FDI in Multibrand Re tail

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Organis e d Re tail
What is it
Branded stores, esp. chain stores Modern infrastructure & technology Self-service

Types
Supermarkets (aka Convenience stores) Hypermarkets Specialty stores Single brand exclusive stores Cash & Carry

Re tail in India
Expanding at CAGR of 6.4% since 1998 Current size of total retail U.S.$550 bn
Share of organised retail 4% Compare: U.S. 85%; Brazil 35%; China 20%

Over next decade BCG report

Share of organised retail 21% Size of the market U.S.$260 bn

Small unorganised family run stores

A fe w Indian re taile rs
Types of Retail chains
Dept Stores Grocery, Food & Beverage, Pharmacy, Books-Music-Gifts

Future Group
Big Bazaar; Food Bazaar; eZone; Central; Brand Factory

Reliance
Reliance Digital, Fresh, Trends, Time Out

RPGs Spencer; Aditya Birlas more & Pantaloons; Tatas Shoppers Stop, Titan Eye+ ,
Tanishq, Landmark

Se gme nt re ve nue
In 2011, of the major retail business types, Textiles earned 38-40% of total sector revenue Food & Grocery 11-12% Consumer durables 9-10% Health & beauty lowest at 0.8%

Re tail Grow th Drive rs

Expansion of consumer class Rise in income & purchasing power Rising discretionary income Changing lifestyle

Growing number of working women

Change in consumer mindset consumers are becoming brand conscious demonstration effect
Access to easy & cheap consumer credit

Rising use of Plastic Money

Curre nt Sc e nario
Sales per outlet
Less than Rs1000 per day in rural areas Rs5KRs8K per day in urban areas

Long supply chain

5-6 intermediaries versus 2-3 in U.S.

Inefficient supply chain

Poor infrastructure bad roads, storage facilities Low percentage of processed food

Fe wmoreke y is s ue s
Over-regulated industry Agriculture Price Marketing Committee (APMC) restricts farmers choices

Multiple tax system

State VAT, Central ST, Octroi, etc.

Archaic labour laws

Regulated shift timings, holidays

High real estate cost, esp. in large cities

 High potential

OR: Curre nt s tatus

Urbanization and growth of middle class Increase in % of working women Exposure to modern retail experience (malls) Increased demand for branded/processed food High growth in turnover

Still on learning curve

Supply chain, technology, management practices Real estate cost, manpower quality, theft Mounting losses

51% FDI in MBR: Highlights

Min investment from foreign retailer - U.S.$100 mn 50% of total FDI must be invested in back-end infrastructure Minimum 30% of local sourcing from SME Retail outlets to come up in cities with more than ONE million population Govt will have the first right to procure agricultural produce State Govt will have final say in allowing such stores under Shops & Establishments Acts

Impac t of FDI in MBR

Infusion of cash for cash Intensive business Transfer of technology and practices
Boost to supply chain and logistics Cold storages and processing units Will require change in APMC

Partnership with Indian players

Local knowledge and global expertise

30% sourcing from Indian SME Sourcing from India for global operations

Boost to Indian Suppliers

Adv & Dis advantage s

For Farmers
Should get better prices Impact may be limited to medium & large farms Better seeds, technology & farm practices Multiple options for farmers Loss of bio diversity

For Small Retailers

Loss of business, but most will survive Impact high in proximity to modern stores Will have to adapt and might need support

Adv & Dis advantage s

For consumers
Better prices, larger variety, better shopping exp Convenience for working couples (& families) Would increase consumption expenditure Purchase of processed food, impulse items

For Manufacturers

30% rule would benefit SMEs Large manufacturers margins squeezed

Adv & Dis advantage s

Employment Loss of unorganized sector jobs at small retail stores Creation of organized sector jobs Net growth in employment if consumption rises Additional jobs in supply chain/food processing Government Higher tax revenues through organized retail May boost agro exports from India

*Conditionsapply
APMC act needs to be amended GST would simplify taxation

Investment in roads/infra required, etc. Long term game

Dont expect results in 2-3 years Walmart and others will go slow at first

Politics may still derail the plan

Opposition parties & allies oppose J Vs would not operate in such states

Thank You!