1. France's Carrefour, England's Tesco, Germany's Metro and America's Wal-Mart are all big retail stores in their respective countries and globally.
2. Why is india afraid of FDI in retail?
-Global retailers will kill the local ‘kirana’ industry-FDI in retail could lead to millions of job losses-Global retailers will put pressure on farmers and suppliers-Predatory pricing policies will lead to monopolies and harm the consumer-Global retailers will trigger growth in cities, causing skewed urban development
3. Erstwhile Wal-Mart International CEO John Menzer [Menzer is now vice-chairman of Wal-Mart.]
4. Foreign retailers present in China
Four of the top 10 global retailers, 35 out of top 50, 78 out of 250
Combined market share of top 17 foreign retailers in China: $13.8 billion out of China’s retail sales of $628 billion or a mere 2.2 per cent
How much foreign retailers export out of China: Wal-Mart: $15 billion-$18 billion
Metro: $2.4 billion
Carrefour: Over $2 billion
Total sourcing of global retailers from China: approx. $60 billion
Percentage of workforce employed in retail: 6%
No.of workers employed by top 100 retailers: 810,000
5. India's retail industry - the fourth largest in the world - accounts for 11 per cent of the country's GDP and employs over 40 million people (about 7 per cent of total employment in the country). Now, a huge majority of the retail workforce is in kiranas. This sector, in fact, acts as an informal social security net - almost anyone without a job can set up a kirana.
Some facts about global retailers in China:
The top 100 retailers (both domestic and foreign) in China had combined sales of $60 billion in 2004, according to the China Chain Store & Franchise Association. These 100 companies have so far opened 30,416 stores with a total area of 25.8 million square metres. But - and here's the revelation - they have only 9.6 per cent share of China's $628-billion retail trade! That
figure has grown from 2.9 per cent in 2000.
More importantly, among the 78 foreign-funded firms in China, only 17 have made it to the top 100. Together, these 17 companies have a combined turnover of $13.8 billion in China, or a mere 2.2 per cent of China's total retail trade. Present in that list of 17 are Wal-Mart, Carrefour, Metro and Tesco, four of the world's six largest retailers. (Their combined global turnover is in excess of $449 billion.) It has taken these giants over 13 years to grab a minuscule 2.2 per cent share of the China market.
It must be mentioned that the global giants got unfettered access into China only in 2004. Therefore, their performance cannot be compared with the rest of the country's retail sector, but must be benchmarked only against the top 100 firms. When seen thus, the foreign firms account for only 23 per cent sales of the top 100 retailers. China's public-sector retailers
(yes, they have retailing PSUs!) had a 32 per cent share and private sector retailers had 45 per cent.
6.
Fact about US retailsBut the fact is that the single-store operations still control a little less than 50 per cent of US retail trade.
7. Reasons for supporting Retail FDI in India:
a) Again, back home, in Chennai, where large and organised supermarket chains like FoodWorld and Nilgiri's have grabbed a 20 per cent market share, the kiranas haven't been slaughtered. They are smarter, more efficient, and more customer-friendly than they were five years ago. They are matching the chains' prices and continue to do brisk business. Even stores in the close vicinity of these large supermarkets have survived. "Small businesses have their own competitive advantages. They are local; they are usually in the same block that the customers are in; and they are very convenient. They know their customers by name, so they offer great customer service. They have tailored their inventory for their customers, so they have great inventory management, and many times they give credit.
Small businesses have their own model, offer a different product mix, and keep their customers happy. I think small businesses can grow and prosper with Wal-Mart," Menzer had argued in an exclusive interview with BW during his May visit.
b) More Jobs but there will be transactional pains. Here, poor distribution and below-par processes is another bottleneck.
"If the economy grows at 6.5 per cent or so every year, we will have 50 per cent more goods to move in the next 5-7 years. If you do not have an efficient distribution chain, the economy cannot grow... Such inefficiency will lead to job losses. If you do not have organised distribution, you won't have employment growth," argues Harsh Bahadur, managing director, Metro Cash & Carry, India.
c) Finally, if the fear of kiranas being snuffed out is true, then the government ought to be equally concerned about Indian retailers as well. Several large and influential Indian business groups like the Tatas and Anil Dhirubhai Ambani Enterprises have ambitious plans that include setting up of hundreds of supermarkets and hypermarkets. Won't these kill kiranas and lead to job losses?
d) In reality, foreign retailers will be in a position to influence employment only several years after they enter India. But they will have an impact on the consumer almost immediately. Of course, in India, the consumer is invariably forgotten when protectionist lobbies voice their 'concerns'.
e) India's supply chain inefficiencies are legendary. The Rs 50,000-crore fruits and vegetables sector is estimated to suffer between 20 and 40 per cent wastage due to poor transportation, storage and handling. "The cost of the intermediary in India is the highest in the world. For every one rupee a consumer spends, the farmer gets 20-22 paisa. Whereas in developed
countries, it's more like 70-80 paisa," points out Mansingh.
f) But critics argue that if domestic companies can deliver such savings, why do we need FDI? They miss a crucial point. That while domestic players will bring efficiencies into the supply chain, they cannot link India's farmer to the global supply chain. That's where the bigger gains lie and that's exactly what happened in China.
Several Indian retailers like RPG Group's Spencer's are beginning to see this happen. "We are seeing savings of 15-50 per cent if we disintermediate and buy from the farmer directly. Any large retailer in India has to go the farmer directly. This will lead to a higher realisation to the farmer, lower price to the consumer and better margins to the retailer," says K.
Radhakrishnan, head (merchandising), RPG Retail.
But the question being asked is: how do they do it?The answers. First, by making the supply chain more efficient. Second, by using their brute buying power to squeeze suppliers. And third, by using monopolistic and unfair trade practices
8.
BPOs by IT companiesInfosys set up Progeon in Bangalore and Satyam started Nipuna in Hyderabad. HCL Technologies leveraged its British Telecom relationship to buy its Ireland call centre and supplemented that with a facility in Noida
9.
Gecis Global is now called
Genpact.
10 The billing rates for call handling tasks are today down at $7-12 an hour from $15-18 an hour in 2002.
11.
Steel Investments in India
On 8 October, Lakshmi N. Mittal, chairman and CEO, Mittal Steel Company, signed an MoU with the Jharkhand government for setting up a steel plant as well as mining operations in the state. The envisaged 12 million tonnes per annum (mtpa) plant will be built at an investment of Rs 40,000 crore.
While comparisons with Posco's agreement with the Orissa government might seem obvious, it is, however, the deal that Tata Steel signed with the Jharkhand government in September that begs attention.
The two memorandums signed are almost identical in their broad details: plants with outputs of 12 million tonnes a year, investment amounts of around Rs 40,000 crore (Tata Steel is planning to invest Rs 2,000 crore more than Mittal), development of iron ore mines, and proposals to put up power projects and townships. Even the time frames are similar.
"It was a masterstroke from Tata Steel," says an industry observer. While the Mittals were still hedging their bets with the state government, hoping to get a swap or export deal for iron ore, Tata Steel steamed ahead with their MoU as soon as the Jharkhand government renewed the land lease for the Jamshedpur plant. Relations between the Tata group and the Jharkhand
government has been off key for the last six years when the land lease renewal issue was going through a series of court cases.
