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In addition to the earlier column on SummerInternship Experience we have added twonew columns this time. Through the columnof Gurumantra, we would be explaining some

of the technical terms. In this issue, the RFIDtechnology has been explained in detail. Theother column is a debate, where students havepresented contrasting views on Should Indiaallow FDI in Retail?

We would like to express gratitude to Prof.B.S. Sahay for motivating us to bring out thismagazine, Prof. Ravi Shankar, Prof. OmkarPrasad Vaidya and Prof. Naval Bajpai forteaching us courses on Operations and Supply

Chain Management and Prof. Bhalender Singhfor teaching a course on Retail Managementwhich helped us in developing a strongfoundation from where we have started applyingour skills to real life problems.

We thank Mr. Arvind Singhal and Mr. Ajay Kaulfor taking out time from their busy schedule andcontributing articles for the magazine.

My editorial would be incomplete withoutacknowledging the support of Abhijeet, Akshay,

Anshu, and Navjeet in bringing out this issueand the whole Team OPEP for their commitmentand dedication towards the club activities.

Please send us your Valuable feedback andsuggestions for improvement at opep@iimraipur.ac.in

Rohit Bhagat

Editor,Strive

Dear Readers,

Recently, the Government of India took thedecision to allow 100% FDI in Single-BrandRetail and 51% FDI in Multi-Brand Retail. Theimplication of the decision can be gauged fromthe fact that Opposition stalled the parliamentfor nine days following the decision.

At this moment of Time, Retail is one of theissues that demands immediate attention giventhe Issues of Ination and Foreign InstitutionalInvestment. The Indian retail sector accountsfor 15% of GDP and employs 3.3% of theIndian Population. Because of the poor stateof Infrastructure and Cold Chains, the end-

consumer ends up paying 200% -400% of whatthe Farmer actually gets and around 25% of theproduced 230 million tonne of vegetables andfruits produced each year goes waste. All thesefactors, in addition to the mushrooming of thee-tailing industry show that the Indian Retailsector is gearing up for a change.

Through the OPEP Club at IIM Raipur, weprovide a platform to the Students, Facultymembers and Industry Practitioners for sharing

of knowledge in the eld of Operations andSupply Chain Management.

The magazine starts with an article by Prof.Bhalender Singh in which he has thrownlight on the Retail Sector of India highlightingthe merits and demerits of the Governmentslatest decision. It is followed by an article byProf. Naval Bajpai where he has dicussed thesignicance of Research in the Retail Sector.

In the industry section, through an exclusive

interview, Mr. Arvind Singhal, Chairman andManaging Director of Technopak, has given aglimpse of the Retail Sector world-wide and howit is different from India. Mr. Ajay Kaul, CEO ofJubilant Foodworks Limited (formerly DominosPizza India Ltd.) has discussed the SuccessStory of Dominos Pizza in India.

Students have written articles on the role playedby Farmers and Middle-Men in the SupplyChain, emergence of E-Tailing in India, Retail in

China, Book Review of It Happened in Indiaand Success stories of Amul and Walmart. Thelocal challenge discussed in this issue is theupcoming Logistics Hub in Raipur.

Editorial

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Since the very first day of its inception, IIM Raipur has setvery high standards for Management Education and Research.The research commitments of the students of OPEP are highlycommendable. The inaugural issue of Strive, the Half Yearlymagazine of Operations and Supply Chain Club (OPEP) of IIMRaipur was another achievement on these lines. It enjoyedfabulous success and I compliment the OPEP team. Movingahead with bigger expectations, the OPEP team is presentingto you the Second Issue of Strive.

While the global economy is going through turbulent times,

India being no exception, however we can take pride that ourfundamentals are well in place. Still there are certain sectorswhere we need improvements. Some of them being retail,healthcare and education. I am delighted to see that this issueof Strive focuses on one of these areas, i.e. the retail sector. Ibelieve that this publication may succeed in delivering somenovel insights into this important subject.

I wish OPEP great success in their endeavors and hope thatyou enjoy reading this publication.

Prof. B.S. Sahay

Directors Message

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Contents

SPECIALS

Gurumantras: RFID........................................37

Is FDI in Retail benecial for India?- The GrandDebate ...........................................................39

Summer InternshipExperience.....................................................40

Book Review: It Happened inIndia.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Crossword..............................................42

About the Cover Page

The world map on the cover page signies the fast-shrinking world, where thedifferent countries and continents are coming close to each other while globalizationhas been taking up grounds. Retail sector is one of the most aggressive participantsof this phenomenon, as the retail organizations are targeting every person on theglobe as a potential customer. They have come a long way from being local entitiesto global brands. The retail sector and these organizations have been represented onthe cover page by the relevant and well-known names of some of the companies inthe world map.

FACULTY ARTICLESFDI in Retail: Boon or Bane?.......................................5

Importance o Research in Retail..............................11

COVER STORIESAgriculture and FDI: Farmers Point o View............15

FDI in Retail: Role o Middle Man. ..........................17

EMERGING AREAS

Logistics Hub in Raipur...............................................20

E-ailing in India..........................................................22

ARTICLES FOM INDUSTRYInterview with Mr. Arvind Singhal, Chairman andManaging Director, echnopak.................................24

Dominos- Story o success in Retail Mr. Ajay Kaul,Chie Executive Ocer, Jubilant Foodworks Ltd......27

SUCCESS STORIESRetail in China: What India can learn?......................30

Amul organised retail..................................................33

Walmart: Operations Strategy....................................35

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FDI in Retail: Bane or Boon?About the Author

Prof. Bhalender Singh

Nayyar is an AdjunctFaculty at Indian Instituteof Management Lucknow(Noida Campus) andVisiting Faculty at IndianInstitute of ManagementRaipur and Rohtak.

He has done his PGDM from Indian Institute ofManagement Calcutta.

He has a rich experience of more than 30 years

in diverse elds including Retail and has workedwith companies like Pepsi, Asian Sky Shop, UshaSales etc.

He has been associated with Impetus ConsultingSingapore in 2008 and 2009 for consultancyin the area of sales and distribution and is aPrincipal Consultant with MART

T

he cabinet ofministers cleared

the commerceministrys proposal for51% FDI in multi-brandretail (with severalriders) and increasedthe limit in single brandretail from 51% to 100%.There was an immediatehue and cry from theopposition parties,traders associationsand nally politicalallies that this would result in the death of thesmall trader and long term exploitation by theinternational giants.

Prior to 1997, FDI in multi-brand retail wasallowed on a case to case basis and one of theprominent players which entered was DairyFarm International in a tie up with RPG groupto start the Foodworld chain.

Some entry routes used by foreign players havebeen:

Franchising Agreements

This was the easiest track with FDI beingallowed with the approval of RBI under the

Foreign Exchange Management Act. Fast foodchains, apparel and footwear companies haveentered through this route.

Cash and Carry Wholesale Trading

The government allowed 100% FDI in cash andcarry wholesale under the Government approvalroute in 1997. Metro and Shoprite enteredthrough this route. It was brought under theautomatic route in 2006. This opened the doors

for the international giants to enter India forthe backroom support for retail. Wal-Mart hasestablished 11 stores already with Carrefouropening up only two. TESCO tied up with TATAgroup. The ow of FDI through this route fromApril 2000 to March 2010 was $ 1.78 billion. Thiscomprised only 1.54% of the total FDI inowsreceived during this period.

Strategic LicensingAgreements

Some foreign brands giveexclusive rights to Indiancompanies for salesthrough own stores orshop-in-shop. Mango inagreement with Pyramidand SPAR RadhakrishnaFoodlands Pvt. Ltd hasentered through thisroute.

Manufacturing andWholly Owned Subsidiaries

Wholly owned subsidiaries in manufacturing aretreated as Indian companies and are thereforeallowed to retail. Nike, Reebok, Adidas andothers have entered through this route.

FDI in Single Brand Retail

In February 2006, FDI was allowed up to 51%,with prior Government approval, in Single

Brand products subject to products being soldunder the same brand internationally and thosebranded at time of manufacturing. 94 proposalswere received from 2006 to 2010. Of these, only

Prof. Bhalender SinghIndian Institute of Management Lucknow

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57 were approved. Against a clearance of $ 137million through this route only $ 44.55 millionhave come through this route.

Retail Sector inIndia

The retail sector

in India isestimated at Rs.19 trillion and isgrowing steadilyat around 9%for the last veyears. The shareof modern retailhas risen fromaround 3% in

2004 to around7% last year.The growth rate of the modern retail has variedbetween 17 and 20% while that for traditionalretail has been around 7 to 8%.

Category wise break-up of the Indian retailmarket is given on this page. The retail sectoris the second largest employer after agriculture.As per NSSO 64th round, in 2007-08 retail tradeemployed 7.2% of the workforce providing jobs

to 33.1 million persons.(Rural to Urban 1:4).

Effect of Modern Retail on Small Shopkeepers

A study conducted by ICRIER across 1,598 smallretailers (793 in head to head competition and805 in safe neighbourhoods) was conductedfrom March to October 2007. Some signicantndings were:

1. Head to head stores sales decreased in 50%of stores, was at in 33%, increased in 17%

of stores. Safe neighbourhood stores salesdecrease in 29%, at 31%, increase 40%. 61% ofdecline in sales was attributed to the opening ofmodern retail

2. Protability of head to head stores fell by 16%while in safe neighbourhood stores it went upby 5%.

3. Decrease in employee count was around 2 to3% in both the stores.

4. The rate of closure of small retail shops was

found to be 4.2% which is much lower than theglobal average. Only 1.7% closed down due tomodern retail.

5. Small retailers were taking both offensive

and defensive action to respond to modernretail. Offensive steps included improving storedisplay, increase range and brands, improvingstore looks and launch of self service. Defensiveactions were cutting of expenses, cutting prices,

reducing staff.

6. 71% of the

shoppers whoshopped atmodern retailoutlets werein favour ofopening ofmore suchstores. 24%were not infavour while

5% had noopinion.

7. The main reasons for preference of modernretail stores were better quality of products,discounts, higher brand choices, one-stopshopping, fresh or new stock, wide productrange, family shopping experience and betterservice.

8. 34% of the shoppers who shopped at smallneighbourhood stores were in favour of opening

up of modern retail outlets in their area with25% against and 41% with no opinion.

9. The preference for small retailers werecloser to home, goodwill, availability of credit,bargaining, buying of small/loose quantities,c o n v e n i e n ttimings andhome delivery.

Another reportin 2008 revealedthe following onsupply side:

1. The averagerealisation forthe farmers whenthey sold directly to retailers was 15 to 20%higher against sale through mandis.

2. The turnover and the prots of intermediarieshad been affected. Most of them, however,wanted to expand their businesses due toopportunities in selling to modern retail

3. Large manufacturers have started feeling thepinch through price and payment pressuresfrom larger retailers. They have reactedby strengthening brands, increasing retail

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presence, adopting small retailers, and settingup dedicated teams to deal with modernretailers.

Effect of Modern Retail on Small Shopkeepers

The limitations of the retail setup as of April2010 were:

1. Inefcient market mechanism with lack ofinvestment in the logistics of retail chains. Therewere only 5,386 cold storages with a capacity of23.6 million tonnes. 80% of this was used forpotatoes. Though 100% FDI was allowed in coldchain, the investments were insignicant.

2. Intermediaries dominated the value chainwith lack of transparency. Farmers receivedonly 1/3rd of nal consumer price against 2/3rdby farmers in nations with a higher share of

modern retail.3. The public procurement and publicdistribution system were inefcient resulting inincreased food subsidies.

4. Agricultural Produce Marketing Committeesneeded to be dismantled or streamlined.

5. The MSME were suffering due to lack ofbranding and lack of avenues to reach out to thevast global markets.

6. Players in modern retail were making lossesdue to high rentals, unbridled expansion and/orlack of focus. Big players like Subhiksha, VishalRetail and others had closed down operations.

7. Investments by bigger players like Futuregroup, TATA or Reliance were slowing downdue to vast nancial requirements.

8. Heavy investments were required inagricultural and supply chain infrastructure.

Recommendations for Introducing FDI inRetail

Various studies had therefore recommended theinduction of FDI in retail to bring about:

Up gradation of agricultural practices andsupply chain

Investment in technology

Manpower and skill development

Greater sourcing from India

Efcient medium and small manufacturingenterprises

Better productivity Growth in market size

They, however, wanted a gradual entry of

foreign players over 3 to 5 years with socialsafeguards to avoid loss of jobs.

Concerns on Introducing FDI in Retail

The Standing Committee on Foreign andDomestic Investment in Retail Sector in July2009 raised concerns:

1. Displacement of labour.

2. Job losses due to predatory pricing strategiesof large retailers.

3. Monopolies of global retail chains leading tocontrol of supply chains at both ends.

4. Non-adherence of single brand retailing bysome foreign retailers.

5. Backdoor entry of foreign players throughcash and carry route.

Recommendations made by the Committeeincluded:

1. Blanket ban on large domestic houses andforeign players in the area of grocery, food andvegetables.

2. Policy for re-employment/deployment ofpeople dislocated by modern retail.

3. Legal and regulatory framework to avoiddisplacement of

small retailers byunfair means.

4. Extension ofinstitutional creditand undertakingp r o g r a m m e sto assist smallretailers inupgrading themselves.

5. Analysis of trafc and economic aspects

before a store is opened.6. Adequate safeguards to prevent diversion ofagricultural land for building malls.

Experience of FDI in Retail Trade in China

49% foreign ownership was permitted in sixprovinces and Special Economic Zones in 1992.Restrictions were lifted progressively and in2004 were lifted completely.

Retail sales have been increasing at a healthy

pace of over 16%. The size of China market wasestimated at over a trillion dollars in 2010 withshare of modern retail being around 25%

Between 1996 and 2001 number of traditional

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outlets in China went up from 1.9 million to 2.5million. Employment in the retail and wholesalesector went up from 28 million to 54 million inthe same period.

Most of the international players have enteredChina and are having a reasonable level ofsuccess.

Experience of FDI in Retail Trade in Thailand Wet market and small family owned grocerystores dominated the scene. Modern retailboomed in early 90s.

Allowed 100% FDI only in 1997 with capitalrequirement of TBH 100 million and TBH 20million for each additional outlet and TBH 100million for each wholesale.

Local players were marginalised by the entryof foreign players.

Entry of foreign players in a recessionaryeconomy adversely impacted manufacturers,wholesalers and retailers in the short run.

Thailand has nowbecome an importantshopping destination.

Entry of foreignplayers hasencouraged growth ofagro-food processing

industry and enhancedthe exports of Thaimade goods throughnetworks of the foreignretailers.

Experience of FDI in Retail Trade in Russia

First retail chain only in 1994.

FDI allowed only in 2000.

Healthy growth rate of 23% from 2000 to2008(USD 558 billion) dropped to USD 470billion in 2009 and recovered to USD 543 billionin 2010

Metro entered Russia in 2001 followed byAuchan in 2002. Both remain in the Top 10although all others are Russian

Carrefour entered and exited the RussianMarket in 2009. Wal-Mart is yet to enter themarket.

Share of modern retail is over 40% in Russia

Experience of FDI in Retail Trade in Chile

Supermarket sector was launched in 1990s

with domestic capital.

Late in the 90s, Carrefour and Ahold enteredthe market and within 3 years increased theirmarket share to around 9%

They, however, had to withdraw completelyfrom the market in 2006.

The Top Two domestic chains control 65% of

the Chile retail market.

The Proposal

The draft policy included the followingconditions for multi-brand retail:

1. 51% FDI after approval from ForeignInvestment Board.

2. Fresh agricultural produce, including fruits,vegetables, owers, grains, pulses, fresh

poultry, shery and meat products, may beunbranded.

3. The government will have the rst right toprocure agricultural produce.

4. Minimum investmentof $100 million o f whichat least 50% in back-end infrastructure.

5. At least 30% ofmanufactured and

processed productsfrom small industry.

6. Compliance throughs e l f - c e r t i f i c a t i o n .Investors need to keep

all records.

7. Retail sale locations can be set in cities withmore than one million population, based on the2011 census. There are 51 such sites.

The Plus Points1. The main point which is raised is the efciencyin the supply chain especially for perishables.The elimination of certain middlemen willincrease the income of the farmers by at least25%.

2. Competition will also force lower consumerprices and hence control ination. A Nielsenstudy during rst quarter of 2010 had revealedthat modern retail dropped prices by more and

increased prices by less between October 2009and March 2010.

3. Government will gain additional incomethrough taxes, as monitoring and transparency

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large family. Weekend shopping and storing infreezers only moves the wastage from the supplychain to the consumer.

6. Higher investments are required in agricultureto increase their bargaining power before FDI is

allowed in retail.

7. Big retailers use cheap prices only for a fewitems to lure customers into their stores andcharge higher prices for other items to maintainmargins. An air-conditioned big box store withprovisions for parking and high overheads willpass these on to the consumers.

8. A lot of small retailers will have to close downin the towns where FDI would be allowed in

retail. There could be a repetition of Thailandin India.

9. FDI in retail will raise the demand for realestate in retail thereby increasing the rentalsand wrong utilisation of agricultural land to putup swanky malls.

10. Foreign players will ood the Indian marketwith cheap foreign goods impacting localindustry.

11. Giant shopping centres will add to our

existing urban snarls.

Implementation Problems for ForeignPlayers

1. Investment of USD 50 million in front end willmean opening up of approximately 1 millionsquare feet of retail space. This would meanaround 200 stores of 5,000 square feet or 20stores of 50,000 square feet.

2. Sourcing of minimum 30% of items from

MSME especially for non-food sector will bevery difcult since customers prefer establishedbrands.

3. Around 50 licenses are required for opening

will improve.

4. Acceleration in growth of retail market willbenet MSME since nearly 35% of goods arealready being procured from this sector. A lotof smaller brands have got a tremendous boostthrough launch of private labels by modernretail.

5. There is the potential of local procurement byglobal retail chains from India.

6. Modern retailers also welcome the movesince they can have strategic partnerships andget much needed capital to expand. The majorplayers are, however, clear that they will notgive majority stake to any partner.

7. Entry of foreign players will result in creationof four million new direct jobs and up to sixmillion indirect jobs in areas such as logistics,

contract labour for distribution, repackaging,housekeeping and store security.

8. The consumer would get consistent qualityand there would be a lower risk of adulterationand counterfeit goods.

The Opponents View

1. FDI in retail is a non-critical area ofintervention. There is no lack of accessespecially in the urban markets. The gloss of a

shiny international brand name need not be thedifferential.

2. The role of middlemen in perishables can bealtered by policy changes and does not requireforeign retail to come in.

3. Foreign retailers will give better prices tofarmers in the short term but will squeeze themwith growing control on the supply chain.

4. Modern retail is only supporting this move

since they are really looking for bailouts andprotable exits from this sector.

5. Big formats are not suitable to the Indianpsyche which looks to buy daily for a reasonably

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sector and this should include small farmers,manufacturers and traders.

The debate in the parliament, of course,ended with the government putting the issueon the back burner till mid-term elections areover. They have done this also for almost alleconomic decisions with media pointing to the

paralysis in the government machinery becauseof the corruption and Lokpal issues. Some evenmentioned that the red herring of FDI in retailwas brought in to minimise the time for thedebate on Lokpal Bill so that it could also gointo deep freeze.

It may, of course,be relevant tosee if the entryof FDI in other

service areas suchas banking andnancial serviceshas actually beenbenecial to theaverage Indianconsumer beforewe get into thedebate on FDI inretail. Anotherarea of thought iswhether organisedmanufacturing isagainst entry offoreign players in

retail since this will weaken their bargainingpower in the distribution chain.

up a store in many states. The red tape and thecorruption involved will be a big deterrent.

4. A number of states are ruled by Oppositionparties and deant allies. They may not allowforeign retail to come up in their respectivestates.

5. Real estate costs are prohibitive in the cities

chosen.6. Credit and free home deliveries are alien totheir nature while it is the main demand of theaverage Indian consumer.

Areas ofImprovement beforeFDI is brought in

1. Dismantling ofAPMC in almost allmajor states to cutdown the tradermargins.

2. Support to smallretailers to upgradetheir efciencies.

3. A relook at the PublicDistribution Systemto cut down wastagesand corruption.

4. Provision oftraining in handling,storing, transporting,grading, sorting,maintaining hygiene standards and packing offresh produce.

5. Creation of infrastructure at Mandis.

6. Integrating long food supply chains in thefood area.

It seems from the above that the main problemsare in the back end while the main fears are inthe front end. Foreign players could, therefore,be asked to invest a minimum of USD 50million in Cash and Carry stores before beingallowed the USD 50 million in the front end. Theapproach of the foreign players would thereforebe partnership with the smaller retailers ratherthan confrontation.

Foreign players should be asked to set up trainingcentres for farmers and small producers toenhance the quality and productivity. Carrefourhas already organised over forty camps in thisdirection.

There has to be inclusive growth in this

Quick Fact:The word retail is derivedfrom the French wordretailier, meaning to cut apiece off or to break bulk.

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Importance o Research in Retail

About the Author

Prof. Naval Bajpai is

Associate Professor atthe Indian Institute ofManagement, Raipur.He has a multifariousbackground in industrial,teaching and researchelds spanning over a

decade and is a life-time member of the IndianSociety for Technical Education.

With over 35 research papers published in journals

of national and international repute, ProfessorBajpai is an avid analyst of contemporary worktrends in public-sector organizations.

Dr. Bajpai has authored three books publishedby Pearson Education, India- Business Statistics,India, Business Research Methods and has co-authored a book titled Quantitative Analysis. Hehas developed 30 case studies in Indian context,in the area of Business Statistics and BusinessResearch Methods.

Retail refers to sale of goods under thefollowing conditions:

1. The sale takes place from a xed location,

2. The goods must be sold in small quantities orindividual lots and

3. The selling should be for direct consumption

It sometimes includes subordinate activities like

delivery (very common in case of e-commerce).Retail can be considered the front-end of thesupply chain which directly interacts with thecustomers and consumers and also provides thelast-mile connectivity.

In the recent years, several new trends haveemerged in the Indian retail sector. Organizedretail has succeeded in penetrating the marketto a good extent. The retail sector in India isvalued at US$ 550 billion, only 5% of which

is organized (around US$ 28 billion). Theorganized retail has around 7% penetration. Butjust within the next decade, organized retail isprojected to go to US$ 260 billion[1]. Malls have

sprung up even in tier 2 and tier 3 cities acrossthe country.

Another development is the aggressive growth ine-tailing and e-commerce. This section of retailis riding high on the penetration of internet inthe not-so-urban regions of the country, wherebrand awareness is high but availability is poor.Several major acquisitions have occurred ine-commerce arena and foreign behemoths likeAmazon have also entered the competition inIndia. Many start-up companies have come upin the same or similar businesses in the lastcouple of years z.

First, any industry on such a growth spreedemands the managements of the involvedorganizations to take well-calculated, well-informed and yet, quick decisions. This callsfor very efcient data collection and processingto provide a strong base for the decisions.Secondly, direct interaction with the consumermakes retail a tricky business as a lot dependson the behaviour of the consumers. Many ofthe decisive factors inuencing this parameter

are not easily quantiable. Business researchhas proven its worth in various industries bydelivering good results in such situations in thepast. This discipline has vast applications inretail sector, especially in the present context,and must be understood well by the relevantcompanies to utilize it in the best possible way.

Research is all about nding something,the absence of which may distort our abilityto take informed decisions[3]. The ability

to take an informed decision is generatedthrough a systematic study that is conductedthrough various interrelated stages.To designsomething, various parts are put together tocomplete the phenomenon. The same processis done to conduct a research. All the steps ina research are interrelated and no independentactivity is launched without consideringthe decisions on the previous stages. Onehas to really understand that, from problem

identication to presentation of ndings,every step is interlinked and interrelated. Forexample, a research project title or objectiveis set as Consumer motivation to purchase

Prof. Naval BajpaiIndian Institute of Management Raipur

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sales in a retail store. This management problemfocuses on the symptoms. Research problem issomewhat information oriented and focusesmainly on the causes and not on the symptoms.This is to determine the consumers opinionon psychological pricing and to estimate theirpurchase behaviour for the psychological pricebeing offered by the retail store.

4. Formal Research Proposal and Introducingthe Dimensions to the Problem

Next, the researcher prepares a formal proposalof the research and develops the approaches tothe research problem. It includes the followingsteps:

i)Preparing a Theoretical Model: A set of major

factors that decide the visiting intentionsof a customer are identied. In our case theycould be location, prices of the products, rangeof products offered and behaviour of the staff.Apart from these some moderating variablesare also identied. They can be age, gender andincome of the customer.

ii) Preparing Questions for Questionnaire:Each main variable identied is explored indetails and statements characterizing them areobtained from literature. These statements areused to form questions.

iii) Forming Hypothesis: Based on the mainfactors, several hypotheses are formed. In ourexample, one hypothesis could be location of asupermarket has a signicant linear impact onthe visiting intention.

5. Approaches to Research

Approaches to research consists of making

a suitable decision regarding researchcomponents like types of research, measurementand scaling, development of questionnaire,sample size-determined sampling techniquesand data analysis plan.

All researches can be classied into threegroups:

i) Exploratory Research: mainly used to explorethe insight of the general research problem. It

must be used with other types of research andnever alone.

ii) Descriptive Research: it is conducted todescribe the business or market characteristics.

a refrigerator: A comparative study betweentwo leading brands. The title of the researchproject itself introduces the dimensions ofthese interrelated steps. In the light of the title,a researcher has to rst construct a theoreticalmodel of consumer motivation. All other stepssuch as the questionnaire design, setting theresearch questions, and setting the hypothesesare related to the title and are interrelatednotindependent.

The gure explains the process of conductinga business research. A research design is thedetailed blueprint used to guide a researchstudy towards its objective [4]. In the previoussection, it has already been discussed that thesteps in conducting a research programme areinterlinked and interrelated.

A good research is conducted using 10 steps. Letus have a look at these one at a time:

1. Problem or Opportunity Identication

The process of business research starts with theproblem or opportunity identication.

Actually, the management of the companyidenties the problem or opportunity inthe organization or in the environment. For

example, a manager in a supermarket mightidentify a problem like diminishing footfalls inthe supermarket.

2. Decision Maker and Business ResearcherMeeting to Discuss the Problem andOpportunity Dimensions

The decision maker contacts the businessresearch rm and then discusses the problemor opportunity with the business researcher.

The researcher can only suggest solution toa problem, but the actual decision is taken bythe decision maker. Hence, it is important thatthe decision maker should understand thedimensions of the research and the researchershould also understand the scope of decisionmaking by the decision maker.

3. Dening the Management Problem andSubsequently the Research Problem

The management problem is concerned with thedecision maker and is action oriented in nature.For example, the management problem offers apsychological pricing to enhance the quantum of

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10. Management Decision and ItsImplementation

As the last step of conducting a researchprogramme, the ndings are conveyed to thedecision maker after consultation with theresearch programmer. The decision makeranalyses the ndings and takes an appropriatedecision in the light of the statistical ndingspresented by the researcher. The researcherpresents the results and conclusions/options tothe decision maker. It is then left to the decisionmaker to take an appropriate action for his owncompany.

As shown in the above steps, business researchis a highly systematic and methodical way toassess and study any problem or opportunityand provides with logical options with a lotof clarity and predictability. It is unfortunatethat in India, many managers still base theirdecisions on ad hoc analysis or observationsand gut feelings, when the chances of successof any decision can be dramatically improvedby employing business research. The futureof Indian retail at least partially depends onthe realization of this fact and subsequentappropriate application of this tool in business.

References

[1] Future Group buys Transmart Indiawarehousing business. Economic Times, 12December 2011.

[2] Online stores see strong business from non-metros, villages.Economic Times, 21 April 2011.

[3] Nwokah, N. G.; Kiabel, B. D. and Briggs, A. E.(2009): Philosophical foundations and researchrelevance: issues for marketing informationresearch, European Journal of ScienticResearch, Vol. 33, No. 3, pp 429437.

[4] Aaker, D. A.; Kumar, V. and Day, G. S. (2000):Marketing Research, 7th ed. (John Wiley & SonsInc), p 70.

iii) Causal Research: helps in identifying thecause and effect relationship between two ormore business (or decision) variables.

6. Fieldwork and Data Collection

The eldwork and data collection activities are

now planned. Supporting ideas are collectedthrough the analysis of secondary data sources.The researcher also decides whether he shouldgo for a survey or adopt observation methodsand whether the project requires a eld datacollection or a laboratory experiment. Only thenthe eldwork is carried out. For our example,the decision could be to conduct a surveyamong shoppers in the supermarket and inother supermarkets in the vicinity.

7. Data Preparation and Data Entry

After eld work, the collected data are in rawformat. Before performing data analysis, itis important for a researcher to structure thedata. There is a specic scientic procedure todeal with the missing data and other problemsrelated to the data-collection process. Afterpreparing the data, a researcher has to feedit into a computer spreadsheet in a pre-determined manner to execute the data analysisexercise. Preparing this data matrix throughthe spreadsheet is also a scientic exercise andrequires a lot of expertise and experience.

8. Data Analysis

The data thus obtained is analyzed using theappropriate parametric or non-parametricstatistical tools.

9. Interpretation of Result and Presentationof Finding

The researcher interprets the result and non-statistical ndings derived from the statisticaldata. A meaningful interpretation of the resultis a skilful activity and is an important aspectof research. The researcher has to determinewhether the result of the study is in line with theexisting literature. It is also important to presentthe ndings in a scientic manner. Considering

our example, the result could be that the pricesof the products being offered are comparativelyhigher than those in other supermarkets.

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R

ecently, we have witnessed upheavalsand debates on (not) allowing foreigndirect investment (FDI) in Indian retail

sector. Amidst the chaos, one of the mosttalked about communities, which many believewould be directly affected by the decision of thegovernment, is that of the Indian farmers. Thebasic idea is that the retail giants would, to offertheir consumers low prices, directly buy farmproduces from the farmers, thus eliminatingthe middlemen. It is also believed by manythat this would also benet the farmers sincethey would be offered better prices. Besides,

these huge organizations are capable enoughto develop and maintain proper and adequatefood infrastructure and supply chain networksin the country. But the ground reality might notbe as simple. In pursuit of the true picture, wehave met a few farmers and gathered their viewsabout FDI as well as some common, but not sowell-known practices followed in the elds.

Dressed in a white shirt and gray trousers and

wielding a Nokia, Prem Kumar Sahu, agedaround 30, seems somewhat busy but calm, ashe talks to us as well as receives frequent phonecalls. He has been cultivating vegetables andfruits along with his father on their 6.5 acresland on Murra Road in village Datrenga nearRaipur. He supplies the produce, which includestomato, cabbage, cauliower, banana andsome other vegetables to Mohanlal Khillumar,an arthiya (middleman) in Shastri Market, amajor fruits and vegetables mandi of Raipur.

The transaction takes place three or four timesa year and each time, Prem gets his paymentin cash from Mohanlal around a week after thedelivery is made. Some of the money he uses topay the wages of the ten odd labourers in hiselds and buy resources for the next crop, i.e.seeds, fertilizers, pesticides etc. When askedabout the reason for this delay in the payment,Prem readily replies that the payment is madeon the basis of the sales of his produce during

the week. He gets, according to him, a fairprice the selling price sans an eight per centcommission that is kept by the middleman.

The huge uctuations in the market prices of

Agriculture and FDI: Farmers Point o ViewAbhay Shankar, Akshay Agarwal, PGP 2011-13

Indian Institute of Management Raipur

fruits and vegetables are a concern though,which at times, eat away the prots. Andsometimes, in order to get rid of access

inventory, the middleman sells the produceat prices lower than the actual prices. ButPrem seems to agree that he has little choice.The produce, being perishable, must be soldwithout much delay. Besides, Prem and otherregular suppliers of Mohanlal easily get creditsof a couple of thousand rupees from the arthiyain case they run out of cash. So the farmers feelsecured against the occasional bad yield, pricehike in fertilizers, drop in the market prices of

the produce, etc.

When asked about his views on the effectsof foreign direct investment in retail sectoron farmers, Prem seems unfazed, and afterthinking for a while, he says that farmers might

be benetted but only if the retail giants buydirectly from them. But wouldnt they havestrict quality norms? he quickly questions,clearly voicing concerns regarding the selectivebuying practices of the major retail players. Incontrast, the arthiyas buy all of the produceregardless of the quality, and even sell someof the low quality vegetables or do number kamaal along with the good quality produce at thesame prices.

So strong is the trust between the farmer andthe middleman, that Prem doesnt recall sellingto anybody else. He even claims that no farmer

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in the village or the surrounding villages, in hisknowledge, has ever sold to any big retail chainor store. He himself has never even thought ofselling to anyone else, owing to the years ofseamless business with Mohanlal.

Prem also grows dhaan (paddy) on around ten

acres of land that he has leased. The governmentbuys paddy from the farmers through ruralbanks at minimum support price. Mr. Jai KumarSapara, who works at the nearest Bachat Bankin Boria Khurd, explains that each farmer cansell only upto 20 quintals of paddy per acre ofland (the quantity cap varies with region andstate) owned by him to the government. Someof the remaining produce, they again sell tothe government, but under the names of other

farmers who own land but do not grow enoughpaddy, and pay some commission to thesefarmers. If they are still left with some paddy,it goes to middlemen in mandis at prices 15-20% lower than the minimum support prices.Prem readily agrees having been following theabove practice from many years, adding thathe doesnt know, and is not even interested inknowing the commission earned by the arthiyain Pandri Dhaan Mandi in Raipur, where he sellsthe dhaan that he fails to sell at the bank.

Anil Chandraker, besides being the owner of afuel station on Dhamtari Road, Raipur, is alsoa farmer. He grows paddy on 75 acres of land,producing over 1600 quintals. Since he useshigh quality foundation seeds, he is able tosell most of the produce (around 1350 quintals)to National Seeds Corporations Ltd, which paysaround Rs.500 more than the minimum supportprice. The Seeds Corporation conducts severalrigorous tests before accepting the paddy.The reject goes to the government through theBachat Bank, where only the moisture level is thecriteria. The only farmers who sell to middlemenare usually those who immediately need moneyand cannot wait for the bank to start buying theproduce (The bank procures from farmers fromaround 1st November to around 20th January).Thus there is little involvement of middleman,as far as the kharif crop (reaped in winters) is

concerned.

But things change in case of rabi crop (reaped inspring). The latter does not produce very good

quality paddy, and is mainly used for makingchiwda (rice akes) and other processed foodproducts. This paddy has to be sold to millersat 20-40% lower prices as compared to theminimum support prices that the governmentoffers for kharif crops. The transaction is donedirectly or through middlemen. Anil adds that

even if FDI is approved and giant retailers enterthe market, they would have to buy only milledrice for direct selling to consumers, and so, theywould not be able to do any direct purchasingfrom the farmers. Instead, they would go to themillers. The same is true for other farm productsunt for direct consumption. The farmers wouldbenet only in case the retail players widen theirscope of activities by getting the milling (andother processing) done themselves. The majorimpact of FDI in retail sector would be seen inthe fruits and vegetable markets, as far as foodsector is concerned.

Another interesting way for middlemen to makeprots is to exploit the differences between theminimum support prices in the adjacent regions.For example, suppose region A has highersupport price than region B. An arthiya wouldrst approach the farmers of A who have spareselling capacity and determine the maximumquantity that could be sold to the bank in Aunder their names. Then he would buy the samequantity of paddy from farmers in region B atprices slightly better than the support price atB, but substantially lower than that at A. Thepaddy would be sold to the bank at A and thefarmers in A involved in the transaction wouldget some commission. Thus the middleman andthe farmers both derive benets and the onlyloser seems to be the government.

Both Anil and Prem react in a similar mannerwhen asked about their recommendations tothe government for the welfare of farmers. Themajor discontent is due to the recent steep pricehikes in agricultural necessities like seeds,fertilizers, pesticides, fuel etc. They believe thatin case these prices cant be controlled, theymust be matched with an equivalent hike inthe minimum support prices. Secondly, there

should be some system for providing relief tothe farmers producing fruits and vegetables,similar to the minimum support price schemeavailable in case of cereals.

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FDI in Retail: Role o MIDDLE MAN

A

s far as FDI in Indian retail sector isconcerned, the speculation levels are

high but, again, these are the views of twofarmers near Raipur(Read Article: Agricultureand FDI: Farmers Point of View), Chhattisgarhand might differ vastly from some other farmers.What we can conclude is that even if the retailgiants enter India, it will be a new challenge forthem to eliminate the middlemen, and perhaps,not even in their best interests.

FDI in retail in India is perceived to be as

a magic wand which will remove ination,unemployment, commission agents, improvefarmer`s condition and help the economy torecover from slow down. But considering thepast records, FDI in retail is not going to bringbig differences unless the rm tries hard to reachthe farmers. Most of the big retails prefer to buyproduct from the middle men, the so calledArthiyas rather than going to the farmers.These practices have made them the famousBad Boys of retail due to the commissionsinvolved in the trade.

The middle men are blamed for the unorganisedmarket conditions and enormous agriculturalwastage as they rot either due to bad weatherconditions or due to poor handling of thegoods. Cold storage could turn things aroundas this would denitely prolong the life of thegoods, but looking at the present facilities madeavailable to farmers in our country we can realisethat its farfetched from reality. Middle men arealso accused of paying less to farmers of whatthey deserve but there is no guarantee even inthe present bill that will ensure better conditionto the farmers in our country. No doubt the billmay be drafted considering the interest of thecitizens and the development of our countrybut only its implementation from the root levelwill create the difference by adding value to thesociety.

Considering the present market size where tonsof vegetable and fruits are brought from variousparts of the country and are being sold from the

local wholesalers to the door to door vendorscould clearly give a clear picture about theresponsibility and complexity of job undertaken

by these Arthiyas. They cannot be accused ofcharging heavy commission as they play animportant role in establishing the market andorganizing them. One can also say that fromthe present structure, they form an importantbackbone and a channel of goods transfer. Somemight think it is unethical for them to chargesuch a high premium as commission withoutdoing anything productive and would like toblame them for the so called ination but theirrole is not limited to the market itself. They may

be the bad guys or could be better termed as thecommission agents but they are considered tobe very respectable in the market not becauseof their position and power but because they

associate themselves with their suppliers(farmers) and buyers (local wholesalers anddoor to door vendors). Normally Arthiyas charge5% commission of which 1% is being paid backto the mandi. Big retail chains can save thiscommission by procuring the products directlyfrom the farmers thus saving expense and itcould directly be transferred to the consumer inform of cheaper products. But how the conditionof a farmer is going to be improved remains abig question. Even in the present scenario manybig rms prefer buying from middle men rathertrying to reach farmers. Now this is a trickysituation as in such situations the prices aregoing to increase than decrease, as it`s similar

Anshu Katiyar and Harish Verma, PGP 2011-13Indian Institute of Management Raipur

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to adding one high prole commission agent inthe chain and the condition will become moreadverse.

When Mr.Rajender Kumar Mishra, a middleman himself was interviewed it seemed as if thegovernment took no notice of such a group of

people. A Master of Commerce himself, he hasbeen in this business for 15 years and knowsquite a lot of how the policies of the governmentwould affect their business. He manages a basicstorage as he mostly clears the stocks on a dayto day basis where the quality of the goods isin the condition in which it was procured fromthe farmer and this negates the need of coldstorage. Mr.Rajender also owns vehicles thataid in the delivery of goods across the state. We

also found that the price decided by any themiddle men are purely based on the supply anddemand at that point in time, thus uctuatingoften and approximately a daily volume of60-80 sacks of 100 Kgs each clearance. Hesupplies to some retail outlets and hotels too.Mr.Rajender is rmly against the FDI statingthat it will denitely affect his business andput its future in doubts. He also claims thatthe policies are corrupt and has no relevanceto ground realities. Unhappy with policies andtaxes levied, Mr.Rajender suggests that thegovernment should shift its focus on helpingtraders rather than levying taxes, which seem tobe quite a valid point.

A share of the Arthiyas may not have access toformal education but the vast knowledge theypossess in the eld of their expertise gives theman upper edge, they can state the differencebetween the similar looking fruit/vegetable andwhich will last longer and thus know whichproduct they need to sell rst. This knowledgehelps them in managing the inventory wiselyin these huge unorganised markets. But this isnot the end of the story as the most importantpart played by these arthiyas is as follows; theyare considered to be the nanciers in the marketas they lend money to the farmers for buyingthe seeds and fertilisers at the time of cropplantation, they even pay for sacks which are

used to store and carry grains. Cash in lakhs aregiven many months in advance to the farmers.Arthiyas also give them money for buildingtheir homes, for buying cattle, for marriages and

other community functions. So now it`s not thepure business we are talking about it`s about theemotional bonding which is created betweenfarmer and arthiyas over a period of time. Thereare farmers who have been associated with somespecic arthiyas for generations and farmerwon`t be able to leave such strong bonding for

petty gains. Lot of local wholesalers and localdoor to door vendors also purchase the productson credit, roughly they are given a time of 7 to8 days to pay their debt. A normal note book isbeing maintained where each vendor registershis name and signs at the time of collectinggoods, while at the time of paying, the collectorput his signature to clear him from the debt. It`snot so easy to deal in these accounts as croresof rupees are at risk and no organisation canthink of working in such manner. These farmersand local vendors are totally dependent on thearthiyas for the credit sales as they do not havesufcient fund to invest in their business. It isamazing to see such an untraditional bankingsystem working in the market in very efcientand effective manner where there was no caseof cheating or fraud being heard as everyoneknows each other very well.

Quality of the product could be another factor tobe considered as many times it does happen thatdue to poor infrastructure and facilities the cropsget affected which results in poor productionof quality or quantity. As the big retailers arerenowned for their high standards and theirpractice to cherry-pick the best product, whatwill happen to the crop which is slightly belowtheir standards? Where will the farmer nd themarket for such products?

There is no doubt that the consumer will get thebest product on the shelves and they shouldget it as they are paying hard earned moneyfor buying the product. They should not sufferfor the aws in the system, but isn`t it theresponsibility of the government to provide thenecessary infrastructure and equipment to thefarmer so they are able to provide the best qualityproduct in the market. Looking at the farmingconditions available in our country where the

farmers depend on rain water for irrigation,traditional methods are used for farming, theydo not have access to good quality seeds or insome cases farmers lack funds needed to buy

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seeds and fertilizers. Electricity is still a distantpicture for majority of the villages and thedropping water level adds to their misery. Fewplaces are suffering from oods and few fromdrought in such adverse conditions how can webelieve that making policy will help the countrygrow and will equip them completely in the

global market. How can we dream of a shiningIndia? The necessity of time says we need to bestrong enough in implementing the policies andmonitoring them at regular intervals as it`s notthe poor policies which lead to the failure ratherthe poor implementations of the policies whichmake things miserable.

Unless we are clear with our action plan forthe near future we won`t be benetted from

the huge investments to be made by the bigrms in India. To cash it in for the best interestof the nation we need to improve our basicinfrastructure because only then will we beable to ght at the international level with thestandard quality and quantity of our product.Clearly we need to lift our standards as theworld has become a global village thus we can`texpect our government to protect the domesticmarket by trade barriers for longer duration asits a hindrance to the national growth. Thuswe need to work together and improvise ourstandards making India a premium brand notjust by drafting bills and allowing the foreignbrands to capture our markets rather competingwith them on the level ground.

The bill is still in the box and a consensus needsto be reached before it could be implementedbut before that there are quite a lot of factsthat needs to be made clear as people are stillnot sure about how the bill will help them indeveloping their business. For instance it isbeing stated that foreign retailers can whollyown their business but need to source 30%of their product from SMEs with revenue notexceeding Rupees 5 crores but consideringthe size of the product required by these bigretailers, if a supplier meets their demand hewill cross the Rs. 5 crore mark very easily andwould no longer remain a SME. If the retailers

go for several suppliers it will be difcult forthem to maintain the uniform quality amongtheir products which may hamper their brandimage and the trust created over decades. Many

big retailers are revising their plans and arelooking for various alternatives to enter India.Similarly Government of India needs to makethings more transparent as to how it will helpthe citizens and an action plan which couldaid in the development of India. The biggerworry will be the way in which the bill would be

implemented which has always been a debaclefor India.

Quick Fact:Workers in China costabout 92 cents an hourcompared with $1.2 inThailand, $1.7 in Mexicoand about $21.8 in theUnited States. Only Indiaamong the major exportcountries, at about 70cents an hour, is cheaper.

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Implementation Strategy or Logistics Hub at RaipurAditya Kumar Konathala and Ranjit Kumar Ram, PGP 2010-12

Indian Institute of Management Raipur

Chhattisgarh economy has witnessedfast paced growth over the last decade,making it one of the preferred investment

destinations for multinational corporationsand a recognized industrial hub to the world.Chhattisgarh is the central hub for steel, iron,power, aluminum, medium scale industriesin India. This, in turn, has resulted inincreased demand for world-class logistics andwarehousing services at Raipur, the capital cityof Chhattisgarh.

Chhattisgarh State reveals a well connected

region in terms of three modes of transportation(rail, road and air). The Raipur region isstrategically located in central India with theMumbai Kolkata rail link and the major east-west (NH-6) corridor connecting Surat/ Mumbaito Kolkata passing through it. ChhattisgarhLogistics Hub, project site is located between

NH-6 and Raipur-Vishakhapatnam Main BroadGauge Rail Line, at the northern boundary ofNaya Raipur City. As a part of the Logistics Hub,NRDA (Naya Raipur Development Authority)is planning to establish a Railway Siding,

Truck Terminal, Warehouses (Open/Covered),other facilities such as Commercial Area withprovision for Ofce complex, Maintenance

Workshop for equipments & Cleaning, AutoService Centres with Spare Parts& Accessoriesand so on.

Today, the biggest challenge before the logisticsindustry is to increase efciencies and becomemore cost-effective, thereby increasing overallcost arbitrage. We presented the SWOT analysis

of various modes of freight transportation viz. roadways, railways, ports, waterways andairways. The report also examined steps thatcan achieve increased efciency and ensurea more balanced and planned growth of thelogistics sector.

For an efcient and effective Logistic hubat Raipur, we presented the supply chainnetwork design and Multimodal DistributionPlanning with Cross-docking, which are critical

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in facilitating coordination among suppliers,manufacturers, distribution centres andcustomers.

The total number of truck registered inChhattisgarh are more than 40000. Out of thetotal, 35000 trucks are operated from Raipur and

rest are from Raigarh, Jagdalpur, Ambikapurand other places. Out of the total number oftrucks, 70% are in Out-Bound and 30% areengaged in In-Bound Services. Approximately7000 move towards Allahabad, 5000 towardsOrrisa, 8000-9000 towards Maharashtra, resttowards Ramanujganj, Konta, and other placesof the country including Andhra Pradesh.

There is a need for national logistics strategy

that can improve efciency and lower costs, inorder to achieve high customer service at lowcost. This strategy aims at aligning diverse stateand central government policies, set targetsfor the growth of this sector, chalk out rolesfor the public and the private sector, focus oninfrastructure development and facilitates theentry of new players in the logistics industry.

Emphasis has to be on creating the need to

meet operational challenges by adoptingworld-class technology and business processesin establishing a successful distribution andlogistics hub at Raipur. For instance, theprocedures to obtain railway and airport cargoclearances will need to be improved immediatelythrough exercises such as business process re-engineering. In the longer term, the State willneed to match the performance of internationalhubs on aspects like on-time delivery and easy

access to information for users. Practices likeusing Electronic Data Interchange (EDI) forsubmitting forms and checking delivery statuswill have to become routine. In addition, thereis also a need to signicantly expand the skillsof staff working in the hub as well as ensurecontinual retraining.

There is a need to create an autonomous bodyto manage the hub. The success of the hub will

depend not only on the efcient functioningof its individual components like ports, roads,railways, airports, etc., but also on how thesefacilities are leveraged in tandem. The bestway to achieve this would be to set up a

dedicated autonomous body that stimulates thedevelopment of the entire hub.

An optimized distribution centre model willhelp in reduction in logistic cost in additionto this facility. Since there will be two kind ofow handled by logistic hub at Raipur Goods

which will be exported from Raipur to all overIndia or outside India, Goods which will comefrom outside India or all over India to Raipuror Chhattisgarh, we proposed an Intermodallogistics model that use transportation costs,xed location costs, modal connectivitycosts, modal transit times and service timerequirements, for three modes of transportation:road, rail and air. The inherent benet ofintermodal shipments lies in the cost advantage

obtained by the joint use of multiple modes oftransportation: road, intermodal rail, air andocean freight.

Thus logistics hub will improve thetransportation capability of the region, enablingit to provide alternative transportation modeswith improved levels of service, capitalizingon the existing industrial and agriculturalproduction capabilities within the catchment

area, while providing a new focus on highervalue added goods for the major target markets.

Chhattisgarh logistics and distribution hub isa logical extension of the overall infrastructureinitiative and a tangible way for the State tojump-start trade. It will also play a vital partin the success of many growth engines withan emphasis on exports, such as poultry,horticulture and labor intensive manufacturing

industries.

(The above article is an abstract of the researchpaper Implementation Strategy for LogisticsHub at Raipur. This paper was selected forthe nals of the International OperationsConference organized by IIM Calcutta andSociety of operations Management, India onDec 16, 2011)

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E-Tailing in IndiaVishal Singh, PGP 2011-13

Indian Institute of Management Raipur

Abstract : This article gives an inside view of thee-tailing industry in India, its growth prospects

and current scenario. With the high growthpotential of the e-tailing industry this articlealso cites certain examples from the industryexplaining how this potential is being utilised bythe traditional and new start-ups. How the growthis happening in India in e-tail through the tier 2-3cities is also being explained in the article. Andat the end, general aspects like how the e-tailinghappens, advantages and challenges of thee-tailing business in India are explained.

E-Tailing (short for Electronic Retailing) isdened as selling of retail goods throughinternet where the buyer and seller are

not at the same physical location. Some of thegoods sold though internet are like computerhardware, cinema, Books, Music cassettes /CDs, travel tickets and gifts etc. In India wherethe internet user mark has crossed100 million and is expected to growto 300 million mark in next three

years according to the Internet andMobile Association of India (IAMAI)growth potential of this businessis immense. Real time facts alsosupport this assumption e.g in year2011 total e-commerce business inIndia was around Rs 46,250 crore,a growth of 47% with respect to Rs31598 crore in year 2010 exceedingthe expected 10-15% growth per

year. Out of this Rs 46,250 crorebusiness at Rs 2,700 crore, e-tailingaccounted for around 6% of the totalnet commerce market, but is expected to growmore than 30% in coming years.

According to the Industry experts apart frompopular items like mobile phones, books, andelectronics the trend of selling fashionableitems like jewellery, accessories, apparel and

footwear is catching fast in India. The reasonbeing the brand preference, ease of selectionand shipping make this category a preferredchoice for online transactions. For example

seeing the huge potential in the e-tailing marketretailers like Shoppers Stop, Globus, Gitanjali

and Futurebazaar are looking at expandingtheir online presence like Shoppers Stop islooking at increasing its reach to more deliverylocations, convenient payment methods, andbetter integration with its stores. Over the next3-5 years, Shoppers Stop expects its onlinebusiness to be equivalent to one of its largerstores. FutureBazaar.com, the e-commercearm of the Future Group, that links to its storesincluding eZone, Pantaloons and Big Bazaaronline delivers goods across 1,500 cities and

towns in India covering 16,000 PIN codes.Apart from these traditional retailers severalstart-ups offering multi-brand products likeipkart.com, Snapdeal.com, fashionandyou.com and Naaptol.com. are also cashing in onthe growth potential of the e- tailing industry.For an example Flipkart which has now becomeIndias Amazon sells 30,000 items a day with

more than 2 million registeredusers.

The rapid growth ofe-commerce industry hasattracted huge investment inpast years in India e.g in 2011alone $350 million investmentwas done into 57 internet start-ups which is more than thecollective investment of thepast four years. E-tailing is the

second fastest growing onlinecommerce segment after onlinetravel bookings, say industry

experts. In 2011 $3 billion worth of e-commercewas transacted and this is expected to growto $20 billion in coming 5-7 years with 12-15%contribution of shopping through online.

Globally with 100 million users, India ranksthird in terms of total number of users in a

country and this number is rapidly increasing.Rapid internet penetration and demand inthe tier 2-3 cities and rural parts of India arefuelling the growth of e-tailing industry. In

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tier 2-3 cities where there is brand awarenessbut no availability of products and services thedemand supply gap is very high which is givingan opportunity for growth for the e-tailingcompanies. Online retailing portals such aseBay.in, Snapdeal.com, and Naaptol.com areregistering anywhere between 40 and 60%

of their sales from rural areas apart from thetier II and III cities like Vadodara, Faridabad.Jaipur, Visakhapatnam, Kanpur and Lucknow.According to eBay India Census 2010, about3,296 Indian cities shopped on eBay last year,of which 2,234 were tier II and tier III cities, and1,045 were rural towns.

In order to understand the e-tailing businessthere are various aspects which are required to

be known which are as follows:How does e-tailing happen ?

After logging in to the companywebsite, consumers order theproduct that they want afterbrowsing through the optionsavailable. Goods are deliveredthrough couriers or any otherlogistics partners. Paymentsare made either on delivery or

upfront online through creditcards with links to secure payment gateways.

E-tailing provides advantages for both sellersand buyers. Buyers are beneted as productsoffered on e-tailing websites are usually 10-15%cheaper than traditional retail stores or shops. Awide range of products are available to choosefrom and sometimes virtual modelling optionsare available to help trials in some cases.

Information about the products is easilyavailable on internet because of whichconsumers are sure whether they are buyingthe right product or not. It saves time for theconsumers to shop while sitting at home andnot spending time going outside searching andbuying the products and devoting this savedtime into their professional and domestic moreimportant work.

E-tailing helps companies save substantiallyon overhead expenses that include real estaterentals, staff salaries and store maintenanceexpenses, while also saving time. In retailing,as much as 50% of the initial investment could

go towards acquiring real estate. But, onlineretail only asks for brand trust, nothing more.

E-tail gives a wide customer base for the companyas the site can be accessed from anywhere inIndia or in fact any part of the world thereforebuilding nationwide presence for a brand, evenin far-ung places for example Bata boasts of

e-tail sales from the Andaman and Kashmir.Out of stock chances are low as the goods aredelivered direct from the warehouses.

The basic requirements for an e-tail businessare:-

Building the Suppliers base- For every businessa good supplier and distributor base is importantfor smooth functioning of business. And ine-tail business where products are almost

always sourced from suppliersin real time and as and whenthe customer places an orderand major part of business isthe delivery of goods buildinga good supply chain basebecomes important.

Building Infrastructurefor Operations- Basicinfrastructure like company

ofces, warehouses at strategiclocations are required for the e-tail business.Since delivering of goods at consumers locationin an essential part of business tie-ups withmajor courier companies is also important.

Use of Information system: Use of technology isan integrated part of e-tail business. Companiesuse sales to predict the inventory levels. Allparts of business unit need to be integratedto know when, where and which items stock

needs to be replenished. Use of technology totrack the delivered good is also important. Thecustomer needs to be updated about the statusof his shipment via email or on the website.

Major challenges for E-tailing are :-

Lack of trust among consumers

Security of online transaction

Many consumers want to touch, feel and trialproducts before buying.

In spite of 100 million users, new users may not

readily start shopping online

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Interview with Mr. Arvind SinghalAbout Mr. Arvind Singhal

Mr. Arvind Singhal is Chairman and ManagingDirector of Technopak. He has done his Engineeringfrom IIT, Roorkee and MBA from University of

California, Los Angeles, USA. He has more than 30years of experience in the industry. He is a regularcontributor to various national and internationalpublications that include Wall Street Journaland Washington Post. He has also been writinga fortnightly column for Business Standard forthe last 10 years and now a monthly column forEconomic Times. He regularly addresses Indianand International conferences and has givenguest lectures at leading educational and other

Institutions in India & abroad including HarvardBusiness School (USA), Wharton (USA), ESADE(Barcelona), various IIMs and IITs etc., and theVatican (Italy).

Strive: Please let us know your views on theGovernments latest decision to allow 100% FDIin Single-Brand Retail?

Mr. Arvind Singhal: In my opinion, this decisiontaken by The Government is meaningless

because of the riders attached to it. Take thecondition of 30% sourcing from Small Scale andCottage Industries. This condition is infeasibleto achieve. Ikea, one of the Worlds largestretailers for example sources tens and thousandsof products from multiple vendors located atseveral locations like China and Europe andthese vendors need to be highly competitive.If Ikea were to source 30% locally, the vendorsneed to have high quality and need to be highlyefcient. If these vendors were to invest more

than US$1 Million in their plant and machinery,they would no longer remain Small Scale andCottage Industries. No Retailer would want todevelop so many vendors. Luxury Brands likeLleyton Hewitt dont even outsource. Recently,I read an article about how By law, SwissWatches cant be called Swiss Watches as mostof the components are produced and assembledoutside Switzerland. The decision taken by theGovernment is infeasible and has no relevance.

Strive: What is your opinion on whetherGovernment should allow 50% FDI in Multi-Brand retail?

Mr. Arvind Singhal: The Government shouldallow 100% FDI in all sectors other than thosethat are of strategic importance. It hardly makesa difference whether a foreign player or anIndian player sells some products. Both havethe same dangers, then why should there bea distinction between the two. Dumping cantbe done as Indian laws are strong enough toprohibit them. Companies cant affect pricingbecause of excise rules and MRP of products.Such issues have not happened in any othercountry and hence this discussion is irrelevant.Rather, the policy should encourage small andmedium-retailers against the large Retailers.

Strive: What according to you are theadvantages and disadvantages of allowing FDIin Retail Sector?

Mr. Arvind Singhal: The decision of allowingFDI in Retail Sector has no disadvantages. It hasonly advantages. Firstly, it will aid in reducingprices. The country suffers from Ination and itcan be controlled if the foreign retailers bringthe vendors in India. Secondly, Competition inthe retail sector is good for the consumers.

Strive: Please give us a glimpse of the current

state of retail Sector world-wide and how is itdifferent/similar to that of India?

Mr. Arvind Singhal: No country has restrictionsregarding ownership. Retail sector is one of

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the largest employers in the world. There arefears that large retailers have impact on localcommunities. But this has happened only whenthese retailers are large and dominant andhence restrictions have been imposed on themin the small cities. It has been observed that asthe economy slows down, it has an impact on

consumption which leads to increased stressamong the retailers. In addition, Europe andUSA have started to see an impact of online

retailers as consumers look for cheaper goods.Hence, the Retail Sector world-wide is not verygood.

Strive: How is the overall environment,especially from the investment point of view, inIndia?

Mr. Arvind Singhal: The overall environmentfrom the investment point of view in India islargely subdued. The indicators are not good.

The Index of Industrial Production grew by just1.8% y-o-y in December 2011 compared to 5.9%increase in November 2011. There is a lot ofnegative news in the market and concern among

both the Indian and Overseas Investors. Whilethe Government may claim the investmentenvironment to be good, Investors need Stabilityand Good Governance. The Environment needsto improve.

Strive: What do you think should be the entry

strategy for Foreign Retailers who want toenter into India keeping into consideration thevarious obstacles and challenges faced.

Mr. Arvind Singhal: Foreign Retailers need to

understand that India is a good long term story.There is diversity in buying behaviour of Indiansand understanding of Consumer Behaviouris important. This requires a lot of patienceand perseverance. Beyond this, the strategy ofdifferent retailers would be different dependingon their business.

Strive: Do you think that the Present state ofInfrastructure and Supply Chain is sufcient

enough to support the future growth in theRetail Sector? If no, Please let us know somerecommendations for improvement.

Mr. Arvind Singhal: The state of infrastructure

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B-Schools you see students focussing on weeklytests and hence their vision is not long and isquite measurable. A job is meant to be for yearsand decades. But, we see young managersasking for increments after a few months andswitching jobs in months. Young Managerswant excitement in their life. Any sector has ups

and downs and employers do well sometimesand not so well at other times. Managers needto learn and develop their competence slowlyand steadily.

(As told to Rohit Bhagat)

in India at present is insufcient. You cansee that the price consumer pays for could be200% - 400% of the price that the farmer gets.For instance, In Punjab, Haryana and NorthernIndia farmers are dumping potatoes on theroads. On the other hand, potatoes are availableat Rs. 3-4/ kg in Delhi Mandis and at Rs. 5/kg in

Retail shops. Farmers dont even get Rs. 1/kg forwhat they produce. The delta between the pointof production and the point of consumption isquite signicant. This leads to a lot of wastage.Once the proper Infrastructure is established,the farmer may or may not get more. But, atpresent there is a lot of wastage and middle menin the Supply Chain which need to be removed.

Strive: Some experts say e-commerce has a vital

role to play in the retail industry ahead. What isyour opinion?

Mr. Arvind Singhal: E-Commerce plays asignicant role in the Retail Sector. In the next4-5 years, it will be the most dominant form ofshopping. Not just 20-30 cities in Urban India,but 300-400 cities will go online. The Onlineretailers dont face any limitations in termsof space. Consumers also prefer e-Commerceas they have to pay reduced prices and it is

convenient for them sitting at home to orderwhat they want. The prospects of E-Commerceare bright.

Strive: Please give some advice to BuddingManagers.

Mr. Arvind Singhal: Surely, I would be pleasedto do so. Firstly, I would advise BuddingManagers to become Experts in a particular eldand not just Generalists. By this, I dont mean

specialisation in Finance or Marketing etc. Theyshould gain competency in an Industry. E.gthe Healthcare Sector is expected to do well inthe next 10 years. Now, the Budding Managersshould learn how to manage the businessissues of Healthcare. They should understandthe Supply Chain of Healthcare which wouldbe quite different from that of an FMCG, or theMarketing of Healthcare would be differentfrom the Marketing of Telecom and similarly theHR Issues again would be quite different fromthose of other sectors. Hence, it is importantto develop expertise in a sunrise industry.Secondly, I would advise them to not run lifelike a 100 metre dash but like a marathon. In

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Dominos - Story o Success in RetailAjay Kaul, CEO

Jubilant Foodworks Ltd.

Mr. Ajay Kaul is the CEOof Jubilant Foodworks

Limited (formerlyDominos Pizza IndiaLtd.). Mr. Kaul has over20 years of Experiencein Industries such asFinancial Services,Airlines, ExpressDistribution and Logisticsand Food Retail. Prior to

joining Jubilant Foodworks, he was working in

Indonesia as the Country Head of TNT ExpressDivision. Mr. Kaul has been Whole Time Directorof Jubilant Foodworks Limited since March 14,2005. He holds a Bachelors Degree in Technologyfrom Indian Institute of Technology, Delhi anddid his MBA from XLRI, Jamshedpur.

Mr. Ajay Kaul has won CEO with HR orientationaward in Asias Best Employer Brand Award 2010 presented by World HRD Congress, RetailProfessional of the Year 2010 award presentedby Franchisee India and Entrepreneur of TheYear 2010 award, presented by Ernst and Young.

In December 2011,Dominos soldover 5.5 million

pizzas in India, thehighest monthlysales so far in thecountry. The brandhas enjoyed 31%same-store growthand 51% systemlevel growth in ninemonths of FY 2011-12. Such success hasbecome a routine for Dominos in India. Butthings werent always this way, especially whenthe global giant was entering the country backin 1995.

The competitors were many fast foods like

burgers, street foods like chats and samosas,south Indian snacks like dosas and also thetraditional food cooked at home.

In fact, Dominos had to shut down in twenty

cities after year 2000. Thus it was operating100 outlets in the country in 2000, and again

the same number of outlets in 2005, while itwas starting to recover. The major reasons forthis set back were weak operations and supplychain. Unlike most retail products, the last milevalue addition is very crucial in case of pizzas.This necessitates the presence of an efcientand robust supply chain network for the successof this business. Another issue was an acuteshortage of trained manpower. Add to these theinadequate cold storage infrastructure in the

country, and quality complaints also enteredthe picture.

When Dominos entered the Indian marketthrough its franchisee Jubilant Foodworks(erstwhile Dominos Pizza India PrivateLimited), it faced a double challenge

1. To create a completely new segment in amarket which was completely alien to theconcepts of pizza as well as home delivery and

2. To establish Dominos as the leading brand in

this segment.In the beginning, the message communicated

to the people wasHungry kya?Dominos Kha!. Thegoal was to ingrainDominos into thepsyche of the Indianconsumers as aquality food provider.All the promotionsincluding TVc o m m e r c i a l sreected the samemessage. In fact,the delivery services

offered by Dominos were not pitched in orderto avoid confusion among the consumers.This stage can be aptly called FunctionalLaddering as the brand was making its wayinto the minds of the consumers by fullling a

functional requirement hunger relief.Once the brand had established itself in themarket, the other very important part of itsservice had to be highlighted. Thus came a

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15 minutes go into the preparation of an order.8 mins are reserved for delivery time, givingbuffer of 5-6 mins for bad traic conditions. Thestores locations played a very important rolehere and hence they were strategically placed.Latest softwares are being used to select thequickest route for each delivery. A happiness

hotline has been created, which can be reachedby the all-India number 68886888, which thenredirects the call to the Dominos store nearestto the caller. This not only saves the customerfrom the trouble of nding the contact numberof the nearest Dominos, but also ensures thatthe order goes to the nearest outlet and not anyother outlet. Another problem that cropped upin the earlier days of implementation was theoccasional delayed, yet non-free delivery.The reason, not surprisingly, was the kindnessof the customer because of the misconceptionthat a free delivery would result in penalties

against the delivery guy. To tackle this issue,every delivery boy was provided with a badgestating that he would not be ned for deliveringfree and was made to compulsorily wear it whiledelivering any order.

Despite all these hurdles and complications,Dominos has been maintaining an impressivenon-free or on time delivery rate of 99.3%.The remaining 0.7% deliveries do look like

an operational loss, but in reality, this lossrepresents a completely justied marketingexpense. The number of free deliveries ismonitored at the CEO level on daily basis.

string of TV commercials with the slogan 30Minutes or Free. The concept itself made senseto very few people. The pizza had to be deliveredat the consumers doorsteps within 30 minutesof placing the order, and if delayed due to anyreason, it had to be delivered free. It simplydeed logic due to more than one reasons.

Firstly, giving away free pizzas was notprotable. Also, given the problems associatedwith trafc, bad roads, weather conditions etc.a lot of pizzas could go out for free.

Secondly, this service could be provided onlyin a limited area around each outlet 2.5 kmradius/8 mins drive time (also called LakhsmanRekha in company parlance). Thus Dominoswas actually refusing to take orders from theconsumers outside this zone, even if they were

not asking for the 30 minutes or free service butjust a delivery. This was a very difcult task forany store manager because it contradicted theirfundamental goal to meet the monthlytargets. Needlessto say, there werea few deviations,especially in thebeginning, incomplying with thenew rules. But themanagement hadtheir minds made up.A very strict military-like regime wasestablished to trainthe store owners andtheir staff members.Also, a culture ofcelebrating the rst

free delivery was introduced, which aimed atgetting rid of the stigma one would naturallyassociate it with. An interesting rule in Dominosis that each quarter, everyone in the seniormanagement has to work in one of the stores asa staff member. This serves the dual purpose ofunderstanding the customers rst hand as wellas absorbing and refreshing the unique culturaltraits of Dominos.

Apart from combating the operational issues,

i.e. enforcing new rules and developing afresh culture, the 30 minutes or free conceptrequired a robust logistics and supply chainnetwork. It is worth noting that on an average,

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International. It was also awarded as the mostAdmired Retailer of the Year: Foodservicebestowed by Indian Retail forum at the 8thannual Images Retail Award and has beenrecognized as one of the 10 brands that havechanged the consumer behaviour and set newtrends in last decade, presented by Brand

reporter & agency faqs.Dominos India has also started online orderingsystem for pizzas, which serves the followingadvantages:

1. Dominos employees do not need to engageon phone and explain the customers about thepizzas, add-ons, prices, varieties etc.

2. The customers get the visual descriptions ofthe products along with the prices, offers etc.Apart from making the choice easier for them, it

prompts them to order more.Around 7-8% of the delivery orders in thecountry are being made online and this numberis growing fast.

To add another colorful feather to its cap,Jubilant Foodworks has already become afranchisee of the coffee and donuts giant DunkinDonuts and will be bringing them to India thisyear itself.

While Dominos was engaged in establishing itsbrand and supply chain network, it constantlyinnovated to introduce new products - thecheese burst pizza was named as the bestproduct launched by Dominos worldwide in2006. Pizza Mania, or Rs. 35 pizza, aimed atpenetrating the market, was launched in 2008.

The next step was to enter the emotionalspace of the consumers mind, i.e. EmotionalLaddering. This step involved showing theconsumers that Dominos provides more thanjust food or pizzas, it delivers happiness. Thenew slogan was Khushiyon ki home delivery.The commercials associated with this strategyhighlighted the emotional aspects of happinessand sharing on any occasion.

Needless to say, the strategy has worked quite

well, and from the mere 100 outlets in 2005,Dominos is now operating over 400 outlets andhas plans well in place to aggressively growyear on year.

During this exciting journey in the Indianmarket, Dominos also set some othermilestones. Jubilant Foodworks Ltd. is the onlyfood service company to be listed on the Indianbourses. Dominos Pizza India was globallyrated amongst top 3 in Operational Excellence,

consecutively for 4 Years by Dominos Pizza

Mr. Ajay Kaul addressing the students at IIM Raipur

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Retail in China: What India can learn?Kriti Singhal and Umesh Chopra, PGP 2010-12

Indian Institute of Management Raipur

Abstract

With highly effective government stimulusaction in place, Chinas economy was the rst torebound from the economic downturn among themajor economies in the world. The ofcial GDPgrowth rate reached 8.7 percent, surpassing thecountrys growth target of 8 percent. Chinasretail industry in particular demonstratedremarkable topline growth but also sufferedserious margin compression. Although Chineseconsumer condence fell dramatically as a resultof the global nancial crisis, it was boosted againby the recovering global economy, as well as by

central and local government policies designedto stimulate domestic demand, maintain growth,and restructure certain industries. TraditionallyChinas retail was as fragmented and unorganizedas what is Indias retail in the present times. Butit survived the liberalization in terms of foreignentry into its market. Indian can learn a lot fromthem and perhaps implement before going furtherwith liberalization.

After a recent series of mishaps created bythe Government of India and oppositionalike on the issue of FDI in retail, a

Continuous provoking thought is still there. Arewe overesti