Retailing : An overview Indian retail The change factor FDI in Indian retailing Why FDI ? Benefits of FDI

Retailing World’s largest industry US$ 6.6 trillion sales annually Indian retailing Largest employer after agriculture - 8% of population Highest outlet density in world Around 12 mn outlets Still evolving as an industry Long way to go An overview Retailing: An overview

Wal-Mart Topmost global Fortune 500 company ( 3 Consecutive Years) Annual Sales of over US$ 250 bn India’s two largest retail player turnover around US$ 158 mn (Bata) and US$ 102 mn (Shoppers Stop) Fortune Retailers Carrefour, Ahold, Home Depot, Kroger, Metro, Kmart-Sears, Target, Albertsons’ An overview Retailing: An overview *Fortune List of world’s top companies

Weekly Markets Village Fairs Melas Convenience Stores Mom and Pop or Kiranas Khadi Stores Cooperatives Exclusive Brand Outlets Hyper/Super Markets Department Stores Shopping Malls Traditional ReachGovernment Supported Historic/Rural Reach Modern Formats/ International Evolution of Indian retail Source of Entertainment Neighborhood Stores/Convenience Availability/ Low Costs / Distribution Shopping Experience/Efficiency

Weekly markets/Melas

Mom & Pop Stores or Kirana Stores The emergence of ‘Kirana’ stores catering to the convenience of the consumers

Khadi Gramodyog Government support for rural retail: by Khadi & Village Industries Commission

Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim In 1980s -- emergence of retail chains

Titan created an organized retailing concept and established a series of showrooms for its premium watches

In latter half of the 1990s Food and FMCG Food World, Subhiksha and Nilgiris Music Planet M and Music World Books Crossword and Fountainhead

Post 1995 onwards --- emergence of shopping centers, Mainly in urban areas, with facilities like car parking Targeted to provide a complete destination experience for all segments of society

Emergence of hyper and super markets trying to provide customer with 3 V’s - Value, Variety and Volume

Unorganised retailing Sector Typically small retailers. Evasion of taxes Difficulty in enforcing tax collection mechanisms No monitoring of labor laws Indian retail Evolution of Indian retail

Organised Retailing Sector Typically large retailers Greater enforcement of taxation mechanisms High level of labor usage monitoring The employees have the opportunity of getting pension and other employee benefits Indian retail Evolution of Indian retail

Modern Format retailers Supermarkets (Food world) Hypermarkets (Big Bazaar) Specialty Chains(Titan) Traditional Format Retailers Kiranas: Traditional Mom and Pop Stores Kiosks Street Markets Indian retail Classifying Indian retail

“One stop destination to farmers and villagers” Which offers a diverse product range from FMCG to electronics appliance to automobiles India’s 1 st Rural Mall ‘Chaupal Sagar’

Villagers shopping at the e- Chaupal Sagar supermarket in Sehore, opened in 2004, a rural mall, operated by ITC.

Sriram Group : 'Hariyali Bazaar' complete shopping basket Tata Chemicals : Tata Kisan Sansar Rural Retailing Classifying Indian retail

Malls in India · A decade ago – not a single mall · A year ago – less than half a dozen · Today – 40 malls · 2 years from now – 300 malls Indian Scenario Classifying Indian retail

The urban consumer Getting exposed to international lifestyles More discerning and demanding than ever No longer need-based shopping Shopping is a family experience Changing Mindset Increasing tendency to spend Post Liberalization children coming of age 100 mn year olds. Tend to spend freely. Greater levels of education Indian consumer The changing Indian consumer

India is ranked 5th Second only to China in Asia Least saturated of all global markets The least competitive of all global markets Considering tremendous market size, excellent potential for foreign players Advantage India The Indian advantage

Metro Group of Germany Cash-and - carry wholesale trading offers assortment of over 18,000 articles across food and non food at the best wholesale prices to business customers for e.g. Hotels, Restaurants, Caterers, Food and Non- food Traders. Current FDI FDI in Indian retailing

METRO sees great opportunity in India for its Supply Chain Model. METRO Cash & Carry operations were started in October 2003  2 Distribution Centres in Bangalore.  Investment of over Rs.200 crores (USD 43 million).  220,000 SqFt (40,000 SqFt temperature controlled).  18,000 food and non-food items. Introduction to METRO Cash & Carry, India

Market study revealed a definite need amongst small businesses for decent looking shoes at affordable prices - uniforms. Studied the characteristics that would need to be fulfilled. METRO worked with an unbranded shoe manufacturer in Agra. –Helped design appropriate basic footwear –Sells at a never before price of Rs. 199/- Helped to make his supply chain more efficient. Success Story – Shoes

The shoe manufacturer was a small scale industrialist. Turnover of previous year (pre-METRO) Rs 4.5 Crores (USD 1 million). Turnover after dealing with METRO Rs 6 Cr (USD 1.3 m), an increase of 33% with Rs 1.1 Cr (USD 0.25 m) coming from just METRO – (relationship is barely 10 months old.) Costs of production reduced by 5%. Profitability increased from 8% to over 12%. Success Story – Shoes …

Helped the SME to organise their production and supply chain better. Improved distribution amongst shoe retailers. Helped in managing the system properly by  Improving the Packaging tremendously.  Helped to deal with some customers who were not approachable in the past. Success Story Shoes… IMPACT

Foodworld 51:49 J V between RPG and Dairy Farm International, Leading food retailer in India now Is Mc Donalds Current FDI FDI in Indian retailing

Franchise International company gives name and technology to local partner. Gets royalty in return In case master franchise is appointed for region or country, he has right to appoint local franchisees Nike, Pizza Hut, Tommy Hilfiger, Marks and Spencer How they are present International retailers in India: Strategies

Manufacturing Unit Company sets up Indian arm for production Bata India. It also has right to retail in India How they are present International retailers in India: Strategies

Wholesale trading Cash and Carry operations 100% FDI permitted Metro Cash n Carry How they are present International retailers in India: Strategies

To improve competition To develop the market Greater level of exports due to increased sourcing by major players Provides access to global markets for Indian producers Benefits of FDI Why FDI?

Investment in technology Cold storage chains solve the perennial problem of wastage Greater investment in the food processing sector technology Better lifestyle Greater level of wages paid by international players More product variety Newer product categories Benefits of FDI Why FDI?

Manpower and skill development Greater managerial talent inflow from other countries Tourism Development For e.g. Singapore and Dubai Long term benefits Up-gradation of agriculture Development of efficient small and medium size industries Benefits of FDI Why FDI?

Increase employment levels FDI would result in market growth and expansion Employment generated at various levels Increased consumer demand implies employment generation Does not need very high skill sets Needs high school graduates and other similar skill levels Benefits to govt. Benefits to the government

Retailers belong to a place called…

… a population of mastodons … always ready for cannibalism … invading green pastures worldwide …

Retailers: Always ready for cannibalism Wal-Mart Wal-Mart Carrefour Carrefour ASDA ASDA Promodés Comptoirs Modernes Promodés Comptoirs Modernes … have bought over … … have bought over …

Be ready! … retail mastodons will enter the Indian "green pastures" Implications for India

Be ready! Be realistic! …. Small players can flourish in the changing environment if they adapt themselves Implications for India

Indian retailers can benefit from adopting latest retail management techniques to improve efficiencies Implications for India

AND DON'T FORGET… … dinosaurs sometimes disappear !! THANK YOU !!!