Professional Documents
Culture Documents
PROJECT REPORT
ANHAD KASHYAP
Roll No. 520946586
BBA Sixth Semester
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
CONTENTS
S.No. CONTENTS
P.No.
ACKNOWLEDGEMENT.3
II
RESEARCH METHODOLOGY...4
III
EXECUTIVE SUMMARY..............................5
i. INTRODUCTION..........................................................................................5
ii. IT WHITSLE BLOWING...........6
iii. GOVERNMENT OF INDIA ON MULTIBRAND RETAIL..................6
IV
CONCEPT STRUCTURING..................................8
i. FOREIGN DIRECT INVESTMENT...8
ii. TECHNOLOGY TRANSFER.......10
iii. MANUFACTURING, WHOLESELLING, RETAILING.......13
VI
VII
IX
CONCLUSION......43
ANNEXURE..44
XI
BIBLIOGRAPHY...46
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
I ACKNOWLEDGEMENT
I am extremely thankful to Sikkim Manipal University for giving me the opportunity of working on this
highly speculated and burning topic as part of the Course Curriculum of the 3 Year BBA graduation
course.
I have been associated with the Telecom Industry for the past three years. My interest in politics and
news exposed me to this burning issue of FDI in retail. My inquisitiveness prompted me to understand
the issue and go in details of the subject.
In June 2011, a few of my friends from Dayalbagh Education Institute, Dayalbagh Agra stayed with
me in Delhi as they had to attend their summer internship with HCL Technologies at Noida. They were
given a project in which they had to look for IT solutions for Retail, Manufacturing, Logistics and Health
Care. This was the point where I had the freedom and the right platform of interacting with these young
brains. I took the issue in a more holistic manner and tried to understand and visualize the benefits of
technology transfer through foreign direct investment in retail. My intention was to understand how
technology transfer through FDI could bring about a cultural and information revolution in our country.
I attempted to apply my knowledge pertaining to Information Technology and Systems Engineering to
retail systems. It was a very different experience of working on an issue of great importance to the
nation. The learning was enormous and the experience was very special.
I hope my efforts bring structure and clarity by eradicating the chaos and speculation pertaining to the
subject.
I am thankful to Mr. Rajeev Sharma of Alcatel Lucent (GM Supply Chain) for sharing his experience
and understanding of Logistics and Supply Chain Management with great simplicity and clarity. I would
thank Mr. Goyal (SMU Agra), Samrath Kashyap (Brother), Agam Adhaar Talwar, Kushagra Arora,
Atul Kannoujiya, Amit Harit, Puneet Gogna, Tamanna Saxena, Arshi Markan, Preeti Markan,
Murshid Salam (Program Controller, Ericsson) and T. Gurusant (A.M., HDFC Ltd.) for sharing,
discussing and debating the issue.
I specially thank my Father Mr. Vidhu Kashyap, Mother Mrs. Dayalpyari Kashyap, Grandmother Mrs.
Surat Kashyap and Grandfather Late Shri. Brij Bhushan Kashyap for their constant guidance,
encouragement and constant inputs on news and current affairs.
I thank Mr. Nandan Nilkeni, Mr. Sam Pitroda, Late. Mr. Rajiv Gandhi and Mr. Kapil Sibal for being a
great source of inspiration.
I dedicate this humble effort to my Ideal, Guru and Mentor Gracious Huzur Dr. Prem Saran Satsangi
who held my hand from time to time and showed me the optimal trajectory to truth. I pray in the Feet of
the Lord Almighty Who Has constantly showered me with His Grace, Blessings and Protection.
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
II RESEARCH METHODOLOGY
The research conducted for this project was exploratory and qualitative in nature. The Retail Industry
was studied in detail. The objective was to understand whether Foreign Direct Investment would in any
way help the retailers or wholesalers. Also I wanted to understand the current IT awareness in the Retail
Industry. The basic approach for the study is furnished below in the workflow.
The research commenced on April 23, 2012. A sample size of 50 retail units was covered. The sampling
technique was judgmental. The Retail vertical included Kirana shops within apartments, outside
apartments and Kiranas in central business districts. Data was collected through in depth interviews and
observation. The owner or the managers of the units were contacted and discussions were done about
their business dynamics, problems, needs and technology intervention in their business. A
questionnaire was used to aid in the interview process (Refer Annexure I).
The study continued for 28 days after which analysis and interpretation of primary data was done. MS
Excel was used to analyze the data.
Parallel to the survey, various newspapers, magazines, articles and case studies were searched and
reviewed on the internet. Special emphasis was given to information related to Information Technology,
Market Research, Foreign Direct Investment and Technology Transfer or Transfer of Technology (TOT).
At the end of the study, a new system was proposed with the advantages.
(ANHAD KASHYAP)
Roll No. 520946586
BBA Sixth Semester
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
INTRODUCTION
The purpose of this project is to understand the Governments of Indias concern on the issue of Foreign
Direct Investment in Multi Brand Retail in India. In this effort, I have attempted to throw light on the
benefits of FDI in Retail, Technology Transfer etc. and have proposed several systems for improving our
Indian Retail System. The basic benefits of Foreign Direct Investment in retail are:
Job opportunities
Development of Infrastructure
Cost Optimization
Benefits to Agriculture
Benefits to Government
Better Market Future Forecasting due to better Market Research Primary Information
Benefits to Retailers as they would get timely and cheap products from the new organized
wholesalers.
As India has developed its competency in the field of software, so have certain organizations like WalMart, Carrefour in fields of Supply Chain Management and Logistics. They have modern techniques of
cost and logistics optimization. They also have an international platform for auctioning farmer produce.
We can produce the competence they have, but this would require several years. Although we can
manage to get into a technology transfer mode with these organizations and become competent in a
few years. Therefore FDI in Multi Brand Retail would be beneficial for our country. We could vary the FDI
percentages with time. FDI would help us in creating jobs, help in organizing the retail market, we
would have control over black marketing, we would have a better and accurate market research
industry, and so on there are innumerous benefits. The only loss according to me in the entire cycle
would be to the WHOLESELLERS as they would be replaced with these Giant organizations. But I feel this
has to be done sometime in the future or else the situations would worsen for us and it would become
really difficult for our government to manage the mess.
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
developed with the growth in foreign retailers, through expansion into new formats, categories,
channels, customers, services and geographies. The industry would become more competitive with
development of the imported food and beverages market. In the processed food industry, small and
new players will be able to find ways to place their products in modern stores by producing store label
brands for them. However, there are a few challenges that the FMCG industry needs to address. Price
realization for the FMCG companies may come down as they need to bargain hard with big retail chains.
Also, private labels may pose a threat to established brands.
Second, large retail has typically succeeded where consumers have been willing to buy in large
quantities to avail volume-related discounts. In a country where the marketing ethos has been
dominated by the paisa pack, and marketers obsess about the fact that the unit outlay for a commodity
must be small for it to be attractive, another question is whether there is a willingness to make large
outlays. Undoubtedly, lower prices psychologically propel buyers to spend more than they otherwise
would. The resulting growth in private consumption creates jobs. It is not clear if this aspect has been
considered. What we must avoid is a situation similar to the one in the US, where increased
consumption does take place, but actually creates jobs in China. If we can ensure that procurement from
large-format retail takes place within India, it may have a beneficial impact on jobs.
Currently, lack of adequate storage facilities causes heavy losses to farmers. As per industry estimates,
35-40% of fruit and vegetables and nearly 10% of food grains in India are wasted annually. Though FDI is
permitted in cold chains to the extent of 100%, in the absence of FDI in front-end retail, investment
flows into this sector have been insignificant. Thus, FDI in retail would help in addressing this issue with
compulsory investment of 50% in back-end.
Farmers would also be able to secure remunerative prices. In the present dispensation, there is a
complex chain of procurement involving several middlemen. FDI in retail will create the enabling
environment and it is expected that progressive states will undertake gradual reform of the APMC
(Agriculture Produce Marketing Committees) Act.
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
IV CONCEPT STRUCTURING
i.
An investment made by a company or entity based in one country, into a company or entity based in
another country. Foreign direct investments differ substantially from indirect investments such as
portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange.
Entities making direct investments typically have a significant degree of influence and control over
the company into which the investment is made. Open economies with skilled workforces and good
growth prospects tend to attract larger amounts of foreign direct investment than closed, highly
regulated economies.
-Investopedia
Foreign direct investment (FDI) is direct investment into production in a country by a company located
in another country, either by buying a company in the country or by expanding operations of an
existing business in the country. Foreign direct investment is done for many reasons including to take
advantage of cheaper wages in the country, special investment privileges such as tax exemptions
offered by the country as an incentive to gain tariff-free access to the markets of the country or the
region. Foreign direct investment is in contrast to portfolio investment which is a passive investment in
the securities of another country such as stocks and bonds.
As a part of the national accounts of a country FDI refers to the net inflows of investment to acquire a
lasting management interest (10 percent or more of voting stock) in an enterprise operating in an
economy other than that of the investor. It is the sum of equity capital, other long-term capital, and
short-term capital as shown the balance of payments. It usually involves participation in management,
joint-venture, transfer of technology and expertise. There are two types of FDI: inward foreign direct
investment and outward foreign direct investment, resulting in a net FDI inflow (positive or negative)
and "stock of foreign direct investment", which is the cumulative number for a given period. Direct
investment excludes investment through purchase of shares. FDI is one example of international factor
movements. Let us have a look at the type of FDIs.
Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain
stage in a host country through FDI.
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
Platform FDI is generally defined as investment and production in a host country where the output is
largely sold in third markets, not the parent or host-country markets. It is not clear how to view these
investments in the terminology of current FDI theory, where the principal distinction is between
horizontal or market-seeking production and vertical or resource-seeking investments. Platform FDI has
elements of both. Often, production is to serve a large integrating market with a branch plant as in
horizontal investments but a specific location within the region is chosen on the basis of cost
considerations, as in vertical investments
Vertical FDI takes place when a firm through FDI moves upstream or downstream in different value
chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host
country. Whereas Horizontal FDI decrease international trade as the product of them is usually aimed at
host country, the two other types generally act as a stimulus for it.
B. METHODS
The foreign direct investor may acquire voting power of an enterprise in an economy through any of the
following methods:
tax holidays
preferential tariffs
Bonded Warehouses
Maquiladoras
infrastructure subsidies
R&D support
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
ii.
TECHNOLOGY TRANSFER
A. DEFINITION
Technology transfer is the exchange of technical knowledge, data, designs, inventions or trade
secrets from one organization to another organization or from one application to another
application.
-TRsG, Inc., USA
The transfer of intellectual property (patents, copyrights, trade secrets, know-how, etc) from the
laboratory to the marketplace. It encompasses all the various life cycles of a product, from the initial
thought through design to marketing and selling the product.
-Office of Technology Transfer and Commercialization, USA
Technology transfer is the process by which existing knowledge, facilities, or capabilities developed
under federal research and development (R&D) funding are utilized to fulfil public and private
needs.
-Federal Laboratory Consortium for Technology Transfer
Technology Transfer also called Transfer of Technology (TOT) and Technology Commercialisation, is the
process of skill transferring, knowledge, technologies, methods of manufacturing, samples of
manufacturing and facilities among governments or universities and other institutions to ensure that
scientific and technological developments are accessible to a wider range of users who can then further
develop and exploit the technology into new products, processes, applications, materials or services. It
is closely related to (and may arguably be considered a subset of) knowledge transfer.
Technology transfer is the term used to describe the processes by which technological knowledge
moves within or between organizations. International technology transfer refers to the way in which this
occurs between countries. The technological knowledge that is transferred can assume various forms. It
can be embodied in goods (including physical goods, plant and animal organisms), services and people,
and organizational arrangements, or codified in blueprints, designs, technical documents, and the
content of innumerable types of training. Alternatively it can be communicated through flows of tacit
knowledge i.e. knowledge that has not been fully codified, and remains embodied in the skills of
people.
All these forms of knowledge may vary in a further important way. At one end of the spectrum, the
transfer involved can be concerned with the knowledge for using and operating technology. At the
other end, it can be concerned with the knowledge necessary for changing technology and innovating.
In between, transferred knowledge may involve the many different kinds of design and engineering
knowledge required to replicate and modify technologies.
Moreover, in international technology transfer there is a distinction between horizontal and vertical
transfers. Horizontal technology transfer consists of the movement of an established technology from
one operational environment to another (for instance from one company to another). Vertical
technology transfer, in contrast, refers to the transmission of new technologies from their generation
during research and development activities in science and technology organizations, for instance, to
application in the industrial and agricultural sectors.
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Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
11
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
Property Rights (TRIPS) of the World Trade Organization (WTO) and the United Nations Framework
Convention on Climate Change (UNFCCC), as well as in regional and bilateral agreements.
Policies adopted by developed countries for stimulating the transfer of technologies to developing
countries are also becoming increasingly relevant. This is because international policies on trade and
environment issues often require such countries to create incentives for the transfer of technologies to
developing countries. In this context, according to UNCTAD, 41 agencies and programs in 23 developed
countries offer incentives that directly or indirectly facilitate technology transfer to developing
countries. These measures include financing support, training, matching services, partnerships, alliances
and support for equipment purchase or licensing. However there is an ongoing discussion about the
effectiveness of existing measures. Some analysts, for example, point out that incentives are selective
and have limited coverage, and that few such programs are centrally concerned with technology
transfers. With regard to the policies of developing countries themselves, it is widely accepted that their
purpose should be to maximize the gains from technology transfer while limiting its shortcomings. But
the new international policies on trade such as those adopted by the WTO appear to be ambivalent
in this respect. Some aspects of the WTO regime, such as the Trade Related Investment Measures
(TRIMS), can constrain the ability of acquiring countries governments to act by excluding the use of
certain interventions. However the WTO regime does not rule out all types of interventions. In particular,
measures to support training, human resources development and research and development are
permitted. For developing countries, therefore, a key question is how to exploit the scope left for proactive policies that can create the conditions under which technology transfer can be most beneficial.
This is particularly relevant in a context of global trade liberalization, and of the new international rules
that govern this process.
12
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
iii.
WHOLESALING
Wholesaling, jobbing, or distributing is defined as the sale of goods or merchandise to retailers, to
industrial, commercial, institutional, or other professional business users, or to other wholesalers and
related subordinated services. In general, it is the sale of goods to anyone other than a standard
consumer. According to the United Nations Statistics Division, "wholesale" is the resale (sale without
transformation) of new and used goods to retailers, to industrial, commercial, institutional or
professional users, or to other wholesalers, or involves acting as an agent or broker in buying
merchandise for, or selling merchandise to, such persons or companies. Wholesalers frequently
physically assemble sort and grade goods in large lots, break bulk, repack and redistribute in smaller
lots. While wholesalers of most products usually operate from independent premises, wholesale
marketing for foodstuffs can take place at specific wholesale markets where all traders are congregated.
Traditionally, wholesalers were closer to the markets they supplied than the source from which they got
the products.
RETAILING
Retail is the sale of goods and services from individuals or businesses to the end-user. Retailers are part
of an integrated system called the supply-chain. A retailer purchases goods or products in large
quantities from manufacturers or directly through a wholesaler, and then sells smaller quantities to the
consumer for a profit. Retailing can be done in either fixed locations or online. Retailing includes
subordinated services, such as delivery. The term "retailer" is also applied where a service provider
services the needs of a large number of individuals, such as a public utility, like electric power.
Shops may be on residential streets, shopping streets with few or no houses or in a shopping mall.
Online retailing, a type of electronic commerce used for business-to-consumer (B2C) transactions and
mail order, are forms of non-shop retailing.
13
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
In some parts of the world, the retail business is still dominated by small family-run stores, but this
market is increasingly being taken over by large retail chains.
Retail is usually classified by type of products as follows:
Food products
Hard goods or durable goods ("hardline retailers") - appliances, electronics, furniture, sporting
goods, etc. Goods that do not quickly wear out and provide utility over time.
Soft goods or consumables - clothing, apparel, and other fabrics. Goods that are consumed
after one use or have a limited period (typically under three years) in which you may use them.
Department stores - very large stores offering a huge assortment of "soft" and "hard goods;
often bear a resemblance to a collection of specialty stores. A retailer of such store carries
variety of categories and has broad assortment at average price. They offer considerable
customer service.
Discount stores - tend to offer a wide array of products and services, but they compete mainly
on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally
retailers sell less fashion-oriented brands.
Warehouse stores - warehouses that offer low-cost, often high-quantity goods piled on pallets
or steel shelves; warehouse clubs charge a membership fee;
Variety stores - these offer extremely low-cost goods, with limited selection;
Demographic - retailers that aim at one particular segment (e.g., high-end retailers focusing on
wealthy individuals).
Mom-And-Pop: is a retail outlet that is owned and operated by individuals. The range of
products are very selective and few in numbers. These stores are seen in local community often
are family-run businesses. The square feet area of the store depends on the store holder.
Specialty stores: A typical speciality store gives attention to a particular category and provides
high level of service to the customers. A pet store that specializes in selling dog food would be
regarded as a specialty store. However, branded stores also come under this format. For
example if a customer visits a Reebok or Gap store then they find just Reebok and Gap products
in the respective stores.
General store - a rural store that supplies the main needs for the local community;
Convenience stores: is essentially found in residential areas. They provide limited amount of
merchandise at more than average prices with a speedy checkout. This store is ideal for
emergency and immediate purchases.
Hypermarkets: provides variety and huge volumes of exclusive merchandise at low margins.
The operating cost is comparatively less than other retail formats.
Supermarkets: is a self-service store consisting mainly of grocery and limited products on nonfood items. They may adopt a Hi-Lo or an EDLP strategy for pricing. The supermarkets can be
anywhere between 20,000 and 40,000 square feet (3,700 m2). Example: SPAR supermarket.
Malls: has a range of retail shops at a single outlet. They endow with products, food and
entertainment under a roof.
Category killers or Category Specialist: By supplying wide assortment in a single category for
lower prices a retailer can "kill" that category for other retailers. For few categories, such as
electronics, the products are displayed at the centre of the store and sales person will be
14
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
available to address customer queries and give suggestions when required. Other retail format
stores are forced to reduce the prices if a category specialist retail store is present in the vicinity.
E-tailers: The customer can shop and order through internet and the merchandise are dropped
at the customer's doorstep. Here the retailers use drop shipping technique. They accept the
payment for the product but the customer receives the product directly from the manufacturer
or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and
are interested in home shopping. However it is important for the customer to be wary about
defective products and non-secure credit card transaction. Example: Amazon, Pennyful and
eBay.
Vending Machines: This is an automated piece of equipment wherein customers can drop in
the money in machine and acquire the products.
Some stores take a no frills approach, while others are "mid-range" or "high end", depending on what
income level they target. Other types of retail store include:
Automated Retail stores are self-service, robotic kiosks located in airports, malls and grocery
stores. The stores accept credit cards and are usually open 24/7.
Big-box stores encompass larger department, discount, general merchandise, and warehouse
stores.
Convenience store - a small store often with extended hours, stocking everyday or roadside
items;
General store - a store which sells most goods needed, typically in a rural area;
Retailers can opt for a format as each provides different retail mix to its customers based on their
customer demographics, lifestyle and purchase behaviour. A good format will lend a hand to display
products well and entice the target customers to spawn sales.
15
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
CURRENT STRUCTURE
MANUFACTURER
Point of disconnect or
disorganization
1
Manufacturer
WHOLESALER
2
Wholesaler
Retailer
RETAILER
The above diagram represents the present scenario of the retail in India. This structure basically
comprises of two relationships:
1.
2.
16
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
ii.
Buckets
New Delhi
Noida
Gurgaon
Total
Kirana
CBD
16
25
Outside
Apartment
Within
Apartment
12
27
15
50
17
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
A. GROWTH SCENARIO
20 % of the retailers surveyed were experiencing high growth rate of more than 20 %, while 46 %
experienced medium growth of 5 20 %.
67 % of the retailers within apartment complexes are growing at a rate of less than 5 %, which is forcing
most of them to start rethinking their position. In one of the apartments in Dwarka, 5 retailers had
changed within a span of 2 years.
Needs, a supermarket chain across Gurgaon, is an example of how a within apartment retail outlet can
succeed. It has 25 outlets, and is integrated with a billing system.
BUCKETS
GROWTH
HIGH
MEDIUM
LOW
TOTAL
CBD
12
25
OUTSIDE APARTMENT
WITHIN APARTMENT
12
KIRANA
AGGREGATE
10
23
17
50
18
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
70 % carry out Delivery services to help them build and retain customers. The rest either dont have
the resources to carry out such services, or dont feel the need to.
One Super Mart owner in Kendriya Vihar (within apartment) felt that not providing such a service
will force the customers to come to the shop, which will increase the probability of him purchasing
more.
BUCKETS
HOME DELIVERY
YES
NO
CBD
17
OUTSIDE APARTMENT
WITHIN APARTMENT
TABLE 1.2.3: HOME DELIVERY AS 7
A PREREQUISITE
KIRANA
AGGREGATE
35
15
19
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
C. CREDIT SERVICES
Most of them extend credit only to very well-known customers who are regulars; also they dont like
getting into a cash crunch situation.
BUCKETS
CREDIT
YES
NO
CBD
19
OUTSIDE APARTMENT
WITHIN APARTMENT
KIRANA
AGGREGATE
13
37
20
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
D. SOURCING OF SUPPLIES
22 % of the retailers go to the wholesalers and also receive goods from distributors, while 8 %
source their supplies from Wholesalers, whereas in 70 % of the cases the supplier comes.
33 % of the retailers within apartments are entirely neglected by the distributors, while 17 % do not
get adequate supplies and hence have to get the remaining supplies from wholesalers, and is
having to incur transit cost.
BUCKETS
SOURCING OF SUPPLIES
BOTH
CBD
GOES TO
WHOLESALER
0
SUPPLIER COMES
OUTSIDE APARTMENT
WITHIN APARTMENT
KIRANA
AGGREGATE
11
35
19
21
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
44 % of the retailers felt that there was a problem of Dead stock being returned.
The manufacturers have a policy of taking back the dead stock. This was backed by the distributor
of Haldiram in Noida. He also said that the whole process takes more than 9 months, and hence it
leads to a lot of funds being blocked.
Hence, if sold on cash basis to the retailer, and the retailer doesnt generate as much business, he
may not take the dead stock back and forgo the business with the retailer.
BUCKETS
DEAD STOCK
YES
NO
CBD
14
11
OUTSIDE APARTMENT
WITHIN APARTMENT
KIRANA
AGGREGATE
22
28
22
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
F. IT ADAPTION
18 % of the respondents already had some kind of an IT solution in place, while 18 % said that they
would like to invest in IT, whereas 16 % said they might invest. 48 % said that they were not interested.
The retailers who were willing to invest or might invest were majorly looking at a Billing solution.
The major reason for not investing in bar coding systems even though they see benefits is that most of
them feel its an additional burden, a skilled individual will be required, or training will be needed for
managing it. Also inputting bar codes on each product is a tedious task and hence feel that, it can be
done without. Another major reason is that they feel that it will slow down the process.
BUCKETS
IT ADAPTION
ALREADY USING
IT
4
INTERESTE
D
8
MAY
BE
2
NOT
INTERESTED
11
OUTSIDE
APARTMENT
WITHIN APARTMENT
KIRANA
AGGREGATE
24
CBD
23
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
G. ECONOMIC SEGMENTATION
According to the different needs, segmentation is done keeping in mind the investment made by the
retailers as follows:
SEGMENT
INVESTMENT
NO. OF RETAILERS
LOWER
24
48%
LOWER MIDDLE
2-8LAKHS
16%
UPPER MIDDLE
ABOVE 8 LAKHS
18
36%
TOTAL
50
100%
SEGMENT
TURNOVER
OPERATING
EXPENSES**
DISPOSABLE
INCOME***
LOWER
(10/10)
LOWER
MIDDLE
1 - 4 LAKHS
10000 - 40000
2000 - 8000
8000 32000
4- 10 LAKHS
40000 - 100000
12000 - 30000
28000
70000
ABOVE 10
LAKHS
ABOVE 100000
40000 AND
ABOVE
60000 AND
ABOVE
UPPER
MIDDLE
24
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
H. KEY INSIGHTS
THREAT PERCEPTION ANALYSIS
Out of the 50 retailers surveyed, 84 % feel that they face some kind of threat in their business.
83 % out of the ones, who feel that they face a threat, feel the threat from organized players, while
36 % feel it from wholesalers and 29 % from other retailers.
19 % cited Inflation as a threat, which maybe one of the reasons for people to become more price
conscious and prefer purchasing goods of daily needs from Big Bazaars and other marts.
72 % of the retailers felt that they faced a threat. 55 % of the ones who stated a threat, felt the threat
from retailers within the CBD, while 88 % feel the threat from Organized players. People from a lot
of colonies and apartments in and around CBDs come there to purchase goods, when they run out
of stock. Also, 92 % of the stores within CBDs do not carry out any CRM measures like maintaining a
database of frequent customers.
KIRANA
88 % of the retailers feel that they face some threat. 62% out of those feel it from organized sector
and 25 % from wholesalers. One of the reasons is that, they are relatively smaller players with 71 %
having invested less than INR 2,00,000. Most of them either bank on existing customers or just
accept the situation.
WITHIN APARTMENT
83 % of retailers within apartment complexes feel that they face a threat. 80 % out of those feel it
from organized players, 70% from Wholesalers & 30 % from retailers outside the apartment.
The retailers within apartments feel that people do not prefer buying their monthly supplies from
them and only when they run out of stock do they turn to them. Also, they treat them as Bread,
butter, eggs & milk store.
OUTSIDE APARTMENT
100 % feel a threat, and all of them feel it from organized players, and 16 % of them feel it from
retailers and wholesalers.
STOCK OUT
82 % of the retailers feel that they come across situations where the customer returns back without
the product that he is looking for.
Error rates can be explained as the number of times the customer has returned without purchasing
the good due to unavailability of the same.
25
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
Hence, a 10 20 % error rate means an opportunity for solving the problem through an ICT
solution.
This is majorly because of flexibility that they receive in terms of credit period, dead stock getting
replaced and lead time getting reduced and supplies being received as and when required.
6 % used both
They carry a strong feeling that they can run their business better with their own business acumen.
Complexity in catering to such a segment of retailers, as billing for loose items a problem.
NEED ANALYSIS
Any solution to help increase the margins, keeping in mind the extended ecosystem.
A simple billing system which allows the retailer to keep track of his daily sales and maintain an
account of the same.
A solution that reduces the error rates due to stock out.
A feature within the solution which intimates him of products which are approaching their expiry
within the stock.
A solution which is flexible, to accommodate billing of loose items
CONCLUSION
The retail sector is highly disorganized. Unwillingness to adapt to IT solutions exists due to cultural
problems with retailers. IT awareness is also a big issue. Instead of sophisticated software solutions,
retailers are looking at basic and simple applications that would enhance their work. They are afraid of
adapting to complex systems. The decision to enter this vertical is a very big strategic and long term in
nature, as the market is widespread, complex and the problem of last mile recovery exists. But at the
same time, in terms of volumes it is a market which cannot be ignored. (52 % of the retailers had
already invested or were willing to invest).
26
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
iii.
The Indian government removed the 51 percent cap on FDI into single-brand retail outlets in December
2011, and opened the market fully to foreign investors by permitting 100 percent foreign investment in
this area. It has also made some, albeit limited, progress in allowing multi-brand retailing, which has so
far been prohibited in India. At present, this is restricted to 49 percent foreign equity participation. The
spectre of large supermarket brands displacing traditional Indian mom-and-pop stores is a hot political
issue in India, and the progress and development of the newly liberalized single-brand retail industry
will be watched with some keen eyes as concerns further possible liberalization in the multi-brand
sector.
According to the 8th Annual Global Retail Development Index (GRDI) of AT Kearney, India retail industry
is the most promising emerging market for investment. In 2007, the retail trade in India had a share of 810% in the GDP (Gross Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to
reach 22% by 2010. According to a report by Northbridge Capita, the India retail industry is expected to
grow to US$ 700 billion by 2010. By the 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.
The industry is fragmented, widely spread, complex and with the problem of last recovery exists if there
are efforts to cater to them. But at the same time, in terms of volumes, the industry cannot be ignored
and hence the Kiranas are seen as a lucrative market. The opportunity can be tapped only if a simple
way is derived to cater to such a market space. Hence it becomes important to understand the industry
and find ways to tap the opportunity.
27
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
If we look at the study carried out by Zinnov Analysis, we can get a fair idea about the format wise
break up of retail shops in 2009 10. More than 1700 stores fall into the category of large stores, which
is set to increase with government opening the doors for investment in the back end of the retail
sector. Also most of these are set to be organised to a large extent. But what eventually catches the eye
is the fact that in terms of volumes, Mom n Pop stores have a base of 12 million. Also the medium store
with a number of 3 million seems an attractive destination. Also an interesting aspect which can be seen
is that, in terms of the market break up, the urban sector has a whopping 45 %.
Also if we have a look at the sector wise breakup of the money spent on retail according to Zinnovs
data, more than 64.8 % is on food, beverages and tobacco, while the money spent on apparels is 7 %
and on personal health care about 7.6 %.
The data gives a decent idea about the format wise break up of retail shops in India, with also
spending preferences.
RETAIL FORMATS
Hyper marts/supermarkets: large self-servicing outlets offering products from a variety of categories.
Mom-and-pop stores: they are family owned business catering to small sections; they are
individually handled retail outlets and have a personal touch.
Departmental stores: are general retail merchandisers offering quality products and services.
Convenience stores: are located in residential areas with slightly higher prices goods due to the
convenience offered.
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.
E-trailers: are retailers providing online buying and selling of products and services.
Discount stores: these are factory outlets that give discount on the MRP.
Vending: it is a relatively new entry, in the retail sector. Here beverages, snacks and other small
items can be bought via vending machine.
28
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
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 Brand Outlets or MBO's.
Specialty stores: are retail chains dealing in specific categories and provide deep assortment.
Mumbai's Crossword Book Store and RPG's Music World are a couple of examples.
TECHNOLOGY ADOPTION
Players increasingly deploying advanced IT tools for managing supply chain, warehousing and
logistics requirements
Indian retail IT market was $253 million in 2006 and it is expected to quadruple to $1.07 billion by
2010.
Small-scale retailers are also embracing IT solutions
IBM India, Oracle and SAP are developing solutions for smaller retailers requirements, such as
merchandising solutions, store-level point of sale (POS) needs, collaboration tools and hardware
requirements, ERP solutions, E-commerce, CRM solutions, Supply Chain
Competition (primary external influencer) is high with SAP with 27% of the share in the market,
followed by Microsoft with 14% and the Local vendors with a 19% share.
22 % of the Indian retailers shortlist IT vendors based on Strong service and support, and 17 % on
the basis of Good prices, domain knowledge of solutions, the clients business and the retail
industry.
In China, majority of the retailers say managing or upgrading their IT infrastructure and lack of
technical manpower are two largest IT pain points affecting them.
The retail industry in India is currently growing at a great pace and is expected to go up to US$ 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 a high growth rates, the consumer spending has also gone up and is also
expected to go up further in the future. In the last four year, the consumer spending in India climbed up
to 75%. As a result, the India retail industry is expected to grow further in the future days. By the year
2013, the organized sector is also expected to grow at a CAGR of 40%.
29
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
DRS-ICRIERs survey gives us an idea about the usage of technology in the retail sector. If we look at
Scanning / bar coding for instance, the usage stands at 4 %, which is set to increase to 21 % with another
17 % planning to use it. In terms of penetration, electronic weighing machines have had the maximum
head way with 45 % usage with a planned use of another 15 %. Computerized billing and inventory
management solutions have a bright future as well, with people wanting to invest in them.
Also the penetration of Credit cards is less than 6 % but the bright side is that 24 % are willing to. Also
the air conditioning is also close to 10 % but has a growth possibility of 21 %.
Hence the general feel is that technology penetration is set to increase in the future and hence it makes
the vertical all the more attractive. This business opportunity will definitely be of interest to various
companies, but an insight into the industry would better equip them to cater to them.
Traditional retail dominates food,
grocery and the allied products sector,
with grocery and staples largely sourced
from Kirana stores and push cart
vendors. Also the total retail sales have
been going up over the past decade
consistently
Large Indian retail players have already
begun formulating strategies for the
rural retail space as it is seen as an
immense opportunity by them.
30
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
Special Formats in the form of Wedding Malls, Khadi plazas, Village Malls are coming up.
72% of India lives in small towns & villages Agriculture-produce is lion share of retail
and hence Reliance Retail and Aditya Birla Nuvo Group have aggressive plans for the
same.
India is emerging as a retail sourcing hub.
GENERAL OBSERVATIONS
The main profit determining factor is sales volume. More is the sales volume, more is the discounts
you get on purchases. Hence retailers with high sales, more retail outlets are able to lower down the
prices of their products.
Regular communication with the distributors is essential in this business. Generally, retailers are
using mobile phones to place orders.
Every area has a lot of retail shops. The reasons for their survival despite of high competition are
that they deal in many different kinds of products and the frequency of purchase by customers is
very high.
94 % of the retailers are not aware of Carrefour. The ones who are, say that the cost of transport will
itself exceed the benefits from increase in margins.
Distributors from Big players like HUL carry portable electronic smart devices where they input
the demand of each retailer which is directly communicated to the manufacturer, who accordingly
sorts and sends the required products to the distributor.
Retail sector is highly disorganized. There are cultural problems with retailers and if this market is
to be catered to, then it would need them to slowly bring about a cultural change.
IT awareness is also a big issue. But rather than IT software solutions, retailers are looking at basic
and simple applications that would enhance their work. They are afraid of adapting to complex
systems.
31
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
32
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
A stipulated percentage of FDI in the sector could be required to be spent on building back-end
infrastructure, logistics or agro-processing units in order to ensure that the foreign investors make a
genuine contribution to the development of infrastructure and logistics.
At least 50 percent of the jobs in the retail outlet could be reserved for rural youth and a certain
amount of farm produce could be required to be procured from poor farmers.
A minimum percentage of manufactured products could be required to be sourced from the SME
sector in India.
To ensure that the public distribution system and the Indian food security system, is not weakened,
the government may reserve the right to procure a certain amount of food grains.
To protect the interest of small retailers, an exclusive regulatory framework to ensure that the
retailing giants do not resort to predatory pricing or acquire monopolistic tendencies.
33
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
NEW STRUCTURE
MANUFACTURER
MANUFACTURER
UNORGANIZED
WHOLESALER
ORGANIZED RETAIL
GIANT
RETAILER
RETAILER
Current System
Proposed System
Presently India has a completely disorganized retail market. The point at which things become disorganized
is the Wholesaler. The wholesalers or distributers act as interfaces between manufacturers and retailers. It is
observed at times when there is speculation in the market about price rise, black marketing takes place at
the wholesalers point. Government has made several policies and has put several taxes but due to an
inefficient and non-IT mechanism, the Government is not able to recover the required amount. Also,
majority of wholesalers do not accept plastic money. Majority of the dealing in the current system happens
in cash which leads to a leakage into black money. Therefore we require a mechanical system. Organized
retail giants could help in structuring the entire industry. Also UID project applications could contribute to
this system. Manufacturers invest a huge amount into market research as in the present setup they are not
having any mechanisms of getting statistics related to buyer and behavior of buyer. The clinical survey
based sampling techniques used by market research organizations are not accurate enough at times and
lead to wrong product designing. Therefore, organizing the retail system would entirely revolutionize the
field of market research as primary data could be collected digitally. A similar kind of revolution took place in
the television industry when the analog cable television was replaced by CAS or digital cable. Prior to the
change, TRPs were measured through surveys which could not as such give accurate understanding of the
public perspective. Digital TV created a revolution as now accurate and real-time information is available
with Service Providers. Therefore, an IT mechanism could also contribute as a data asset for manufacturers.
As we see in the above diagram, the current system which is not an improving system could become
continually improving just by organizing the wholesalers. Retail giants have invested in transport and supply
chain optimization. Retailers could get attached with these giants for timely deliveries and also get products
at lower prices. Also IT applications could be developed which could bind the retailer and the retail giant in
order to make ordering, planning, replacing easy for the retailer. All the above points could indirectly benefit
the Government as it would have a more transparent retail system which would help is control black
marketing and formation of black money.
34
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
ii.
Bar Code
Database
Centralized
Retail
Database
Driving
Licence
UID Database
GIS
PAN Database
SIBIL
Passport
Once we enter into a digital mode of communication in the retail system, then it would become easy to
access and make relationships of the retail database with other databases. The Government could have
good control over the entire retail system and its stakeholders including the consumer. Though it
appears to be mechanical but it has its own advantages. There are many ways of doing it. We can have a
system where the Government has a centralized system and all retailers or manufacturers or distributers
get themselves enrolled. All transactions taking place would be recorded digitally. All retailers can be
provided online barcode scanners which could simply scan the barcode and get details from some
centralized source as it is very difficult for the retailers to maintain databases. In case of false barcode
notifications, those retailers could be inspected. Fraud Analytic infrastructures could be made to keep
an eye on the transactions. Black Marketed stock could be traced with barcode and batch details.
IT Whistle Blowing is the best and the most accurate way of getting information related to any noncompliance within the system. Therefore we now need to speak of making all the interactions in the
Retail System digital. We need to organize the entire retail system so that the market becomes
35
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
intelligent and we are able to prevent factors like corruption and black marketing. Basically all the
disorganization in the retail system happens at the Wholesalers end and therefore replacing the
primitive wholesalers with organized giants like Wal-Mart and Carrefour would help in organizing the
Retail System and make it a Wisdom Based System from a Knowledge Based System. In this competitive
environment, we need to take necessary steps now as if we dont, the future where our population
would hugely explode, we would not have systems in place to monitor and control corruption, black
marketing etc.
Foreign Direct Investment in Retail would be a revolution in the Indian retail sector and in a long term
bring about a cultural change in the entire country. It would organize the entire unorganized retail
sector as the primitive hard copy techniques of invoicing and billing would be replaced with digital
techniques which would take Market Intelligence to the next generation. This would hugely impact the
Market Research Industry and would also provide good and accurate information to manufacturers. This
would enable the producers and manufacturers to improve their products with greater accuracy in
alignment with the consumer need.
iii.
BENEFITS
A. BENEFITS OF FDI IN MULTI BRAND RETAIL
Soaring inflation is one of the driving motives behind this move towards multi-brand retail. Allowing
international retailers such as Wal-Mart and Carrefour, which have already set up wholesale operations
in the country, to set up multi-brand retails stores will assist in keeping food and commodity prices
under control. Moreover, industry experts feel allowing FDI will cut waste, as big players will build
backend infrastructure. FDI in multi-brand retail would also help narrow the current account deficit.
Additional benefits include moving away from an industry focus on intermediaries and job creation.
36
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
thereby bring more stability to prices, unlike the present system where hoarding and artificial shortages
by profiteering intermediaries push up product prices.
JOB CREATION
Despite predictions from some analysts that millions of jobs would be lost due to FDI in retail, it may in
fact be the other way around. With the entry of branded retailers, the market will increase, creating
additional employment in retail and other tertiary sectors. Given their professional approach, organized
retailers will allot some quantity of resources towards the training and development of the resources
they employ. This effect of branded retailing can already be seen with the Bharti-Wal-Mart collaboration,
which has joined forces with state governments to open training and development centers in Amritsar,
Delhi and Bangalore, preparing local youth for jobs in retail. Training is entirely free and more than 5,600
local youth have already been trained. Retail jobs dont require higher education or highly specialized
abilities.
Various other benefits of FDI are furnished below:
JOB OPPORTUNITIES
COST OPTIMIZATION
BENEFITS TO AGRICULTURE
BENEFITS TO GOVERNMENT
The Indian Cabinet approved 51 per cent FDI in multi-brand retail on 24 November after intense
deliberations at different levels that extended over a year, although these reforms have since stalled.
With the clear objective of curbing inflation, the policy came with some riders to protect the interests of
neighborhood stores, farmers, and small- and medium-sized enterprises. If effectively implemented,
allowing FDI has the potential to streamline and modernize the sector through a number of ways. First,
the development would bring in foreign capital, technology and the managerial expertise of big
international retailers. Second, it would develop an efficient linkage between the back-end supply chain
and the front-end via capital investment and technological inputs, creating a proper farm-to-fork
infrastructure through direct purchase from farmers and the resultant control of intermediaries. This will
also bring about efficient movement of produce through the reduction of transit costs. Third, it
would minimize the prevailing wastage of fresh produce by improving upon the countrys existing coldstorage facilities, transport infrastructure, warehousing technology and food-processing facilities.
Fourth, FDI should help raise farm productivity through the application of contract farming, increase
agricultural production, reduce intermediate costs, render remunerative prices to farmers for their
produce and eventually lower final food prices to consumers, thus integrating retailers into the value
chain. And fifth, it would create employment in small- and medium-sized industries and back-end
infrastructure. Despite regulatory provisions to ensure domestic competition and protect the domestic
retail industry and farmers, the policy received stiff opposition. Concerns included the possibility of
foreign entrants monopoly power over both farmers and consumers; predatory pricing strategies by
the new entrants; manipulation of prices for the entrants own benefit and a fall in income, employment
and the eventual destruction of the unorganized indigenous retail sector, which is dominated by small
family-run outlets. But it is important to remember that other countries like Argentina, Brazil, Chile,
37
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
China, Indonesia, Malaysia, Russia, Singapore and Thailand have allowed 100 per cent FDI in multi-brand
retail since the 1990s, with encouraging experiences. China, for one, permitted FDI in retail as early as
1992. It has since attracted huge investments in the retail sector without affecting either small retailers
or domestic retail chains. Since 2004, the number of small outlets has increased from 1.9 million to over
2.5 million in China. Employment in the retail and wholesale sectors also increased from 28 million to 54
million from 1992 to 2001. And in Indonesia, even after 10 years of opening up to FDI in multi-brand
retail, 90 per cent of business remains with small traders. The favorable experiences of other emerging
markets suggest the appropriate implementation of FDI in multi-brand food retailing, with effective
checks designed to protect indigenous small- and medium-sized enterprises, will eventually alleviate
the supply-side impediments to agricultural production. It will transform the way perishable agricultural
produce is acquired, stored, preserved and marketed and thus help control Indias persistent food
inflation.
38
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
security and cash to farmers, and pull them away from the clutches of their multi-faced money lenders. If
individual farmers are bundled together by a resourceful retailer, the group can enjoy economy of scale,
modern farm technology, and assistance in capital investment to boost yields. In fact, modernization has
become essential because rural labour has been migrating to cities rapidly. Already, farm labour is either
unavailable or too expensive.
Of course, there are serious riders. Retail houses under the FDI scheme must exhibit patience, customize
their supply chain management models to suit tricky Indian conditions, and place long-term interest
before short-term profits and quarterly results. Indian farmers have been conservative due to a variety of
historical factors and socio-cultural traditions. And now, the younger of them, must fearlessly shed the
negative attitude towards change, and participate wholeheartedly in the new process of market-driven
and technology-based farming.
39
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
40
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
and Taiwan, China have traditionally been the most important sources of FDI, but the presence of
investors from Japan, the USA, and Europe has grown over the years.
China has been quite open for FDI in almost all manufacturing and most service industries. But China
has been circumspect in its gradual approach to liberalization to synchronize it with the development of
institutional capacity. Arguably, this has served China well to weather the financial crisis. Looking into
the near future there may be a case for further liberalization of backbone services such as finance and
telecommunication.
Chinas highly decentralized FDI approval and policy implementation creates opportunities for healthy
competition for FDI among local authorities but can also become cause of excessive red tape and
corruption. In such a decentralized environment transparency of regulation and open communication
between Government and business community is of special importance. To this end, local governments
are increasingly seeking to ensure the administrative and operational efficiency of the approval process.
The most common practice is setting up one-stop facilities, which aim at allowing investors to conduct
all procedures in one place.
The World Bank Group recently published its Investing Across Borders 2010 report. The report is a new
study comparing regulation of inbound foreign direct investment across four topics for 87 countries. It
presents indicators only on countries laws, regulations, and practices affecting how foreign companies
invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes. As such
its scope is intentionally limited. It does not cover all circumstances relevant for foreign investors. As
stated in the report, for example, in addition to assessing the legal and regulatory framework, it is well
established that investors value the economic size of the host country, its domestic market and
proximity to important foreign markets, the potential for innovation, and the level and quality of
government services; and an educated and skilled workforce. From the host countrys point of view, the
risk of negative externalities from foreign investments, such as environmental and social damage
(especially if the poor are the ones affected) needs to be balanced with the opportunity of positive
externalities that such investments can yield. The Country profiles of the report need to be read with
that context in mind.
THE CHALLENGE FOR CHINA NOW IS TO ATTRACT THE RIGHT KIND OF FDI
China strives to rebalance its economy, improve the environment, and move up the value chain. As a
result, recent FDI strategies have taken a more selective approach, to attract environmentally
sustainable, energy efficient, and technologically advanced industries. As befits its economic global rank
China is providing a level playing field for all firms, domestic or foreign alike.
China has been quite open for FDI in almost all manufacturing and most service industries. But China
has been circumspect in its gradual approach to liberalization to synchronize it with the development of
institutional capacity. Arguably, this has served China well to weather the financial crisis. Looking into
the near future there may be a case for further liberalization of backbone services such as finance and
telecommunication.
Chinas highly decentralized FDI approval and policy implementation creates opportunities for healthy
competition for FDI among local authorities but can also become cause of excessive red tape and
corruption. In such a decentralized environment transparency of regulation and open communication
between Government and business community is of special importance. To this end, local governments
are increasingly seeking to ensure the administrative and operational efficiency of the approval process.
The most common practice is setting up one-stop facilities, which aim at allowing investors to conduct
all procedures in one place.
41
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
The World Bank Group recently published its Investing across Borders 2010 report. The report is a new
study comparing regulation of inbound foreign direct investment across four topics for 87 countries. It
presents indicators only on countries laws, regulations, and practices affecting how foreign companies
invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes. As such
its scope is intentionally limited. It does not cover all circumstances relevant for foreign investors. As
stated in the report, for example, in addition to assessing the legal and regulatory framework, it is well
established that investors value the economic size of the host country, its domestic market and
proximity to important foreign markets, the potential for innovation, and the level and quality of
government services; and an educated and skilled workforce. From the host countrys point of view, the
risk of negative externalities from foreign investments, such as environmental and social damage
(especially if the poor are the ones affected) needs to be balanced with the opportunity of positive
externalities that such investments can yield. The Country profiles of the report need to be read with
that context in mind.
The challenge for China now is to attract the right kind of FDI as it strives to rebalance its economy,
improve the environment, and move up the value chain. As a result, recent FDI strategies have taken a
more selective approach, to attract environmentally sustainable, energy efficient, and technologically
advanced industries. As befits its economic global rank China is providing a level playing field for all
firms, domestic or foreign alike.
42
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
VIII CONCLUSION
The retail sector is highly disorganized. Unwillingness to adapt to IT solutions exists due to cultural
problems with retailers. IT awareness is also a big issue. Instead of sophisticated software solutions,
retailers are looking at basic and simple applications that would enhance their work. They are afraid of
adapting to complex systems.
Opening up of FDI in multi-brand retail in India could potentially be a mixed blessing for domestic
players. While initially the small indigenous retailers business would be impacted once modern retail
enters the locality, this adverse impact is expected to be short-lived and to weaken over time. While this
long awaited move is not expected to have an immediate impact on the Indian retail sector, it is
expected to reap benefits in the medium to long-term as it will help improve the a) balance sheet and
liquidity profile of cash-starved retailers with aggressive expansion plans b) supply chain and back-end
infrastructure while reducing margins for middlemen through direct sourcing from farmers and c) arrest
inflationary pressures through increased supplies facilitated by improved productivity of farmers and
reduction of agri-waste. However, once 100% FDI is allowed in retail, that is when the landscape will
become extremely competitive. Further, the move needs to be monitored in the wake of the current
opposition by several political parties.
Foreign Direct Investment in Retail would be a revolution in the Indian retail sector and in a long term
bring about a cultural change in the entire country. It would organize the entire unorganized retail
sector as the primitive hard copy techniques of invoicing and billing would be replaced with digital
techniques which would take Market Intelligence to the next generation. This would hugely impact the
Market Research Industry and would also provide good and accurate information to manufacturers. This
would enable the producers and manufacturers to improve their products with greater accuracy in
alignment with the consumer need.
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
IX ANNEXURES
i.
Company Name
Sub Vertical
Location
Areas
Goyal Store
CBD
New Delhi
Dwarka
CBD
New Delhi
Dwarka
Millenium Shoppe
CBD
Noida
CBD
Gurgaon
CBD
New Delhi
R K Puram
Neelkanth Departmental
Store
Outside
Apartment
Noida
Sec -62
Fatehsingh Departmental
Store
Within Apartment
New Delhi
CBD
New Delhi
R K Puram
Vado
CBD
New Delhi
Dwarka
10
Harmilapi Store
CBD
New Delhi
Malviya Nagar
11
CBD
Noida
Sec 26
12
CBD
Gurgaon
South city 1
13
Kirana
New Delhi
R K Puram
14
Kirana
New Delhi
R K Puram
15
Kirana
New Delhi
R K Puram
16
Haryana Store
CBD
New Delhi
Sunehari Market
17
Super Bakery
CBD
Gurgaon
Galleria
18
Kirana
Noida
19
Rangoli Store
CBD
Noida
20
J K Store
CBD
Noida
21
CBD
Noida
Sec 29
22
Budget Bazaar
CBD
New Delhi
Uttam Nagar
23
CBD
Gurgaon
South city 1
24
Dhairya Store
Kirana
New Delhi
Pancheel Enclave
44
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
25
Bhalanath Amarnath
Kirana
New Delhi
Sitaram Bazaar
26
Outside
Apartment
Noida
B Block, Sec 62
27
CBD
New Delhi
Dwarka
28
Outside
Apartment
New Delhi
Pancheel Enclave
29
Dimple Store
Kirana
New Delhi
Dwarka Sec 5
30
Aggarwal Store
CBD
New Delhi
Dwarka Sec 4
31
Himanshu Store
Within Apartment
New Delhi
Dwarka Sec 13 A
32
M.K.General Store
Within Apartment
Noida
33
Needs Supermarket
Within Apartment
Gurgaon
Vatika city
34
Within Apartment
Noida
Sec 52
35
Krishna Store
CBD
New Delhi
Dwarka
36
Within Apartment
Gurgaon
DLF 4
37
Outside
Apartment
Gurgaon
South city 1
38
Within Apartment
Noida
Sec 82
39
Within Apartment
Gurgaon
Retreat Apartments
40
Outside
Apartment
New Delhi
Janakpuri
41
CBD
New Delhi
Sitaram Bazaar
42
OM General Store
CBD
New Delhi
Dwarka Sec 11
43
Rajdhani Bazaar
CBD
New Delhi
Dwarka Durgaplaza
44
CBD
New Delhi
Saket
45
Outside
Apartment
Noida
Sec 20
46
Within Apartment
New Delhi
47
Within Apartment
Noida
48
Super Mart
Within Apartment
Noida
49
Hiralal Apartments
Within Apartment
Noida
45
Foreign Direct Investment, Technology Transfer and Transformation in Indian Retail Sector
X BIBLIOGRAPHY
1.
Impact of FDI in Retail on SME Sector: A Survey Report, Confederation of Indian Industry (CII), Dec11
2.
3.
Indias Experience with FDI: Role of a Game Changer, The Associated Chambers of Commerce and
Industry of India (ASSOCHAM), Jan
4.
Wal-Marts Global Track Record and the Implications for FDI in Multi-Brand Retail in India, UNI Global
Union, March 2012
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6.
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