retail katha

8/9/2019 Retail Katha

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Retail and real estate are the two booming sectors of India in the present times. And if industry experts are to bebelieved, the prospects of both the sectors are mutually dependent on each other. Retail, one of India¶s largestindustries, has presently emerged as one of the most dynamic and fast paced industries of our times with severalplayers entering the market. Accounting for over 10 per cent of the country¶s GDP and around eight per cent of theemployment retailing in India is gradually inching its way toward becoming the next boom industry.

As the contemporary retail sector in India is reflected in sprawling shopping centers, multiplex- malls and hugecomplexes offer shopping, entertainment and food all under one roof, the concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping in India. This has also contributed to largescale investments in the real estate sector with major national and global players investing in developing theinfrastructure and construction of the retailing business. The trends that are driving the growth of the retail sector inIndia are

y Low share of organized retailingy Falling real estate pricesy Increase in disposable income and customer aspirationy Increase in expenditure for luxury items

Another credible factor in the prospects of theretail sector in India is the increase in the youngworking population. In India, hefty pay-packets,nuclear families in urban areas, along withincreasing working-women population andemerging opportunities in the services sector.These key factors have been the growth driversof the organized retail sector in India which nowboast of retailing almost all the preferences of life - Apparel & Accessories, Appliances,

Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and Leisure and many more. With this theretail sector in India is witnessing a rejuvenation as traditional markets make way for new formats such asdepartmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are increasingly becoming familiar in largecities. When it comes to development of retail space specially the malls, the Tier II cities are no longer behind in therace. If development plans till 2007 is studied it shows the projection of 220 shopping malls, with 139 malls in metrosand the remaining 81 in the Tier II cities. The government of states like Delhi and National Capital Region (NCR) arevery upbeat about permitting the use of land for commercial development thus increasing the availability of land for retail space; thus making NCR render to 50% of the malls in India.

India is being seen as a potential goldmine for retail investors from over the world and latestresearch has rated India as the top destinationfor retailers for an attractive emerging retailmarket. India¶s vast middle class and its almostuntapped retail industry are key attractions for global retail giants wanting to enter newer markets. Even though India has well over 5million retail outlets, the country sorely lacksanything that can resemble a retailing industry in

the modern sense of the term. This presents international retailing specialists with a great opportunity. The organized



retail sector is expected to grow stronger than GDP growth in the next five years driven by changing lifestyles,burgeoning income and favorable demographic outline.

Another cap to the retailing industry in India is allowing 51% FDI in single brand outlet. The government is now set toinitiate a second wave of reforms in the segment by liberalizing investment norms further. This will not only favor theretail sector develop in terms of design concept, construction quality and providing modern amenities but will also

help in creating a consumer-friendly environment. Retail industry in India is at the crossroads but the future of theconsumer markets is promising as the market is growing, government policies are becoming more favorable andemerging technologies are facilitating operations in India. And this upsurge in the retail industry has made India apromising destination for retail investors and at the same time has impelled investments in the real estate sector. Asforeign investors cautiously test the Indian Markets forinvestments in the retail sector, local companies and jointventures are expected to be more advantageously positioned than the purely foreign ones in the evolving India'sorganized retailing industry.

FDI norms in retail sector should be relaxed'

New Delhi: The Government needs to relax norms on foreign direct investment in retail to facilitate fresh infusion of funds and also promote competition in the sector, which has been hit by the economic slowdown, real estateconsultant CB Richard Ellis has said.

"The existing FDI rules are a constraint. There is need to open up the sector a bit more as it will facilitate freshinfusion of funds and also promote competition," CB Richard Ellis (CBRE) Chairman and MD (South Asia) AnshumanMagazine said.

Currently, 100 per cent FDI is allowed in wholesale cash-and-carry business, while in single-brand retailing 51 per cent FDI is allowed but none in multi-brand retailing.

The Parliamentary Committee on Commerce had earlier this year submitted a report opposing further opening up of the retail sector for FDI.

However, a report by the Indian Council of Research in International Economic Relation (ICRIER) in 2008, hadmooted liberal FDI norms in the sector saying the sector would grow to USD 590 billion by 2011-12, of whichorganised retail would have a share of 16 per cent.

Sharing ICRIER's views, Magazine said: "(Curently) the share of organised retail is still very small in the overallmarket and has scope for growth."

SEB I proposes to double retail investment limit

New Delhi: Market regulator SEBI proposed to double the investment limit for retail investors to Rs 2 lakh in publicissues, a move that will enable individuals to aggressively participate in primary issues of companies.

"It is proposed to ... enhance the limit prescribed for defining a retail individual investor in a public issue from theexisting Rs 1 lakh to Rs 2 lakh," the Securities and Exchange Board of India (SEBI) said in a draft regulation on whichit invited comments from stakeholders by September 3.

The current limit of Rs 1 lakh for retail investors was fixed over five years ago in March 2005.

Giving justification for its proposal, SEBI said the limit for retail investors needed to be enhanced in view of theincrease in inflation rate from 4 per cent in 2005 to around 12 per cent currently and rise in the BSE Sensex from8,000 points to about 18,000 points during the same period.

"This means that the retail individual investors now buy a lesser number of securities with Rs one lakh than theywould buy with the same amount in 2005," it added.



"It is a very timely and logical step. The lukewarm public response to some recent offers may also have made SEBIput the proposal," SMC Capitals equity head Jagannadham Thunuguntla said.

A llow 100% FDI in multi-brand retail'

New Delhi: Promising to create a strong infrastructure and thousands of jobs in India, French retail major Carrefour has called for allowing 100 per cent FDI in multi-brand stores, and said that the move would ease inflationarypressures.

The government has taken a tentative step to open the politically sensitive sector, which employs 34 million people,to global players with the Department of Industrial Policy and Promotion (DIPP) releasing a discussion paper on theissue.

"Any cap or restriction on FDI in this sector may result in potential loss of opportunities and avenues of inclusivegrowth of the retail sector," Carrefour has said in its suggestions recently to the industry ministry.

It, however, said if the government wants staggered opening of the sector, the FDI cap should be kept such that aforeign retailer is "entitled to make a minimum of 51 per cent investment with rights to manage the company...".

The firm said each store of 50,000-60,000 sq ft sales area could provide about 200 direct and 250 indirect jobs.

"As per our estimates, if Carrefour starts its retail operations in India, in about 10 years, we would provide direct andindirect employment opportunities to approximately 20,000 people in the stores itself," the firm said.

While global players like USA's WalMart and German-Metro want the government to completely open the sector toforeign investments, Indian business chambers like Ficci and Assocham favour calibrated liberalisation.

India allows foreign investment only in single-brand retail, with FDI cap of 51 per cent.

Carrefour said, "(FDI in multi-brand retail) will help in controlling the inflation rate by offering more competitive andrationalised prices of products to consumers and reduction of wastage across India's farm-to-fork supply chain," itsaid.

Inflation in India is hovering at about 10 per cent.

The French firm said that improving supply chain and logistics will enable retailers to enhance overallcompetitiveness, decrease the prices offered to consumers and reduce wastage.

Carrefour has plans to built appropriate back-end infrastructure to support the retail operations," it said. The back-endinfrastructure includes contract farming, local sourcing, cold chains and other logistic supports. As per estimates,India loses fruits and vegetables worth thousands of crore rupees annually due to lack of proper cold chains andback-end infrastructure.

' India mulls FDI in multi brand retailCurrent FDI limit is 51% in single-brand retail, 100% in cash-and-carry stores that can onlysell to other retailers

The government pulled a sensitive item in the reforms agenda out of cold storage on Tuesday, withthe department of industrial policy and promotion (DIPP) releasing a discussion paper on permittingforeign direct investment (FDI) in multi-brand retail chains such as those run by the likes of Wal-MartStores Inc. and Carrefour SA around the world.



This move is fraught with political risk and comes a day after opposition parties joined hands fornationwide protests against rising inflation. There have been widespread fears that the entry of globalretail giants could hurt kirana stores that dominate the retail trade in India and employ 33.1 millionpeople, the most outside farming.

The government has tried to defuse some of these concerns, by suggesting in its discussion paper thatthe sector would be opened up to foreign firms in a ³calibrated manner´. It has also pitched issuessuch as inflation control and employment into the discussion about FDI in multi-brand retail.

It has been suggested in the discussion paper that modern retailers with efficient cold storage chainscould minimize wastage of fresh produce and ease food inflation. India currently lets around Rs1trillion of fresh produce go waste and more than half of this can be brought to market if the properfarm-to-fork infrastructure is in place. The department has argued that ³FDI in front-end retailing isimperative´ to fund cold storage for farm produce.

Among the other indications that popular concerns are being taken on board, the discussion paperasks whether half the jobs created by new retail chains should be reserved for rural youth and citesdata from China to show that big-box retailers do not necessarily kill the existing system of mom-and-pop stores.

Both industry and the stock market welcomed the baby step towards opening up the sector. ³Theretail industry in India needs access to more capital. It can definitely go into the investment (for) thesupply chain. But we just cannot build the back-end without an equal amount of development in thefront-end,´ said Rakesh Biyani, CEO of Future Group.

Retail stocks rose by as much as 5%. Shares of Pantaloon Retail (India) Ltd ended 4.84% up at Rs441on the Bombay Stock Exchange. Shares of Shopper¶s Stop Ltd rose 2.02% and Trent Ltd, 3.19%. Theexchange¶s key index rose 173.04 points, or 0.99%, to 17,614.48.

India currently allows 51% FDI in single-brand retail and 100% in cash-and-carry stores that can onlysell to other retailers and businesses.

Thomas Varghese, CEO of Aditya Birla Retail Ltd, said he is in favour of allowing 49% FDI in multi-brand retail. ³If you are allowing FDI, do it in a calibrated fashion because it is politically sensitive andlink it (with) up some caveat from creating some back-end infrastructure,´ he added.

To allay fears about the impact on small retailers once the big boys step in, the discussion paper hasasked whether a Shopping Mall Regulation Act should be put in place to protect them.

³The unfounded fear that large retailer will kill small ones is wrong. There is room for both to growover the next foreseeable future,´ said Harsh Bahadur, general manager (wholesale) at TescoHindustan Wholesaling Pvt. Ltd. He added that if the government went ahead and allowed FDI, itwould be ³good news for the economy´.

Wal-Mart India¶s president Raj Jain declined comment on the grounds that he hadn¶t read thediscussion paper.

An analyst appreciated the government¶s willingness to finally get down to the business-end of policymaking.



³While there have been ongoing discussions for many years, this is very significant in putting down allthese issues, talking about them very clearly and coming up with issues that we need to resolve,´ saysSaloni Nangia, vice-president (retail) at consultancy Technopak Advisors Pvt. Ltd.

Both the Bharatiya Janata Party and the Left parties are opposed to allowing FDI in multi-brand retail.

W al-Mart ready for multi-branded retailingif rules eased

³In case the government decides to allow FDI into multi-branded retailing we will be happyto participate in it. We can set up our chain of stores in a matter of months...a maximum of one year,´ Wal-Mart India president Raj Jain said

New Delhi: The world¶s largest retailer, Wal-Mart, on Tuesday said it is ready to enter multi-brandedretail segment in India within a year of any government decision to open up the sector to foreigndirect investment.

³In case the government decides to allow FDI into multi-branded retailing we will be happy toparticipate in it. We can set up our chain of stores in a matter of months...a maximum of one year,´ Wal-Mart India president Raj Jain told reporters here.

The Bentonville-based retailing giant¶s statement comes in the wake of the Indian governmentconsidering easing norms for FDI in multi-brand retailing in India.

Jain said the company wants the government to liberalise the FDI regime in retail in the country andhas conveyed this to the concerned authorities several times.

³Our supply chain is getting ready. It is difficult to say what the government has in mind but we wouldwant it to open the multi-brand retail sector (for FDI),´ Jain said.

Under current rules, foreign players can hold a maximum of 51% stake in single-brand retail entity,while FDI in multi-brand segment is prohibited.

Wal-Mart currently operates in India under a 50:50 joint venture with Bharti Enterprises in the cash-and-carry wholesale segment where 100% FDI in allowed.

The JV, Bharti Walmart Pvt Ltd, has two outlets and plans to expand to 15 stores across the countrywithin three years.

Jain, who is also the managing director and CEO of the JV company said the cash-and-carry businessin progressing well and on schedule.

Raj Jain | Our model will serve small storesbetterRaj Jain, chief executive of Bharti Wal-Mart Pvt. Ltd, spoke about his plans



ew Delhi: After years of unsuccessful lobbying with the government to open India¶s retail market toforeign investors, US-based Wal-Mart Stores Inc. opened its first wholesale store in Amritsar in May.Wal-Mart, which has tied up with Bharti Enterprises Ltd for a 50:50 cash-and-carry joint venture,plans to open up to 15 such stores in three years. Raj Jain , chief executive of Bharti Wal-Mart Pvt.Ltd, spoke about his plans. Edited excerpts:

How has been the response to your first store in Amritsar?

We are very pleased. It¶s better than what we had expected, but not overwhelming.

What have been the surprise learnings?

Road ahead: Bharti Wal-Mart chief executive RajJain says the firm¶s supply chain is most under-developed in India and needs to be worked upon.Harikrishna Katragadda / Mint

It has taught us a lot of lessons and we are stilllearning. So far, the Indian consumers have beendriven a lot by promotional merchandise²one freeon buying one and that kind of stuff. We didn¶t wantto do that. We said you buy whenever you want tobuy and you buy it at the lowest prices. Ourcustomers have been very happy and they are

rewarding us by saying, ³Hey, there¶s a store where you can go anytime and get the cheapest prices.´ It¶s not that there¶s a Nestle promotion today and you can attack the store and that there¶ll be nopromotional activity tomorrow.

The second thing we are realizing is that although a lot of FMCG (fast-moving consumer goods)companies such as HUL (Hindustan Unilever Ltd), ITC, Colgate have developed a very evolveddistribution system, the customers (read trade) are still very much under-served. There is a shortageof products sometimes and some things are not available. The supply chain is very erratic. But wehave been able to supply consistently and at good prices.

How do you manage the supply chain?

It really starts with the suppliers. First is to have an open discussion with the suppliers. The secondthing is having intricate and global IT systems in place, which are able to leverage your planning andexecution. Third, we have a distribution centre we have invested in upfront. We are able to run thisvery effectively and we also do a good job of getting the merchandise time and time again to the rightplace and getting them to the store and so on. Fourth, we are working with our suppliers who are notable to meet our deadlines and commitments. I have to say that it has taken some time.

I would bifurcate suppliers into four buckets. There are the multinational suppliers, which are theUnilevers, the P&Gs of the world, who essentially know what modern retail is. They have not beengeared to cater to modern retail in India and as we work with them, they are raising their standardsand (we¶re) getting them to supply to the modern wholesale.

The second are the big local suppliers such as Dabur. They don¶t have the international experience,but have the management and the financial bandwidth to invest and to learn. We are helping them toinvest, so they can see returns on their investments through their sales.



Have they been forthcoming?

Initially they were reluctant, but of late the response has been pretty good. The third set of suppliersis the regional suppliers. For example, the suppliers from Punjab and Haryana and the pickle makers²many of them are small or medium size, and they don¶t have the financial capacity and the

management bandwidth to invest. There, we are really holding their hand literally from themanagement perspective and also from the financial perspective, as much as we can do as ourbusiness grows.

How are you helping them financially, technologically?

We are helping them technologically in setting up best practices. Financially, if they are looking forinvestments then we go to the banks and say they are our suppliers so please do fund them for theirexpansion plans.

Lastly, there are government cooperatives and suppliers. They tend to be in the areas of dairy andthey tend to be little bit of a challenge. Right now, we are trying to change their way of working.These are very strong brands and customers want them.

You extend such help only in India or do you do it elsewhere as well?

It happens everywhere. I think our supply chain has been probably the most underdeveloped in Indiabecause there hasn¶t been any serious attempt to upgrade that. So the work required is more here.

You just stock about 5,000 stock keeping units (SKUs) in your Best Price Modern Wholesalestore. What are the reasons?

The question is you have to be focused on who your customer is. We have always said in Best Priceour customer is the trade, it¶s not the consumer. So a lot of people who tested this model and tried tomake it successful said they are the trade, but they will also buy for their personal consumption. Weare not doing that.

We are only doing it for trade and it¶s working for us. In my view, it gives a lot of focus on that 5,000-6,000 SKUs and we keep working on them, refining the supply chain, refining the prices and refiningwhat the customers want.

Is there room to tweak the model further?

Absolutely. We will continue to tweak our model for several years to come.

What are the immediate changes?

I think first we have to...open more stores because what (we) have is only one store and a fivemonths¶ experience. So one can only learn that much from there. We have to open more stores andsee if this can be replicated in four or five different geographies.

Second thing is, we are looking at the supply chain itself. What is the total working capital in thesupply chain versus sales. Because a lot of these inefficiencies in our supply chain are resulting instocks being very high. Therefore, our overall profitability doesn¶t work in the current movement. So,how do we reduce the working capital and yet reach the efficiency level.



Are you still looking at 15 cash-and-carry stores in the next three years or are you planningmore?

We have said that we would do anywhere between 10 and 12 (wholesale stores) in the next two tothree years. So we can accelerate our programme more than we thought originally.

As we go ahead and as the customers continue to favour us, maybe we can look at increasing thenumber of stores. Based on the experience of one store, it¶s difficult to say whether it¶s going to be 15or 25 outlets. The initial response has been good. The trade in this country is under-served from theavailability, assortment and pricing point of view and, therefore, there is a role for this cash-and-carryformat.

Will Wal-Mart continue to do cash-and-carry business even if India allows foreign directinvestment in multi-brand retailing?

Based on our one-store experience, I would say yes. There is a place for both organized retail andorganized cash-and-carry for trade.

And the beauty of the model lies in the end²the organized cash-and-carry will serve the existing retailtrade to be competitive with the organized trade. That¶s how the government needs to look at (it)because, I think, both can play a significant role. The small kiranas (small stores) will be betterserviced by the cash-and-carry than by the traditional wholesalers.

What percentage of your SKUs are skewed towards the µkiranas¶?

I would say 70% of our SKUs are only for kiranas , and the balance is for offices, institutions andrestaurants. Large chunk is for kiranas and resellers.

T esco to open its first cash & carry outlet inIndiaThe company already has presence in India through a joint venture with Tatas. These storesare located in Mumbai, Bengaluru, Ahmedabad and Chennai

London: ³Tesco, the third largest retailer in the world, is planning to open its first wholesale Cash & Carry outlet in India this year,´ Tesco International and internal communications director Greg Sagesaid.

³We will open our first wholesale Cash & Carry outlet in India this year,´ Greg said.

Tesco already has presence in India through a joint venture with Tatas. These stores are located inMumbai, Bengaluru, Ahmedabad and Chennai.

Greg said: ³We see a huge opportunity for future growth in India.´

Corporate and legal affairs director and Tesco board member Lucy Neville-Rolfe said that Tescooperated 4,331 stores worldwide and employed 470,000 people in 14 countries.



Besides India, the other international markets were the UK retail giant Tesco has presence includeThailand, Poland, Hungary, South Korea, China, Ireland, Malaysia, Slovakia, Turkey, Japan and theUS.

³We continue to expand our international business and are investing in banking, mobile phones and

other retail services,´ he said.

³Each of Tesco¶s international businesses also has a community plan, which include initiatives to helpconsumers to be green and meet our commitment to be a zero-carbon business by 2050,´ he added

Opening up India retail? Don¶t hold yourbreathOpening $450 bn retail market to FDI is political hot potato; Govt, eyeing state elections,wants to keep populist appeal; value of India retail grew least among Bric markets in 2003-08

Mumbai: Plans by Carrefour, the world¶s No.2 retailer, to open its first cash-and-carry outlets in Indiaare a sign of optimism in the country¶s $450 billion retail sector, but foreign investors and someofficials want more -- an easing of the country¶s tough investment rules.

Just days before Carrefour¶s announcement, Africa¶s Shoprite Holdings said it may quit India becauserestrictive foreign investment laws have hamstrung its growth, highlighting the many hurdles forforeign retailers.

India¶s retail industry is among the fastest growing in the world, but it remains heavily regulated, withstrict limits on foreign investment. Even big local retailers face opposition in some states amid claims

they cause massive job losses.

Some foreign firms had expected the re-election last year of a Congress-led government would openup retail to outside investment as it was no longer held back by communist allies who say such amove would hurt farmers and traders.

Analysts say opening up retail to foreign direct investment (FDI) may help bridge a yawning fiscaldeficit, rein in food price inflation by curbing waste and create thousands of jobs.

But the move is a political hot potato and is off the table, as the Left-leaning government eyesupcoming state elections and does not want to dent its populist appeal.

³The government is not talking about FDI in retail at all,´ said Seema Desai, analyst at riskconsultancy Eurasia in London.

³It¶s not just the impact on kirana (small) stores, but also the impact on middlemen and wholesalerswho are politically very powerful ... (and) the political backlash from within the party and theopposition. So the government will tread carefully.´

³I don¶t expect we will see any major moves towards retail FDI in the next year or so. It will happen ina phased manner.´



Waiting Game

Organised or branded retail makes up just over 5% of the total Indian market, but is estimated to begrowing at more than 20% a year.

For years, Indian shoppers bought rice and soap in tiny neighbourhood shops lacking freezers andwell-stocked shelves, but who would often sell on credit and deliver at home for free.

Rapid economic growth, forecast at 7.2% in the year to 31 March, and rising incomes in Asia¶s third-largest economy have drawn global retailers looking to offset sluggish home markets.

But foreign retailers have long been frustrated by Indian rules which permit single-brand foreignretailers to take up to 51% in a local venture, and limit multiple-brand retailers to franchise, licenceand wholesale cash-and-carry operations.

Marks and Spencer has a venture with Reliance Retail for apparel and homeware, while Tesco haspartnered the Tata Group for cash-and-carry outlets. Germany¶s Metro also operates wholesalecentres.

Shortly after the Congress-led alliance sealed its election victory last year, top retailer Wal-Mart StoresInc said it was opening its first cash-and-carry centre in India, a move seen as signalling renewedinvestor confidence in the government.

But the trade minister has since said he saw no need for further liberalization in retail, while a Bill toraise FDI in insurance is languishing, and moves to raise foreign ownership in banks and open up thepension sector have also stalled.

³There is no economic argument against modernization of retail; there is a political argument. Andthat is a concern about India,´ said Ira Kalish, director of global economics and consumer business atDeloitte Research.

³And there are still substantial opportunities in other emerging markets like China, Brazil and Russiawhere either governments are more welcoming or consumer spend is high.´

The value of Indian retail grew the least of the Bric markets from 2003-08, according to research firmEuromonitor.

While Carrefour and Wal-Mart have continued expanding in China even through the downturn,Starbucks and IKEA have put their plans for India on ice, and Shoprite is ready to exit.

Until the government ³frees up retail´ Shoprite, which has one wholesale outlet, would not be able toopen more outlets to derive economies of scale, and its business ³cannot achieve breakeven results´,it said in its annual report recently.

Torn

Some analysts say this does not augur a mass retailer exodus.

³Look at Wal-Mart, Metro, Tesco -- they¶re all expanding,´ said Arvind Singhal, chairman of consultancy Technopak Advisors.



³We tend to forget just how many foreign retailers are doing well in India, from Reebok andMcDonald¶s to Louis Vuitton.´

But while there is some support for opening up retail even within the government, it is unlikely tohappen soon, said Montek Singh Ahluwalia, deputy chairman of the Planning Commission.

³I think there is a case for relaxing that (FDI), but there¶s no proposal before the government atpresent to do so (and) I can¶t say it¶s bound to happen as of now,´ he told Reuters.

Still, recent reform in areas such as allowing retailers to procure directly from farmers, and moves toimprove infrastructure, ease trade between states and introduce a simpler tax system have allcheered foreign retailers in the country.

Others including UK¶s John Lewis are keen to enter.

But they remain cautious about their prospects, Kalish said.

³They are a bit torn: they see the opportunity, but there is some concern about making a go of it inIndia now,´ he said.

B harti- W almart seeks clarity on newwholesale trade FDI rulesThe Department of Industrial Policy and Promotion, while issuing a single document on FDIrules, had put a cap of 25% on sales of cash-and-carry players to front-end retailcompanies owned by their Indian joint venture partners

Chandigarh: Faced with the possibility of changing India plans due to a recent change in FDI norms,Bharti-Walmart on Tuesday said it has sought clarifications from the government on caps imposed onsales by cash-and-carry players to their group¶s front-end companies.

³The new norms have only just been announced. There is still lack of clarity on them. We have askedthe government to clarify certain points like what exactly is 25% of total sales and what exactly aregroup companies,´ Bharti Walmart managing director and CEO Raj Jain, who is also Walmart Indiapresident said.

Bharti Walmart is a 50:50 joint venture set up in 2007 between Bharti Enterprises and Walmart and isengaged in wholesale cash and carry trade. It supplies to Bharti Enterprises¶ front-end retailing arm,

Bharti Retail that runs µEasy Day¶ stores.

Earlier this month, the Department of Industrial Policy and Promotion (DIPP), while issuing a singledocument on FDI rules, had put a cap of 25% on sales of cash-and-carry players to front-end retailcompanies owned by their Indian joint venture partners.

As per the DIPP rule, wholesale trade of goods would be permitted among companies of the samegroup. However, such wholesale trade to group companies taken together should not exceed 25% of the total turnover of the wholesale venture and the wholesale made to the group companies should befor their internal use only.



When asked what could be the implications of the new rule on the India plans of Bharti-Walmart, Jainsaid it is premature to comment without clarity.

³Till the time some clarity does not emerge, it would not be appropriate for us to comment,´ he said.

According to consultancy firm KPMG, the new rules could force the wholesale companies to revisitIndia plans. It could make firms, such as Bharti Walmart, Tata Tesco and Metro AG to reduce theirinvestment plans by around Rs800 crore in the immediate term and the long-term impact will bemuch higher.

C arrefour announces first wholesale outlet inIndiaCarrefour is exploring options to enter into a partnership with an Indian firm to sell directlyto consumers

New Delhi: French retailer Carrefour SA is exploring options to enter into a partnership with an Indianfirm to sell directly to consumers.

³We are open to a partnership and in the next few months we will identify a partner, and it will thenbe announced by our global headquarters,´ Jean Noel Bironneau, managing director for Carrefour in

India said, without elaborating.

In store: Carrefour India managing director JeanNoel Bironneau says the firm will finalize an Indianpartner in a few months. Pradeep Gaur/Mint

The company will open its first wholesale store inSeelampur in Delhi by the end of next month, it toldthe media on Tuesday.

India allows 100% foreign ownership in the domesticretail sector if a company only establishes wholesale,or cash-and-carry stores.

Carrefour will enter the wholesale space already occupied by Wal-Mart Stores Inc. and Germany¶sMetro AG to get a toehold in India¶s $400 billion (around Rs18 trillion) annual retail market that¶sgrowing at 25%-35% a year.

Mint had reported earlier that Carrefour plans to open its first store in Seelampur by June-end.

The French retailer has forged an alliance with F uture Group that operates India¶s largest network of branded stores including the Big Bazaar and Pantaloon chains, two people close to the developmenthad said on condition of anonymity.

Future Group is planning to open anywhere between 150 and 300 Carrefour-branded franchiseehypermarkets, and the Indian company will pay a royalty to the French retailer, according to one of the two people.



Carrefour will fully own its cash-and-carry venture and not have a local partner, Bironneau said.

Carrefour¶s rival Wal-Mart has partnered with India¶s Bharti Enterprises Ltd in a 50:50 joint venture forits wholesale business.

The 60,000 sq. ft Seelampur store will stock nearly 30,000 product categories. When it opens, theSeelampur store will be Delhi¶s first branded wholesale store from a modern retailer. Metro has fivecash-and-carry outlets in Bangalore, Hyderabad, Kolkata and Mumbai, while Wal-Mart operates twosuch stores in Punjab.

W al-Mart steps up India rollout, hopes ruleseaseFood price inflation and the need for food security should spur the government to open thesector to foreign direct investment, says Raj Jain, chief of Indian operations, Wal-Mart

New Delhi: Wal-Mart Stores Inc, the world¶s biggest retailer, will accelerate its rollout of wholesalestores in India, a crucial growth market that has long frustrated overseas operators with restrictiverules.

Raj Jain, chief of Indian operations for Arkansas-based Wal-Mart, said the firm now expects to open10-12 wholesale centres in India over two-to-three years, from an earlier target of five years, as realestate prices have become more attractive and it gains confidence in operating in the country.

Food price inflation and the need for food security should spur the government to open the sector toforeign direct investment (FDI), he added.

´We will quicken the pace of expansion,́ Jain said in a late Tuesday interview at his offices inGurgaon, a fast-rising suburb of New Delhi that houses a host of multi-nationals.

´We have more confidence in running the stores, we feel more confident about real estate comparedto two years ago,´ he said.

Retail rents fell by 30-40% from late 2007 peaks.

Wal-Mart currently runs wholesale operations in India in an equal partnership with India¶s BhartiEnterprises.

India¶s $450 billion retail sector is dominated by small local operators, a powerful constituency thathas stood in the way of foreign multi-brand players such as Wal-Mart and No.2 Carrefour beingallowed to operate their own retail stores.

Instead, foreign players must operate through franchise tie-ups with local partners or operate cash-and-carry, or wholesale, outlets of the kind Wal-Mart is rolling out.

While the government is yet to liberalise rules for foreign retailers in India, Jain said India has movedbeyond the question of whether or not organised retail is positive for the country.



Éveryone realises this country needs organised retail and that it won¶t overnight replace mom-and-pop stores,´ he said, sitting at a conference table adorned by a small shopping trolley filled withcandy.

Food inflation is a nagging problem in India, eating into disposable incomes and prompting political

protests. Some 40% of fresh produce in India, which has a population in excess of 1.2 billion, iswasted due to inadequate supply chains and lack of cold storage.

Jain said opening retail to foreign investment would enhance food distribution and security, which thegovernment realises.

Ńow it¶s a question of having the political will and the timing of the decision,´ he said.

Í think the current government is focused on having a more open debate and the food inflationmakes people understand that even when there is a good monsoon, food security and food distributionare serious issues. And so this is one of the levers the government is willing to use,´ Jain said.

Big, untapped market

India¶s potential for retailers is massive. With a 300 million-strong middle class and an economy set togrow at 8.5% this year, disposable incomes are rising quickly. Sales of cars and mobile phones arebooming.

But even in wealthy neighbourhoods of big cities, Indian shoppers are accustomed to buying rice andsoap from tiny neighbourhood shacks that lack freezers and well-stocked shelves but often sell oncredit and deliver at home for free.

Real estate consultant Knight Frank said in a report this week that organised retail in India would growto around 11% of the industry total by 2013 from 6% now.

Organised retail is growing at an estimated 20% a year in India, which has also lured rivals such asGermany¶s Metro and Carrefour of France, which this week said it will soon open its first cash-and-carry outlet in the country and unveil a local franchise partner.

Cost-cutter

Wal-Mart is legendary for driving down costs, which keeps prices low but also crowds smalleroperators out of business, making it a magnet for criticism even in its home market.

Its model has not thrived everywhere. In 2006 it pulled out of Germany and South Korea amid stiff competition and poor performance.

Jain said Wal-Mart is stepping up direct sourcing in India, where it now procures 35-40% of producedirectly from farmers, and is tapping regional suppliers such as dairy cooperatives to increaseefficiencies in a fragmented market.

´The supply chain is one of the big challenges: maintaining quality, ensuring commitments are kept,´ Jain said.



Wal-Mart recently opened its second wholesale outlet in Chandigarh, and will open its next wholesalecentres in Rajasthan, Madhya Pradesh and Hyderabad, he said.

W al-Mart in trouble over B est Price brandnameThe registrar¶s office had cited an application from Aditya Birla Retail to trademark BestPrice for retailing, allied biz

New Delhi: US-based Wal-Mart Stores Inc. has run into trouble with the trademark office over thebranding of its wholesale stores in India.

The world¶s largest retailer, which operates in the country through Bharti-Walmart Pvt. Ltd, a 50:50 joint venture with Bharti Enterprises Ltd, chose to avoid its global brands such as Walmart and Sam¶sClub, opting for Best Price Modern Wholesale instead.

But in June, the registrar of trademarks wrote to Bharti-Walmart¶s law firm, Anand and Anand, sayingit had found ³similar´ trademarks in its records. It asked the firm to respond in a month.

A Bharti-Walmart spokesperson said this was a routine query. ³There is no objection to the Best PriceModern Wholesale logo. As a process, the trademark registry flags certain points of observation forclarification, to which we have sent our response,´ said the spokesperson in an email, but declined togive details of its response.

Neil Mason, a trademark lawyer, also said the trademark office¶s remarks are part of a processfollowed in many other cases.

In its letter, the registrar¶s office had cited an application from Aditya Birla Retail Ltd to trademarkBest Price for retailing and allied businesses. Aditya Birla Retail declined to comment, citing thesensitivity of the issue.

Bharti-Walmart rolled out its first cash-and-carry store in Amritsar in May 2009, and added anotheroutlet near Chandigarh this year. The company plans to open 15 wholesale stores in the next threeyears.

Five months before launching the first store, Bharti-Walmart made half a dozen applications totrademark Best Price Cash and Carry and Best Price Modern Wholesale, among other names, alongwith the logo. While opening the Amritsar store, Bharti-Walmart officials said the brand was chosen

after a consumer study. But analysts say Wal-Mart was deliberately playing down its global brands toweaken the backlash against the entry of foreign retailers in India.

³That¶s is one of the key reasons that they don¶t want to use the Walmart name, presumably to keep alow profile and not to attract any adverse interest,´ said a retail analyst, asking not to be named as hedoes business with Bharti Walmart. ³It¶s an over-cautious way to go, but there is no harm in it.´

Small shopkeepers, who have traditionally dominated India¶s retail sector, have been protesting foryears against the entry of big business groups²such as Wal-Mart²in the sector. They have stagedmarches and ransacked stores owned by large corporations in several cities.



Raymond to expand capacity, retail reachPlans to add around 100 franchise outlets this year; Raymond shirtingfabrics JV to add 10mn metres per annum; closes unprofitable stores,consolidates to turn corner

Mumbai: Textiles maker and retailer Raymond Ltd plans to add about 100 retail outlets this fiscal asdomestic consumer sentiment turns buoyant, though demand from some developed economies havenot matched expectations, a senior official said.

³Going forward, looking at the feedback we have received from the trade and our own internal studies,consumer sentiment will remain buoyant and this season is looking quite good,´ chief financial officerH Sunder told Reuters on Wednesday.

³The winter season where we are taking in growth in excess of 17-18% in terms of bookings, weexpect the optimism to continue,´ Sunder said.

Raymond plans to open up to three-fourths of the new stores in non-metros and class IV and V townsthrough franchise, in line with its strategy of cementing its footing in India¶s hinterland. Class IV and Vtowns typically have a population of 500,000 or less. Raymond, which currently occupies a retail spaceof around 1.4 million square feet, hopes to add 150,000-175,000 square feet through the new outlets.

Raymond also plans a Rs400 million expansion of its shirting fabrics joint venture with Italy¶s GruppoZambaiti, boosting capacity by 10 million metres a year at its Kohlapur unit to 22 million metres.

India¶s textiles and apparel industry is fast recovering after a near two-year slowdown that hitconsumer sentiment and discretionary spending.

However developed markets particularly Europe and US have not yet overcome the slowdown.

³The demand pick-up is not as robust as expected except in denims, where we have been able to passon price increases.´

Raymond, which sells brands such as Manzoni, Park Avenue, Parx and ColorPlus, closed severalunprofitable stores last fiscal and in June folded up its home retail brand, Be:Home, after two years of operation.

Raymond swung to a standalone net profit of Rs25.06 crore in FY10 from a year-ago net loss of Rs270crore, while its June-quarter net loss narrowed to Rs24.88 crore from Rs31.60 crore.

The firm is in the process of setting up a gas-based captive power plant at Vapi in Gujarat to reducecosts and increase profitability.

³We are hoping to have a much better performance than the previous 2 years.

Internally we are ready to deliver on expectations so hopefully we should turn the corner this year´.

However rising raw material costs, particularly cotton, remains a concern and the firm would look topass on some of the price increases.



³We have started to pass on price increases. But there is always a time lag, so it does impact marginsin the short run.´

At 1:30 p.m., Raymond shares were down 0.43% at Rs231 in a firm Mumbai market.

Are new FDI norms for better or worse?T he new twist and turn in policy has put most of the major business houses in a sticky situation.

T he recent FDI policy has caused furor among the big players in the retail segment who have already floated

JVs with international wholesalers or who are mulling over such a plan.

Department of Industrial Policy and Promotion (DIPP) in the Ministry of Commerce and Industry on March31 came up with a new policy on Foreign Direct Investment (FDI)). The new twist and turn in policy hasput most of the major business houses in a sticky situation. The recent guideline has stated that the FDIin wholesale retail does not permit cash & carry retailers to exceed sales more than 25 per cent of itsturnover to its partner retailer. This is for the first time that the industrial ministry has come up with such

guidelines for wholesale trade, otherwise known as cash & carry trade. Cash & carry companies areasked to maintain daily sales records which will include registration or license details of buyers.Does the policy pull back foreign investors? India¶s retail sector has been creating its own niche quite successfully, and considering its growth andstability in economy, it has become the cynosure for foreign eyes. With many foreign players makinginvestment and inroads into the market, the new cap on FDI has triggered a lot of reactions, uncertaintyand clamour in the retail industry. The tie-ups between Bharti-Retail and WalMart, Tesco and Woolworth¶s

joint venture with big retailers Trent and Infinity Retail respectively have received a jolt after thegovernment¶s ruling. So long these tie-ups have ensured majority of the cash & carry sales to the bigretail chains, which now comes to a halt with the new FDI policy. It poses a big threat to the participation

of international wholesale retailers in the country¶s retail development. There is a fear that initialenthusiasm might fade in spite of 100 per cent FDI permission in wholesale trading.T he reaction in the industry Bharti Wal-Mart and Metro Cash & Carry are among leading firms involved in wholesale trade in India.India¶s big business houses are at crossroads with the current norms, seeking more clarity on the matter.It has compelled them to stall or put on hold with their plans which could have bearing on their businesses. India¶s largest retailer, Kishore Biyani, has a plan to forge an alliance with wholesale tradingcompany, Carrefour. But, as the situation demands, he is considering a major modification of the plan, for the venture seems to be a far cry to hope for a bright future. The spokesperson for Pantaloons Retail,promoted by Kishore Biyani, declined to comment on this government policy. ³We are in the process of

reviewing and understanding the new consolidated guidelines´, comments the spokesperson for BhartiRetail.

What will be the consequence? Justifying the government¶s role in drafting this new policy, a government official comments that this is anattempt to stop foreign traders from grabbing a huge share of front-end retail pie, in the name of wholesale trading. However, apprehension and confusion have gripped the wholesale trading fraternity.They are in the midst of understanding the whole process. Time will tell if it is a dampener or facilitator of retail growth.



Govt Expected to Relax FDI Norms in Retail SectorPublished by Newsroom June 11th, 2010 in Newsbytes .

The Government is soon expected to come out with a concept paper on the retail sector that would

particularly look at relaxing FDI norms in this sector. There are still doubts on whether this is a move

to relax FDI norms or just another forum to reiterate what has been repeatedly said, µno further

liberalisation in retail¶.

India¶s FDI regime in the retail sector is constantly under the review of the Government. It has

maintained a restrictive stance in the retail policy despite the popular belief among policy makers that

single-brand retail is doing well in India.

Foreign investments in this sector have been increasing consistently and have been less susceptible to

external shocks. However, will the popular belief be put on paper this time?

FD I on the growth path

In 2006, the Government for the first time eased retail policy in the country by allowing up to 51 per

cent FDI through the single-brand retail route. Since then, there has been a steady increase in FDI in

the retail sector; the sector¶s share in total FDI flows into India have increased from zero to 0.2 per

cent in a two-year period. The cumulative FDI in single-brand retail stood at $190 million in February

2010.

FDI data since 2007 demonstrates a steadily rising trend in the single-brand retail sector. Besides,

there has been less volatility in FDI flows even during periods of world-wide recession. The retail

policy relaxation was followed by a series of doubts about the sustainability of FDI in the retail sector.

Moreover, the global slowdown that adversely affected demand in most economies raised concerns

regarding the flight of capital from the Indian retail sector.

Contrary to the belief, foreign investment in the single-brand retail sector in India has been resilient to

external shock. Given its large population and rapidly expanding middle-class, there is growing

demand and a market for almost everything in the country. As a result, when most countries were

facing a demand crunch, foreign brands rushed in to invest in the Indian market, illustrated by a clear

peak in FDI during mid-2008, in the accompanying figure.



From 2006 to March 2010, around 94 foreign players applied to invest through the single-brand route,

of which 57 entities got approval. The percentage increase in FDI flows in the retail sector over the

last two years has been higher than that in sectors such as the services sector, trading and

telecommunications, which have a much higher share in the country¶s overall FDI.

Moreover, direct investment, which is the key source of foreign capital in the retail sector, is less

volatile than equity or institutional investment. As a result, there is a lower risk of the market being

affected by the adverse effects of stock market changes and consumer confidence. According to a

2010 A.T. Kearney report, India ranks third after China and the US on the FDI Confidence Index while

it is the top location for non-financial investment. The study found that if the Indian retail sector

becomes more open in future, it could become a vital, high potential market like China.

Foreign investors in China are lured by the increased domestic demand and high potential for retailers,

contributing to overall growth in China. In addition to this, foreign retailers in China have increased

their sourcing from Chinese SMEs, which now have a 70 per cent share in exports. Over the past few

years, the retail sector in India has been successful in attracting and retaining foreign investment. The

Indian market is emerging as an attractive destination for foreign investors interested in investing in

the retail sector. In such a scenario, given the forthcoming opportunities, policy restrictions would not

be the best way to protect traditional retailers.

The Government should, in turn, impose regulations such as sourcing requirements, zoning

regulations and back-end investment requirements to protect traditional retailers. This could, in fact,

help in SME sourcing from India, as in the case of China. In countries such as China, the retail sector

has been a major propellant of growth and with a more liberal FDI policy, the story can be repeated in

India.

R etail stocks soar as Govt unveils FDI plans

McKinsey says India's retail space set to grow to $450 b.



Our Bureau

Mumbai, July 7

Shares of multi-retail firms soared on Wednesday after the Government's plans to consider FDI investments in theorganised retail space.

Some multi-retail stocks even touched their highs on a day when the benchmark indices fell.

The Ministry, in a discussion paper on Wednesday, said: ³«keeping in view the large requirement of funds for back-end infrastructure, there is a case for opening up of the retail sector to foreign investment.´

Trent, the retail operations arm of the Tatas which runs the lifestyle chain Westside, sky-rocketed more than 7 per cent to close at Rs 1,128.85 on the BSE. During the day it jumped to an all-time high of Rs 1,135.

Pantaloon Retail rose 5.36 per cent to close at Rs 464.6 touching its 52-week high of Rs 469.95 in intraday trade.Shoppers Stop, too, touched a 52-week high of Rs 658. It closed up 11.54 per cent at Rs 626.15 on Wednesday.

The movement of these stocks was in contrast to that of the market as a whole; the Sensex was down 143 points(0.81 per cent) to close at 17471 on Wednesday.

FDI is not allowed in the multi-brand retail space. In the single brand space, FDI is allowed up to 51 per cent. In thecash and carry segment, FDI of 100 per cent is permitted.

According to the ninth annual Global Retail Development Index study from management consulting firm A.T.Kearney, India is among the top 10 countries on the index's 2010 mix. ³India, last year's top GRDI destination, fell tothird. Retail growth will continue in India, but an influx of foreign players, limited and expensive desirable real estateand foreign investment restrictions have pushed the country's retail market closer to maturity.´ India was number onein 2009.



A recent McKinsey report said that India's retail space is set to grow to $450 billion by 2015, comparable to Italy's$462 billion market. ³The game here has just begun, with organised retail accounting for just 5 per cent of today'smarket and likely to expand anywhere between 14 and 18 per cent by 2015.´

³There are positives to this move (the government discussion paper) as a lot of foreign players are waiting on thesidelines for the FDI rules to come through. And many of them are looking at India with the long term in view,´ said Mr Viraj Nadkarni, Research Analyst at Angel Broking. As the concept paper points out that it has been written keepingin mind the need to protect the smaller kirana shops or unorganised sector, bringing in FDI into the space will notharm them either, said Mr Nadkarni.

³The jump in the share price of retail companies was a sentimental push following news of the concept paper,´ saidMr Nadkarni.

There is a huge potential for FDI in Indian retail, said Mr Amit Khurana, Head of Research at Dolat Capital Market. ³Alot of foreign players will jump to it once the FDI norms come out. Wal-Mart has already tied up with an Indian player.Carrefour and other such retailers are testing the waters here. Home Depot has also shown interest here.´

New framework for FDI in retail

C ircular 1, effective April 1, supersedes all the previous guidelines and press notes relating to FDI, issued by theGovernment.

Ravi Shingari

Just back from first frenzied shopping experience in the UK, my four year old ever-inquisitive daughter inquired,³Daddy, why do we not have a Harrods in Delhi? Shopping there is so much fun!´ Simple question for a four-year-old,but not so simple for her father to explain.

Retail in India has remained a point of academic discussion for several years.

The recently released consolidated policy framework for foreign direct investment (FDI) in India is undoubtedly arespectable effort of the Indian government to promote FDI through a policy framework that is transparent,predictable and simple, thus reducing regulatory burden.

This document (Circular 1 of 2010) now consolidates all existing regulations relating to FDI contained in the ForeignExchange Management Act (FEMA), the Reserve Bank of India (RBI) Circulars under FEMA and various Press Notesissued by the Department of Industrial Policy & Promotion (DIPP). This new Circular, effective April 1, 2010,supersedes all the previous guidelines and press notes relating to FDI, issued by the government. It is envisaged thatthis Circular will be updated every six months, thus liable to be superseded on September 30, 2010.

FDI in multi-brand retail

Returning to our discussion on FDI in retail, as per the current regulatory regime, retail trading (except under single-

brand product retailing ² FDI up to 51 per cent, under the Government route) is prohibited in India. Simply put, for acompany to be able to get foreign funding, products sold by it to the general public should only be of a µsingle-brand';this condition being in addition to a few other conditions to be adhered to. That explains why we do not have aHarrods in Delhi. Additionally, the Circular explains that the aim of opening FDI in single-brand retail is to attractinvestments in production and marketing, improving the availability of such goods for the consumer and encouragingincreased sourcing of goods from India, among others.

The plausible question one would be tempted to ask at this stage is that would these objectives not be better achieved by opening FDI in multi-brand retail also?

Interestingly, as per popular news items, DIPP will soon come up with concept papers on relaxing norms for FDI inmulti-brand retail. The paper may include a provision that global retailers interested in opening multi-brand stores inthe country will have to put in a significant part of their investment in the back-end infrastructure.



As per the extant regulatory policy, FDI up to 100 per cent is allowed under cash and carry wholesale trading.

The term µcash and carry wholesale trading' was not defined earlier. The Circular now defines it as ³sale of goods/merchandise to retailers, industrial, commercial, institutional or other professional business users or to other wholesalers and related subordinated service providers´. Thus this kind of sales is for the purpose of trade, businessand profession, as opposed to sales for the purpose of personal consumption.

Wholesale trading

Further, the Circular wisely suggests that the yardstick to determine whether the sale is wholesale or not would be thetype of customers to whom the sale is made and not the size and volume of sales.

As per the µcash and carry' structure commonly employed in India, the wholesale and retail entities are maintained asseparate entities without any cross-shareholdings. The retail entity is owned and controlled by the Indian partner while the wholesale entity can be owned by the foreign partner up to 100 per cent. The association between thewholesale and retail entity can then operate on a number of exclusive arrangements. At this stage it is also worthnoting that an additional condition has been specified in the Circular that seems to be raising everyone's eyebrows.

The condition spells that though wholesale trading of goods would be permitted among companies of the µsamegroup', however, such wholesale trading to group companies taken together should not exceed 25 per cent of the

total turnover of the wholesale venture and the wholesale made to the group companies should be for their internaluse only.

Further, the term µgroup company' has not been defined in the said Circular. Further clarification on the meaning of µgroup company' is much awaited by the market players.

Govt opens debate on FDI in multi-brand retail R eleases discussion paper for stakeholders' response.

Our Bureau

New Delhi, July 6

Braving all political odds, the Government, on Tuesday, took the first step towards opening up foreign directinvestment in multi-brand retail.

Advocating that FDI in retail would bolster farmers' income, tame inflation and bring technical knowhow, theGovernment has kicked off a discussion to formulate the rules of the game, including imposition of FDI cap and ridersfor local sourcing and rural job creation.

The move was eagerly awaited by foreign players such as Carrefour, Wal-Mart, and Woolworths, that have beenangling for a larger play in the market. Even domestic retailers such as Future Group and Aditya Birla Retail havebeen lobbying hard for FDI in the sector.



While foreign investment in multi-brand retail is prohibited now, the Government allows 51 per cent FDI in singlebrand retail and 100 per cent in wholesale cash-and-carry trade.

³Keeping in view the large requirement of funds for back-end infrastructure, there is a case for opening up of retailsector to foreign investment. At the same time, there is a view that this may be more appropriately done, in acalibrated manner,´ the Department of Industrial Policy and Promotion (DIPP) said in its discussion paper on thecontroversial issue, which has, in the past, triggered widespread resistance from political parties such as the BJP andthe Left.

Detractors have been arguing that such a move could hit the fortunes of 1.3 crore small retailers across the country.

Interestingly, Tuesday's discussion paper has not recommended a specific FDI ceiling; it has, instead, sought publicopinion on the same.

³It appears that the Government is under pressure from MNC retailers to open up the sector. We also have beendemanding opening up of multi-brand retail to step up investment in back-end and front-end. If the Government doesit in a calibrated and graded manner, it would be a welcome step,´ said Mr Thomas Varghese, Chief OperatingOfficer, of Aditya Birla Retail and Chairman, CII Committee on Retail.

However, he rued that the concept paper, though comprehensive, has not spelt out a clear direction for FII portfolio

investment in retail ± which is what many domestic retailers have been clamouring for.

The discussion paper talks of earmarking 50 per cent of FDI inflows for building up of back-end infrastructure,logistics and agro processing; and even moots riders such as reserving 50 per cent jobs in FDI-funded retail outletsfor rural youth.

Other issues up for debate include identifying possible locations for such stores. The current thinking is that thesestores could initially be allowed to come up in cities with population of over 10 lakh, particularly on the outskirts. Also,to provide a fillip to the SME sector, the Centre has recommended sourcing a percentage of manufactured productsfrom the domestic SMEs. Over the last few years, foreign investment in retail has been a politically sensitive issue.Concerns that foreign retailers, with their financial prowess, could rob the kirana stores and pushcart vendors of their livelihoods, meant that the Government had to tread cautiously on the issue.

Last year, a Parliamentary Standing Committee headed by BJP's Dr Murli Manohar Joshi had sought a blanket ban

on large corporate houses and MNC retailers entering the trade.

However, earlier this year, the Prime Minister, Dr Manmohan Singh, called for a debate on the opening up of thesector, pointing to the vast difference between farm gate and consumer prices.

On similar lines, the DIPP's discussion paper points out that the farmers get just a third of the total price paid by thefinal consumer, as against two-thirds realised by farmers in nations with a higher share of organised retail. FDI inretail, therefore, could be an efficient way of addressing concerns of farmers and consumers, it said.

³Allowing FDI in multi-brand retail in India is a step in the right direction«The FDI percentage could be between 49-51 per cent based on all considerations and the conditions should not be too onerous,´ said Mr Rajan Bharti Mittal,President of FICCI and Vice-Chairman of Bharti Enterprises, which has a joint venture with Wal-Mart.

The Indian retail industry is the fifth largest in the world. The organised retail segment in India accounts for less thanfive per cent of the total retail market, but it is expected to grow at a compounded annual rate of 40 per cent to $75billion by 2015, from less than $20 billion now, according to estimates by various brokerage reports.

R etail investment in India gung ho! India's FDI regime, its impact on the retail sector and more«.

India's FDI regime in retail is constantly under the review of the Government. It has maintained a restrictive stance inthe retail policy despite the popular belief among policy makers that single-brand retail is doing well in India.



Tanu Goyal

The Government is soon expected to come out with a concept paper on the retail sector that would particularly look atrelaxing FDI norms in this sector. There are still doubts on whether this is a move to relax FDI norms or just another forum to reiterate what has been repeatedly said, µno further liberalisation in retail'.

India's FDI regime in the retail sector is constantly under the review of the Government. It has maintained a restrictivestance in the retail policy despite the popular belief among policy makers that single-brand retail is doing well in India.

Foreign investments in this sector have been increasing consistently and have been less susceptible to externalshocks. However, will the popular belief be put on paper this time?

FDI on the growth path

In 2006, the Government for the first time eased retail policy in the country by allowing up to 51 per cent FDI throughthe single-brand retail route. Since then, there has been a steady increase in FDI in the retail sector; the sector'sshare in total FDI flows into India have increased from zero to 0.2 per cent in a two-year period. The cumulative FDIin single-brand retail stood at $190 million in February 2010.

FDI data since 2007 demonstrates a steadily rising trend in the single-brand retail sector. Besides, there has beenless volatility in FDI flows even during periods of world-wide recession. The retail policy relaxation was followed by aseries of doubts about the sustainability of FDI in the retail sector.

Moreover, the global slowdown that adversely affected demand in most economies raised concerns regarding theflight of capital from the Indian retail sector.

Contrary to the belief, foreign investment in the single-brand retail sector in India has been resilient to external shock.Given its large population and rapidly expanding middle-class, there is growing demand and a market for almosteverything in the country. As a result, when most countries were facing a demand crunch, foreign brands rushed in toinvest in the Indian market, illustrated by a clear peak in FDI during mid-2008, in the accompanying figure.

From 2006 to March 2010, around 94 foreign players applied to invest through the single-brand route, of which 57entities got approval.

The percentage increase in FDI flows in the retail sector over the last two years has been higher than that in sectorssuch as the services sector, trading and telecommunications, which have a much higher share in the country's overallFDI.

Moreover, direct investment, which is the key source of foreign capital in the retail sector, is less volatile than equityor institutional investment. As a result, there is a lower risk of the market being affected by the adverse effects of stock market changes and consumer confidence.



According to a 2010 A.T. Kearney report, India ranks third after China and the US on the FDI Confidence Index whileit is the top location for non-financial investment. The study found that if the Indian retail sector becomes more openin future, it could become a vital, high potential market like China.

Foreign investors in China are lured by the increased domestic demand and high potential for retailers, contributing tooverall growth in China. In addition to this, foreign retailers in China have increased their sourcing from ChineseSMEs, which now have a 70 per cent share in exports.

Over the past few years, the retail sector in India has been successful in attracting and retaining foreign investment.The Indian market is emerging as an attractive destination for foreign investors interested in investing in the retailsector.

In such a scenario, given the forthcoming opportunities, policy restrictions would not be the best way to protecttraditional retailers.

The Government should, in turn, impose regulations such as sourcing requirements, zoning regulations and back-endinvestment requirements to protect traditional retailers.

This could, in fact, help in SME sourcing from India, as in the case of China. In countries such as China, the retailsector has been a major propellant of growth and with a more liberal FDI policy, the story can be repeated in India.

G overnment looking at FDI in multi-brandretail: SharmaTue Apr 27 2010 15:26:14 GMT+0530 (India Standard Time) by IANS ( Leave acomment )

New Delhi, April 27 (IANS) The Indian government is consulting various stake-holders on allowing foreign direct investment (FDI) in multi-brand retail and thescope of such investments in other sectors, Commerce and Industry Minister AnandSharma said Tuesday³FDI in multi-brand retail is part of the discussion paper being prepared by our ministry. We are also studying the scope of FDI in sectors like agriculture, defenceand retail,´ Sharma told reporters here, releasing a strategy paper on growth of engineering exports.

A day earlier, he had said that the government was not working on the modalities of opening up multi-brand retail to foreign investors as it was still trying to strengthen

back-end of the retail industry.

³Back-end operations have to be strengthened first as it would lead to value addition,higher remuneration to farmers and also create jobs,´ he said Monday.

The current policy allows 51 percent FDI in single-brand retail only. The governmenthas not allowed foreign companies to run multi-brand stores in India. The policyallows 100 percent FDI only in cash-and-carry or wholesale trading.



The government is expected to seek industry opinion next month to change FDInorms in sectors like defence, agriculture, retail and pharma.

According to the minister, FDI in India since liberalisation in 1990-91 has been $175 billion. The FDI investment during April-February 2009-10 was $33 billion, he said.

More at : Government looking at FDI in multi-brand retail:Sharma http://www.thaindian.com/newsportal/business/government-looking-at-fdi-in-multi-brand-retail-sharma_100354646.html#ixzz0xPRuqhEN

New FDI norms: Bharti-Wal-Mart, Tata- Tesco JVs in aspot

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MUMBAI: New rules on foreign direct investment in wholesale trade have caused consternation amongIndian business houses with big plans for retail such as Sunil Mittal¶s Bharti and the Tatas and their partners, global giants like Wal-Mart and Tesco. The guidelines have also disrupted plans by India¶slargest retailer Kishore Biyani to team up with French company Carrefour for a foray into wholesale



trading, also known as cash & carry.

Companies are seeking the help of lawyers and consultants to make sense of the sudden change in theregulatory landscape which might result in existing agreements being reworked. A top lawyer ET spoke tosaid the new guidelines would lead to uncertainty for investors in the retail sector.

The new rules, issued by the industry ministry on March 31, say sales to 'group companies' should notexceed 25% of a cash & carry company¶s turnover and should only be for 'internal use'. ET had reportedthe new guidelines in its edition dated April 1. The rules also require cash & carry companies to maintainelaborate records of daily sales.

But the main irritant is the 25% cap on sales to group companies because some agreements had beenstructured so that cash & carry companies owned by foreign investors sell the bulk of their goods toIndian-owned retailers selling to consumers.

India allows foreigners to own 100% in companies carrying out wholesale trade but prohibits FDI inretailers selling to consumers. Foreign-owned wholesale traders can sell to shops and restaurants or other retailers but not to individual buyers.

³If it is a change in policy which the government seems to claim is not, it will dislocate the existingstructures and lead to a whole lot of uncertainty. There are lots of discussions taking place on the plan of action and the government will have to be approached again to clarify guidelines,´ said Zia Mody, senior partner of AZB, a law firm whose clients include companies in the retail business.

A partner at Ernst & Young, which counsels retail companies, echoed the thoughts. ³There is a lot of uncertainty now because of these guidelines. And if one reads between the lines, the message from thegovernment actually is: µDo not follow the current model¶. I do not know what kind of thinking went into theguidelines. It sends a very wrong message to the investing community at a time when India is seen as a

stable economy. But I am hoping there is some scope for clarification here,´ said partner Pinakin Desai.

But a senior official in the department of industrial promotion & policy (Dipp) told ET the new guidelinesare clear and will not be changed. ³There will be no exceptions. A wholesale/cash & carry business willnot be allowed to supply more than 25% to its group company. This has been done to ensure front-endretail doesn¶t come in the garb of the wholesale business,´ the official said.

Kishore Biyani, CEO of Future Group, said companies may have to tweak their plans. ³We are lookinginto the guidelines. This will alter a lot of plans in the retail industry.´

A Bharti-Wal-Mart spokesperson said they were seeking clarity on the new guidelines. ³It is too early to

comment on this. We are currently reviewing the new guidelines.´

The Future Group, which owns the Big Bazaar supermarket chain, is in advanced talks with Europe¶slargest retailer Carrefour for a joint venture to set up cash & carry outlets in India. Bharti and Wal-Marthave set up a cash & carry company in which each owns 50%. Another company, fully owned by theBharti Group, sells to individual consumers.

The Dipp official declined to comment on whether this will impact Bharti¶s retail plans since it has a jointventure with Wal-Mart, stating the company is free to forward its query to Dipp. ³The guidelines are self-explanatory. There is no room for confusion. And we won¶t make exceptions for anyone.´

The guidelines also state that cash & carry outlets will have to maintain elaborate records indicating



details of sales like the buyer¶s name, registration number and the amount of sale. This would have todone every day.

Cash and carry (sales)From Wikipedia, the free encyclopedia

C ash and carry wholesale represents a type of operation within the wholesale sector. Its main features are

summarized best by the following definitions:

The C ash and carry concept was originally thought up and created by Lawrence Batley from Huddersfield .

C ash and carry is a form of trade in which goods are sold from a wholesale warehouse operated either on

a self-service basis, or on the basis of samples (with the customer selecting from specimen articles using a

manual or computerized ordering system but not serving himself) or a combination of the two. Customers

(retailers, professional users, caterers, institutional buyers, etc.) settle the invoice on the spot and in cash,

and carry the goods away themselves.

Though wholesalers buy primarily from manufacturers and sell mostly to retailers, industrial users and

other wholesalers, they also perform many value added functions. The wholesaler, an intermediary, is used

based on principles of specialisation and division of labour as well as contractual efficiency. (OECD -

Organisation for Economic Cooperation and Development) .

There are significant differences between "classical" sales at the wholesale stage and the cash and

carry wholesaler: These differences are based in particular on the fact that customers of the cash and

carry wholesaler arrange the transport of the goods themselves and pay for the goods in cash and not oncredit. [1]

In a retail context, the term has a similar meaning: customers pay cash for the goods they purchase (the

retailer does not offer credit accounts) and carry them away themselves (the retailer does not

offer delivery service).

C ash & C arry" C onceptWhat does the term ³ C ash & C arry´ mean? The term ³cash & carry´ derives from English and means ³pay in cash and take your goods away.´

Is it a large supermarket? No, a supermarket is a form of retail, meaning that it sells to end-users, whereas ³Cash & Carry´ is a formof wholesale, selling to intermediaries and large commercial users. Our customers buy the goods to cover their daily business needs.

S o who are your customers? To enter the store and make a purchase, a client needs to hold a customer card, which is issued only toprofessional customers on the basis of official documents they submit. Thus, our stores are openexclusively to legal entities and private entrepreneurs.

We work with three primary groups of customers: y HoReCa ± hotels, restaurants and catering businesses who source food products and supplementary

goods from us.



y Traders ± small retail outlets, neighbourhood stores, kiosks and private entrepreneurs who buy goodsfor resale.

y Other business users ± offices, service companies, government agencies and other organizations thatpurchase anything from detergents to office equipment for professional use.

C an an ordinary person walk in a store even just to have a look?No, cash & carry stores are open only to professional customers. Our goal is to make their shopping

experience convenient, fast and efficient. At Metro Cash & Carry, you cannot buy a single chocolate bar.We sell our goods in bulk packaging, which is not very convenient for private users.

If you are a wholesaler, does it mean that you deliver the goods to the customer?Unlike the traditional wholesale, our concept in based on the self-service. Our customers come to thestore, pick their merchandise and carry it away themselves. This is convenient for several reasons.

y We offer a wide assortment of goods, providing for one-stop-shopping and thus allowing our customer to save time.

y Given the permanent availability of goods in our store, the customer can always purchase goods heneeds and is able to store and f inance them in the short term.

y Despite the principle of cash payment, cash & carry largely takes over the function of financing andstockholding on behalf of its customers.

y Because of our long business hours, a customer can do his shopping at a convenient time, sevendays a week.

y Therefore, our customers can enjoy one-stop-shopping while not giving up the benefit of attractivewholesale prices.

Is it true that at a cash & carry, prices are lower than in supermarkets?We at Metro Cash & Carry are able to achieve an attractive price due to a number of factors:

y Bulk quantities. Our customers buy in bulk, and so do we. Our global purchasing power allows us toachieve significant economies of scale.

y Lean operation cost. Based on almost 40 years of experience, we have optimized our logistics andgoods management systems to minimize operation costs. The savings are then passed to our customer.

The combination of these two factors allows us to offer to our customers the lowest possible price.What kinds of goods can one buy at your store? Typically, cash & carry stores carry a wide assortment in both, Food and Non Food. In Makro, we willoffer about 20 000 articles supplied by more than 600 partners. The permanent availability of our merchandise is based on a computerised goods management system which allows us to monitor thestock rotation on a daily basis and place orders with our suppliers in order to avoid ³out-of-stock´situations. Because of our assortment competency, customers can rely on us to provide all they needunder one roof.RETA IL C ash A nd C arry

A flurry of new deals have put the Indian retail sector back in the news

MUTHUKUMAR K. & VISHAL KRISHNA14 Aug 2008



BUILDING BRIDGES: Tesco has partnered with the Tata Group to enter India (Bloomberg)

Indian retail sector is hotting up with a line of announcements. First it was the UK retail major Tesco getting into cash-and-carry business. Close on the heels was a franchise agreement of Reliance Retail with Hamleys, the UK-based248-year-old toy maker. Trent, run by Tata Group Chairman Ratan Tata¶s half-brother Noel Tata, is doing a similar franchisee deal with Tesco for its hyper-market business (Star Bazaar).

While the franchisee deals are effective ways to leverage the expertise and technical know-how of a retailconglomerate, Indian retailers should understand that the cash-and-carry model adopted by foreign retailers ² abackdoor entry so to say ² could give them a run for their money. While Metro and Shoprite is into it already, Wal-Mart would soon start operations. ³Cash and carry suits Indian market conditions, where the kirana stores dominatethe landscape,´ says Saket Bhatnagar, principal consultant for Technopak, a Gurgaon-based retail consultant.

There are 15 million kirana stores in India, with organised retail constituting only 5-6 per cent of the $280-billiondomestic retail industry. Retail experts say it takes anything between Rs 300 crore and Rs 400 crore of sales a year for an outlet ² under cash-and-carry format ² to break even. Proper sourcing and supply chain management wouldbe key for survival in this business.

It would be interesting to check how different retail formats co-exist. For the moment, the stringent foreign directinvestment norms are the only glue keeping the foreign and Indian retailers together.

India R etail IndustryThe Indian retail industry is the fifth largest in theworld. Comprising of organized and unorganizedsectors, India retail industry is one of the fastest

growing industries in India, especially over thelast few years. Though initially, the retail industryin India was mostly unorganized, however with the change of tastes and preferences of the consumers, the industryis getting more popular these days and getting organized as well. With growing market demand, the industry isexpected to grow at a pace of 25-30% annually. The India retail industry is expected to grow from Rs. 35,000 crore in2004-05 to Rs. 109,000 crore by the year 2010.

Growth of Indian R etail

According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry is the mostpromising emerging market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (GrossDomestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by 2010.

R etails Industry NewsA ditya Birla R etails plans expansion in India

Growth Phase of IndianR

etailS

ector toC

ontinueIndian Garment exporters focusing on domestic retail



According to a report by Northbride Capita, the India retail industry is expected to grow to US$ 700 billion by 2010. Bythe same time, the organized sector will be 20% of the total market share. It can be mentioned here that, the share of organized sector in 2007 was 7.5% of the total retail market.

Major R etailers in India

Pantaloon:

Pantaloon is one of the biggest retailers in India with more than 450 stores across the country. Headquartered inMumbai, it has more than 5 million sq. ft retail space located across the country. It's growing at an enviable pace andis expected to reach 30 million sq. ft by the year 2010. In 2001, Pantaloon launched country's first hypermarket µBigBazaar¶. It has the following retail segments:

y Food & Grocery: Big Bazaar, Food Bazaar y Home Solutions: Hometown, Furniture Bazaar, Collection-iy Consumer Electronics: e-zoney Shoes: Shoe Factoryy Books, Music & Gifts: Depoty Health & Beauty Care: Star, Sitaray E-tailing: Futurebazaar.comy Entertainment: Bowling Co.

T ata Group

Tata group is another major player in Indian retail industry with its subsidiary Trent, which operates Westside andStar India Bazaar. Established in 1998, it also acquired the largest book and music retailer in India µLandmark¶ in2005. Trent owns over 4 lakh sq. ft retail space across the country.

R PG Group

RPG Group is one of the earlier entrants in the Indian retail market, when it came into food & grocery retailing in 1996

with its retail Foodworld stores. Later it also opened the pharmacy and beauty care outlets µHealth & Glow¶.

R eliance

Reliance is one of the biggest players in Indian retail industry. More than 300 Reliance Fresh stores and RelianceMart are quite popular in the Indian retail market. It's expecting its sales to reach Rs. 90,000 crores by 2010.

A V Birla Group

AV Birla Group has a strong presence in Indian apparel retailing. The brands like Louis Phillipe, Allen Solly, VanHeusen, Peter England are quite popular. It's also investing in other segments of retail. It will invest Rs. 8000-9000crores by 2010.

R etail formats in India

Hypermarts/supermarkets: large self-servicing outlets offering products from a variety of categories.

y Mom-and-pop stores: they are family owned business catering to small sections; they are individually handledretail outlets and have a personal touch.

y Departmental stores: are general retail merchandisers offering quality products and services.y Convenience stores: are located in residential areas with slightly higher prices goods due to the convenience

offered.y Shopping malls: the biggest form of retail in India, malls offers customers a mix of all types of products and

services including entertainment and food under a single roof.y E-trailers: are retailers providing online buying and selling of products and services.



y Discount stores: these are factory outlets that give discount on the MRP.y Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and other small items can be

bought via vending machine.y Category killers: small specialty stores that offer a variety of categories. They are known as category killers as

they focus on specific categories, such as electronics and sporting goods. This is also known as Multi BrandOutlets or MBO's.

y Specialty stores: are retail chains dealing in specific categories and provide deep assortment. Mumbai'sCrossword Book Store and RPG's Music World are a couple of examples.

C hallenges facing Indian retail industry

y The tax structure in India favors small retail businessy Lack of adequate infrastructure facilitiesy High cost of real estatey Dissimilarity in consumer groupsy Restrictions in Foreign Direct Investmenty Shortage of retail study optionsy Shortage of trained manpower y Low retail management skill

T he Future

The retail industry in India is currently growing at a great pace and is expected to go up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the year 2018 at a CAGR of 10%. As the country has got ahigh growth rates, the consumer spending has also gone up and is also expected to go up further in the future. In thelast four year, the consumer spending in India climbed up to 75%. As a result, the India retail industry is expected togrow further in the future days. By the year 2013, the organized sector is also expected to grow at a CAGR of 40%.

DI norms in retail sector should be relaxed'

retail katha

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