Press release from Business Wire India
Source: CustoLogix Solutions (India) Private Limited
Wednesday, March 14, 2012 01:19 PM IST (07:49 AM GMT)
Editors: General: Consumer interest, Economy, People, Social issues; Business: Agriculture, Banking & financial services, Business services, Major diversified industrial groups, Retailers
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FDI a Major Growth Factor for Indian Economy: An Article by CustoLogix
Bangalore, Karnataka, India, Wednesday, March 14, 2012 -- (Business Wire India) -- The effect of FDI in Indian retail sector is creating a lot of havoc all around the country. Indian Prime Minister believes that entry of FDI would bring modern technology into Indian retail sector with fewer resources wasted and farmers will get a better rate for their produce. 51% on multi-brand retailing and 100% on single brand retailing has been announced.
Indian retail sector is dominated by small unorganized players such as traditionaland small grocery stores. 7.2% of Indian workers open up independent retail shops reducing the unemployment rate. FDI affects the middle men in the complex Indian distribution system. The opposition political parties are suggesting that FDI would crush these unorganized retail sectors snatching the livelihood of 3% of Indian population.
However, these small powerful units called as Kirana stores / Mom and Pop stores have their own advantages over big retailers. It's availability at every street makes them easily accessible to lower and middle class customers at anytime of the day. Their close proximity with customers enables them to be at first name terms with customers. Thereby they can better understand their customer's regular demands and provide innovative services such as bargaining, selling loose items and providing doorstep delivery. One of the most interesting services is the credit facility offered. Like any other monthly bill, a customer can pay the total amount at the end of every month. Given the FDI effects and survey in Bangalore; 20% of small retailers would fight back by preparing themselves through technology and analytics, 19.14% would partner with an international retailer, 9.86% would do everything to block FDI investment, 51% would wait and watch how the situation evolves and absolutely 0% would sell/downsize existing retail store. Moreover according to BCG (The Boston Consulting Group) survey the unorganized sector would grow from 400 billion dollars to 984 billion dollars by 2020, even if FDI is opened up.
65 - 72% of Indian population depends on agriculture for living. Currently Wal-Mart is working with a network of 800 farmers in Punjab. Wal-Mart agronomists are working with farmers on testing soil, increasing efficiency, use of digital scales to ensure a correct weight and conducting monthly workshops. The target is to increase farmer's income by 20% and export the produce to its stores worldwide. Thus, creating a win-win situation for both the parties. Besides, food inflation will decrease to a large extent as the retailers can directly buy products from the farmers consequently reducing middleman resources and wastages.
In a 100% single brand retailing, the foreign retailers must source from small and medium enterprises a minimum of 30% of the total value of the products sold. This would help the Indian retail sector with more number of retail investors. In terms of corporate tax, for domestic companies it is 36.59% whereas foreign players have to pay 41.82%.
To say the least, the retail industry in India is transforming itself at a pace never seen before. With the arrival of FDI investments in retail the formats of retail are inevitably going to get larger. A successful retailer will need to learn several new techniques that necessarily are not skills handed down the generations of traditional retailing. Enter the fray of forecasting, inventory management, assortment optimization, store labor planning and vendor management for starters. Retailers soon realize the vast array of information and scale of operations demand the use of technology and mathematics. The good news is the Indian retail industry does not need to reinvent the wheel. The larger mature economies of the west have gone through the same learning cycles several decades ago and have evolved several methodologies and best practices which can be simply put to work here in our maturing retail industry. In addition to the skills, the employment rate will also increase along high Indian economic growth which is the key to reduce poverty.
Reference:
ET INSIGHT - The need for FDI in Indian retail: http://www.youtube.com/watch?v=TRhsjpZ0GoI
Impact of Organized Retailing on the Unorganized Sector - Mathew Joseph, NirupamaSoundararajan, Manisha Gupta, SanghamitraSahu: http://dipp.nic.in/English/Publications/Reports/icrier_report_27052008.pdf
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CONTACT DETAILS
Dipin S, CustoLogix Solutions (India) Private Limited, +91 (80) 25501995 /9686204884, dipins@custologix.com
KEYWORDS
CONSUMER, ECONOMY, PEOPLE, SOCIAL, AGRICULTURE, BANKING, BUSINESS SERVICES, GROUPS, RETAIL
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