Entry of MNC
The world’s largest retailer by sales, Wal-Mart Stores Inc and Sunil Mittal’s Bharti Enterprises have entered into a joint venture agreement and they are planning to open 10 to 15 cash-and-carry facilities over seven years. The first of the stores, which will sell groceries, consumer appliances and fruits and vegetables to retailers and small businesses, is slated to open in north India by the end of 2008.
Carrefour, the world’s second largest retailer by sales, is planning to setup two business entities in the country one for its cash-and-carry business and the other a master franchisee which will lend its banner, technical services and know how to an Indian company for direct-to-consumer retail
The world’s fifth largest retailer by sales, Costco Wholesale Corp (Costco) known for its warehouse club model is also interested in coming to India and waiting for the right opportunity.
Opposition to the retailers’ plans have argued that livelihoods of small scale and rural vendors would be threatened. However, studies have found that only a limited number of small vendors will be affected and that the benefits of market expansion far outweigh the impact of the new stores.
Tesco Plc., plans to set up shop in India with a wholesale cash-and-carry business and will help Indian conglomerate Tata group to grow its hypermarket business
A McKinsey study claims retail productivity in India is very low compared to international peer measures. For example, the labor productivity in Indian retail was just 6% of the labor productivity in United States in 2010. India’s labor productivity in food retailing is about 5% compared to Brazil’s 14%; while India’s labor productivity in non-food retailing is about 8% compared to Poland’s 25%.
Total retail employment in India, both organized and unorganized, account for about 6% of Indian labor work force currently – most of which is unorganized. This about a third of levels in United States and Europe; and about half of levels in other emerging economies. A complete expansion of retail sector to levels and productivity similar to other emerging economies and developed economies such as the United States would create over 50 million jobs in India. Training and development of labor and management for higher retail productivity is expected to be a challenge.
To become a truly flourishing industry, retailing in India needs to cross the following hurdles:
Automatic approval is not allowed for foreign investment in retail.
Regulations restricting real estate purchases, and cumbersome local laws.
Taxation, which favours small retail businesses.
Absence of developed supply chain and integrated IT management.
Lack of trained work force.
Low skill level for retailing management.
Lack of Retailing Courses and study options
Intrinsic complexity of retailing – rapid price changes, constant threat of product obsolescence and low margins.
In November 2011, the Indian government announced relaxation of some rules and the opening of retail market to competition.