The document discusses the ongoing debate over foreign direct investment (FDI) in India's retail sector, highlighting its potential benefits such as increased GDP, job creation, and improved consumer engagement. It argues that the advantages of FDI outweigh the concerns, particularly for small traders, drawing parallels with successful implementations in other countries. The anticipated impact includes competitive pricing, innovative marketing strategies, and a significant growth in the consumer class by 2025.

1. customer centria
The Customer Engagement & Experience Company
Retail -
Future of Developing India
Date: 05/12/2011
www.customercentria.com

2. The national debate over Foreign Direct Investment (FDI) in retail in India is heating up with each passing
day. Even as opposing views clash from different centers of the society, FDI in retail is no doubt a matter of
contemplation, and cannot be rejected without a fair amount of thinking and reasoning. While the decision
makers battle it out on FDI in retail, this document presents a bird's eye view of the proposed move, and what it
means for the consumers, marketers, suppliers and the country…
Row over FDI in Retail
Under the current regulatory regime, retail trading (except under single-brand product retailing — FDI up to
51%, under the Government route) is not allowed in India. That explains why many international successful retail
giants are missing from the Indian retail scene. The currently proposed 100% FDI in retail sector has met a
considerable 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 sector
outweigh the issues attached to it. Similar successful implementations
in countries like Thailand and China, has proved that the move is an
advantageous one for the country. Even in these countries, the step
invited protests, but later it turned out to be one of the most significant
political and economical decisions with increased GDP and more job
opportunities.
India's market size poses a magnum potential for growth with so many consumers with different tastes and
cultures. 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 India
India is a large emerging market, with consumer spending power increasing by 75% in last 3 years. The
per capita income in 2009–2010 has more than doubled to US$ 849 from US$ 348 in 2000–01.
The Arguments
The biggest concern by most of the opposing society corners, features small traders and merchants, based in
villages and towns, due to FDI in multi-brand retail. But similar concerns in countries like China proved
irrelevant, as there was no bad impact noticed, with traders and merchants competing with equal zest and
success. 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 means
more organised players entering the scene, with more hiring not just in the retail sector, but also in associated
sectors like sourcing and logistics. Also expect new technology to enter the domain especially in rural areas, with
infrastructure also getting a major boost.
It's not all positive, but if handled well, FDI in retail seems to be about more pros and less cons.
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3. What about the consumers
Customer Engagement will witness a direct impact if the FDI in retail becomes a reality. There will be a paradigm
shift in the way consumers are managed and categorised, with competitive pricing leading to attractive offers and
new marketing strategies. Each brand will bring with it a unique consumer approach, user-friendly policies, and a
definite benefit in terms of reduced prices, and loads of new international brand making a foray into the Indian
market.
Mr. C R Vinay, Managing Director, Customer Centria says, “For home grown retail the challenge will not be in
communication 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 relevant
mix of merchandise and service.”
The move will also mean more innovation on the marketing
front. For e.g. The engagement strategy used by retailing giant
Tesco in South Korea, where the company actually tapped on
the major problem of each shopper in South Korea – 'hectic
schedules and no time to shop'. They pasted large hoardings in
busy subways each carrying the product, its description and an
assigned QR code, so people could actually shop by just placing
their mobile phones on the QR code while they wait for the train
and the product gets delivered at their doorsteps. Such unique engagements promise to ease shopping
experience, 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 future
definitely looks as bright as the sun if FDI in retail is implemented.
Final Note
Vinay further hints, “Global retailers however will face the challenge of becoming "Indian". Foreign does not
always mean better value. It also comes with a tag of price premium and some amount of intimidation. Today's
middle class Indian has choice and is more than happy shopping at the Kirana store and having merchandise
delivered home all the time. Global retail expects a certain level of independent self-service that we are not used
to. 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 opinions
flying all over. Basis initial observations and foresighted benefits, the move definitely has the makings of a
winner. At the end of the day, it's the increase employment, superior logistics, better pricing and delightful
customer experience that acknowledges this decision.
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