fully in place in 1980s and 1990s, China experimented with opening up to foreign

investment in selected coastal cities and in special economic zones/industrial parks with a focus on

attracting export-oriented manufacturing FDI. Corresponding to China’s shift of its development goal

from an emphasis on GDP growth towards a more harmonious balanced development, China made a

radical commitment to services liberalization in its accession to WTO. This has triggered a shift of FDI to

service industries. By 2009, FDI in services increased 3 times from that in 2000, while manufacturing FDI

in China increased 81 percent. Regional production networks in East Asia grew substantially in the past

few years and were largely aligned with China as their center. The results have been extraordinary.

Thousands of multinational corporations have invested in China. The latest UNCTAD report on World

Investment Perceptions lists China in first place among the top 15 investment locations. Hong Kong SAR


41

and Taiwan, China have traditionally been the most important sources of FDI, but the presence of

investors from Japan, the USA, and Europe has grown over the years.

China has been quite open for FDI in almost all manufacturing and most service industries. But China

has been circumspect in its gradual approach to liberalization to synchronize it with the development of

institutional capacity. Arguably, this has served China well to weather the financial crisis. Looking into

the near future there may be a case for further liberalization of backbone services such as finance and

telecommunication.

China’s highly decentralized FDI approval and policy implementation creates opportunities for healthy

competition for FDI among local authorities but can also become cause of excessive red tape and

corruption. In such a decentralized environment transparency of regulation and open communication

between Government and business community is of special importance. To this end, local governments

are increasingly seeking to ensure the administrative and operational efficiency of the approval process.

The most common practice is setting up “one-stop” facilities, which aim at allowing investors to conduct

all procedures in one place.

The World Bank Group recently published its Investing Across Borders 2010 report. The report is a new

study comparing regulation of inbound foreign direct investment across four topics for 87 countries. It

presents indicators only on countries’ laws, regulations, and practices affecting how foreign companies

invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes. As such

its scope is intentionally limited. It does not cover all circumstances relevant for foreign investors. As

stated in the report, for example, in addition to assessing the legal and regulatory framework, it is well

established that investors value the economic size of the host country, its domestic market and

proximity to important foreign markets, the potential for innovation, and the level and quality of

government services; and an educated and skilled workforce. From the host country’s point of view, the

risk of negative externalities from foreign investments, such as environmental and social damage

(especially if the poor are the ones affected) needs to be balanced with the opportunity of positive

externalities that such investments can yield. The Country profiles of the report need to be read with

that context in mind.

THE CHALLENGE FOR CHINA NOW IS TO ATTRACT THE RIGHT KIND OF FDI

China strives to rebalance its economy, improve the environment, and move up the value chain. As a

result, recent FDI strategies have taken a more selective approach, to attract environmentally

sustainable, energy efficient, and technologically advanced industries. As befits its economic global rank

China is providing a level playing field for all firms, domestic or foreign alike.

China has been quite open for FDI in almost all manufacturing and most service industries. But China

has been circumspect in its gradual approach to liberalization to synchronize it with the development of

institutional capacity. Arguably, this has served China well to weather the financial crisis. Looking into

the near future there may be a case for further liberalization of backbone services such as finance and

telecommunication.

China’s highly decentralized FDI approval and policy implementation creates opportunities for healthy

competition for FDI among local authorities but can also become cause of excessive red tape and

corruption. In such a decentralized environment transparency of regulation and open communication

between Government and business community is of special importance. To this end, local governments

are increasingly seeking to ensure the administrative and operational efficiency of the approval process.

The most common practice is setting up “one-stop” facilities, which aim at allowing investors to conduct

all procedures in one place.


42

The World Bank Group recently published its Investing across Borders 2010 report. The report is a new

study comparing regulation of inbound foreign direct investment across four topics for 87 countries. It

presents indicators only on countries’ laws, regulations, and practices affecting how foreign companies

invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes. As such

its scope is intentionally limited. It does not cover all circumstances relevant for foreign investors. As

stated in the report, for example, in addition to assessing the legal and regulatory framework, it is well

established that investors value the economic size of the host country, its domestic market and

proximity to important foreign markets, the potential for innovation, and the level and quality of

government services; and an educated and skilled workforce. From the host country’s point of view, the

risk of negative externalities from foreign investments, such as environmental and social damage

(especially if the poor are the ones affected) needs to be balanced with the opportunity of positive

externalities that such investments can yield. The Country profiles of the report need to be read with

that context in mind.

The challenge for China now is to attract the right kind of FDI as it strives to rebalance its economy,

improve the environment, and move up the value chain. As a result, recent FDI strategies have taken a

more selective approach, to attract environmentally sustainable, energy efficient, and technologically

advanced industries. As befits its economic global rank China is providing a level playing field for all

firms, domestic or foreign alike.


43

VIII CONCLUSION

The retail sector is highly disorganized. Unwillingness to adapt to IT solutions exists due to cultural

problems with retailers. IT awareness is also a big issue. Instead of sophisticated software solutions,

retailers are looking at basic and simple applications that would enhance their work. They are afraid of

adapting to complex systems.

Opening up of FDI in multi-brand retail in India could potentially be a mixed blessing for domestic

players. While initially the small indigenous retailers’ business would be impacted once modern retail

enters the locality, this adverse impact is expected to be short-lived and to weaken over time. While this

long awaited move is not expected to have an immediate impact on the Indian retail sector, it is

expected to reap benefits in the medium to long-term as it will help improve the a) balance sheet and

liquidity profile of cash-starved retailers with aggressive expansion plans b) supply chain and back-end

infrastructure while reducing margins for middlemen through direct sourcing from farmers and c) arrest

inflationary pressures through increased supplies facilitated by improved productivity of farmers and

reduction of agri-waste. However, once 100% FDI is allowed in retail, that is when the landscape will

become extremely competitive. Further, the move needs to be monitored in the wake of the current

opposition by several political parties.

Foreign Direct Investment in Retail would be a revolution in the Indian retail sector and in a long term

bring about a cultural change in the entire country. It would organize the entire unorganized retail

sector as the primitive hard copy techniques of invoicing and billing would be replaced with digital

techniques which would take Market Intelligence to the next generation. This would hugely impact the

Market Research Industry and would also provide good and accurate information to manufacturers. This

would enable the producers and manufacturers to improve their products with greater accuracy in

alignment with the consumer need.

IndiawouldbenefitfromFDIINRETAIL


44

IX ANNEXURES

i. LIST OF RETAILERS COVERED

S.No Company Name Sub Vertical Location Areas

1 Goyal Store CBD New Delhi Dwarka

2 Dwarka Fresh Store CBD New Delhi Dwarka

3 Millenium Shoppe CBD Noida Sec - 18, Noida

4 Ammus General Store CBD Gurgaon Sushant Shopping Arcade

5 Bindra Provisional Store CBD New Delhi R K Puram

6 Neelkanth Departmental

Store

Outside

Apartment Noida Sec -62

7 Fatehsingh Departmental

Store Within Apartment New Delhi

Sansad Vihar Appartments,

Dwarka

8 Laxmi Provisional Store CBD New Delhi R K Puram

9 Vado CBD New Delhi Dwarka

10 Harmilapi Store CBD New Delhi Malviya Nagar

11 Gopalji Departmental Store CBD Noida Sec – 26

12 Sharma Departmental Store CBD Gurgaon South city 1

13 Kashyap Atta Chakki Kirana New Delhi R K Puram

14 Aggarwal Flour Mills Kirana New Delhi R K Puram

15 Jindal Flour Mills Kirana New Delhi R K Puram

16 Haryana Store CBD New Delhi Sunehari Market

17 Super Bakery CBD Gurgaon Galleria

18 Jai Durga Departmental Store Kirana Noida Jalvayu Vihar, Sec 21

19 Rangoli Store CBD Noida Sec - 28 Alakhnanda Market

20 J K Store CBD Noida Sec -28 Alakhnanda Market

21 Mohanz Super store CBD Noida Sec – 29

22 Budget Bazaar CBD New Delhi Uttam Nagar

23 Jai Shree Ram General Store CBD Gurgaon South city 1

24 Dhairya Store Kirana New Delhi Pancheel Enclave


45

25 Bhalanath Amarnath Kirana New Delhi Sitaram Bazaar

26 Surbhi General Store Outside

Apartment Noida B Block, Sec – 62

27 Yashica Departmental Store CBD New Delhi Dwarka

28 Shiv Shakti Store Outside

Apartment New Delhi Pancheel Enclave

29 Dimple Store Kirana New Delhi Dwarka Sec – 5

30 Aggarwal Store CBD New Delhi Dwarka Sec – 4

31 Himanshu Store Within Apartment New Delhi Dwarka Sec 13 – A

32 M.K.General Store Within Apartment Noida Flex Apartments, Sec – 62

33 Needs Supermarket Within Apartment Gurgaon Vatika city

34 LM Gupta Provisional Store Within Apartment Noida Sec – 52

35 Krishna Store CBD New Delhi Dwarka

36 Salt and Pepper Within Apartment Gurgaon DLF 4

37 City Heart Store Outside

Apartment Gurgaon South city 1

38 Vivek Vihar Apartments Within Apartment Noida Sec – 82

39 Aapka Daily Mart Within Apartment Gurgaon Retreat Apartments

40 Ahuja Departmental Store Outside

Apartment New Delhi Janakpuri

41 New Ashoka store and sweets CBD New Delhi Sitaram Bazaar

42 OM General Store CBD New Delhi Dwarka Sec – 11

43 Rajdhani Bazaar CBD New Delhi Dwarka Durgaplaza

44 Jagdamba General Store CBD New Delhi Saket

45 Akash General Store Outside

Apartment Noida Sec – 20

46 Apna Departmental Store Within Apartment New Delhi Heritage Tower, Sec - 3,

Dwarka

47 The Bakery Provisional Store Within Apartment Noida Kendriya Vihar Sec – 82

48 Super Mart Within Apartment Noida Kendriya Vihar Sec – 82

49 Hiralal Apartments Within Apartment Noida Aravali Appartments, Sec -

52


46

X BIBLIOGRAPHY

1. Impact of FDI in Retail on SME Sector: A Survey Report, Confederation of Indian Industry (CII), Dec’11

2. Indian Retail Sector, Resurgent India (Mar’11)

3. India’s Experience with FDI: Role of a Game Changer, The Associated Chambers of Commerce and

Industry of India (ASSOCHAM), Jan’

4. Wal-Mart’s Global Track Record and the Implications for FDI in Multi-Brand Retail in India, UNI Global

Union, March 2012

5. Wikipedia, Foreign Direct Investment

6. Export Platform Foreign Direct Investment, Karolina Ekholm, Rikard Forslid, James R. Markusen, National

Bureau of Economic Research, Feb’03

7. Investopedia

8. Technology Transfer through FDI in Top-10 Transition Countries: How Important are Direct Effects,

Horizontal and Vertical Spillovers?, Jože P. Damijan, Mark Knell, Boris Majcen and Matija Rojec, THE

WILLIAM DAVIDSON INSTITUTE (Feb’03)

9. A.T. Kearney’s (2007): Global Services Locations Index”, www.atkearney.com

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DirectInvestment”,digitool.library.mcgill.ca.8881/dtl_publish/7/21670.htm Andersen P.S and Hainaut P.

(2004): “Foreign Direct Investment and Employment in the Industrial Countries”,

http:\\www.bis\pub\work61.pdf.

11. Balasubramanyam V.N, Sapsford David (2007): “Does India need a lot more FDI”, Economic and Political

Weekly, pp.1549-1555.

12. Basu P., Nayak N.C, Archana (2007): “Foreign Direct Investment in India: Emerging Horizon”, Indian

Economic Review, Vol. XXXXII. No.2, pp. 255-266.

13. Bhagwati J.N. (1978), “Anatomy and Consequences of Exchange Control Regime”, Vol 1, Studies in

International economies Relations No.10, New York, ideas-repec.org/b/nbr/nberbk/bhag78-1.html.


47

Documents

Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector