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in Retail Sector
Agenda
Retailing : An overview Indian retail FDI in Indian retailing Why FDI?
Retailing : An overview
Retailing: An overview
Retailing Worlds largest private industry US$ 6.6 trillion sales annually
Indian retailing Largest employer after agriculture - 8% of population Highest outlet density in world Around 12 mn outlets Still evolving as an industry Long way to go
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Retailing: An overview
Wal-Mart Topmost global Fortune 500 company(3 Consecutive Years) Annual Sales of over US$ 250 bn Fortune 100 9 Retailers Carrefour, Ahold, Home Depot, Kroger, Metro, Kmart-Sears, Target, Albertsons
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Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls PDS Outlets Khadi Stores Cooperatives
Convenience Stores Mom and Pop/Kiranas Weekly Markets Village Fairs Melas
Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency
collection
Fragmented
Employment to 7% of workforce
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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%)
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
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US
Unorganised Organised 15% 85%
Taiwan
19% 81%
Malaysia
45% 55%
Thailand
60% 40%
Indonesia
70% 30%
China
80% 20%
India
92% 8%
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Corporate Houses
Tatas: Tata Trent RPG group: Food World, Health & Glow, etc ITC: Wills Life Style Rahejas(Shoppers Stop), Hiranandani (Haiko), DLF(DT cinemas), etc. Nike, Reebok, Zodiac, etc Vijay Sales, Viveks, Ritu Wear, Sehgal Bro, etc. Bata, Weekender, Lilliput
Multi-brand outlets
Manufacturers/ Exporters
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Modern Format retailers Supermarkets (Foodworld) Hypermarkets (Big Bazaar) Department Stores (S Stop) Specialty Chains (Ikea) Company Owned Company Operated
Traditional Format Retailers Kiranas: Traditional Mom and Pop Stores Kiosks Street Markets Exclusive /Multiple Brand Outlets
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Hypermarket
Department store
Entertainment
Category Killers Specialty Stores Shop-in-Shop Supermarket Department Stores Cash and Carry Hypermarkets
8000 sq. feet Single-category Within Large malls Large in Size, Typical in layout 10,000 60,000 sq. feet 75,000 Sq. feet 50,000 1,00,000 sq. feet
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Departmental stores
Supermarkets Shop-in-shop
Lifestyle , Globus
Household product as well as food as Apna Bazaar , Food integral part of the service Bazaar Shops located in shopping malls Navras ( Big Bazaar)
Specialty stores
Category killers Discount stores Convenience stores
Brand Factory
The LOFT Levis Outlet In and Out
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Segmentation
Retail Segment Percentage Major Retailers holding in sector 63% 9% 5% 5% 4% Reliance Fresh, Caf Brio, Food Bazaar Westside, Shoppers Stop, Globus Tanishq IRCTC Viveks, Vijay Sales, Croma
Food and Grocery Clothing, Textile and Fashion Jewellery Catering services Consumer durable
Pharmaceuticals
Entertainment Furnishing, utensils Mobile handsets
4%
3% 3% 2%
Piramal Group
Bowling Co. Hometown, Tangent Concept The Mobile Store,
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US Sales: $374.5 bn
France
Germany
US Sales: $77.3 bn
Sales: $130 bn
Stores: 2,258
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Pantaloons Reliance Bharti retail RPG Lifestyle K. Raheja Piramyd Trent Vishal group
GLOBAL
INDIAN
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F.D.I.
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capital
to
purchase
financial
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Investment done by citizens and government of one country (home country) invest in industries of another country (host country).
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WHAT IS FDI?
Movement of capital across national frontiers in a manner that grants the investor control over the acquired asset.
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WHAT IS FDI?
As per Dictionary of Economics FDI means investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. Simply put, FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy.
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Automatic Route
Government
No permission required
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sectors.
1997-FDI allowed up to 100% in sectors like mining, manufacturing, Cash and carry/wholesale (under Govt. approval route). It was brought under the automatic route in 2006.
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As per Press Note 4 of 2006 issued by DIPP and consolidated FDI Policy issued in October 2010 which provide the sector specific guidelines for FDI with regard to the conduct of trading activities. A) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route.
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51% 100%
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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
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By Target By Motive
Mergers and Acquisitions Horizontal FDI Vertical FDI. *Backward Vertical FDI *Forward Vertical FDI
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Private labels Hi-Tech items/items requiring specialized after sales service Medical and diagnostic items Items sourced from the Indian small sector (manufactured with foreign technology) For 2 year test marketing (simultaneous commencement of investment in production facility required)
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1. Franchise Agreements
services, FDI is allowed with the approval RBI under FEMA E.g. Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer, Mango
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stores,
or
enter
into
shop-in-shop
franchisees
E.g. Mango with Piramyd, SPAR with
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4. Manufacturing & Wholly Owned Subsidiaries Bata, Nike, Reebok, Adidas, etc. have whollyowned subsidiaries in manufacturing which are treated as Indian companies and are, therefore, allowed to do retail They sell products to Indian consumers by franchising, internal distributors, existent Indian retailers, own outlets, etc. E.g. Nike entered through an exclusive licensing agreement with Sierra Enterprises but now has a wholly owned subsidiary, Nike India Private Limited
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5.Distribution
Supply products to Indian retailers to sell Also set up franchised outlets for brand
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of India.
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VAT
INEFFICIENT LABOUR
PREVENTION OF BLOCK MARKETING ACT ANTI-HOARDING & PROFEELING ACT MONEY LENDING ACT PROVIDENT FUND ACT MINIMUM WAGES ACT ESI ACT GRATUITY ACT BONUS ACT
OCTROI
WATER TAX
CENTRAL EXCISE
SALES TAX
POWER PROBLEM
INCOME TAX
Inspector Raj
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Information Technology
Retail Traders
Banking Insurance
Pharma
Mining Steel
Professional
Education
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CONTRACT FARMING
TO OWN FACTORY
TO CUSTOMER
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