Retail industry

What is retail?

Retailis thesaleof goods and

services from individuals or
businesses to theend-user.
Retailersarepartofanintegrated
systemcalledthesupplychain.A
retailer purchases goods or
productsin large quantities from
manufacturersdirectly or through
awholesaler, and then sells
smaller quantities to the
consumerfor a profit. Retailing
can be done in either fixed

Types of retail
Shops may be on
residential
streets,
streets with few or no
houses
or
in
ashopping
mall.
Shopping streets may
be for pedestrians
only. Sometimes a
shopping street has a
partial or fullroofto
protect
customers
fromprecipitation.

Online retailing, a type ofelectronic commerceused

forbusiness-to-consumer(B2C)transactionsandmailorde
r,areformsofnon-shopretailing.

French
connection

Retail comes from the Old French

wordtailer(compare modern French

retailer), which means "to cut off,
clip,

pare,

divide"

in

terms

of

tailoring (1365). It was first recorded

as a noun with the meaning of a
"sale in small quantities" in 1433
(from the Middle Frenchretail, "piece
cut off, shred, scrap, paring").

Retail formats
Form of
Form of
Ownership
Ownership

Store Strategy
Store
Strategy
Mix
Mix

Independent

ConvenienceStore

Chain
Franchising
Cooperative

ConventionalSupermarket
Hypermarket
SpecialtyStore
DepartmentStore
RetailCatalog
Showroom

Non Store
Non Store
Operations
Operations

Vending
machine
Inhome
retailing
Telephone
retailing
Catalogretailing
ERetailing

Convenience Store
Convenience
storesare
essentially
found
in
residential areas. They
provide limited amount of
merchandise at more than
average prices with a
speedy checkout. This
storeisidealforemergency
and immediate purchases
as it often works with
extended hours, stocking
everyday;

General store

Ageneral
store,general
merchandise
store,general
dealerorvillage shopis a rural or
small townstorethat carries ageneral
lineofmerchandise.[1]Itcarriesabroad
selectionofmerchandise,sometimesin
a small space, where people from the
townandsurroundingruralareascome
topurchasealltheirgeneralgoods.The
store carries routine stock and obtains
special orders fromwarehouses. It
differs from aconvenience storeor
corner shop in that it will be the main
shop for the community rather than a
convenientsupplement.

Mom-And-Pop Store
Mom-And-Pop: is a retail
outlet that is owned and
operated by individuals. The
range of products are very
selective and few in
numbers. These stores are
seen in local community
often
are
family-run
businesses. The square feet
areaofthestoredependson
thestoreholder.

Specialty store
A typical speciality store gives
attention to a particular category
andprovideshighlevelofservice
tothecustomers.Apetstorethat
specializes in selling dog food
wouldberegardedasaspecialty
store. However, branded stores
also come under this format. For
example if a customer visits a
Reebok or Gap store then they
find just Reebok and Gap
productsintherespectivestores.

Department store
aretailestablishment
which satisfies a wide range of
durablegoodsand products to the
consumer's personal and residential
needs; and at the same time offering the
consumer a choice of multiple
merchandiselines,atvariablepricepoints,
in all product categories. Department
stores usually sell products including
clothing, furniture, home appliances, toys,
cosmetics, gardening, toiletries, sporting
goods,doityourself, paint and hardware
and additionally select other lines of
products such as food, books, jewellery,
electronics,
stationery,
photographic
equipment and baby and pet needs.
Certain department stores are further
classifiedasdiscountstores
Adepartment

storeis

Supermarket

ASDAsupermarket

Asupermarket,alargeformofthe
traditional grocery store, is a
self-serviceshopoffering a wide
variety offoodand household
products,organizedintoaisles.Itis
larger in size and has a wider
selection than a traditional grocery
store, but is smaller and more
limitedintherangeofmerchandise
than
a
hypermarket
or
big-boxshop. The supermarkets
can be anywhere between 20,000
and40,000squarefeet(3,700m 2).

Hypermarket

A hypermarketis
asuperstorecombining
asupermarketand
a
department store. The
result
is
an
expansiveretailfacility
carrying a wide range of
products under one roof,
includingfullgrocerieslines
andgeneral merchandise.
In theory, hypermarkets
allow customers to satisfy
all their routine shopping
needsinonetrip.

Retail in INDIA
Retailing in Indiais one
of the pillars of its
economyandaccountsfor
14 to 15 percent of its
GDP.The Indian retail
marketisestimatedtobe
US$450billionandoneof
the top five retail markets
in the world by economic
value. India is one of the
fastest growing retail
market in the world, with
1.2billionpeople.

Current Indian Retail

India's retailing industry is
essentially
owner
manned small shops. In
2010,
larger
format
convenience stores and
supermarkets accounted
forabout4percentofthe
industry, and these were
present only in large
urban centres. India's
retail
and
logistics
industry employs about
40 million Indians (3.3%
ofIndianpopulation).

The story so far

2010

2006

1997

FDI
permittedin
cash&carry,
wholesale
tradingcomes
100% FDI
underthe
being
permitted in automatic
cash & carry route
wholesale
FDIin
trading
singlebrand
under the
government retailwas
approval
permittedto
route
theextentof

DIPPhadputup
adiscussion
paperproposing
FDIinmultibrand
Retail

UnionCabinet
approved
51%FDIin
multi-brandretail
Increasing
theFDIlimitin
singlebrand
retailto100%
Howeverthe
implementation
wasdeferred,for
evolvinga
broader
consensuson
thesubject

January
DIPP
notified the
decision to
allow 100%
FDI in Single
brand retail

2012

September
Union
Cabinet
approves
the FDI limit in
Multi
brand retail of
51%

2011

The Policy - Single Brand

Retail Trading
Earlier:

ForSingleBrandRetailTrading
(SBRT)sectoronly51%FDI
permittedsubjecttoapprovals
andconditionssuchas:

ProductsshouldbeofaSingle
Brandonly
Productstobeunderthesame
brandinoneormorecountriesif
aresoldoutsideIndia
SingleBrandproductsshould
bebrandedduringmanufacturing
Theforeigninvestorshouldbe
theownerofthebrand

Now:

FDIinsinglebrandretailtradingispermitted
upto100%withGovernmentapproval

ProductstobesoldshouldbeofaSingle
Brandonly

30%sourcingistobedonefrommicroand
smallindustries(investmentinPlantand
MachinerynotexceedingUS$1mm)

ThisconditionwillensurethatSMEsector,
includingartisans,craftsman,handicraftand
cottageindustrygetsthebenefitsof
liberalization

The Policy - Multi Brand

Retail Trading
EARLIER:
FDIinMultiBrandRetail
Tradingwasnot
allowed

*StatesinfavorofFDIinMBRT-AndhraPradesh,Assam,Delhi,
Haryana,
J&K,Maharashtra,Manipur,Rajasthan,UttarakhandandDaman&
Diuand
DadraNagarHaveli
**Back-endInfrastructureincludessupplychain,logisticsand
warehousingbut
notlandandrentals

NOW:
FDIinMultiBrandRetailTradeispermittedup
to51%,subjecttofollowingconditions:
Outletstobesetup-onlyin cities with a
populationofmore than 1m (within a 10km
range)*
Minimum investment by the foreign investor US $100mm and at least 30% of the
procurementofmanufactured/processed
productsshallbesourcedfrom'small
industries(investmentinPlantandMachinery
notexceedingUS$1million)
Sourcingrequirementswillbechecked
togetherforfirstfiveyearsafterthatona
annualbasis
Retailtradingbymeansofe-commercenot
permissible
Atleast50%oftotalFDIbroughtinshallbe
investedinback-endinfrastructure**within
threeyearsoftheinductionofFDI

SWOT Analysis of FDI

in Retail

TRENGTHS

Retailisa$450bnIndustryin
India
Younganddynamicmanpower
Highestshopdensityintheworld
Highgrowthrateinretail&
wholesaletrade
Presenceofbigindustrialhouses
withdeeppockets

PPORTUNITIES

Highemploymentgenerationin
thefuture
Willenhancefinancialconditionof
farmers
Encourageforeigncapitalinflows
Resultinincreasingsupply-chain
efficiency
ImproveLogistics&Infrastructure

EAKNESSES

Highcapitalinvestmentrequired
intheretailsector(realestate)
Lackoftrainedandeducated
workforce
Higherpricesascomparedto
localshops
Willmainlycatertohigh-end
consumersplacedinmetros

HREATS

Effectonthesmallretailers-local
Kiranastores(mom-popstores)
Longgestationperiod-Foreign
Retailerswilltakeawhiletoadapt
toIndiaandgenerateprofits
Statesnotbuyinginso
efficienciesexpectedmaynotbe
achieved

Global Experience of FDI in

Retail
INDIA

BRAZIL

RUSSIA

CHINA

INDONESIA

FDIallowed
51%in
Multibrand&
100%in
SingleBrand

FDIallowed
100%

FDIallowed
100%

FDIallowed
100%,up
from49%in
1992

FDIallowed
100%in1998

Population
1,210m

Population
205.7m

Population
143.1m

Population
1,343m

Population
242.3m

Shareof
organized
retail5-6%

Shareof
organized
retail36%

Shareof
organized
retail33%

Shareof
organized
retail20%

Shareof
organized
retail30%

TopRetailer:
FutureGroup

TopRetailer:
Paode
Acucar

TopRetailer:
X5Retail
Group

TopRetailer:
BailianGroup
CoLtd

TopRetailer:
Matahari
PutraPrima

Steps to Establish Presence

in India
FindaJointVenturePartnerThemaximumequitystakewhich
aForeigninvestorcanholdcannotbemorethan51%,therefore
itwillhavetofindanIndianpartnertoenterintoaJointVenture
with

Look for space It will have to look for a city with a minimum
population of 1million as per the 2011 census. Indiacomprises
of about 51 cities which meet the condition. Further state
governmentandFIPBpermissionswillberequired

Get it approved - All the regulatory approvals of FDI and other

applicablelawswillhavetobeobtained,whichwillbeeasierto
do,giventhepresenceofIndianpartner

Proposed Business
Model
Indian Partner
- To provide 49% stake in
form of capital /
infrastructure or leverage
their network to establish
presence
-They will also be able to
navigate the political and
legal hurdles as well as
use their local knowledge
and brand

Foreign Partner
- To provide capital of at
least US $100mm
- They will bring
technology, efficiency in
supply chain
management and global
experiences from
previous ventures

Outcome:
- There is a possibility of a mutually symbiotic relationship between the Foreign
and Indian Partner to jointly harness their capabilities and create a world-class
Retailer in India, which will have the unique advantage of a being the first mover
and establishing the benchmark of excellence for the Industry

OVERVIEW
There is clearly an opportunity for the Domestic Giants, Kirana Stores and the Foreign
Retailers to co-exist in India
TheWal-Martmodel,offersevery-day low pricing, but are typically in far-off locations, have a
homogenous selection of products across their stores, typically need 150,000 sq feet of space
andrequire a car to get to. India is years away from when majority of its population willhavethe
abilitytoonlyshop attheWal-Martsoftheworld. Competition will force the Kirana Stores to lift
their game, become more price competitive, have a better selection of goods at lower prices
and maintain proper records of customers (people will still shop there for proximity, comfort of
relationshipandeasycredit)
ForeignerswillbringtoIndiatheir expertise and efficiency in retailing, they will invest capital
in improving logistics and infrastructure in India (for example: Cold Storage Logistics is still
almostnon-existentinIndia)andshare technology and know-how with their localIndianPartners,
but will also be able to become profitable over a period of time as their brands and presence
increaseacrossthecountry
Hopefully, the Domestic Giants will learn the best practices from their foreign counterparts
andjustasinBrazil foreign retailers thrive but still a local player is the most dominant (Pao de
Acucar) India will see a much more inclusive and efficient Retail Industry

INDIALand of hopes!
Onthewhole,ifIndiahastogrowitneeds capital, training
and innovation. Yes the short-term effects of the announced
reformswillbepainful,butinthelong-termiftheywillhelp
makeRetailamoreorganizedindustryinIndia,provide
better quality goods at cheaper prices at convenient
locations,improve infrastructure and the supply chain
mechanismthroughoutthecountry,provide employment
andretailsectorspecifictraining to a large population it will
beahugeboontothenation

ForeignRetailerswhoarelookingtomakeaquickprofitarebetteroffinvestingelsewhere.But
thosewhoarewillingtobepatient and make a more long-term bet on India, definitely have the
opportunitytoHIT THE BULLS EYE. India is a virtually untapped and a huge growing market
intermsoftheOrganizedRetailIndustry($450bn industry, with only 5-6% organized retail).
Theforeignplayerswhoarewillingtolearn from their mistakes in other emerging markets and
earlyexperiencesinIndia,gothroughacareful partner selection process, understand the
political / legal / external hurdles and invest with a realistic time horizon truly have an
uniqueopportunitytocreatewin-win situations for all stakeholders. Several other sectors have
seenforeignentrantswithasuccessfulandprofitablemodelinIndia(Dominos, Citigroup,
Honda etc). Our view is that the FDI in Retail will unfold in a similar manner in the times to com

HAPPY SELLING!!!

The
End

Preparedby

Winner Pandey