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FDI | Retail


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A take on FDI in Retail in India

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FDI | Retail

  1. 1. customer centriaThe Customer Engagement & Experience Company Retail - Future of Developing India Date: 05/12/2011
  2. 2. The national debate over Foreign Direct Investment (FDI) in retail in India is heating up with each passingday. Even as opposing views clash from different centers of the society, FDI in retail is no doubt a matter ofcontemplation, and cannot be rejected without a fair amount of thinking and reasoning. While the decisionmakers battle it out on FDI in retail, this document presents a birds eye view of the proposed move, and what itmeans for the consumers, marketers, suppliers and the country…Row over FDI in RetailUnder the current regulatory regime, retail trading (except under single-brand product retailing — FDI up to51%, under the Government route) is not allowed in India. That explains why many international successful retailgiants are missing from the Indian retail scene. The currently proposed 100% FDI in retail sector has met aconsiderable amount of both - acceptance and opposition from the various parties involved in the process.Why India is a Retail haven?The advantages of letting in unrestrained FDI in the retail sectoroutweigh the issues attached to it. Similar successful implementationsin countries like Thailand and China, has proved that the move is anadvantageous one for the country. Even in these countries, the stepinvited protests, but later it turned out to be one of the most significantpolitical and economical decisions with increased GDP and more jobopportunities.Indias market size poses a magnum potential for growth with so many consumers with different tastes andcultures. A look at the contribution of retail industry to the GDP of various economies stands at: 20% for USA, 14% for Japan and 12% for IndiaIndia is a large emerging market, with consumer spending power increasing by 75% in last 3 years. Theper capita income in 2009–2010 has more than doubled to US$ 849 from US$ 348 in 2000–01.The ArgumentsThe biggest concern by most of the opposing society corners, features small traders and merchants, based invillages and towns, due to FDI in multi-brand retail. But similar concerns in countries like China provedirrelevant, as there was no bad impact noticed, with traders and merchants competing with equal zest andsuccess. In fact, the farmers will get better value for their produce, accompanied by less food wastage in transit.Besides, almost all experts agree that FDI in the rapidly growing Indian retail will give a big boost to employment,with the potential of creating a staggering 80-lakh jobs in the country. FDI implementation in retail also meansmore organised players entering the scene, with more hiring not just in the retail sector, but also in associatedsectors like sourcing and logistics. Also expect new technology to enter the domain especially in rural areas, withinfrastructure also getting a major boost.Its not all positive, but if handled well, FDI in retail seems to be about more pros and less cons.
  3. 3. What about the consumersCustomer Engagement will witness a direct impact if the FDI in retail becomes a reality. There will be a paradigmshift in the way consumers are managed and categorised, with competitive pricing leading to attractive offers andnew marketing strategies. Each brand will bring with it a unique consumer approach, user-friendly policies, and adefinite benefit in terms of reduced prices, and loads of new international brand making a foray into the Indianmarket.Mr. C R Vinay, Managing Director, Customer Centria says, “For home grown retail the challenge will not be incommunication but in matching the customer experience across customer touch points especially in stores.Leveraging technology, data and analytics will be come ever more critical so as to be able to provide the relevantmix of merchandise and service.”The move will also mean more innovation on the marketingfront. For e.g. The engagement strategy used by retailing giantTesco in South Korea, where the company actually tapped onthe major problem of each shopper in South Korea – hecticschedules and no time to shop. They pasted large hoardings inbusy subways each carrying the product, its description and anassigned QR code, so people could actually shop by just placingtheir mobile phones on the QR code while they wait for the trainand the product gets delivered at their doorsteps. Such unique engagements promise to ease shoppingexperience, reduce costs, enhance efficiency, boost revenue and delights customers at the same time.The consumer class in India is set to grow from 50 million at present to 583 million by 2025. So the futuredefinitely looks as bright as the sun if FDI in retail is implemented.Final NoteVinay further hints, “Global retailers however will face the challenge of becoming "Indian". Foreign does notalways mean better value. It also comes with a tag of price premium and some amount of intimidation. Todaysmiddle class Indian has choice and is more than happy shopping at the Kirana store and having merchandisedelivered home all the time. Global retail expects a certain level of independent self-service that we are not usedto. There in lies a critical challenge of an experience that can be not so friendly.”The decision over FDI in retail is bound to keep the nation on hook for some time now, with views and opinionsflying all over. Basis initial observations and foresighted benefits, the move definitely has the makings of awinner. At the end of the day, its the increase employment, superior logistics, better pricing and delightfulcustomer experience that acknowledges this decision.