F for FDI in Food Retail

Much has been spoken and written about the opportunities and perils of allowing Foreign Direct Investment in Retail, especially in the Food & Grocery business. At the moment, only locally procured farm goods and other products manufactured in India can be sold in organized retail stores with FDI. Unfortunately, the top Food Retailers in India including the Future Group, Reliance Retail, RPG-SG led Spencers Retail, etc. do not have foreign investors. Most of the retail chains are reeling under heavy losses and have not been able to scale their businesses beyond existing geographies.

Carrefour and Auchan have shut shop while Walmart has severed it’s tie-up with Bharti Retail and is on it’s own for a while now. Tesco has always had a back-end arrangement with Tata Retail and it continues to be just that. And there is no news of any other international Food Retail chain getting into India in the near future. Interestingly, Amazon and homegrown start-ups Grofers and Big Basket have applied FDI proposals to FIPB for operating in the food & grocery space, perhaps in e-commerce, which is gaining ground every passing day.

Big Basket started operations in 2011, is well funded at the moment and works on an Inventory model in gross violation to existing FDI rules. BB has a warehouse where its products are purchased, sorted and stored. Customers order online/mobile apps and BB delivers the said products from their Warehouse to customers at their doorsteps. BB also procures products from local retailers for quicker delivery and for items that they do not carry. Needless to say, BB hasn’t made a single penny in profits and continues to mount losses.

Grofers started similarly as Big Basket and built ghost stores (outlets with products but no name board and consumer shopping) but then modified its business model to a Hyperlocal model where it currently picks products from neighborhood stores and delivers to customers.

Others like Peppertap, Zopnow, etc. have tried their best raising Investments but have failed to make a dent and have shut shop or have morphed in to delivery companies. Amazon Now currently operates only in Bangalore and is app-based. Customers order on the Amazon Now Mobile app and Amazon picks the products from The Future Group run Food Bazaar & Shopper’s Stop’s Hyperlocal format “Hypercity” Stores and delivers products to customers in a scheduled manner. This is the entity perhaps to whom the FDI license is being sought for.

Incidentally, I have been operating “Oyethere” which has a website and mobile apps on Android and iOS which are not only Hyperlocal but also Convenience formats. Customers can order products from our website or apps and we pick products from the nearest Retail outlet with which we have tie-ups and deliver to customers in 30-300 mins which is our Unique Selling Proposition (USP). We have been around for a year and half now with minimal investments and are on the verge of getting well funded shortly.

Food Retail is a hot space both offline & online Retail and we are playing a wait & watch game with what the Modi-Government is up to. Let’s hope for the best.

Best Price - Best in Class!

 

I have seen a few abroad, I have read a quite a lot but today was the first time I was part of the inauguration of a Hypermarket Store. The sixth Cash & Carry store of Bharti-Walmart, rightfully named “Best Price” opened its doors for customers today at Ludhiana. Spread over 50,000 sft on a single level, the store has almost all categories including Grocery, Fruits and Vegetables, Fresh Meat, Personal Care, Home Needs and Home Care, Electronics and General Merchandise. Café Coffee Day is the only F&B point, right after the cash counters – smart planning by the store designers. This is the third CCD after opening within Best Price stores at Amritsar and Jalandhar. Addressing a small gathering of the Press & Media, Employees, Vendors and Guests, Mr. Rajan Mittal, Vice Chairman of the Bharti Group emphasized the relevance of Organized Retail and such formats in the current Indian scenario. He expressed his pride that the group was able to open at their hometown of Ludhiana where he had lived for over 20 years and thanked well-wishers for their stupendous success. Drawing an example of the telecom industry which was in its nascent stage fifteen years back, and which was fully controlled by the Government through its own bodies, he said that the sector was opened up to private players and today, India has a remarkable tele-density. Similarly, the group is pioneering Organized Retail through two formats, the B2B model (Best Price) and B2C model (Easy Day markets) in association with Wal-Mart, the world’s largest Retailer. He also drew comparisons of how China had opened up Organized Retail, how employment is generated and millions are benefitted. Mr. Raj Jain, President of Bharti-Walmart said that the company intends to expand outside of Punjab in states such as Chhattisgarh, Madhya Pradesh, Rajasthan etc. South India would also be a focus with one out of the three Distribution Centers expected to come up at Bangalore. He explained how small retailers can benefit immensely by becoming members of the Best Price format – registration is simple, just a few documents to be provided and patrons can benefit from the prices offered by the store. To ensure only genuine buyers are using the facility, he said that the membership is renewed annually. Credit Cards are not accepted but Kotak Bank, which is the strategic partner to the Retailer, provides 14 day’s credit to members who are part of its own credit program.

While the discussions on FDI is raging all along, Mr. Mittal expressed that the intellectual debate was over and it is now time to act – to open up the Retail sector and allow 100% investment across various formats. The white paper on allowing FDI was published by the Government and the industry has replied their thoughts and concerns. Currently 100% FDI is allowed only in the B2B model while 50% FDI is allowed in the B2C formats, although foreign companies can invest upto 100% in single-brand Retail. Such investments would allow multinationals to invest in back-end supply chain, only which would fuel front-end business. Bang on.

Well. It is easier said than done but eternal optimists like me who intend to spend our lifetimes in this ever exciting industry believe that this should happen sooner than later, for the larger benefit of the society. If one such store can offer direct and indirect employment to over 200 people, it is not so difficult to gauge the overall employability that the sector can generate. Currently, over a million people are part of Organized Retail in India but this number should increase significantly – by 5 times or more in the next 10 years, if only the Industry is allowed to grow. Specific to the Cash & Carry format, small traders and retailers can benefit immensely, thanks to the EDLP or “Every Day Low Pricing” philosophy (although founded by ASDA) but  implemented aggressively by the Grand Old Man of Modern Retail, Sam Walton – the founder of Wal-Mart. He believed that consumers must benefit everyday with lower prices – the reason was two-fold – one, that customers would not hoard commodities for the future; two, that they would visit the store more often, a smart way of driving repeat footfalls. For a nation that has over 10 million small and medium retail stores, India doesn’t have even 50 Cash & Carry Stores! Metro AG, the German Retailer opened for business in 2001 and operates half-a-dozen stores, while the French Retailer Carrefour commenced in 2010 and is still studying its first store located in the suburbs of Delhi.  The Future Group and Reliance Retail are also carefully monitoring and are expected to launch their own Cash and Carry formats soon. Expect a lot of action in this space. And if you are a professional running your own business, be sure to reap rich benefits from such stores. Long Live, Organized Retail. 

A Retailer cannot be everything for everyone!

“I was an eternal optimist, now I am a cautious optimist” thus remarked Kishore Biyani, considered to be the most revered Retail face in India at the concluding day of India Retail Forum 2010 recently held at Mumbai. Not surprising, as he should know better than anyone else, for he leads the Indian Retail Industry with the highest recorded turnover of over USD 2 Billion in Sales from The Future Group that has various formats such as Big Bazaar (Hypermarkets), Central Malls, Home Town, Pantaloon Department stores, Food Bazaar (Supermarkets) and many other formats with over 800 stores across the country. Many other CEOs and leaders from within the Indian Retail Industry echoed the same feeling – things are much better than 2008 / 2009 but we should tread with caution. Consumer confidence is on the high, but that doesn’t mean we can open stores left & right, one needs to move ahead with all the learning over the past 24 months according to the Head of Operations of one of the leading apparel brands in India.

India Retail Forum (IRF) is the annual extravaganza organized by the Images Group that publishes various magazines such as Images Retail, Images Fashion, F, and many other collaborative efforts with leading international publications. Apart from IRF, they also conduct Images Fashion Forum and Images Food Forum every year. These Forums are not mere conferences but a place of congregation where some of the brightest minds participate, share and learn over each other’s experiences. The two day events are busy days, with back-to-back & parallel panel discussions and presentations from eminent speakers and delegates trying to network with their peers across businesses for professional as well as personal purposes. This year saw over 2,000 participants – not bad for an event that charges an entry fee of Rs. 25,000 per person which includes lunch and dinner with cocktails on both days along with an entry invitation to the Images Retail Awards – the most sought after respectable awards that recognize the efforts of Retailers.

The agenda this year too was chock-a-block. Over the years, the event has evolved and now follows international conventions where three things happen in parallel – the main conference hall with its speakers, the retail theatre and the ball rooms with their sessions and workshops and the all day exhibition stalls where various retailers and real estate companies showcase their latest offering. The Forum was chaired this year by Mr. Biju Kurien, Chief Execuitive – Lifestyle, Reliance Retail along with the Chairman of the previous year, Mr. B.S.Nagesh, Vice Chairman of Shoppers Stop Ltd. In his opening remarks, Mr. Kurien said that India is expected to contribute 7.5% of world GDP (PPP) and stressed on the need for increased investments within the sector to foster growth. Mr. Nagesh reiterated that it was important to focus on the product offering rather than showering discounts while also informing that controlling attrition would be one of the key tasks for Retailers. Mr. Vikram Bakshi, CEO – Mc Donalds India (North & East) shared his thoughts on the current trends in food retail during his opening remarks. This was followed by a detailed presentation by Ms. Ireena Vittal, Principal, McKinsey India in which she shared statistics about the current trends and opportunities in Indian Retail with lots of comparison to similar markets such as Brazil and China. This was followed by the Confederation of Indian Industry (CII) panel discussion on “Permitting FDI in Indian multi-brand Retail” led by its Chairman, Mr. Thomas Verghese, Chief Executive – Aditya Birla Retail which had the most looked up names within the industry – Mr. Kishore Biyani, CEO – The Future Group, Mr. Raj Jain, President – Walmart India & MD & CEO, Bharti Walmart, S. Sivakumar, Chief Executive – ITC Rural Retail, Ireena Vittal, Vikram Bakshi and BS Nagesh. With various thoughts being expressed by speakers, the unanimous view was clear and forthcoming – India needed investments urgently to support the backend and frontend of our Retail businesses and the color of the money (Read FDI or FII or any other) really didn’t matter.

The rest of the day and the second day had various sessions by leaders within the Retail industry and community and delegates were seen sharing an easy camaraderie with one another, be it over coffee or beer. I was part of one of the Panel Discussions on Multi channel Retailing, hosted by vCustomer which has been a support partner to companies across multiple retail channels. With a 4000+ global workforce deployed at its managed centers from multiple locations worldwide, they deliver 24x7 services to more than 75 global clients including 20 Fortune 500 brands and more than 30 retailers. My co-panellists were Mr. Sanjay Gupta, COO – vCustomer, Mr. Ashish Madhav, Director Retail CoE, vCustomer, Mr. Rajiv Prakash, CEO – Future Ecommerce, Mr. Manoj Chandra, VP Marketing - Bata India, Mr. Sundeep Malhotra, CEO – HomeShop18 and Mr. Neeraj Bhalla, Director – Whirlpool. The speakers shared their perspectives on multi-channel use for better reach towards their own consumers. My view was similar too, that Cafe Coffee Day was always at the reach of its consumers be it shopping high streets or malls, transit points or other non-traditional locations such as Hospitals, Colleges, Hotels and Clubs.

The most awaited session happened to be an interview with Mr. Kishore Biyani by none other than Mr. Shivnath Thukral, Group President, Corporate Branding & Strategic Initiatives – Essar Group, more famous in his previous avatar as the former Group Business Editor at NDTV, India’s leading News channel.  The session was indeed candid and Mr. Biyani was at his transparent best, sharing some of the very rarely heard stuff – that the group has made a few mistakes, learned from them and hence moved on, that he shops only at his own group stores and doesn’t shop at fellow retailers such as Shoppers Stop. He also admitted that the group doesn’t anymore continue its approach on being “everything to everyone”. We are no more so, he said while answering a question specifically and advised fellow retailers to think about it. This was followed by an interesting session led by Mr. Vikram Bakshi and Mr. BS Nagesh where selected delegates had an opportunity to grill eminent Retail executives including Mr. Kishore Biyani, Mr. Thomas Verghese, Mr. Ajit Joshi, CEO – Croma Retail and Ms. Vibha Rishi Paul of the Future Group. At the end of the session, each winner won an hour over lunch or dinner or drink with Mr. Biyani, Mr. Nagesh and Mr. Kurien to be mentored about the business.

The Grand finale was the Images Retail Awards – a much looked up event in the business of Indian Retail. The award ceremony, besides honouring the most deserving companies and people in the Retail Industry, had scintillating performances by singer Leslie Lewis and stand-up comedian Ash Chandler. The event was anchored by Mandira Bedi and Anish Trivedi. The IMAGES Retail Awards 2010 followed strict international benchmarks in deciding the top honours, with IRIS Retail Intelligences Knowledge Partner and global consulting firm AT Kearney as the Process Approver. The selection process involved self-nominations as well as a countrywide poll to short-list nominees. Over 11,000 consumers and about 1,000 professionals voted for their most admired retailers across formats and categories. The list of categories, awardees and nominees are as below.

1. Most Admired Retailer of the Year: Fashion & Lifestyle - Benetton
Nominees: Bata, Titan, Levi's, Van Heusen, Tanishq, Louis Philippe, Benetton, Reebok
2. Most Admired Retailer of the Year: Food & Grocery – Food Bazaar
Nominees: More, Easyday, Food Bazaar, Reliance Fresh, Spencer's
3. Most Admired Retailer of the Year: Foodservice – KFC
Nominees: Café Coffee Day, Mainland China, Haldiram's, McDonald's, Domino's Pizza, Pizza Hut, KFC
4. Most Admired Retailer of the Year: Consumer Electronics  - Croma
Nominees: Croma, Next, Reliance Digital, eZone, Reliance iStore
5. Most Admired Retailer of the Year: Leisure - Crossword
Nominees: Crossword, Reliance Timeout, Odyssey, Landmark, Planet M
6. Most Admired Retailer of the Year: Multiplex - PVR
Nominees: Big Cinemas, INOX, PVR, Fun Multiplex, Cinemax, Fame Cinemas
7. Most Admired Retailer of the Year: Mobile & Telecom  - The Mobile Store
Nominees: Uninor, Spice Hotspot, Reliance Webstore, The Mobile Store
8. Most Admired Retailer of the Year: Beauty & Wellness - The Body Shop
Nominees: VLCC, Kaya Skin Clinic, The Body Shop, NewU, M.A.C
9. Most Admired Retailer of the Year: Pharmacy & Healthcare - Guardian
Nominees: Apollo Pharmacy, Guardian, Religare Wellness, 98.4
10. Most Admired Retailer of the Year: Home & Interiors - Home Centre
Nominees: Home Centre , TTK Prestige, Rosebys, Home Town, @home, Home Stop
11. Most Admired Regional Retailer of the Year – Kapsons, RMKV
Nominees: Kapsons, Ritu Wears, Jade Blue, Sohum Shoppe, Total, Le Marche, RMKV, MK Retail

12. Most Admired Retail Launch of the Year - Cinepolis, Editions by Odyssey
Nominees: Sports XS, Titan GoldPlus, Golfworx, Head Quarters, Cinepolis, Editions  13. Most Admired Innovative Concept of the Year - Cinediner - Big Cinemas
Nominees: Moms Lounge, Spencer's Patisserie, Cinediner - Big Cinemas, Colours, The Collective, William Penn, Presto Wonders

14. Most Admired Retailer of the Year: Department Store - Shoppers Stop
Nominees: Lifestyle, Pantaloons, Shoppers Stop, Reliance Trends, Westside, Central
15. Most Admired Retailer of the Year: Hypermarket - Big Bazaar
Nominees: Spencer's Hyper, Hypercity, MORE Megastore, SPAR Hypermarket, Big Bazaar, Reliance Mart, Star Bazaar
16. Most Admired Retailer of the Year: Customer Relations - Shoppers Stop
Nominees: Lifestyle, Shoppers Stop, Van Heusen, SPAR, Apollo, Guardian, Pantaloons
17. Most Admired Retail Face of the Year - Thomas Varghese
Nominees: Raj Jain, Kabir Lumba, Bijou Kurien, Thomas Varghese, Govind Shrikhande, Rakesh Biyani, Vineet Kapila
18. Most Admired Retail Group of the Year - Future Group
Nominees: Future Group, Landmark Group, Reliance Retail , K Raheja Corp, RPG Group, Tata Group, Aditya Birla Group

19. IMAGES Award for Excellence in Retailing – KISAN SEVA KENDRA, HOME SHOP 18

Overall, the India Retail Forum 2010 came to an end with optimism coupled with caution among participants while hoping for a better times to come. Here's wishing all of us a great festive season ahead.

It was a Sunday afternoon and a lazy one at it. And that’s just when someone at home asks for a pack of NAN 3 – a health substitute from Nestle SA that’s given to children. Given that it is a product not available so easily and usually procured from Pharmacies or Drug Stores, no one at home is willing to hit the road and that’s when the friendly Kirana comes to remembrance. One phone call and it would be delivered in a few minutes, suggested one of the members at the household. The next minute, someone was making the call and the friendly voice at the other end was actually prodding for further purchases if the family needed something else. A few other items were included and it was promised the stuff would be delivered shortly. And indeed, it was. In the next 15 minutes, there was a young boy at the door with a bag full of items for well over Rs. 500/-. This can happen, most probably only in India. We as a nation are not yet fully used to shopping in a cycle – although we see major crowds at the large hyper and super markets, consumers miss out buying many things – either they are out of stock or they are out of their shopping list. This is very unlike in the West where there has been an evolution of shopping habits, usually during the beginning of the month, or even on weekends, well in advance for the week ahead. But here, most times we prefer the “just-in-time” way.

 

While the debate and discussion regarding opening up FDI in Retail has prevailed for long, there is little doubt that Organized Retailers could offer such services. “Free Home Delivery” is usually advertised at many Supermarkets like Foodworld, Spencers, Nilgiris and even a few Hypermarkets like Total, Food Bazaar but they all come with riders – that the distance should be within a 3-5 km radius, the total bill value should be above a certain level and that the delivery could take between 2- 6 hours depending on the day of the week and place of delivery. Naturally, since the cost of operating is far higher for Organized Retailers than the neighbourhood kiranas. The big boys need to maintain books of accounts, a mini truck or a van to deliver and a driver to drive (not to forget the maintenance of these vehicles) and many other internal processes. All these are negated with the local kirana. Depending on the level or urgency, the kirana is willing to deliver at the earliest and usually within the locality and most of them operate in one.

Cash & Carry Retailers (are they actually retailers?!?) such as Metro AG have been operating in India since 2001 and most recently Wal-Mart in a JV with the Bharti Group has been operating such stores in Punjab under the trade name “Best Price”. These stores usually sell their wares to the smaller kiranas, hotels, restaurants, etc. who in turn retail to end users and consumers. Since the large Organized Retailers order their goods directly from the brands and suppliers, they are able to pass on higher margins to the kiranas who in fact benefit from this exercise. This has been a strong point supporting FDI in Retail all along since many in the industry believe that it would do well in the long run for the Retailers, the Kiranas and the Consumers.

 

It is quite natural to see more deliveries over the weekends, festivals days and specials events such as Cricket Series and Public holidays as there are more people to consume at home. Not just the kirana stuff, even door-delivery of food and other beverages seems to be on the rise. Last Sunday along with the morning newspapers, there were pamphlets from atleast three restaurants in the area – all small time local operators. An A4 page size pamphlet cluttered with a whopping menu of more than 100 items printed in two colours on the back and front size. But who cares! As long as the food is tasty and delivered on time, nobody bothers. What’s important is not just quick service but the quality of products. Kiranas and small-time eateries take greater care while packing, transporting and delivering as these simple steps are their real “Brand Ambassadors”. If all three were good the first time, chances are they would be called again.

So, no matter how many large Retail formats open up in this country, one reason why Kiranas will remain in business is “convenience” – a fact that most of us live by.

Long Live Kiranas! Long Live Home Deliveries!

FDI in Retail – A never ending discussion!

5^th and 6^th July 2010 would remain etched in the history of Indian Retail for some time to come. While the country witnessed an unprecedented (sic) response to a nation-wide Bandh (shutdown) called by the opposition parties against the recent Fuel price hike (after the Government deregulated Fuel prices) and to show their solidarity against rising levels of inflation on Monday, leading to estimated losses over USD 3 Billion, Tuesday was a green letter day for Organized Retailers. The Government of India (GoI) announced a discussion paper to debate on allowing FDI in multi-brand retail leading to mixed reactions across the country and outside. Everyone who was anyone in the Retail realm in the country had comments to make. Rightly so, as this public debate was much needed; while the fundamentalists have always argued against the entry of foreign multinationals in Retail, those in the business have usually welcomed the idea, although with caution. One of the biggest criticisms against such a move by the country is that the small retailers (Read: Kirana Stores aka Mom-Pop stores) would lose business to the modern, organized retailers.

Currently, Indian Government allows upto 100% FDI in Cash and Carry (B2B), 51% FDI in multi-brand retail and 100% FDI in single-brand retail – that means, the brand can sell various categories of products with the same brand identity – apparel, accessories, watches, footwear, etc. Insofar multi brand retail, the restriction is to ensure that Joint Ventures are formed only with Indian partners, thereby benefitting Indian business houses. Although this was allowed by GoI way back in 1996, apart from the then dominant RPG Group which formed a JV with Hong-Kong based Dairy Farm International to form Foodworld Supermarkets Ltd., not many business houses took advantage of the model. Organized Retail was after all not so lucrative those days and my own kith and kin didn’t take me so seriously when we would discuss the upcoming opportunities. Today, the top business houses in the country including Tatas (Westside Department Stores, Star Bazaar hypermarkets), Birlas (Aditya Birla – Fashion Retail, More Hypermarkets), Ambanis (Reliance Hyper and other formats) and Mittals (Bharti-Wal-Mart) are focussing on this business. Some of the concerns on allowing FDI in multi-brand retail are captured here;

Loss of livelihood for Kirana stores

The biggest and single largest qualm against allowing FDI in Retail have been that Organized Retail would lead to losses of small kirana stores. There are over 12 million retail touch points in India of which more than 90% of them are Unorganized. The estimated size of the Indian Retail Market (as per various sources online) is more than INR 200,000 Crores. So, 90% of those engaged in Retail business, to begin with do not pay necessary taxes to the Government. These small retailers operate on a net margin of 4-7% after all their expenses and hence the Governments (Read Political parties) have remained soft on them. These small traditional Retailers have been serving Indian consumers and their families for over four decades and remain favourites – from buying milk to bread or vegetables. Many of them provide credit facilities and some even deliver at doorstep at odd times of the day (and night), without any additional cost. These Kirana stores have been all time favourites for FMCG Companies to introduce and promote new products, new variants and various consumer promotions. All this changed since 2000 AD when organized retailers started to spring up all across the country. Those days, Organized Retail was less than 5% and was considered pricier and novel, even by urban consumers. However, Organized Retail has come a long way since then. In large cities and metros today, Organized Retailers aren’t competing with Kirana stores anymore, but with those of their own ilk – other organized retailers. It is quite common to see large advertisements in leading newspapers all through the week and weekends advertising various offers and promos to entice consumers to visit their outlets. Having said that, not many small retailers and Kiranas have lost business; In fact, they have got better and more organized than before. Those who are out of business are not because of large retailers, but because of competition in the same league – similar ones are offering better pricing and service, two main attributes why consumers were shopping at Kiranas. When consumers in SEC B and above moved towards Organized Retail, those below moved up from shopping at Govt. Run PDS Stores to small Kiranas. Maslow’s theory of Evolution?

Hence, the logic that small Kiranas would run out of business is not just a myth, but also immature. Remember, we have a billion people to feed, dress and house – there is enough and more opportunity at the bottom of the pyramid.  

Employment opportunities and benefits

Most of the Kiranas are entrepreneurs of their own right – they would have started their business using a small capital, borrowed from friends and family and the shop would actually be a part of a house, either their own or somebody else’s. The husband-wife couple take turns to run the show and some of their relatives’ children or their own add hands for support when required, especially on weekends or for home-delivery. It is amazing to see sometimes, children in their teens explaining fabulously about product attributes and pushing sales (top-ups), even better than Management Trainees of FMCG Companies. One of the biggest qualms of allowing FDI is that it would lead to loss of employment – a strange fact, since it is actually the couple who run the business and usually do not employ outsiders. Those employed are their own kith and kin and hence, the staff cost is less than 2% of their turnover, if not lower. Organized Retailers need to comply with Govt. norms with regard to payment of wages and the staff salary includes health benefits (ESI) as well as long term benefits (gratuity / pension). Therefore, Organized Retail would not only provide higher wages to those working in the front-end but would also ensure continuity of service and job-security. The Future Group along with its subsidiaries and joint-ventures, which manages various formats such as Big Bazaar, Central Malls, Pantaloon Fashion and various other formats employs over 12,000 employees!

Capital infusion and erosion of profits

Capital infusion is considered among the biggest benefits of allowing FDI in Retail. Although large business houses like Tatas, Birlas and Ambanis have enough (monetary) capital to provide, what they need is Intellectual Capital. While it is always good to say that India is a country of entrepreneurs and we know to run the business best, what we also need to know from International partners is ways and methods to run the business more efficiently – simply because they have been running their own businesses successfully across countries and continents all over the world. Having said that, the next concern is that the multi-nationals would send their profits back home to their headquarters situated outside the country. This too, is a far-fetched dream. The net margin EBITDA that Organized Retailers manage is between 4-12%, depending on the nature of their business. Typically after paying taxes of all sorts, what they end up with a single digit or a decimal profit. Note, Retail is a business that gets profitable over a period of time and with scale. So, to increase their presence and run the business across the country, a lot of capital (including profits) gets circulated. So, if there is any one multi-national that would make money and send back home, it would be a long, long time!

Decision-Makers – Final word

While all the razzmatazz of the FDI paper was being discussed in India, Carrefour SA, the French Retailer announced that it is planning to sell of its business and exit South East Asian countries such as Singapore, Malaysia, Thailand, etc. Many would know that US Retailer Wal-Mart had to exit certain European countries after its failed attempt many years ago. Japanese and Chinese Retailers have never stepped out of their terrain since they believe they know their market best. As many would agree in the business, Retail is a very local business. The players need to understand the sentiments of the local and accordingly manage the business. I was at a popular Hypermarket at Bangalore yesterday and while I was talking to their Head of Operations, I learnt that the layout was designed by two foreigners who were experts from Europe. Needless to say, the layout was not only unfriendly but also needs localization, NOW. Consumers have shrugged off the “phoren” theory of Retailing and have embraced local players because of their offering. So, ultimately it is not just Government policies but the consuming public who decide the success or otherwise of any business, and particularly Retail. Time will tell who remains in the business.