Pros And Cons Of Fdi In Retail Marketing Essay


Indian Retail Industry is standing up at its point of inflexion, looking forward to the boom to occur. The inception of the retail industry goes back to times where shops were found in the village fairs, Melas or in the each week marketplaces. These stores were highly unorganized. The maturity of the retail sector took place with the establishment of retail stores in the vicinity for convenience. With the government intervention the retail industry in India needed a new condition. Outlets for Open public Syndication System, Cooperative stores and Khadi stores were create. These retail Stores demanded low opportunities because of its establishment.

The retail industry in India gathered a new sizing with the establishing of the different International Brand Outlet stores, Hyper or Super market segments, shopping malls and departmental stores.

Future of planned retail in India looks bright. Relating to recent studies it is projected to grow for a price of about 37% in 2007 and for a price of 42% in 2008. It captured a show of 10% of the total retailing by the finish of 2010.

The sorted out retail sector is likely to expand to a value of Rs. 2, 00, 000 crore (US$45 billion) and could make 10 to15 million jobs in next 5 years. This can happen in two varieties- 2. 5 million of the people may be associated directly with retailing and the others 10 million people may be gainfully used in related sectors that will be taken up through the strong onward and backward linkage effects.

However to contend in this sector one needs to have up-to-date market information for planning and decision making. The second most important necessity is to control costs widely to be able to earn at least normal income in face of stiff competition.

FDI in One Brand Retail:

The Government hasn't categorically defined this is of "Single Brand" anywhere neither in virtually any of its circulars or nor any notifications.

In single-brand retail, FDI up to 51 % is allowed, subject to Foreign Investment Campaign Board (FIPB) authorization and at the mercy of the conditions mentioned in following

(a) Only solitary brand products would be sold (i. e. , retail of goods of multi-brand even if made by the same producer would not be allowed)

(b) Products should be sold under the same brand internationally,

(c) single-brand product retail would only cover products that happen to be branded during creation and

(d) Any addition to product categories to be sold under "single-brand" would require fresh endorsement from the federal government.

FDI in Multi Brand Retail:

FDI in Multi Brand retail means that a shop with a overseas investment can sell multiple brands under one roof.

In July 2010, Department of Industrial Policy and Advertising (DIPP), Ministry of Commerce circulated a talk newspaper on allowing FDI in multi-brand retail. The newspaper doesn't suggest any higher limit on FDI in multi-brand retail. If executed, it would start the doorways for global retail giants to enter into and create their footprints on the retail landscaping of India. Opening up FDI in multi-brand retail will mean that global suppliers including Wal-Mart, Carrefour and Tesco can open stores supplying a range of household items and grocery store directly to consumers in the same way as the ubiquitous 'kirana' store.


SWOT Examination of Retail Sector:

1. Talents:

· Major contribution to GDP: the retail sector in India is hovering around 33-35% of GDP when compared with around 20% in USA.

· High Development Rate: the retail sector in India looks forward to an exceptionally high expansion rate of approximately 46%.

· High Potential: since the organised part of retail sector is only 2-3%, in that way creating great deal of prospect of future players.

· High Job Generator: the retail sector utilizes 7% of work force in India, which is rite now limited by unorganised sector only. After the reforms get put in place this percentage is likely to increase considerably.

2. Weaknesses (restriction):

· Lack of Opponents: AT Kearney's research on global retailing tendencies found that India is least competitive as well as least saturated market segments of the world.

· Highly Unorganised: The unorganised part of retail sector is only 97% as compared to US, which is merely 20%.

· Low Output: Mckinsey research claims retail output in India is suprisingly low as compared to its international peers.

· Shortage of Talented Professionals: the retail trade business in

India is not regarded as reputed job and is mainly carried out by the members of the family (self-employment and captive business). Such people aren't academically and professionally qualified.

3. Opportunities (benefits):

· You will see more business in the sector: Organized retail will require more workers. Corresponding to conclusions of KPMG, in China, the career in both retail and inexpensive trade increased from 4% in 1992 to about 7% in 2001, post reforms and progressive competition in retail sector in that country.

· Healthy Competition will be boosted and there will be a check on the costs (inflation): Retail giants such as Walmart, Carrefour, Tesco, Aim for and other global retail companies already have operations far away for over 30 years. As yet, they have not at all become monopolies alternatively they have managed to keep a check on the meals inflation through their healthy competitive routines.

· Create transparency in the machine: the intermediaries working as per mandi norms don't have transparency in their prices. According to some of the information, an average Indian farmer realises only one-third of the purchase price, which the final consumer gives.

· Intermediaries and mandi system will be evicted, hence immediately benefiting the farmers and manufacturers: the prices of goods will automatically be examined.

· Quality Control and Control over Leakage and Wastage: scheduled to company of the sector, 40% of the production does not reach the\ ultimate consumer. Cost conscious and highly competitive merchants will attempt to avoid these wastages and loss and it'll be their endeavour to make quality products offered by least expensive prices, hence making food available to weakest and poorest section of Indian world.

· Heavy circulation of capital can help in accumulating the infrastructure for the growing human population: India is already working in budgetary deficit. Neither the government of India nor domestic investors can handle satisfying the growing needs (school, hospitals, transport etc. ) of the ever before growing Indian inhabitants. Hence foreign capital inflow will enable us to create a heavy capital platform.

4. Threats:

· Current Separate Stores will be compelled to close:

This will lead to significant job damage as the majority of the functions in big stores like Walmart are highly automated requiring less employees.

· Big players can knock-out competition: they are able to lower prices in initial stages, become monopoly and then raise prise later.

· India does not need foreign vendors: as they can gratify the whole domestic demand.

· Bear in mind East India Company it got into India as investor and then had taken over politically.

In view of the above mentioned evaluation, if we try to balance opportunities and leads attached to the given financial reforms, it will definitely cause good to Indian current economic climate and therefore to public most importantly, if once applied. Thus the period for which we postpone these reforms will be damage for federal government only, since most the general public is in favour of reforms. All the above mentioned drawbacks are typically politically created. Together with the implementation of the coverage all stakeholders will gain whether it is consumer through quality products at low price, farmers through more transparency in trading or Indian corporates with 49% income share remaining with Indian companies only.



It will slice intermediaries between farmers and the stores, thereby helping them get more money for their produce

It will bring the necessary foreign investment into the country, along with technology and global best-practices

It can help in reducing the costs at retail level and calm inflation

Small and medium enterprises will have a bigger market, along with better technology and branding

It will induce better competition in the market, which will effect as an advantage to both producers and consumers

It will actually create occupation than displace people employed in small stores


It will lead to closure of tens of thousands of mom-and-pop shops across the country and endanger livelihood of 40 million people

Small and medium companies will become subjects of predatory costing regulations of multinational retailers

It may bring down prices primarily, but gas inflation once multinational companies get a stronghold in the retail market

Farmers may be given remunerative prices initially, but eventually they will be at the mercy of big retailers

It will disintegrate established resource chains by stimulating monopolies of global retailers


It can be said that the advantages of allowing unrestrained FDI in the retail sector evidently outweigh the cons mounted on it and the same can be deduced from the types of successful experiments in countries like Thailand and China where too the issue of allowing FDI in the retail sector was initially found with incessant protests, but later ended up being one of the most promising politics and economical decisions of their governments and led not only to the commendable rise in the level of job but also led to the extensive development of their country's GDP.

And also, nobody can induce a consumer to visit a mega shopping complex or a small store/sabji mandi. Consumers will shop in accordance with their maximum convenience, exactly where they get the cheapest price, max variety, and a good consumer experience.

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