ESSAY on FDI in Retail Sector
What is Retail sector?
In 2004, The High Court of Delhi defined the term ‘retail’ as a sale for final consumption in contrast to a sale for further sale or processing (i.e. wholesale). The Retail Industry is the sector of economy which is consisted of individuals, stores, commercial complexes, agencies, companies, and organizations, etc., involved in the business of selling or merchandizing diverse finished products or goods to the end-user consumers directly and indirectly. A retailer is involved in the act of selling goods to the individual consumer at a margin of profit. Thus, retailing can be said to be the interface between the producer and the ...view middle of the document...
Multiple brand retail means selling the same product under different brand names. FDI in multi-brand retailing should be carefully monitored as there are chances that if left alone it can directly impact a large percentage of population and would ultimately deepen the gap between the rich and the poor. So in order to ensure development, it can be stipulated that a percentage of FDI should be spent towards building up of back end infrastructure, logistics or agro processing units, and reconstituting the poverty stricken and stagnating rural structure with at least 50% of the jobs in the retail outlet should be reserved for rural youth.
FDI in ‘Single brand’ retail means that a retail store with foreign investment can only sell one brand. i.e. if a foreign brand want to sell its product in India then it has to sell its product with the same name rather using a new name. The main motive to introduce such a policy was to enable Indians to spend the money on the same goods in India which they spend on shopping abroad. Allowing 100%FDI in single brand retail would be of twin benefit to both the forging player and the Indian businessman as the foreign investor would develop knowledge and understanding of the Indian market. Whereas the Indian businessman would get to know about the global best management practices, designs and technological knowledge. Advantages of Mom-and-Pop Retail outlets: 1. Small kirana stores all available at almost every street in villages and cities and both seller and buyers share a special bondage because of proximity in living in same area which is absent in the big shopping malls. 2. Kiranas are patronized by the local folks due to personalized human touch which is not available in the malls as they possess more of business oriented approach. 3. Items can be purchased in small quantities 4. Due to acquaintance with the people in locality the kirana shops allow credit for certain periods of time. 5. These outlets are a place of discussions for many people 6. Large Bargaining Power is available whereas in malls there is no scope for bargain. 7. Not much of an investment is needed and can be established every where. Even in the front yard of the house a shop can be established whereas malls cannot be established every where as they need big space. 8. Less manpower is required, less infrastructure and shops are generally established at a walk able distance. 9. These are generally run by people of low income groups and it is a good source of self employment and an avenue for employment generation. 10. There would be long operating hours, strong customer relations, convenience and hygiene. Disadvantages of Mom-and-Pop Retail outlets: 1. Not much of range and variety of goods are available resulting in less choice 2. Generally kirana stores are small and there is no scope for a good ambience SWOT 1. Strengths: Analysis of Retail Sector: