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Role of Fdi in Retailing IRJC Asia Pacific Journal of Marketing & Management Review Vol.1 No. 2, October 2012, ISSN 2319-2836 ROLE OF FDI IN RETAILING MS P.USHA VAIDEHI*; MRS P. ALEKHYA** *Assistant Professor, Department of MBA, CMR College of Engineering and Technology, Hyderabad. **Assistant Professor, Department of MBA, CMR College of Engineering and Technology, Hyderabad. INTRODUCTION Retail comes from the Old French word tailer (compare modern French retailler), which means "to cut off, clip, pare, divide" in terms of tailoring (1365). It was first recorded as a noun with the meaning of a "sale in small quantities" in 1433 (from the Middle French retail, "piece cut off, shred, scrap, paring").Like the French, the word retail in both Dutch and German (detailhandel and Einzelhandel, respectively) also refers to the sale of small quantities of items. Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mall, in small or individual lots for direct consumption by the purchaser.[1] Retailing may include subordinated services, such as delivery. Purchasers may be individuals or businesses. In commerce, a "retailer" buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells smaller quantities to the end-user. After farming, retailing is India‘s major occupation. It employs 40 million people. A sizeable majority of owner/employees are in the business because of lack of other opportunities. The decade of liberalisation has so far been one of jobless growth. It is no wonder that retail has become there fuge of these millions. Lopsided economic development is transforming India from an agrarian economy directly to a service oriented post-industrial society. Even though organized retail sector in India is at the infant stage, India has today become a budding target for FDI. India today offers the most persuasive investment opportunity for mass merchants and food retailers looking to expand overseas as Indian economy is growing at a rapid pace with consumers having high purchasing power. With a robust economy experiencing unrelenting growth, India has exerted a pull and an irresistible enticement to companies looking to expand their scope of operations. FDI is a sturdy source for the intensification of retailing and will create enormous opportunities for innovation in retail sector in India but at the same time it is quite likely that a section of the domestic retailing industry will be severely hurt due to the entry of foreign retailers. In this paper researchers have tried to accentuate both the thoughts in detail and concluded the most constructive view on FDI in Indian retailing www.indianresearchjournals.com 45 IRJC Asia Pacific Journal of Marketing & Management Review Vol.1 No. 2, October 2012, ISSN 2319-2836 FOREIGN RETAILERS HAVE ALREADY STARTED THEIR OPERATIONS IN INDIA THROUGH Joint venture where the Indian firm was an export house franchising (KFC, Nike) Sourcing from small-scale sector cash and carry operation (Giant in Hyderabad) non-store formats- direct marketing (Amway) REVIEW OF LITERATURE Retail modernization: Retail modernization in developing countries and its effect on the broader food system has been a major focus of research since the early 2000s. The most visible banner for this work has been the ―supermarket revolution‖. Supermarkets existed in Latin America from at least the 1960s1, but began to grow much more rapidly in that region during the economic boom and opening to Foreign Direct Investment (FDI) of the 1990s. Growth began later in East/Southeast Asia and Central Europe, followed by selected countries of Africa (Reardon et al, 2004). This growth, together with new procurement practices that the firms work to apply, has lead to a rash of studies attempting to document and anticipate the impacts of these firms on existing actors in the food system, and to draw policy implications for governments and donors In India, market reform and opening to FDI, along with prospects for 7% yearly growth in retail sales in a market of 1.2 billion people have generated billions of dollars of planned investment in supermarkets by local and multi-national firms, including Wal-Mart and Carrefour. Yet supermarket shares in India are currently very low (around 2%), due to the country‘s massive and complex small retail sector. Supermarkets there face the 20/20/20 challenge: they must grow their food sales by 20% a year for 20 years just to reach a 20% market share. Such unprecedented growth would still leave more traditional channels holding 80% of the food market. OBJECTIVES 1. To analyze the present trends in retail industry. 2. To study the impact of FDI in retailing 3. To analyze the benefits and concerns with regard to opening of the retail sector for FDI www.indianresearchjournals.com 46 IRJC Asia Pacific Journal of Marketing & Management Review Vol.1 No. 2, October 2012, ISSN 2319-2836 EMERGING TRENDS IN RETAILING YEAR TREND CHARACTERISTICS 1986 The foot FMCG companies had started to build robust chains. With 1,275 depots, soldiers Brooke Bond‘s large field force was part of a unique cash-based direct selling system. Coupled with the Hindustan Lever network, it had India‘s largest retail distribution chain. 1990s Sachet Selling in rural India was near impossible. Affordability, size, packaging, Revolution distribution — everything had to be different. The answer came along in the mid-1990s in the form of sachets — 20 ml plastic pouches. With this, FMCG companies rapidly ramped up their rural plans. 1999 The Big The big players in Indian industry wanted a slice of the retail pie — the Push Tata‘s, Piramal Enterprises, ITC and S Kumar‘s. Piramal Enterprises chairman Ajay Piramal who setup Crossroads, a 150,000-sq. ft mall in south Mumbai has since exited the business 2000s The Mall Suburbs in Delhi and Mumbai saw multiple malls of average size Bug 250,000 sq. ft spring up. Tier-2 cities followed suit and retail-only real estate companies came up. About 600 malls were to come up by the end of the decade, from 20 in 2004. The retail formats, too, underwent big changes. 2001 Second- Competition began in full earnest. While it took Shoppers Stop over Movers eight years to become one of the largest department store chains in India, Westside grew to about half its size within just two years of starting off.. While almost 75 per cent of Shoppers Stop sales came from brands supplied by other producers, 95 per cent of West side‘s sales came from its own in-store brands. 2004 Size For all the hype, through the 1990s, organised retail in India added just 1 Matters million sq. ft of space a year. In 2003 alone, 10 million sq. ft was picked up by retailers. The growth continued. In 2004, at least 50 new malls — of 100,000 sq. ft size and above — were slated to open. 2005 More Of Urban organised retail was getting crowded. To be different, a few The Same specialty malls cropped up. While some focused on luxury brands, others went for gold, jewellery, furniture, and even weddings. But these were just a minuscule part of the big pie. www.indianresearchjournals.com 47 IRJC Asia Pacific Journal of Marketing & Management Review Vol.1 No. 2, October 2012, ISSN 2319-2836 2007 Green — Reliance Industries (RIL), Aditya Birla Group, the Mittals of telecom Evolution fame, Pantaloon Retail and RPG Group — as well as a host of smaller players jumped into retailing of fresh vegetables, fruits and groceries. And with good reason. Of the retail pie that was worth Rs 12 lakh crore in 2006, 63 per cent was food and groceries alone. 2009 Shutters Chennai-based value retailer Subhiksha Trading Services went neck- Down deep in Rs 600 crore of debt (plus Rs 180 crore raised internally as shareholders‘ funds). It could not pay vendors, and employees. By 2009, it had no money to run its operations, senior staff was deserting, many stores were reportedly looted, and there was a demand for the government to initiate an independent audit of its accounts. 2010 Foreign Big retail was at the doorstep, waiting for the still elusive green signal to Hand foreign investment. Two years after it entered India, in partnership with Bharti, Wal-Mart was perfecting its back-end system at its five stores in India (three in Punjab, and one each in Rajasthan and Madhya Pradesh). The rules allowed Wal-Mart only to operate in the cash-and-carry segment. But in every other country, it sold directly to consumers. It had plans to invest Rs 500 crore more in the next five years to open 12 similar stores — if the retail FDI rules did not change that is. And change they did 2011 The Gates The government has now given its nod to increased FDI in retail — 51 Open per cent in multi-brand, and 100 per cent in single-brand retail. Easier said than done. Political consensus is missing. As we go to press, Parliament has been stalled on the issue for the seventh day. Source: This story was published in Business world Issue Dated 12-12-2011 GROWTH OF INDIAN RETAIL INDUSTRY IN THE LAST DECADE Last decade has indeed witnessed tremendous growth in Indian retail industry and has integrated our Indian economy with the world. Retailing in India is progressively inching its way toward becoming the next boom industry. It has emerged as one of the most dynamic and fast paced industries accounting for over 10 per cent of the country's GDP. This growth has become major attraction for foreigners to enter in India.
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