1. FDI InFDI In Multi-Brand RetailMulti-Brand Retail
&&
Its Impact onIts Impact on Indian MarketIndian Market

2. Indian Government
The waThe walk,lk,
The taThe talk,lk,
The playThe players,ers,
The playThe playgroundground

3. Retail is the sale of goods to the public for
use & consumption rather than Resale.
Retail Can be divided in two parts:
- Organised retail
- Unorganised retail
Organised is further divided into:
- Single brand retail
- Multi – brand retail
Urorganised is further divided into:
- Wholesalers
- Retailers
WHAT IS RETAIL ??

4. RETAIL SECTOR
ORGANISED
RETAIL
(involves trading activities
undertaken by
licensed retailers,
e.g., those registered
for sales tax, income tax, etc)
UNORGANISED
RETAIL
(local kirana stores,
Single owner,
general merchant stores,
Paan shops, convenience
stores, pavement vendors
& hand carts)

5. ORGANISED
RETAIL
SINGLE BRAND
RETAIL
(would cover
products
which are
branded during
manufacturing)
MULTI BRAND
RETAIL
(process of
marketing two
or more
widely similar
& competing
Products by same
firm under
different brands)
UNORGANISED
RETAIL
WHOLESALERS
(first source
of supply
direct from
manufacturers/
marketers)
RETAILERS
(like local
area kirana
shops, pavement
vendors,
paanshops,
etc)

6. ORGANISEDORGANISED
RETAILRETAIL

7. UNORGANISEUNORGANISE
D RETAILD RETAIL

8. Tera kya hoga ‘kirana’Tera kya hoga ‘kirana’

9. Against
FDI
Pro
FDI KEY PLAYERS

10. Fears that allowing foreign direct investmentFears that allowing foreign direct investment
(FDI) in the multi-brand retail sector will force(FDI) in the multi-brand retail sector will force
local retailers out of business and hurt farmers’local retailers out of business and hurt farmers’
interests, may be exaggerated if not totallyinterests, may be exaggerated if not totally
unfounded.unfounded.
The authors of the paper titled, The authors of the paper titled, FDI in Retail: AFDI in Retail: A
Global PerspectiveGlobal Perspective, have come to this, have come to this
conclusionconclusion
after analyzing transnational retailers’ (TNR)after analyzing transnational retailers’ (TNR)
limited success in emerging economies,limited success in emerging economies,
bottlenecks in India, diverse customerbottlenecks in India, diverse customer
demographics, and India’s fragmented industry.demographics, and India’s fragmented industry.
Retail will stay
local, even
after FDI: IIMA

11. FARMERS’ CONCERNS.

12. Recent Developments:
Wholesale markets remain closed, kirana stores ignore bandh call
The nationwide “Bharat Vyapar
Bandh” called by the Confederation
of All India Traders (CAIT) and
supported by the BJP and other
Opposition parties, evoked a mixed
response.
While a number of wholesale markets
observed a total shutdown, the
neighbourhood and small ‘kirana'
(provision) stores — for whom the
trade bandh had been called — kept
their shutters open remaining
indifferent to the call by the CAIT.

13. • US secretary of state Hillary Clinton
will hold talks with West Bengal chief
minister Mamata Banerjee in Kolkata
on Monday before leaving for New
Delhi in the afternoon.
• Clinton is expected to urge Banerjee
to support opening India's retail
sector to foreign giants such as
Walmart, after the West Bengal chief
minister opposed the move in
Parliament last year.
Hillary Clinton to meet Mamata for supporting FDI in Retail.

14. THE FIGHT
between
Policy makers &
Anti-foreign goods’
lobbyists in India:
CATCH ME IF YOU CAN

15. Retail Study in Contrast

16. GLOBAL SCENE & MAJOR PLAYERS
Major PlayersMajor Players
WalmartWalmart
CarrefourCarrefour
TescoTesco
MetroMetro
TargetTarget
CoopCoop
IkeaIkea
GlobalGlobal ScenarioScenario
Worldwide organized retail is moreWorldwide organized retail is more
than 50% of total retail.than 50% of total retail.
More than 80% of total retailMore than 80% of total retail
in Developing countries.in Developing countries.
Brazil, Russia & China are havingBrazil, Russia & China are having
20-40% of organized retail share.20-40% of organized retail share.
FDI started coming into China sinceFDI started coming into China since
1992 with 49% equity.1992 with 49% equity.
Equity restrictions removed in 2004.Equity restrictions removed in 2004.
India’s share of organizedIndia’s share of organized
retail is 5-6% only.retail is 5-6% only.

17. T
H
E
G
I
A
N
T
S

18. Global position
–
Impact of
Opening up
FDI in
Organized
Retail
There has been a positive impact of
organized retailing in USA, UK, Mexico
and also in China.
Retail is the second largest industry in US.
It is also one of the largest employment
generators.
Countries like Argentina, China, Brazil,
Chile, Indonesia, Malaysia, Russia,
Singapore and Thailand have allowed 100%
FDI in multi brand retail & benefited
immensely from it.
China permitted FDI in retail in 1992 and
has seen huge investment flowing into
the sector. It has not affected the small
or domestic retail chains.
On the contrary small retailers have
increased since 2004 from 1.9 million
to over 2.5 million.
In Indonesia 90% of the business still
remains in the hands of small traders.

19. US-based General Atlantic LLC, which manages approximately $17 billion in capital
globally, invested in bulk logistics solutions provider Fourcee Infrastructure Equipment
Pvt Ltd.
In December 2011, New York-based private equity fund, India Equity Partners (IEP),
had acquired the road operations of Dutch freight major TNT Express in India.
IEP had earlier picked a significant minority stake in Gwalior-based Swastik Road lines Pvt
Ltd, a food cargo supply chain service provider.
Warburg Pincus had struck one of the biggest PE deal in the domestic logistics space with
$100 million investment in Chennai-based logistics firm Continental Warehousing
Corporation (Nhava Seva) Ltd, a subsidiary of the NDR Group.
Other high-profile deals in the recent past include an investment of $10 million by
Ashmore Alchemy Investment Advisors in Siesta Logistics Corp Ltd and Blackstone’s
investment in All cargo Logistics.
As per a recent Cushman & Wakefield report, the Indian logistics industry is expected to
grow at 15-20 per cent annually, touching revenues of $385 billion by 2015.
PE funds/ investors stepping up the gas on Logistics
sector, a key gainer if the policy gets through.

20. Some impressions from a
Cartoonist’s perspective of an Aam Aadmi

21. Farmers
Intermediaries
Wholesalers
Retailers
Consumers
Sells his produce to the first intermediary (middleman).
Receives only 1/3rd
or 1/4th
of the price paid by the consumers.
Buys out produce at throwaway prices from farmers.
Then add up his profit margins and sell it to the next middleman
or at the Mandi.
Buys it from the Mandi.
After adding their profit margin, sell it to the retailer
or the sub-wholesaler.
Buys from the wholesaler.
After adding their margin, sells it to the consumer
or sub-retailer.
Consumer has little or no choice but to buy the
product at the price stated by the retailer.
Ultimately ends up paying 3 or 4 times the
actual price of the product.
At loss At profitSupply Chain Mechanism involved in RetailSupply Chain Mechanism involved in Retail

22. PANTALOON
SPENCERS
MORE
RELIANCE FRESH
EASY DAY
SPAR
STAR BAZAAR
LILLIPUT KIDSWEAR
CHROMA
KOUTONS
PROVOGUE
SHOPPERS STOP

23. S
O
M
E
K
E
Y
F
A
C
T
S
and
F
I
G
U
R
E
S

24. ClassificationClassification
The Indian retail sectorThe Indian retail sector
can becan be
broadly classified into:broadly classified into:
1. Food Retailers1. Food Retailers
2. Health and beauty2. Health and beauty
ProductsProducts
3. Clothing and Footwear3. Clothing and Footwear
4. Home Furniture &4. Home Furniture &
Household goodsHousehold goods
5. Durable goods5. Durable goods
6. Leisure & Personal6. Leisure & Personal
GoodsGoods
Of these aboveOf these above
segments, food &segments, food &
beverages and clothingbeverages and clothing
segment is expected tosegment is expected to
Indian Retail Market Scenario

25. Indian Retail Sector

26. In 1997, Indian Retail Sector was opened
with 100 % FDI permitted in Cash & Carry
Wholesale trading.
FDI Limit in Single brand retail has been opened up
with 51% in 2006. (Multi - Brand Retail still prohibited).
In July 2010 Department of Industrial Policy
and Promotion had put discussion paper.
In July 2011, Committee of Secretaries had cleared the
proposal to allow upto 51% FDI in multi-brand retail.
The Union Cabinet has approved increasing the FDI limit
in single brand retail to 100% . (Vide Notification
dated 11/01/2012).
51% FDI in Multi-Brand retail still not passed.
CURRENT FDI POLICY &
FRAMEWORK IN RETAIL

27. GROWTH DRIVERS
OF INDIAN
RETAIL SECTOR
Rising Income and increase in
convergence of consumer tastes
and preferences.
Dual family Income.
Knowledge about different products
through different electronic and print
media like Internet, Television etc.
Also knowledge about the latest
trends and fashion statements.
47% of the India’s population is
under the age of 30. This category
is driving the consumption story.
Emergence of new retailing format.

28. Bottom-Heavy Age Pyramid of the Indian Population
47 % of Indian
population is
under the age of
30 which is
driving the
consumption
story.

29. Personal Disposable Income: Actual and Projected (1989-2011)
in USD Billion
From USD 200 billion
to USD 1370 billion
in 22 years signifies
a jump of
more than 670 %
in personal
disposable income

30. Private Consumption Per Head: Actual and Projected
(1980-2020) in USD
From USD 250
to USD 1950
in 40 years signifies
a jump of
more than 780 %
in private
consumption
per head.

31. Impact
on
Indian
markets
Real Estate
Development
(more FDI
in the form
of
investments
for setting
up high-end
retail malls)
Improved
Technology
(use of
improved
technology
in processing,
grading,
packaging &
handling)
Farmer
(better prices;
supply chain
infrastructure
improvement;
Cold chain
& storage
facility
improvement)
Government
(foreign
Currency
Inflow &
increase in
Revenue from
Shift in
Unorganised
To organised
Sector)
Customers
(better quality
of products
at lower
prices)

32. Impact
on
Indian
markets
FDI in multi brand will stimulate
further investment in the sector.
There are companies in the retail sector
that are reeling under heavy debt burden.
These companies might get fresh lease
of life.
CompanyCompany Debt (in Crores)Debt (in Crores) Market cap (in Crores)Market cap (in Crores)
PantaloonPantaloon 42004200 38673867
Lilliput KidswearLilliput Kidswear 750750 Not availableNot available
(company is up for sale(company is up for sale
after exit of theafter exit of the
promoters and PEpromoters and PE
funds)funds)
ProvogueProvogue 400400 275275

33. Impact
on
Indian markets

34. STRENGTHSSTRENGTHS WEAKNESSESWEAKNESSES OPPORTUNITYOPPORTUNITY THREATSTHREATS
High growth rateHigh growth rate
of 46 %.of 46 %.
Huge diversity inHuge diversity in
buying pattern &buying pattern &
customer attitudecustomer attitude
in India.in India.
Growth inGrowth in
employmentemployment
generation.generation.
Profits going toProfits going to
foreign shores.foreign shores.
More choices ofMore choices of
global sourcing.global sourcing.
Shortage ofShortage of
skilledskilled
professionals.professionals.
HealthyHealthy
competition willcompetition will
reduce inflation.reduce inflation.
UnemploymentUnemployment
and monopoly.and monopoly.
10 million jobs in10 million jobs in
next 3 years.next 3 years.
No industryNo industry
status.status.
Transparency inTransparency in
the system.the system.
Farmers will beFarmers will be
exploited.exploited.
BetterBetter
negotiations fornegotiations for
funds with FIs.funds with FIs.
Supply chainSupply chain
relatedrelated
complexities.complexities.
Quality & wastageQuality & wastage
control & FDIcontrol & FDI
inflow.inflow.
No consensusNo consensus
withinwithin
Government.Government.

35. Riders for Multi-Brand Retail FDI
in India
Retailers to source at least 30 % of their goods from small &
medium sized Indian suppliers.
Retail stores to be opened in cities having population of
Over one million.
Products to be sold should be of “single brand” only and sold
under the same brand internationally.
Minimum investments of USD 100 million. 50 % of this investments
shall be in backend infrastructure such as cold chains,
Refrizeration, transportation & processing, etc.
Opening up of FDI will be within the parameters
of state laws & regulations.

36. Main Objective is to Modernize Indian Retail.
Government has to proactively assist traditional Retailers
in modernizing themselves.
FDI would lead to more comprehensive of integration of India
into World market.
Allow Foreign entry into Retail in a phased manner & with
proper controls.
It will be a boon for the overall economic development &
social welfare, if done in right manner.
Conclusion
and
way
forward

37. THANK YOUTHANK YOU

38. Submitted by:Submitted by:
Adarsh SaxenaAdarsh Saxena
MBF, Batch 3,MBF, Batch 3,
Centre: New DelhiCentre: New Delhi
Date of presentation - 13/05/2012.Date of presentation - 13/05/2012.