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F.D.I in Retail Sector ppt
- 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. Investment done by citizens and government of one country (home country) invest in industries of another country (host country). Foreign Investment through Foreign Direct Investments Foreign Institutional Investors
- 6. Automatic Route No permission required Government 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. By Target • Mergers and Acquisitions • Horizontal FDI • Vertical FDI. *Backward Vertical FDI *Forward Vertical FDI By Motive • • • • Resource-Seeking Market-Seeking Efficiency-Seeking Strategic-Asset-Seeking
- 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 2000-10 crossed $300 billion FDI inflows from August 1991 to April2010 were $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 mix Lifestyle , Globus Supermarkets Household product as well as food as integral part of the service Apna bazaar , food 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 prices Subhiksha, levi’s outlet Convenience stores Small Retail stores In and out
- 19. Retail Segment Percentage holding in sector Major retailers Food and grocery 63% Reliance fresh, Café brio, food bazaar Clothing, textile and fashion 9% Westside, shoppers 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.
- 23. US France UK Germany US Sales: $374.5 bn Sales: $130 bn Sales: $102.6 billion Sales: $101 billion Sales: $77.3 bn Earnings: $12.9 billion Earnings: $5.2 billion Earnings: $5.5 billion Earnings: $1.5 billion Earnings: $4.2 billion Stores: 6,800 worldwide Stores: 87,422 worldwide Stores: 3,729 worldwide Stores: 2,221 Stores: 2,258
- 24. US Taiwan Malaysia Thailand Organised Indonesia Unorganised China India 0 US 20 40 60 80 100 Taiwan Malaysia Thailand Indonesia China India Unorganised 15% 19% 45% 60% 70% 80% 95% Organised 81% 55% 40% 30% 20% 5% 85%
- 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 from 50 million at present to 583 million by 2025. With more than 23 million people taking their place among the world’s wealthiest citizens. Upper class Middle class Lower class
- 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
- 36. •Easy consumer credit. EMI & loan via credit cards -easy for Indian consumers to afford expensive products. For instance, Casas Bahia’sBrazil. Note: BOP C.K.Prahalad. Upper class Middle class Lower class
- 37. •Employment generation. Second-largest employer after agriculture. Retail trade employing 35.06 million. Wholesale trade generating an additional employment of 5.48 million. Additional 1.6 mn jobs .
- 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.
- 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 Reliance Bharti retail RPG Lifestyle K raheja Subhiksha Piramyd Trent Vishal group GLOBAL INDIAN • • • • • • • • • • • • • • • • Tesco Walmart Metro Carrefour B&Q Target
- 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 Organized •95% •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 postharvest 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 Store Operations Back End Operations Merchandising Logistics & Distributions Marketing Procurement / Purchase Corporate Services
- 65. MBA Graduates with 510years of Experience Graduates with 2-5years of Experience Graduates/ 12th Pass/ 10th Pass Graduates/ 12th Pass/ 10th Pass
- 67. Level Associates & Executives Skills Required Skill Gaps Transaction processing Associate/ Billing associate • Computer Skills • Transactions • Knowledge • Soft Skills Customer service representative/ Sales Associate/Sales person • Selling Skills • Promotional Schemes • Product Knowledge •Comm. Skills • Knowledge • Cross Selling Merchandising Associate/ Executive • Responsibility • Routine Visits • Customize
- 68. Purchase executive Executive/ Marketing Associate • New Vendors • Communicate •Marketing Strategies • Feedback • Knowledge • Delivery of merchandise during peak demand season • Communication
- 69. Level Skills Required Skill Gaps Store Manager/ Department Manager Senior Manager & Manager •Management • Proficient Tools •Sales Promotion Programms •Cross Functional Activities •Man Management Skills •knowledge. Merchandising Manager/Sr. Merchandising Manager • Current Market Trends • Product Knowledge • Visual Merchandising Concepts • Understanding • Soft Skills Purchase Manager/ Category Manager • Sourcing Alternatives • Track Inventory Level • Negotiation Skills • Soft Skills
- 70. Level Skills Required Skills Gap Senior Manager/ Manager •Availability of merchandise. •Maintenance •Design/modify the logistic schemes. • Negotiation with warehouse owners. •Availability of experienced Logistics personnel is a key challenge Marketing Manager/Sr. Marketing Manger/ Marketing Officer • Knowledge of data analysis. •Understand customer behavior. •Coordinate with media agencies. • Ability to understand •Communication
- 71. Complexity/Technical Nature of Product Nature of Supply Chain Level of Customer Involvement Changes in the Product Nature/ Type Price Segment(Luxury, Mass market etc. Intensity of Skill Requirement Store Characteristics
- 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 Level 3 Level 2 Level 1 4-5% 30-33% 10-15% 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. Lifestyle plans to have more than 50 stores across India by 2012–13. Shoppers Stop has plans to invest Rs250 Crore to open 15 new supermarkets in the coming three years. Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million to add up to existing 2.4 million sq ft retail space. . Timex India will open another 52 stores by March 2011 taking its total store count to 120
- 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 1.4 1.3 CAGR 10% 1.2 1 0.83 0.8 0.6 0.4 0.59 0.35 0.2 0 2008 2011 2013 2018 • In the last four year, the consumer spending in India climbed up to 75%. • By the year 2013, the organized sector is also expected to grow at a CAGR of 40%. • The total number of shopping malls is expected to expand at a CAGR of over 18.9 per cent 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
Notes de l'éditeur
- Varied window displat : now a days retailers know that if your product is dosplayed properly acc. to the culture of the state you are operating in , will definaltey help you
- Count the country and then speak on the 4 things showed here
- This is not all there is still more
- In 2881, India had the highest shop density in the world, with 11 outlets for every 1,888people.. The high density restricts their scope of expansion, and thereby ofupgrading. This also means that, except in the case of severely segmented markets, thissector stands little chance of competing against large retailing corporations operatingwith economies of scale.
- It will bring out many positive changes i.e. improvement in supply chain management. It is noticed that 35-40% of the agriculture produce perishes every year due to poor infrastructure in India and there are only 6522 cold storages in India mainly used for potatoes.Investment in technologies and infrastructure by the retail corporations will act as a boon for our economy.These org will come in with technical know how and expertise and will train indian manpower and hone their skills as suitable for the industry.Moreover small players who have already been working with Internationalchains like Wal-Mart/Carrefour in India have benefitted a lot by manufacturing their private label products & also showcasing ourproducts in their stores by reaching end consumer directly at competitiveprices which would otherwise launching and building a new brand is a task in itself.It is understood that MNC that invest in retail in india would also source indian goods to their international outlets in a big way, thus provide a boost to indian exports. Indian retail chains would get integrated with global supply chain since Fdi will bring in technology, quality standards and marketing.
- technological know how, soil quality improvement, pesticide and fertilizer usage,grading, sorting, capabilities and increasing availability of low interest credit forfarmers.
- After observing the opportunities and challenges, the views of different org. and the benefits that are likely to take place in indian economy..the panel recommends that fdi in multi brand retail should be allowed but a cap of 49% should be imposed to protect the interest of small and medium size retailers and give them a breathing space to adjust themselves to the new environment and also work to bring in their competitive advantage. China opened the fdi 49% in 1992 and has been immensely benefitted due transfer of technical know how and increased exports there are currently appx 40 foreign players contributing to org retail sector. Now, its time for india to open the borders and be benefitted by the retail growth.A major proportion of initial FDI should be invested in developing back endinfrastructure. For e.g. the foreign partners need to tell the total amount thatthey will be investing in next five years. Out of these atleast 80% of the FDIhas to be made in initial three years.We talked of large percentage of agriculture produce getting wasted annually. Well investment in technology and supply chain will surely prevent such wastages consequently curb the supply caused inflation which is currently hovering around 15.46%.
- It is well noted that urban migration has created a significant excess of labour in India's largeand medium-sized cities. Retail jobs can offer a viable career opportunity for the urbanunemployed who may lack in formal education and training, just as they can for those inrural areas. Rather than stipulating employment conditionalities that may obstructemployment generation in urban areas, alternative incentive structures may be used toencourage companies to train and employ youth in the areas in which retail outlets arelocated - both rural and urban.Additionally, if incentive structures or conditionalities are imposed, they should be mandatedupon both domestic and foreign funded retail chains equally.Furthermore, it is being discussed that retailers should be restricted to larger citiesof 10 lakh or more. This point is in direct conflict with a stipulation requiring the hiring ofrural youth, who will likely be unable to travel to their place of employment in a consistent,cost-effective manner.
- And u can well see difference in the share of spending in these 3 categories by rural and urban households.
- Retail investments and operations are typically executed with local and regionalconsiderations in mind, so a national legal framework cannot truly be effective. State andlocal licensing requirements are sufficient to protect small retailers, and otherwise regulatethe industry.Implementing new regulations will likely hold back growth in this sector, as well as weaken itsAttendant benefits on SME suppliers, consumers and supply chain investment. Rather thanimpose such regualtion, the government may consider policies and incentives that directlybenefit small retailers. These incentives can include, for example, access to low-cost capital,training on quality and technical standards, and infrastructure investment in their ownbusinesses.