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Old 28th November 2011, 20:25   #16
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

I am not very good when it comes to policy and all this stuff but I just understand one thing.
When Indian Market was opened for the world, every political party was shouting that India would become slave but it didn't happen.
We already have big stores operating like Reliance, Big Bazaar etc so why is so much of noise about this move now?
I buy my ration from big stores but still for daily needs, I goto kirana shops. IMHO, I do not think one would goto these big stores just to buy small things like milk, vegetables etc. So I do not think its going to affect local shops in anyways.
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Old 28th November 2011, 21:14   #17
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

From what I read, the policy has two parts

Single brand retailers can come in with a 100% ownership
This basically means the likes of apple, adidas, Casio can finally open official stores in any of those 53 Indian cities, bringing down prices by getting rid of the premium paid to resellers and making warranty issues a breeze
No resistance to this by the looks of things.

Multi brand retailers can come in with a 51% ownership
This is the bone of contention since they will be doing two things
1. Procuring produce directly from the farmers
2. Competing with the corner store

The concept of direct procurement and the removal of middle men was one of our governments own objectives always right ? I thought this was the objective of HOPCOMS (which is surely better located than anything wall-mart or tesco can ever hope for). The only change now is, private entities from other countries will be doing the same thing - maybe more efficiently ? If the prices these companies offer farmers aren't good enough, at the end of the day, can't the farmers sell it to the same people they've been selling it to all along - last I checked, the minimum support price offered by the government is not being revoked.

Though i could be wrong, I feel the Multi-brand stores that do come in, do not really bring in something we haven't already seen here in India. I mean come on, we have had the likes of food-world, spencers, reliance fresh and spar competing with the corner store for a long time.

As mentioned by so many others before, these stores also need to invest a minimum of 100 million usd, 50% of which should go towards the supply chain - improving cold storage options and logistics available to producers.
Further, they are not allowed to brand the produce into any premium-chargable categories and 30% of all items stocked must be from small and medium enterprises within the country - If i had a small company manufacturing something that our current set of retailers weren't willing to stock, i guess this is a boon for me.

From the information available in the media, this looks like a win-win situation for all but, there just might be fine print and clauses we are not aware of.

---
SiddVish

Last edited by SiddVish : 28th November 2011 at 21:37. Reason: Forgot to mention something
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Old 28th November 2011, 22:14   #18
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

All economic benefits depend on the optimum labor utilization and reallocation of resources.

Ideally this will bring order in retail space and force the less efficient retailers to other more productive usage of their time and money, benefiting economy as a whole.

But all this will fail if the existing retailer decides he is doomed and gives up, or he doesn't have any other skills and stays unemployed for a long time, or moves to a lower skill job.

We are already seeing this effect in USA where outsourcing was supposed to move US labor force to more productive jobs, but not everything seems to be going as planned.
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Old 28th November 2011, 22:18   #19
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

Quote:
Originally Posted by SiddVish View Post
From what I read, the policy has two parts

Single brand retailers can come in with a 100% ownership
This basically means the likes of apple, adidas, Casio can finally open official stores in any of those 53 Indian cities, bringing down prices by getting rid of the premium paid to resellers and making warranty issues a breeze
Wait a minute. This was not allowed earlier? I mean we do have Apple/Adidas shops here. Are are those running on some other business model?

Even I want to know the viewpoint of those who are opposing it. If this is win win situation why are people protesting against it? I think the small shop owners will somewhat threatened. I mean there used to be 2-3 competitors but now there will be more biggies coming with competitive prices. I know this thing is not a right or a wrong thing but I just want to know the perspective of both the parties - Those who agree to it and those who do not.
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Old 28th November 2011, 22:19   #20
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Default Re: FDI in retail

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Originally Posted by mayankjha1806 View Post
Do we know how much is Food wastage in India, because the Government godowns are limited and they dont have space to store more? Last year alone it was 12+ Billion $ worth of food was wastage.
Preface:
Are there millions of dollars stashed away abroad by Govt. servants/politicians? Yes or No?
Are there scams and swindling to the tune of millions of dollars going on right now? Yes or No?

If Yes, my argument:

Why do we need FDI to improve infrastructure? Is it not the elected Government's job to ensure basic needs of citizens like food storage is completed? If land can be found for auto manufacturers, why not for food storage?

If Megamarts of the world can come to India, and improve infrastructure to streamline retail and hope to make profit out of it, why can the Govt not do the same in a non-profit manner?

What is the secret to retail that only Walmart knows that cannot be learned/implemented by an Intelligent Indian?

So, do we need FDI, or better governance?

Cheers.
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Old 28th November 2011, 22:24   #21
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Default Re: FDI in retail

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Originally Posted by gthang View Post

What is the secret to retail that only Walmart knows that cannot be learned/implemented by an Intelligent Indian?
why this question now when FDI retail is invited? Didn't we know this for past few decades?

Simple answer, walmart is tightly run by competition, answerability to shareholders, and a nice management structure to serve it.

Govt can do it the day govt workers (including our babus and legislators) are required to truly work and file their hourly timesheets.
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Old 28th November 2011, 22:38   #22
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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Originally Posted by Saanil View Post
Wait a minute. This was not allowed earlier? I mean we do have Apple/Adidas shops here. Are are those running on some other business model?
They are usually franchises of the brand, and in some cases subsidiaries. I really don't know the answer in terms of ownership percentages

But the main difference is the variety available, scope of service and price.
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Old 28th November 2011, 22:46   #23
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Default Re: FDI in retail

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Originally Posted by gthang View Post
Why do we need FDI to improve infrastructure? Is it not the elected Government's job to ensure basic needs of citizens like food storage is completed? If land can be found for auto manufacturers, why not for food storage?
We gave our government a chance, and i'm not saying they didn't do anything, but it honestly wasn't good enough - nearly 25% of all food produced in India is wasted!
If this is what it takes to speed up the process - I guess i'd rather have infrastructure development at the cost of allowed foreign companies a share of our retail pie rather than not have development at all.
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Old 28th November 2011, 23:35   #24
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

I am wondering, don't we have big brand stores already? Or is it that if the store is owned by a foreign company, somehow they will use hypnosis to force you to go to big brand store.
All this is political fear mongering. As for small time shops and kirana owners, why should I care. Do they care about my job. If I am not competitive I will lose my job. They are not going to give me free food and stuff. So I really do not care about their job either.

Anyways, I don't think its going to make much of a difference to small time shops. Maybe a few close here and there. Big deal. Every time recession happens lot of people lose their jobs. Outsourcing happens, again lot of people lose. Its one of the side effects of an open economy. Take it or leave it, its here to stay.

Speaking of farmers, this minimum support price thing is total bull. You can either sell at a rate much below MSP, or watch your grain rot away because govt does not have procurement resources. So you have middlemen making a killing.
Hopefully, fierce competition in retail will help the farmers.

Consider this. The price a farmer gets for wheat has not changed more than 10% in past 5 years. But the price you pay for flour has gone up 2-fold.
Whether big retail will make this worse(hoarding) or better(competition...) only time will tell

Last edited by tsk1979 : 28th November 2011 at 23:38.
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Old 28th November 2011, 23:50   #25
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

Today's TOI reads that the local grocer goes to DMART / Big Bazaar, picks-up the buy-one-get-one-free items and sells them individually at MRP at his shop.

As a customer, why should i get cheated in such a scenario. Speaking strictly from a "self" perspective, why should i care whether my hard earned taxed white money goes to DMART / Walmart / Local Grocer. All i care is where i get a good deal.

P.S: This with respect to company manufactured MRP items only and not for items like towels/plastics etc.
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Old 29th November 2011, 01:08   #26
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

I can appreciate the emotions of the Anti FDI folks, but I feel that Competition is probably the best option in the long run. Whenever you have a monopoly, or a restricted environment, you end up becoming less competitive, which is counter productive for both the retailers and the consumers.

Consider the current crop of players, Bharti, Reliance, Tata, Birla, Biyani. Some of them are definitely looking at encashing some of their investments, thanks to the expected foreign investors. And the govt ruling of the minimum cap will ensure that only the serious players will come in.

A Walmart or Ikea or Best Buy will ensure global products at more reasonable price points, and better standards of customer service. Thats the only way they will be able to entice the Indian customers.

Do I honestly believe that there will be no loss of jobs or negative impact to local kirana stores? No, I'm sure there will be job losses, and kirana stores shutting down, but well, the ones who will survive are the ones who are able to ensure customer loyalty due to their customer service, and the ones who will close down are the ones who were fringe players. In the long run, it will ensure that only the serious players continue, and that will automatically ensure a better standard of service for everyone.

Last but not the least, the ability to source directly from the farmers, bypassing the traditional middlemen/mandis is a great way to reduce the spread. Will it actually happen or will this be another opportunity to exploit the consumer? Only time will tell.
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Old 29th November 2011, 05:10   #27
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Default Re: FDI in retail

Quote:
Originally Posted by gthang View Post
If Megamarts of the world can come to India, and improve infrastructure to streamline retail and hope to make profit out of it, why can the Govt not do the same in a non-profit manner?

What is the secret to retail that only Walmart knows that cannot be learned/implemented by an Intelligent Indian?

So, do we need FDI, or better governance?

Cheers.
Fair argument, and i respect that.

The only problem is our experience in the past (i mean Indian Govt and Indian Public experience) and internationally Govt's have realized that mostly they have been unsuccessful in getting this done efficiently.

To add some data and experiences :- There was a time in this country when telephones, trains, airways, busses, car manufacturing were all done by government, and just to refresh our memory how long it used to take to get a telephone connection, how much of palm greasing we used to do, and to top it all how much we used to pay for an international call (i remember the amount meter competing with seconds meter). We waited six months to get telephone connection.

What has happened since government has allowed private players. They are competing and getting efficient. Sometime back govt allowed FDI in telecom. Did it kill the existing players (Airtel is still running healthy after Vodaphone took over Hutch), and my experience says BSNL is much more efficient today.

So bottom line we have learnt (from our own past) that when govt gets involved in doing things themselves they became inefficient, lazy, leads to monopoly, and customer suffers. So world over govermnents have relized this and are moving from Doing/Running things themselves to Enabling others to do it and it focuses on policy matters and its implementation.

Companies like Walmart/Tesco will bring experience which we have been lacking. The Indian retailers are only focused in the downstream processes (Customer facing) not the upstream processes (Like direct procurement from farmers, supply chain etc). They are not building backend infrastructure which supports the front end operations. The big players will surely do that is what we believe. Also govt has put up some constraints so as it does not became a mechanism to make a quick buck and only long term players come in with an intention of building long term operations. Also there are constraints put which would enable the local producers to gain from all this procurement.

In the end (As public at large and the govt) we get to choose what we want to do, and this should not be taken as Foreign Vs Indian. I rest my case.

Last edited by mayankjha1806 : 29th November 2011 at 05:18.
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Old 29th November 2011, 07:35   #28
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Let's hope parliament is having an equally healthy debate as team-BHP
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Old 29th November 2011, 08:55   #29
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

The so called "friendly Kirana" store are not so friendly as it is put.
First they serve people as if they are doing us a favor by selling things to us.
Second they "DO NOT" pay any taxes. My friend who had some of his relatives in Kirana business told me that the profit made by most of the small stores in India is 90% made up of the "TAXES NOT PAID".

Big stores will come with their own set of problems. But I am ok with that. Its high time the kirana store owners get their act together like "Air India" was supposed to do when competition came knocking at doors.
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Old 29th November 2011, 09:48   #30
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Default Re: Foreign Direct Investment in the retail sector. Good or bad?

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The so called "friendly Kirana" store are not so friendly as it is put.
First they serve people as if they are doing us a favor by selling things to us.
Second they "DO NOT" pay any taxes. My friend who had some of his relatives in Kirana business told me that the profit made by most of the small stores in India is 90% made up of the "TAXES NOT PAID".
It is for this very reason that I never visit the nearby grocey stores.

I do all my grocey shopping from big malls like Spar, Star etc or other branded stores like Reliance Fresh, Foodworld, NIlgiris etc. When we purchase any item from these malls/branded stores, we get a proper receipt and hence we can be sure that the sales tax paid by us is reaching the government.

When was the last time you local kirana store gave you a receipt ? Never ? You pay the sales tax (included in the MRP) to the kirana store, and he simply pockets it. The taxes paid by us never reaches the government.

These kirana stores deserve to shut down.

Rohan
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