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2. •FDI in Retail – Policy Perspectives.
•Retail Sector – An Overview.
•FDI Policy in Retail - Opportunities & Challenges.
•Emerging Human Resource Challenges.
•What lies ahead ?
Issues for Discussion

4. The commitment of money or
capital to purchase financial
instruments or assets in order to
gain profitable returns.

5. Foreign
Investment done by citizens and Investment
government of one country (home through
country) invest in industries of
another country (host country).
Foreign Foreign
Direct Institutional
Investments Investors

6. Automatic Route Government
No permission required Approval /License required.

7. • 1991- FDI allowed selectively up to 51% in priority
sectors.
• 1997-FDI allowed up to 100% in sectors like
mining, manufacturing.

8. • 2000-06 FDI allowed up to 100% in specified sectors.
FDI limits increased.
Procedures further simplified
• The top 3 Indian Regions attracting the highest FDI.
 Mumbai, Delhi and Karnataka.
 Account for nearly 62% of the total FDI.

9. • Mergers and Acquisitions
By • Horizontal FDI
• Vertical FDI.
Target *Backward Vertical FDI
*Forward Vertical FDI
• Resource-Seeking
By • Market-Seeking
• Efficiency-Seeking
Motive • Strategic-Asset-Seeking

10. Super
Government markets
Kirana Stores
Stores Hyper
markets
Weekly Conveni
ence Malls
market
store Brand
Village outlets
Barter melas
system

11. Single Brand
Retailing • 51%
Cash and
Carry Model • 100%

12. Incentives attract FDI.
Market size and potential are sufficient inducers.
 Tax breaks, import duty exemptions, land and power
subsidies, and other enticements.

13. FDI inflows from
FDI inflows from
August 1991 to
2000-10 crossed
April2010 were
$300 billion
$134.6 billion.

16. GRDI Position : 3rd
Size : $ 400 billion
Growth Rate : 13%
GDP contribution : 12%
Major sector : Food and Grocery
Employment : 2nd largest industry
(35.06 million)
Types: Organized ( 5%)
Unorganized ( 95%)

17. • Corporates are increasingly coming into this sector.
• Demand of branded goods on a large scale.
• Demand of new and varied products.
• High quality product is preferred .
• Varied window display.
• E-tailers increase the presence.

18. Format Description Retailers
Hypermarkets Offering basket of product Spencers, Big bazaar
Cash and Carry Bulk-buying requirement Bharti-wal-mart
Departmental stores Large layout, Wide merchandise Lifestyle , Globus
mix
Supermarkets Household product as well as food Apna bazaar , food
as integral part of the service bazaar
Shop-in-shop Shops located in shopping malls Navras ( big bazaar)
Specialty stores Focus on individual product type Brand Factory
Category killers Particular segment The LOFT
Discount stores Branded product at discounted Subhiksha, levi’s
prices outlet
Convenience stores Small Retail stores In and out

19. Retail Segment Percentage holding Major retailers
in sector
Food and grocery 63% Reliance fresh, Café
brio, food bazaar
Clothing, textile and 9% Westside, shoppers
fashion stop, globus
jewellery 5% Tanishq
Catering services 5% IRCTC
Consumer durable 4% Viveks, vijay sales,
Croma
pharmaceuticals 4% Piramal group
Entertainment 3% Bowling co.,
Furnishing, utensils 3% Hometown, Tangent
Concept
Mobile handsets 2% The mobile store,

20. • One of the world's largest industries exceeding US$ 9
trillion.
• Dominated by developed countries.
• 47 global fortune companies & 25 of Asia's top 200
companies are retailers.
• US, EU & Japan constitute 80% of world retail sales.

21. • Retail trade in Europe employs 15% of the European
workforce (3 million firms and 13 million workers).
• The world’s population is poised to expand 50% by 2050.
The world currently comprises of 78% poor, 11% middle
income and 11% rich.

22. Contribution Respective
to GDP
12% India
6% Brazil
14% Japan
8% China
20% USA

23. US France UK Germany US
Sales: $374.5 Sales: $130 Sales: $102.6 Sales: $101 Sales: $77.3
bn bn billion billion bn
Earnings: Earnings: Earnings: Earnings: Earnings:
$12.9 billion $5.2 billion $5.5 billion $1.5 billion $4.2 billion
Stores: 6,800 Stores: Stores: 3,729 Stores: 2,221
87,422 worldwide
worldwide
worldwide Stores: 2,258

24. US
Taiwan
Malaysia
Thailand Organised
Indonesia
Unorganised
China
India
0 20 40 60 80 100
US Taiwan Malaysia Thailand Indonesia China India
Unorganised 15% 19% 45% 60% 70% 80% 95%
Organised 85% 81% 55% 40% 30% 20% 5%

27. India China
Focus on Services Focus on Industry
High labor cost Low Labor Cost
Home grown Capital FDI
Old technology Adaptability to Latest
technology
Democratic Government Communist Government

30. INDIA
•A large emerging market .
Increase in disposable income of a family.
70 mn Indians – salary of $18,000.
Rise to 140 mn by 2011.
Consumer spending power increased by 75% in
last 3 years.
The per capita income in 2009–2010 has more
than doubled to US$ 849 from US$ 348 in 2000–01.

31. Characteristics of Indian Market
Source: McKinsey&Company

32. •Increase in consumer class.
Consumer class will grow Upper class
from 50 million at present to
583 million by 2025. Middle class
With more than 23 million
Lower class
people taking their place
among the world’s
wealthiest citizens.

33. •Wide demographics -- average age of 25 yrs.
•Brand consciousness.
60 % of population below age of 30.
Awareness through World Wide Web.
•Changing consumer mindset.
Focus shifting from low price to convenience, value
and a superior shopping experience.
•Small Basket Size Shaping of Consumption

34. Source: McKinsey&Company

36. •Easy consumer credit.
Upper class
EMI & loan via credit cards --
easy for Indian consumers to Middle class
afford expensive products.
For instance, Casas Bahia’s- Lower class
Brazil.
Note: BOP C.K.Prahalad.

37. •Employment generation.
Second-largest employer after
agriculture. Additional
1.6 mn
Retail trade employing 35.06 million.
jobs .
Wholesale trade generating an
additional employment of 5.48 million.

38. •Technology Better use of resources and
goods.
Wastage and Storage problems will be
resolved.
Efficient logistics, production, and
distribution channels.
Digital records.

40. •Rural market.
Robust Consumption.
70% Indian households.
2/5 of the country’s total consumption pie.
Accounts to 45% of GDP.

41. •FDI in Retail sector will resolve problems
regarding foreign exchange in India.
•The life-long basic needs will keep on
driving the Retail Industry.

42. Let the liberalisation be in
steps rather than being a leap.

44. SKILLED
WORKERS
INFLATION COMPETITION
REAL
TAXATION
ESTATE
POLICIES
PROBLEM
PROBLEM IN MARKET
RAISING POWER
FUNDS
SUPPLY CHAIN
MANAGEMENT

45. • Major challenge faced by Organized retail sector:
In Retail, over 70 per cent of the labor force in
both sectors combined (organized and unorganized)
is either illiterate or educated below the primary
level.
• Labor Laws

46. • A strong competition from mom and pop shops:-
Easily accessible & approachable.
Provide services like Free home delivery and goods on
credit.
They change consumer focus.

47. • Pantaloons
GLOBAL
• Tesco
INDIAN
• Reliance • Walmart
• Bharti retail • Metro
• RPG • Carrefour
• Lifestyle • B&Q
• K raheja • Target
• Subhiksha
• Piramyd
• Trent
• Vishal group

48. Clustering of
outlets.
Highest Stamp
Duty.

49. FORMAT AVERAGE SIZE
Convenience Stores 800 sq. feet
Discount Stores 1000 sq. feet
Category Killers 8000 sq. feet
Specialty Stores Single-category
Shop-in-Shop Within Large malls

50. FORMAT AVERAGE SIZE
Supermarket Large in Size
Typical in layout
Department Stores 10,000 – 60,000 sq. feet
Cash and Carry 75,000 Sq. feet
Hypermarkets 50,000 – 1,00,000 sq. feet

51. • Market power is in hands of unorganized retail.
Unorganized •95%
Organized •5%
• Potential of Indian Market is US$ 200 billion whereas India
is just earning its 3%.

52. Shrinkage
Lack of
logistic Infra.
Corruption
Additional Intermediaries
Technology Hurdles

53. In India every year there is pilferage of US$ 65 billion
whereas in USA it is just 1-2%.
Due to lack of proper storage infrastructure post-
harvest losses of farm produce is Rs. 1 trillion cr.
annually.

54. In terms of corruption India stands at 85th position.
Because of paper work, corruption is present along the
entire supply chain.
In India, there are additional 2-3 intermediaries as
compared to USA.
i. They dominate the value chain.
ii. They flout mandi norms & their pricing lacks
transparency.

55. India is still in developing stage in installing and
managing an effective IT system especially in rural areas
which hampers the overall growth of organized retail
sector.

56. Banks are reluctant to finance retailers because of falling
demand of organized retailers in India as it has witnessed
failure of many stores like Spencer's, Subhiksha, etc.

57. • Taxation laws in India favors only small retail businesses.
• Implementation of non-uniform VAT across states.
• Octroi and entry tax in some states.

58. • No Automatic Approval for FDI- Only 51% FDI is
allowed to one brand shops in Indian retail sector.
• Complications in issuance of licenses like a hypermarket
in Mumbai must apply for 29 unique licenses & then when
it has to come up with second store it has to apply for same
29 licenses all over again.

59. Disturbed economic
status.
Challenge to get
more customers at
low cost.
Liquidity pressure

61. • Indian retail sector :
Employs 8% (35 million)of the working population.
Could yield 12 to 15 million retail jobs in the coming
five years.
• Out of which organized segment is about 0.3 million.
• Retail sector grew at 9.4% on real terms & 15.4% on
nominal terms.

62. Front End
Operations
Back End Operations
Store Logistics & Procurement Corporate
Merchandising Marketing
Operations Distributions / Purchase Services

65. MBA Graduates with 5-
10years of Experience
Graduates with 2-5years of
Experience
Graduates/ 12th Pass/ 10th
Pass
Graduates/ 12th Pass/ 10th
Pass

67. Level Skills Required Skill Gaps
Transaction • Computer Skills • Knowledge
processing • Transactions • Soft Skills
Associate/
Billing associate
Associates
& Customer • Selling Skills •Comm. Skills
Executives service
representative/
• Promotional
Schemes
• Knowledge
• Cross Selling
Sales • Product
Associate/Sales Knowledge
person
Merchandising • Responsibility • Customize
Associate/ • Routine Visits
Executive

68. • Delivery of
Purchase • New Vendors merchandise
executive • Communicate during peak
demand season
•Marketing • Communication
Strategies
Executive/ • Feedback
Marketing • Knowledge
Associate

69. Level Skills Required Skill Gaps
Store Manager/ •Management •Cross
Department • Proficient Tools Functional
Manager •Sales Promotion Activities
Programms •Man Management
Skills
•knowledge.
Senior Manager
& Merchandising • Current Market • Understanding
Manager/Sr. Trends • Soft Skills
Manager Merchandising • Product
Manager Knowledge
• Visual
Merchandising
Concepts
Purchase • Sourcing • Negotiation
Manager/ Alternatives Skills
Category • Track Inventory • Soft Skills
Manager Level

70. Level Skills Required Skills Gap
Senior Manager/ •Availability •Availability of
Manager of merchandise. experienced Logistics
•Maintenance personnel is a key
•Design/modify the challenge
logistic schemes.
• Negotiation with
warehouse owners.
Marketing • Knowledge of data • Ability to understand
Manager/Sr. analysis. •Communication
Marketing •Understand customer
Manger/ behavior.
Marketing •Coordinate with media
Officer agencies.

71. Complexity/Technical Nature of Product Level of
Store
Customer
Characteristics
Nature of Supply Chain Involvement
Changes in the Product Nature/ Type
Price Segment(Luxury, Mass market etc.
Intensity of Skill Requirement

72. Demand
• Communication Skills
• Multi Tasking
Supply
• Limited Retail Training
Opportunities
• Higher Level Skills

73. • The Retailers Association of India (RAI)
- Diploma and Degree Programs in Retailing
- Bharti Retail and Vishal Retail
- 5,000 trained persons

75. Level 4 4-5%
Level 3 30-33%
Level 2 10-15%
Level 1 50-53%

77. • Employment.
• Unfair competition.
• Under-developed organized retail sector.

78. FDI can be a powerful catalyst to spur competition in the
retail industry.
It can bring about:
 Supply Chain Improvement
 Investment in Technology
 Manpower and Skill development
 Efficient Small and Medium Scale Industries
 Increase in exports

79. Pantaloon
Lifestyle plans Shoppers Stop Timex India will
has plans to Retail India open another
to have more
invest Rs250 (PRIL) plans to 52 stores by
than 50 stores
Crore to open invest US$ March 2011
across India by
15 new 77.88 million taking its total
2012–13.
supermarkets to add up to store count to
in the coming existing 2.4 120
three years. million sq ft
retail space. .

81. • Investment into warehouse and cold storage chain will
result in significant efficiency on supply chain.
• Farmers benefited through direct marketing and contract
farming programme.
• Improves farm production through modern techniques.
• Increasing availability of low interest credit for farmers.

82. Expected Growth
• In the last four year, the
CAGR 1.3 consumer spending in India
1.4 10%
climbed up to 75%.
1.2
• By the year 2013, the
1 0.83
organized sector is also
0.8
0.59 expected to grow at a CAGR of
0.6 40%.
0.35
0.4 • The total number of shopping
0.2 malls is expected to expand at
0 a CAGR of over 18.9 per cent
2008 2011 2013 2018 by 2015.

83.  The initial cap on investment could be pegged at 49%.
 FDI should be leveraged to create back-end infrastructure.
 FDI will be a powerful driver to curb inflation.

84. ?????
 To develop our rural sector ,should
conditionality’s be put on the FDI funded chains
relating to employment?
For example, should we stipulate that at least 35%
of the jobs in the retail outlets should be reserved
for the rural youth?

85.  Urban migration
 Opportunity to urban and rural unemployed
 Alternative incentive schemes

86.  Industry experts predict that the
next phase of growth in the
retail sector will emerge from
the rural markets.
 By 2012 the rural retail market
is projected to have a total of
more than 50 per cent market
share.
 Apparel, along with food and
grocery, will lead organised
retailing in India.(RNCOS)

87. ?????
 What additional steps should be taken to protect
small retailers?
Should an exclusive legal and regulatory framework
be established to protect their interests?

88.  National legal framework cannot be effective.
 Hamper growth in retail sector.
 Incentives directly to benefit small retailers.

89.  Restrict the number of stores that can be operated in a city.
 Allow access to the small retailers to the stores through
special windows.

90. Thank You