2. What is organized retail ?
Branded stores (Usually Part of a chain)
Modern Infrastructure and Technology
Self Service
Types of Organized retail
Supermarkets & Convenience stores
Department Stores
Hypermarkets
Cash and carry
Specialty stores
Single brand Exclusive stores
Discount Stores/Factory outlets
3. Retail in India
Organized retail is 6% but growing fast
Global range:
2% in Pakistan
35% Brazil
55% Malaysia
85% USA
Small Unorganized family run retail stores
4. Organized Retail in India
Future group
Pantaloon, Big Bazaar, food bazaar, eZone etc
Reliance
Reliance Fresh, Trends, Jewels etc
RPG Spencer's
Aditya Birla More
Cash and Carry
Metro AG, Bharti Wal-Mart
5. Retail and India
Food and Groceries – 60%
Clothing and Footwear – 9-10%
Furniture and Appliances – 5-6%
6. Indian Retail Key Issues
Low sales per outlet
Rs 1000 – 1200 per day Rural
Rs 7000 – Rs 8000 per day Urban
Low productivity of Labor
6% of USA levels
Long Supply chain
5 to 6 intermediaries Vs 2-3 in USA/Europe
Inefficient supply chain
Poor infrastructure – Roads, Storage etc
Low percentage of processed food
7. Indian Retail Key Issues
Over regulated industry
Antiquated APMC restricts farmers choice
Multiple taxes
State VAT, Central CST, Octroi etc
Archaic labor laws
Regulate shift timings, holidays, contract labor etc
High Real estate costs
Cost of real estate in Cities is very high
8. Organized Retail in India
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, Mgt practices
Real estate cost, Manpower quality, theft etc
Mounting losses
9. FDI in retail
Current scenario
100% FDI in Cash and Carry
51% in Single brand stores
Proposal
to allow 100% in Single brand
and 51% in multi brand retail
Current Status: on Hold
10. Potential impact
Infusion of cash for cash Intensive business
Infusion 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
11. Potential impact
Impact on urban small retailers
Loss of business and potential closure
FDI allowed in 51 cities
Farm to fork
Better prices for farmers, consumers
Reduced losses in transport & Storage
Contract farming
Technology sharing with farmers
12. Is it a good thing?
For Farmers
Should get better prices
Impact may be limited to Medium/Large farms
Better seeds, technology and 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
13. Is it a good thing?
For consumers
Better prices, larger variety, Better shopping exp
Convenience for Working families
Would increase consumption expenditure
Purchase of processed food, impulse items
For Manufacturers
30% rule would benefit SME’s
Large manufacturer’s margins squeezed
14. Is it a good thing?
Employment
Loss of unorganized sector jobs at small retail
Creation of organized sector jobs
Net Growth in employment if Consumption Inc
Additional jobs in supply chain/Food processing
Government
Higher tax revenues through organized retail
May boost agri exports from India
15. Conditions Apply
APMC act needs to be amended
GST would simplify taxation
Investment in Roads/infra required etc
It is long term game
Don’t expect results in 2-3 years
Wal-Mart and co will go slow at first
Politics may still derail the plan
Opposition states and Some Allies oppose
The JV’s would not operate in such states
Editor's Notes
Department or Convenience Stores: Medium sized stores focusing or food and groceries and other household items. They are found close to residential neighborhoods hence the name. Arambagh Stores, some spencer’s stores Hypermarts: Large format stores with wide range of goods, low prices, ample parking space. Ideal for customers to shop in large quantities (monthly shopping) Speciality Stores: Stores that focus on a specific category of goods and provide a wide assortment of brands and products. Reliance Digital, Ezone, etc
Labor productivity is based on sales per employee. Mark up between Farmer to store is 3-4 times. Transport losses for farm produce upto 30-35%.
Agri produce marketing act forces famers to sell at Specified Mandi’s through authorized agents or aggregators. A retail outlet has to get licenses from APMC, Municipal authority, and get NOC from Labor, Fire, Environment and various other divisions.Buying direct from farmers and contract farming are not allowed. Most farmers would prefer to deal with Organized retail as they get better prices, easy purchase process and immediate payment terms etc. Unlike USA, where customers are wiling to drive longer distances and buy large quanities, for Indian consumers proximity is very important.
After a grand launch and rapid expansion, there is a bit of slowdown. Subikhsha was a hi profile causality. Spencer’s, Reliance etc are also revising their plans and going slower.
Cutting down the number of middle men may lead to better prices for both farmers and consumers. Companies like ITC, Pepsico and Bharti Wal-Mart etc have worked with Indian farmers improving farm productivity and income for farmers.
Focus will be on standard varieties of fruit, vegetables which are suitable for sale in modern retail. Would lead to loss of bio diversity. If we consider say Mango’s there will be boost to 2-3 varities like Alphonso as opposed many other local variants.
In general exposure to large varieties and options will increase shopping expenditure for most of us despite lower prices. Bargaining power shifts from Manufactures to large retailers.
Increase in labor productivity. So less employees at the same level of turnover. But growth in turnover can create higher number of jobs. Also jobs created are low level jobs but in the organized sector with benefits like PF etc compared to jobs at small retailers. Again jobs would require some education.
BJP, JDU, CPI(M), TMC etc are all opposed to FDI in retail. Hence they Companies would only be able to operate in Congress ruled states like Delhi, Rajasthan, Assam, Andhra Pradesh etc,