Fdi in Indian Retail Sector

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Introduction
What is FDI
Foreign direct investment (FDI) in its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. Its definition can be extended to include investments made to acquire lasting interest in enterprises operating outside of the economy of the investor. What is Retailing

Retailing is a distribution channel function where one organization buys products from supplying firms or manufactures the product themselves, and then sells these directly to consumers. A retailer is a reseller (i.e., obtains product from one party in order to sell to another) from which a consumer purchases products. Indian Retail Sector

Indian retail industry is the largest industry in India, with an employment of around 8% and contributing to over 10% of the country's GDP. According to this year’s Global Retail Development Index, India is positioned as the leading destination for retail investment. There are about 300 new malls, 1,500 supermarkets and 325 departmental stores being built in the cities very soon. The Indian retail sector is now worth about $250bn (£140bn) a year, but it is heavily underdeveloped. Well over 95% of the market is made up of small, uncomputerised family-run stores. Now there are finally signs that the Indian government is dropping its traditionally protectionist stance and opening up its retail market to greater overseas investment. Recently it eased restrictions on foreign investment, allowing overseas retailers to own 51% of outlets as long as they sell only single-brand goods. A shopping revolution is ushering in India where, a large population between 20-34 age groups in the urban regions is boosting demand by 11.1 percent in 2004-05 to an Rs 23,308 purchasing power. This has resulted in huge international retail investment and a more liberal FDI. Evolution of Indian Retail

The era of Indian retail began with weekly markets and village fairs, which catered to the daily necessities of villagers. Village fairs were larger in size with a wide variety of goods sold from food, clothing, cosmetics and small consumer durables. Then came the emergence of Kirana stores and mom-and-pop stores. These stores used to cater to the local people. This was followed by the era of government supported rural retail and many indigenous franchise stores came up with the help of Khadi & Village Industries Commission. The KVIC has a countrywide chain of 7000 plus stores in India. The Modern era has a host of small and large formats with exclusive outlets showcasing a complete range of products. The department stores and shopping malls targeting to provide a complete destination experience for all segments of the society. The hyper and super markets are consistently trying to provide the customer with the 3 V's (Value, Variety and Volume).

Classification of Indian Retail Sector
The Indian retail sector is broadly classified into the organized sector (modern retailers) and the un-organized sector (traditional retailers). The organized sector refers to licensed retailers, that is, those who are registered for sales tax, income tax, etc and primarily consist of Hypermarkets, Supermarkets, Multi Brand Outlets, Department Stores, Malls and Discount Stores. The un-organized sector on the other hand, refers to the traditional formats of low-cost retailing requiring limited investment such as hand cart and pavement vendors, mobile vendors, the local kirana shops and local village fairs and melas. Categories of the Retail Sector

The Indian retail sector is extremely fragmented, with over 12 million outlets across all sectors. These are typically small family owned over-the-counter stores with an average size of 100 square feet. Organised retail is mostly developed in segments such as clothing (14% organised), watches (40%) and footwear (25%). The major players in...
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