fdi in multibrand retail 2013
TRANSCRIPT
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www.time4education.comTriumphant Institute of
Management Education Pvt. Ltd.
FDI inMultibrand
Retail
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Organised Retail
What is it Branded stores, esp. chain stores
Modern infrastructure & technology
Self-service
Types Supermarkets (aka Convenience stores)
Hypermarkets
Specialty stores
Single brand exclusive stores
Cash & Carry
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Expanding at CAGR of 6.4% since1998
Current size of total retail U.S.$550
bn Share of organised retail 4%
Compare: U.S. 85%; Brazil 35%; China 20%
Over next decade BCG report Share of organised retail 21%
Size of the market U.S.$260 bn
Small unorganised family run stores
Retail in India
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Types of Retail chains Dept Stores Grocery, Food & Beverage,Pharmacy,Books-Music-Gifts
Future Group Big Bazaar; Food Bazaar; eZone; Central; Brand
Factory
Reliance Reliance Digital, Fresh, Trends, Time Out
RPGs Spencer; Aditya Birlas more &Pantaloons; Tatas Shoppers Stop, Titan Eye+,
Tanishq, Landmark
A few Indian retailer
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In 2011, of the major retailbusiness types,
Textiles earned 38-40% of total
sector revenue Food & Grocery 11-12%
Consumer durables 9-10%
Health & beauty lowest at 0.8%
Segment revenue
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Retail Growth Driver
Expansion of consumer class
Rise in income & purchasing power
Growing number of working women
Rising discretionary income Changing lifestyle
Change in consumer mindset consumers are becoming brandconscious demonstration effect
Access to easy & cheap consumer credit
Rising use of Plastic Money
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Current Scenario
Sales per outlet Less than Rs1000 per day in rural
areas
Rs5KRs8K per day in urban areas
Long supply chain 5-6 intermediaries versus 2-3 in U.S.
Inefficient supply chain Poor infrastructure bad roads,
storage facilities
Low percentage of processed food
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Few more key issue
Over-regulated industry
Agriculture Price Marketing Committee(APMC) restricts farmers choices
Multiple tax system
State VAT, Central ST, Octroi, etc.
Archaic labour laws Regulated shift timings, holidays
High real estate cost, esp. in large
cities
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statu
High potential Urbanization and growth of middle class Increase in % of working women Exposure to modern retail experience (malls)
Increased demand for branded/processed food High growth in turnover
Still on learning curve
Supply chain, technology, management practices Real estate cost, manpower quality, theft Mounting losses
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51% FDI in MBR: Highlight
Min investment from foreign retailer - U.S.$100 mn 50% of total FDI must be invested in back-end
infrastructure
Minimum 30% of local sourcing from SME Retail outlets to come up in cities with more than
ONE million population Govt will have the first right to procure agricultural
produce State Govt will have final say in allowing such
stores under Shops & Establishments Acts
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Impact of FDI in MBR
Infusion of cash for cash Intensivebusiness
Transfer of technology and practices
Boost to supply chain and logistics Cold storages and processing units Will require change in APMC
Partnership with Indian players Local knowledge and global expertise
Boost to Indian Suppliers 30% sourcing from Indian SME Sourcing from India for global operations
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For Farmers Should get better prices Impact may be limited to medium & large farms Better seeds, technology & farm practices
Multiple options for farmers Loss of bio diversity
For Small Retailers
Loss of business, but most will survive Impact high in proximity to modern stores Will have to adapt and might need support
Adv & Disadvantage
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Adv & Disadvantages
For consumers Better prices, larger variety, better shopping
exp
Convenience for working couples (&families) Would increase consumption expenditure Purchase of processed food, impulse items
For Manufacturers 30% rule would benefit SMEs Large manufacturers margins squeezed
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Employment Loss of unorganized sector jobs at small retail
stores Creation of organized sector jobs
Net growth in employment if consumption rises Additional jobs in supply chain/food processing
Government Higher tax revenues through organized retail May boost agro exports from India
Adv & Disadvantages
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*Conditions apply
APMC act needs to be amended
GST would simplify taxation
Investment in roads/infra required, etc
Long term game Dont expect results in 2-3 years
Walmart and others will go slow at first
Politics may still derail the plan Opposition parties & allies oppose J Vs would not operate in such states
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Thank You!