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www.time4education.comTriumphant Institute of

Management Education Pvt. Ltd.

FDI inMultibrand

Retail

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Organised Retail

What is it Branded stores, esp. chain stores

Modern infrastructure & technology

Self-service

Types Supermarkets (aka Convenience stores)

Hypermarkets

Specialty stores

Single brand exclusive stores

Cash & Carry

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Expanding at CAGR of 6.4% since1998

Current size of total retail U.S.$550

bn Share of organised retail 4%

Compare: U.S. 85%; Brazil 35%; China 20%

Over next decade BCG report Share of organised retail 21%

Size of the market U.S.$260 bn

Small unorganised family run stores

Retail in India

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Types of Retail chains Dept Stores Grocery, Food & Beverage,Pharmacy,Books-Music-Gifts

Future Group Big Bazaar; Food Bazaar; eZone; Central; Brand

Factory

Reliance Reliance Digital, Fresh, Trends, Time Out

RPGs Spencer; Aditya Birlas more &Pantaloons; Tatas Shoppers Stop, Titan Eye+,

Tanishq, Landmark

A few Indian retailer

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In 2011, of the major retailbusiness types,

Textiles earned 38-40% of total

sector revenue Food & Grocery 11-12%

Consumer durables 9-10%

Health & beauty lowest at 0.8%

Segment revenue

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Retail Growth Driver

Expansion of consumer class

Rise in income & purchasing power

Growing number of working women

Rising discretionary income Changing lifestyle

Change in consumer mindset consumers are becoming brandconscious demonstration effect

Access to easy & cheap consumer credit

Rising use of Plastic Money

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Current Scenario

Sales per outlet Less than Rs1000 per day in rural

areas

Rs5KRs8K per day in urban areas

Long supply chain 5-6 intermediaries versus 2-3 in U.S.

Inefficient supply chain Poor infrastructure bad roads,

storage facilities

Low percentage of processed food

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Few more key issue

Over-regulated industry

Agriculture Price Marketing Committee(APMC) restricts farmers choices

Multiple tax system

State VAT, Central ST, Octroi, etc.

Archaic labour laws Regulated shift timings, holidays

High real estate cost, esp. in large

cities

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statu

High potential Urbanization and growth of middle class Increase in % of working women Exposure to modern retail experience (malls)

Increased demand for branded/processed food High growth in turnover

Still on learning curve

Supply chain, technology, management practices Real estate cost, manpower quality, theft Mounting losses

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51% FDI in MBR: Highlight

Min investment from foreign retailer - U.S.$100 mn 50% of total FDI must be invested in back-end

infrastructure

Minimum 30% of local sourcing from SME Retail outlets to come up in cities with more than

ONE million population Govt will have the first right to procure agricultural

produce State Govt will have final say in allowing such

stores under Shops & Establishments Acts

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Impact of FDI in MBR

Infusion of cash for cash Intensivebusiness

Transfer of technology and practices

Boost to supply chain and logistics Cold storages and processing units Will require change in APMC

Partnership with Indian players Local knowledge and global expertise

Boost to Indian Suppliers 30% sourcing from Indian SME Sourcing from India for global operations

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For Farmers Should get better prices Impact may be limited to medium & large farms Better seeds, technology & farm practices

Multiple options for farmers Loss of bio diversity

For Small Retailers

Loss of business, but most will survive Impact high in proximity to modern stores Will have to adapt and might need support

Adv & Disadvantage

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Adv & Disadvantages

For consumers Better prices, larger variety, better shopping

exp

Convenience for working couples (&families) Would increase consumption expenditure Purchase of processed food, impulse items

For Manufacturers 30% rule would benefit SMEs Large manufacturers margins squeezed

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Employment Loss of unorganized sector jobs at small retail

stores Creation of organized sector jobs

Net growth in employment if consumption rises Additional jobs in supply chain/food processing

Government Higher tax revenues through organized retail May boost agro exports from India

Adv & Disadvantages

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*Conditions apply

APMC act needs to be amended

GST would simplify taxation

Investment in roads/infra required, etc

Long term game Dont expect results in 2-3 years

Walmart and others will go slow at first

Politics may still derail the plan Opposition parties & allies oppose J Vs would not operate in such states

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Thank You!