It is primarily a wholesale set up where the wholesaler buys goods from a producer and sells in bulk to a retailer. The retailer has to pay in cash when he takes delivery of the goods and he has to "carry" it himself. The wholesaler will not arrange delivery. There is no credit in this business.
Reliance's "Ranger Farm" which opened in Hyderabad sells to bulk retailers and is open for business from 2AM till 11AM. Ranger Farm deals in fruits and vegetables.
The customers for this "cash and carry"business are mostly retailers and institutional buyers such as hotels, restaurants, caterers and hospitals.
Since FDI (foreign direct investment) is not allowed in retail as of now, these Cash & Carry businesses cannot sell directly to consumers like us. If they do, that will mean death of all our neighbourhood stores. These businesses (like Reliance, Mittal, Metro) buy in bulk from producers all over the globe (wherever cheaper) and have huge logistic advantages, hence they could really sell cheap and destroy all neighbourhood stores, if they are allowed in retail with foreign participation. So, they will essentially sell to middlemen like retailers.
The kind of items they deal in does not warrant credit terms, so credit is not allowed. Bring cash & carry it (the goods) yourself. We give you really cheap.
The whole sellers employing cash and carry method can actually start their own retail chains (without any foreign investment) and hence bypass the law that prohibits FDI in retail. This way, they can take advantage of the cheaper rates provided by the wholesaler. Actually this is what Reliance and Mittal will be doing. Reliance's retail chain Reliance Fresh will buy goods from Ranger Farm and sell in retail. Mittal's JV with Wal Mart will sell to Mittal's soon to be announced retail chain. Either way, it will spell doom for smaller shops.
But consumers are going to get a treat. Provided you have cash and can carry it yourself (at least credit cards)!!!
4th February 2007 From India , Delhi
7th February 2007 From India , Ghaziabad
OPTIMIZING YOUTH EMPLOYMENT THROUGH FDI IN RETAIL IN INDIA
Prof Gan Bhukta, Professor of Marketing, GITAM Institute of Foreign Trade,India
The size of the Indian retail sector is projected to be doubled by 2008 growing at around 36% every year till 2008. Thus the overall size would be USD 300 Billion by 2008 from its present size of USD 150 billion according to a study conducted by Associated Chambers of Commerce & Industry of India.
The size of the organized sector in retailing will witness at least three-fold growth to USD 3 Billion by end of 2008 from the present USD 1 Billion, says the study. According to the study, unorganized sector would continue to have it edge over organized retailing till the time Foreign Direct Investment is allowed in the sector.
The retail sector is the second largest source of employment and the job market is hugely receptive to this with more and more Business Schools focusing on the sector and large retailers setting up retailing academies. In addition to this it is the experts’ opinion that experience of the foreign players will certainly benefit India though India is altogether a different market. More importantly, the latest pool for retail sector is somewhat trained and industry ready. All they need is a little tweaking as per industry experts. Apart from graduates from Business schools to handle management posts, the retail sector would offer excellent job opportunities to youths with 10+2 pass category that boasts of lot more talent than what the BPO needs, namely graduates. Moreover hiring from rural and tier 3 towns is not an issue for retail as familiarity with local area is an advantage.
Some facts about retailing sector in India are mind boggling. There are 11 million outlets as against 9 million in USA even though their economy is 13 times larger. According to KPMG’ survey, India has emerged as the top FDI destination offering a higher return on investment than emerging markets like Mexico, Brazil and even China. The AT Kearney’s 2004 Global Retail Development Index ranks India as the second most attractive retail destination among the 30 odd emerging markets and places it next to Russia pushing China to 3rd position. Gradual opening up of the retail segment for FDI will work to the advantage to both the consumers and existing retailers. While consumer will have variety of global standard branded goods and services to choose from and that too at reachable cost. The existing retailers will be saddled with a host of unseen opportunities like joint ventures with foreign partners apart from avenues to upgrade their technologies, systems etc.
More importantly FDI in retail in India would help generating millions of jobs for the teeming jobless numbers in India. A conservative estimate puts the number of direct jobs at one million in three years. More importantly revitalized retailing necessitating a never ending supply chain of goods and services will infuse new life into the manufacturing sector, especially agriculture, food processing, small and medium enterprises and handicrafts creating avenues of indirect employment for many more millions.
At the macro level, FDI in retail will enable Indian economy to integrate with the global economy. It will help to overcome both the lack of experience in organized retailing as well as lack of trained manpower. FDI in retail would reduce cost of intermediation and entail setting up of integrated supply chains that would minimize wastage, give producers a better price and benefit both producers and consumers. From the stand point of consumers, organized retailing would help reduce the problem of adulteration, short weighing and substandard goods.
In conclusion, FDI in retail sector would certainly enable to optimize youth employment in India. For those fearing the effects of FDI in retail in India, the examples of Thailand and China should give comfort. Entry of foreign players in Thailand and China gave a big boost to retail and the exports in both countries got a shot in the arm. Notwithstanding the mounting pressure from left wing parties, the present Indian government has decided to allow FDI in retail outlets meant exclusively for single brands which means that multinationals can invest upto 51% in joint venturesfor marketing their premier brands.
However, the policy certainly needs a relook and should evaluate measures for further
liberalization to invite FDI in this sector to optimize youth employment opportunities.
(End of report)
Trust this gives an overview. For specific opportunities, you may need to refer to retail magazines.
7th February 2007 From India , Delhi