1. Organized Retail and FDI Knowledge Session 1

2. What is organized retail ? Branded stores (Usually Part of a chain) Branded stores (Usually Part of a chain) Modern Infrastructure and Technology Modern Infrastructure and Technology Self Service Self Service Types of Organized retail Types of Organized retail Supermarkets & Convenience stores Supermarkets & Convenience stores Department Stores Department Stores Hypermarkets Hypermarkets Cash and carry Cash and carry Specialty stores Specialty stores Single brand Exclusive stores Single brand Exclusive stores Discount Stores/Factory outlets Discount Stores/Factory outlets

3. Retail in India Organized retail is 6% but growing fast Organized retail is 6% but growing fast Global range: Global range: 2% in Pakistan 2% in Pakistan 35% Brazil 35% Brazil 55% Malaysia 55% Malaysia 85% USA 85% USA Small Unorganized family run retail stores Small Unorganized family run retail stores

4. Organized Retail in India Future group Future group Pantaloon, Big Bazaar, food bazaar, eZone etc Pantaloon, Big Bazaar, food bazaar, eZone etc Reliance Reliance Reliance Fresh, Trends, Jewels etc Reliance Fresh, Trends, Jewels etc RPG Spencer's RPG Spencer's Aditya Birla More Aditya Birla More Cash and Carry Cash and Carry Metro AG, Bharti Wal-Mart Metro AG, Bharti Wal-Mart

5. Retail and India Food and Groceries – 60% Food and Groceries – 60% Clothing and Footwear – 9-10% Clothing and Footwear – 9-10% Furniture and Appliances – 5-6% Furniture and Appliances – 5-6%

6. Indian Retail Key Issues Low sales per outlet Low sales per outlet Rs 1000 – 1200 per day Rural Rs 1000 – 1200 per day Rural Rs 7000 – Rs 8000 per day Urban Rs 7000 – Rs 8000 per day Urban Low productivity of Labor Low productivity of Labor 6% of USA levels 6% of USA levels Long Supply chain Long Supply chain 5 to 6 intermediaries Vs 2-3 in USA/Europe 5 to 6 intermediaries Vs 2-3 in USA/Europe Inefficient supply chain Inefficient supply chain Poor infrastructure – Roads, Storage etc Poor infrastructure – Roads, Storage etc Low percentage of processed food Low percentage of processed food

7. Indian Retail Key Issues Over regulated industry Over regulated industry Antiquated APMC restricts farmers choice Antiquated APMC restricts farmers choice Multiple taxes Multiple taxes State VAT, Central CST, Octroi etc State VAT, Central CST, Octroi etc Archaic labor laws Archaic labor laws Regulate shift timings, holidays, contract labor etc Regulate shift timings, holidays, contract labor etc High Real estate costs High Real estate costs Cost of real estate in Cities is very high Cost of real estate in Cities is very high

8. Organized Retail in India High potential High potential Urbanization and growth of middle class Urbanization and growth of middle class Increase in % of working women Increase in % of working women Exposure to modern retail experience (Malls) Exposure to modern retail experience (Malls) Increased demand for branded/Processed food Increased demand for branded/Processed food High growth in turnover High growth in turnover Still on learning curve Still on learning curve Supply chain, Technology, Mgt practices Supply chain, Technology, Mgt practices Real estate cost, Manpower quality, theft etc Real estate cost, Manpower quality, theft etc Mounting losses Mounting losses

9. FDI in retail Current scenario Current scenario 100% FDI in Cash and Carry 100% FDI in Cash and Carry 51% in Single brand stores 51% in Single brand stores Proposal Proposal to allow 100% in Single brand to allow 100% in Single brand and 51% in multi brand retail and 51% in multi brand retail Current Status: on Hold Current Status: on Hold

10. Potential impact Infusion of cash for cash Intensive business Infusion of cash for cash Intensive business Infusion of technology and practices Infusion of technology and practices Boost to supply chain and logistics Boost to supply chain and logistics Cold storages and processing units Cold storages and processing units Will require change in APMC Will require change in APMC Partnership with Indian players Partnership with Indian players Local knowledge and global expertise Local knowledge and global expertise Boost to Indian Suppliers Boost to Indian Suppliers 30% sourcing from Indian SME 30% sourcing from Indian SME Sourcing from India for global operations Sourcing from India for global operations

11. Potential impact Impact on urban small retailers Impact on urban small retailers Loss of business and potential closure Loss of business and potential closure FDI allowed in 51 cities FDI allowed in 51 cities Farm to fork Farm to fork Better prices for farmers, consumers Better prices for farmers, consumers Reduced losses in transport & Storage Reduced losses in transport & Storage Contract farming Contract farming Technology sharing with farmers Technology sharing with farmers

12. Is it a good thing? For Farmers For Farmers Should get better prices Should get better prices Impact may be limited to Medium/Large farms Impact may be limited to Medium/Large farms Better seeds, technology and farm practices Better seeds, technology and farm practices Multiple options for farmers Multiple options for farmers Loss of bio diversity Loss of bio diversity For Small retailers For Small retailers Loss of business, but most will survive Loss of business, but most will survive Impact high in proximity to Modern stores Impact high in proximity to Modern stores Will have to adapt and might need support Will have to adapt and might need support

13. Is it a good thing? For consumers For consumers Better prices, larger variety, Better shopping exp Better prices, larger variety, Better shopping exp Convenience for Working families Convenience for Working families Would increase consumption expenditure Would increase consumption expenditure Purchase of processed food, impulse items Purchase of processed food, impulse items For Manufacturers For Manufacturers 30% rule would benefit SME’s 30% rule would benefit SME’s Large manufacturer’s margins squeezed Large manufacturer’s margins squeezed

14. Is it a good thing? Employment Employment Loss of unorganized sector jobs at small retail Loss of unorganized sector jobs at small retail Creation of organized sector jobs Creation of organized sector jobs Net Growth in employment if Consumption Inc Net Growth in employment if Consumption Inc Additional jobs in supply chain/Food processing Additional jobs in supply chain/Food processing Government Government Higher tax revenues through organized retail Higher tax revenues through organized retail May boost agri exports from India May boost agri exports from India

15. Conditions Apply APMC act needs to be amended APMC act needs to be amended GST would simplify taxation GST would simplify taxation Investment in Roads/infra required etc Investment in Roads/infra required etc It is long term game It is long term game Don’t expect results in 2-3 years Don’t expect results in 2-3 years Wal-Mart and co will go slow at first Wal-Mart and co will go slow at first Politics may still derail the plan Politics may still derail the plan Opposition states and Some Allies oppose Opposition states and Some Allies oppose The JV’s would not operate in such states The JV’s would not operate in such states