Editorial

Dear Readers,
Recently, the Government of India took the
decision to allow 100% FDI in Single-Brand
Retail and 51% FDI in Multi-Brand Retail. The
implication of the decision can be gauged from
the fact that Opposition stalled the parliament
for nine days following the decision.
At this moment of Time, Retail is one of the
issues that demands immediate attention given
the Issues of Inflation and Foreign Institutional
Investment. The Indian retail sector accounts
for 25% of GDP and employs 3.3% of the
Indian Population. Because of the poor state
of Infrastructure and Cold Chains, the endconsumer ends up paying 200% -400% of what
the Farmer actually gets and around 25% of the
produced 230 million tonne of vegetables and
fruits produced each year goes waste. All these
factors, in addition to the mushrooming of the
e-tailing industry show that the Indian Retail
sector is gearing up for a change.
Through the OPEP Club at IIM Raipur, we
provide a platform to the Students, Faculty
members and Industry Practitioners for sharing
of knowledge in the field of Operations and
Supply Chain Management.
The magazine starts with an article by Prof.
Bhalender Singh in which he has thrown
light on the Retail Sector of India highlighting
the merits and demerits of the Governments
latest decision. It is followed by an article by
Prof. Naval Bajpai where he has dicussed the
significance of Research in the Retail Sector.
In the industry section, through an exclusive
interview, Mr. Arvind Singhal, Chairman and
Managing Director of Technopak, has given a
glimpse of the Retail Sector world-wide and how
it is different from India. Mr. Ajay Kaul, CEO of
Jubilant Foodworks Limited (formerly Dominos
Pizza India Ltd.) has discussed the Success
Story of Dominos Pizza in India.
Students have written articles on the role played
by Farmers and Middle-Men in the Supply Chain,
emergence of E-Tailing in India, Retail in China,
Book Review of It Happened in India and
Success stories of Amul and Walmart. The local
issue discussed in this edition is the upcoming
Logistics Hub in Raipur.

In addition to the earlier column on Summer

Internship Experience we have added two
new columns this time. Through the column
of Gurumantra, we would be explaining some
of the technical terms. In this issue, the RFID
technology has been explained in detail. The
other column is a debate, where students have
presented contrasting views on Should India
allow FDI in Retail?
We would like to express gratitude to Prof.
B.S. Sahay for motivating us to bring out this
magazine, Prof. Ravi Shankar, Prof. Omkar
Prasad Vaidya and Prof. Naval Bajpai for
teaching us courses on Operations and Supply
Chain Management and Prof. Bhalender Singh
for teaching a course on Retail Management
which helped us in developing a strong
foundation from where we have started applying
our skills to real life problems.
We thank Mr. Arvind Singhal and Mr. Ajay Kaul
for taking out time from their busy schedule and
contributing articles for the magazine.
My editorial would be incomplete without
acknowledging the support of Akshay, Anshu,
Abhijeet and Navjeet in bringing out this edition
and the whole Team OPEP for their commitment
and dedication towards the club activities.
Please send us your Valuable feedback and
suggestions for improvement at opep@
iimraipur.ac.in
Rohit Bhagat
Editor,
Strive

Directors Message
Since the very first day of its inception, IIM Raipur has set
very high standards for Management Education and Research.
The research commitments of the students of OPEP are highly
commendable. The inaugural edition of Strive, the Half Yearly
magazine of Operations and Supply Chain Club (OPEP) of IIM
Raipur was another achievement on these lines. It enjoyed
fabulous success and I compliment the OPEP team. Moving
ahead with bigger expectations, the OPEP team is presenting
to you the Second Edition of Strive.
While the global economy is going through turbulent times,
India being no exception, however we can take pride that
our fundamentals are well in place. Still there are certain
sectors where we need improvements. Some of them being
retail, healthcare and education. I am delighted to see that
the edition of Strive focuses on one of these areas, i.e. the
retail sector. I believe that this publication may succeed in
delivering some novel insights into this important subject.
I wish OPEP great success in their endeavors and hope that
you enjoy reading this publication.
Prof. B.S. Sahay

Contents
FACULTY ARTICLES
FDI in Retail: Boon or Bane?.......................................5
Research Methodology Techniques in Retail...........11
COVER STORIES
Agriculture and FDI: Farmers Point of View............15
FDI in Retail: Role of Middle Man. ..........................17
EMERGING AREAS
Logistics Hub in Raipur...............................................20
E-Tailing in India..........................................................22
ARTICLES FOM INDUSTRY
Interview with Mr. Arvind Singhal, Chairman and
Managing Director, Technopak.................................24
Dominos- Story of success in Retail Mr. Ajay Kaul, SPECIALS
Chief Executive Officer, Jubilant Foodworks Ltd......27 Gurumantras: RFID........................................37
Is FDI in Retail beneficial for India?- The Grand
SUCCESS STORIES
Debate ...........................................................39
Retail in China: What India can learn?......................30 Summer Internship
Experience.....................................................40
Amul organised retail..................................................33
Book
Review:
It
Happened
in
India...............................................41
Walmart: Operations Strategy....................................35
Crossword..............................................42

About the Cover Page

The world map on the cover page signifies the fast-shrinking world, where the
different countries and continents are coming close to each other while globalization
has been taking up grounds. Retail sector is one of the most aggressive participants
of this phenomenon, as the retail organizations are targeting every person on the
globe as a potential customer. They have come a long way from being local entities
to global brands. The retail sector and these organizations have been represented on
the cover page by the relevant and well-known names of some of the companies in
the world map.

FDI in Retail: Bane or Boon?

Prof. Bhalender Singh
Indian Institute of Management Lucknow

This was the easiest track with FDI being

allowed with the approval of RBI under the
Foreign Exchange Management Act. Fast food
chains, apparel and footwear companies have
entered through this route.

About the Author

Prof. Bhalender Singh
Nayyar is an Adjunct
Faculty at Indian Institute
of Management Lucknow
(Noida Campus) and
Visiting Faculty at Indian
Institute of Management
Raipur and Rohtak.
He has done his PGDM from Indian Institute of
Management Calcutta.
He has a rich experience of more than 30 years
in diverse fields including Retail and has worked
with companies like Pepsi, Asian Sky Shop, Usha
Sales etc.
He has been associated with Impetus Consulting
Singapore in 2008 and 2009 for consultancy
in the area of sales and distribution and is a
Principal Consultant with MART

Cash and Carry Wholesale Trading

The government allowed 100% FDI in cash and
carry wholesale under the Government approval
route in 1997. Metro and Shoprite entered
through this route. It was brought under the
automatic route in 2006. This opened the doors
for the international giants to enter India for
the backroom support for retail. Wal-Mart has
established 11 stores already with Carrefour
opening up only two. TESCO tied up with TATA
group. The flow of FDI through this route from
April 2000 to March 2010 was $ 1.78 billion. This
comprised only 1.54% of the total FDI inflows
received during this period.
Strategic
Licensing
Agreements
Some foreign brands give
exclusive rights to Indian
companies for sales
through own stores or
shop-in-shop. Mango in
agreement with Pyramid
and SPAR Radhakrishna
Foodlands Pvt. Ltd has
entered through this
route.

he
cabinet
of
ministers cleared
the
commerce
ministrys proposal for
51% FDI in multi-brand
retail
(with
several
riders) and increased
the limit in single brand
retail from 51% to 100%.
There was an immediate
hue and cry from the
opposition
parties,
traders
associations
and finally political
allies that this would result in the death of the
small trader and long term exploitation by the
international giants.
Prior to 1997, FDI in multi-brand retail was
allowed on a case to case basis and one of the
prominent players which entered was Dairy
Farm International in a tie up with RPG group
to start the Foodworld chain.

Manufacturing
and
Wholly Owned Subsidiaries
Wholly owned subsidiaries in manufacturing are
treated as Indian companies and are therefore
allowed to retail. Nike, Reebok, Adidas and
others have entered through this route.
FDI in Single Brand Retail
In February 2006, FDI was allowed up to 51%,
with prior Government approval, in Single
Brand products subject to products being sold
under the same brand internationally and those
branded at time of manufacturing. 94 proposals
were received from 2006 to 2010. Of these, only

Some entry routes used by foreign players have

been:
Franchising Agreements

and defensive action to respond to modern

retail. Offensive steps included improving store
display, increase range and brands, improving
store looks and launch of self service. Defensive
actions were cutting of expenses, cutting prices,
reducing staff.
6. 71% of the
shoppers who
shopped
at
modern retail
outlets were
in favour of
opening
of
more
such
stores.
24%
were not in
favour while
5% had no
opinion.
7. The main reasons for preference of modern
retail stores were better quality of products,
discounts, higher brand choices, one-stop
shopping, fresh or new stock, wide product
range, family shopping experience and better
service.
8. 34% of the shoppers who shopped at small
neighbourhood stores were in favour of opening
up of modern retail outlets in their area with
25% against and 41% with no opinion.
9. The preference for small retailers were
closer to home, goodwill, availability of credit,
bargaining, buying of small/loose quantities,
convenient
timings
and
home delivery.
Another report
in 2008 revealed
the following on
supply side:
1. The average
realisation for
the farmers when
they sold directly to retailers was 15 to 20%
higher against sale through mandis.
2. The turnover and the profits of intermediaries
had been affected. Most of them, however,
wanted to expand their businesses due to
opportunities in selling to modern retail
3. Large manufacturers have started feeling the
pinch through price and payment pressures
from larger retailers. They have reacted
by strengthening brands, increasing retail

57 were approved. Against a clearance of $ 137

million through this route only $ 44.55 million
have come through this route.
Retail Sector in
India
The retail sector
in
India
is
estimated at Rs.
19 trillion and is
growing steadily
at around 9%
for the last five
years. The share
of modern retail
has risen from
around 3% in
2004 to around
7% last year.
The growth rate of the modern retail has varied
between 17 and 20% while that for traditional
retail has been around 7 to 8%.
Category wise break-up of the Indian retail
market is given on this page. The retail sector
is the second largest employer after agriculture.
As per NSSO 64th round, in 2007-08 retail trade
employed 7.2% of the workforce providing jobs
to 33.1 million persons.(Rural to Urban 1:4).
Effect of Modern Retail on Small Shopkeepers
A study conducted by ICRIER across 1,598 small
retailers (793 in head to head competition and
805 in safe neighbourhoods) was conducted
from March to October 2007. Some significant
findings were:
1. Head to head stores sales decreased in 50%
of stores, was flat in 33%, increased in 17%
of stores. Safe neighbourhood stores sales
decrease in 29%, flat 31%, increase 40%. 61% of
decline in sales was attributed to the opening of
modern retail
2. Profitability of head to head stores fell by 16%
while in safe neighbourhood stores it went up
by 5%.
3. Decrease in employee count was around 2 to
3% in both the stores.
4. The rate of closure of small retail shops was
found to be 4.2% which is much lower than the
global average. Only 1.7% closed down due to
modern retail.
5. Small retailers were taking both offensive

presence, adopting small retailers, and setting foreign players over 3 to 5 years with social
up dedicated teams to deal with modern safeguards to avoid loss of jobs.
retailers.
Concerns on Introducing FDI in Retail
The Standing Committee on Foreign and
Domestic Investment in Retail Sector in July
2009 raised concerns:
1. Displacement of labour.
2. Job losses due to predatory pricing strategies
of large retailers.
3. Monopolies of global retail chains leading to
control of supply chains at both ends.
4. Non-adherence of single brand retailing by
some foreign retailers.
5. Backdoor entry of foreign players through
cash and carry route.

Effect of Modern Retail on Small Shopkeepers

The limitations of the retail setup as of April
2010 were:
1. Inefficient market mechanism with lack of
investment in the logistics of retail chains. There
were only 5,386 cold storages with a capacity of
23.6 million tonnes. 80% of this was used for
potatoes. Though 100% FDI was allowed in cold
chain, the investments were insignificant.
2. Intermediaries dominated the value chain
with lack of transparency. Farmers received
only 1/3rd of final consumer price against 2/3rd
by farmers in nations with a higher share of
modern retail.
3. The public procurement and public
distribution system were inefficient resulting in
increased food subsidies.
4. Agricultural Produce Marketing Committees
needed to be dismantled or streamlined.
5. The MSME were suffering due to lack of
branding and lack of avenues to reach out to the
vast global markets.
6. Players in modern retail were making losses
due to high rentals, unbridled expansion and/or
lack of focus. Big players like Subhiksha, Vishal
Retail and others had closed down operations.
7. Investments by bigger players like Future
group, TATA or Reliance were slowing down
due to vast financial requirements.
8. Heavy investments were required in
agricultural and supply chain infrastructure.
Recommendations for Introducing FDI in
Retail
Various studies had therefore recommended the
induction of FDI in retail to bring about:
Up gradation of agricultural practices and
supply chain
Investment in technology
Manpower and skill development
Greater sourcing from India
Efficient medium and small manufacturing
enterprises
Better productivity
Growth in market size
They, however, wanted a gradual entry of

Recommendations made by the Committee

included:
1. Blanket ban on large domestic houses and
foreign players in the area of grocery, food and
vegetables.
2. Policy for re-employment/deployment of
people dislocated by modern retail.
3. Legal and regulatory framework to avoid
displacement
of
small retailers by
unfair means.
4. Extension of
institutional credit
and undertaking
programmes
to assist small
retailers
in
upgrading themselves.
5. Analysis of traffic and economic aspects
before a store is opened.
6. Adequate safeguards to prevent diversion of
agricultural land for building malls.
Experience of FDI in Retail Trade in China
49% foreign ownership was permitted in six
provinces and Special Economic Zones in 1992.
Restrictions were lifted progressively and in
2004 were lifted completely.
Retail sales have been increasing at a healthy
pace of over 16%. The size of China market was
estimated at over a trillion dollars in 2010 with
share of modern retail being around 25%
Between 1996 and 2001 number of traditional

outlets in China went up from 1.9 million to 2.5

million. Employment in the retail and wholesale
sector went up from 28 million to 54 million in
the same period.
Most of the international players have entered
China and are having a reasonable level of
success.
Experience of FDI in Retail Trade in Thailand
Wet market and small family owned grocery
stores dominated the scene. Modern retail
boomed in early 90s.
Allowed 100% FDI only in 1997 with capital
requirement of TBH 100 million and TBH 20
million for each additional outlet and TBH 100
million for each wholesale.
Local players were marginalised by the entry
of foreign players.
Entry of foreign players in a recessionary
economy adversely impacted manufacturers,
wholesalers and retailers in the short run.
Thailand has now
become an important
shopping destination.
Entry of foreign
players
has
encouraged growth of
agro-food processing
industry and enhanced
the exports of Thai
made goods through
networks of the foreign
retailers.

with domestic capital.

Late in the 90s, Carrefour and Ahold entered
the market and within 3 years increased their
market share to around 9%
They, however, had to withdraw completely
from the market in 2006.
The Top Two domestic chains control 65% of
the Chile retail market.
The Proposal
The draft policy included the following
conditions for multi-brand retail:
1. 51% FDI after approval from Foreign
Investment Board.
2. Fresh agricultural produce, including fruits,
vegetables, flowers, grains, pulses, fresh
poultry, fishery and meat products, may be
unbranded.
3. The government will have the first right to
procure agricultural produce.
4. Minimum investment
of $100 million o f which
at least 50% in backend infrastructure.
5. At least 30% of
manufactured
and
processed
products
from small industry.
6. Compliance through
self-certification.
Investors need to keep
all records.
7. Retail sale locations can be set in cities with
more than one million population, based on the
2011 census. There are 51 such sites.

Experience of FDI in Retail Trade in Russia

First retail chain only in 1994.
FDI allowed only in 2000.
Healthy growth rate of 23% from 2000 to
2008(USD 558 billion) dropped to USD 470
billion in 2009 and recovered to USD 543 billion
in 2010
Metro entered Russia in 2001 followed by
Auchan in 2002. Both remain in the Top 10
although all others are Russian
Carrefour entered and exited the Russian
Market in 2009. Wal-Mart is yet to enter the
market.
Share of modern retail is over 40% in Russia

The Plus Points

1. The main point which is raised is the efficiency
in the supply chain especially for perishables.
The elimination of certain middlemen will
increase the income of the farmers by at least
25%.
2. Competition will also force lower consumer
prices and hence control inflation. A Nielsen
study during first quarter of 2010 had revealed
that modern retail dropped prices by more and
increased prices by less between October 2009
and March 2010.
3. Government will gain additional income
through taxes, as monitoring and transparency

Experience of FDI in Retail Trade in Chile

Supermarket sector was launched in 1990s

will improve.
4. Acceleration in growth of retail market will
benefit MSME since nearly 35% of goods are
already being procured from this sector. A lot
of smaller brands have got a tremendous boost
through launch of private labels by modern
retail.
5. There is the potential of local procurement by
global retail chains from India.
6. Modern retailers also welcome the move
since they can have strategic partnerships and
get much needed capital to expand. The major
players are, however, clear that they will not
give majority stake to any partner.
7. Entry of foreign players will result in creation
of four million new direct jobs and up to six
million indirect jobs in areas such as logistics,
contract labour for distribution, repackaging,
housekeeping and store security.
8. The consumer would get consistent quality
and there would be a lower risk of adulteration
and counterfeit goods.

large family. Weekend shopping and storing in

freezers only moves the wastage from the supply
chain to the consumer.
6. Higher investments are required in agriculture
to increase their bargaining power before FDI is

allowed in retail.
7. Big retailers use cheap prices only for a few
items to lure customers into their stores and
charge higher prices for other items to maintain
margins. An air-conditioned big box store with
provisions for parking and high overheads will
pass these on to the consumers.
8. A lot of small retailers will have to close down
in the towns where FDI would be allowed in
retail. There could be a repetition of Thailand
in India.
9. FDI in retail will raise the demand for real
estate in retail thereby increasing the rentals
and wrong utilisation of agricultural land to put
up swanky malls.
10. Foreign players will flood the Indian market
with cheap foreign goods impacting local
industry.
11. Giant shopping centres will add to our
existing urban snarls.

The Opponents View

1. FDI in retail is a non-critical area of
intervention. There is no lack of access
especially in the urban markets. The gloss of a
shiny international brand name need not be the
differential.

Implementation Problems for Foreign

Players
1. Investment of USD 50 million in front end will
mean opening up of approximately 1 million
square feet of retail space. This would mean
around 200 stores of 5,000 square feet or 20
stores of 50,000 square feet.
2. Sourcing of minimum 30% of items from
MSME especially for non-food sector will be
very difficult since customers prefer established
brands.
3. Around 50 licenses are required for opening

2. The role of middlemen in perishables can be

altered by policy changes and does not require
foreign retail to come in.
3. Foreign retailers will give better prices to
farmers in the short term but will squeeze them
with growing control on the supply chain.
4. Modern retail is only supporting this move
since they are really looking for bailouts and
profitable exits from this sector.
5. Big formats are not suitable to the Indian
psyche which looks to buy daily for a reasonably

up a store in many states. The red tape and the

corruption involved will be a big deterrent.
4. A number of states are ruled by Opposition
parties and defiant allies. They may not allow
foreign retail to come up in their respective
states.
5. Real estate costs are prohibitive in the cities
chosen.
6. Credit and free home deliveries are alien to
their nature while it is the main demand of the
average Indian consumer.
Areas
of
Improvement before
FDI is brought in
1. Dismantling of
APMC in almost all
major states to cut
down
the
trader
margins.
2. Support to small
retailers to upgrade
their efficiencies.
3. A relook at the Public
Distribution System
to cut down wastages
and corruption.
4.
Provision
of
training in handling,
storing, transporting,
grading,
sorting,
maintaining hygiene standards and packing of
fresh produce.
5. Creation of infrastructure at Mandis.
6. Integrating long food supply chains in the
food area.
It seems from the above that the main problems
are in the back end while the main fears are in
the front end. Foreign players could, therefore,
be asked to invest a minimum of USD 50
million in Cash and Carry stores before being
allowed the USD 50 million in the front end. The
approach of the foreign players would therefore
be partnership with the smaller retailers rather
than confrontation.
Foreign players should be asked to set up training
centres for farmers and small producers to
enhance the quality and productivity. Carrefour
has already organised over forty camps in this
direction.
There has to be inclusive growth in this

sector and this should include small farmers,

manufacturers and traders.
The debate in the parliament, of course,
ended with the government putting the issue
on the back burner till mid-term elections are
over. They have done this also for almost all
economic decisions with media pointing to the
paralysis in the government machinery because
of the corruption and Lokpal issues. Some even
mentioned that the red herring of FDI in retail
was brought in to minimise the time for the
debate on Lokpal Bill so that it could also go
into deep freeze.
It may, of course,
be relevant to
see if the entry
of FDI in other
service areas such
as banking and
financial services
has actually been
beneficial to the
average
Indian
consumer before
we get into the
debate on FDI in
retail.
Another
area of thought is
whether organised
manufacturing is
against entry of
foreign players in
retail since this will weaken their bargaining
power in the distribution chain.

10

Quick Fact:
The word retail is derived
from the French word
retailier, meaning to cut a
piece off or to break bulk.

Importance of Research in Retail

Prof. Naval Bajpai
Indian Institute of Management Raipur

About the Author

Prof. Naval Bajpai is
Associate Professor at
the Indian Institute of
Management,
Raipur.
He has a multifarious
background in industrial,
teaching and research
fields spanning over a
decade and is a life-time member of the Indian
Society for Technical Education.
With over 35 research papers published in journals
of national and international repute, Professor
Bajpai is an avid analyst of contemporary work
trends in public-sector organizations.
Dr. Bajpai has authored three books published
by Pearson Education, India- Business Statistics,
India, Business Research Methods and has coauthored a book titled Quantitative Analysis. He
has developed 30 case studies in Indian context,
in the area of Business Statistics and Business
Research Methods.

etail refers to sale of goods under the

following conditions:

1. The sale takes place from a fixed location,

2. The goods must be sold in small quantities or
individual lots and
3. The selling should be for direct consumption
It sometimes includes subordinate activities like
delivery (very common in case of e-commerce).
Retail can be considered the front-end of the
supply chain which directly interacts with the
customers and consumers and also provides the
last-mile connectivity.
In the recent years, several new trends have
emerged in the Indian retail sector. Organized
retail has succeeded in penetrating the market
to a good extent. The retail sector in India is
valued at US$ 550 billion, only 5% of which
is organized (around US$ 28 billion). The
organized retail has around 7% penetration. But
just within the next decade, organized retail is
projected to go to US$ 260 billion[1]. Malls have

sprung up even in tier 2 and tier 3 cities across

the country.
Another development is the aggressive growth in
e-tailing and e-commerce. This section of retail
is riding high on the penetration of internet in
the not-so-urban regions of the country, where
brand awareness is high but availability is poor.
Several major acquisitions have occurred in
e-commerce arena and foreign behemoths like
Amazon have also entered the competition in
India. Many start-up companies have come up
in the same or similar businesses in the last
couple of years z.
First, any industry on such a growth spree
demands the managements of the involved
organizations to take well-calculated, wellinformed and yet, quick decisions. This calls
for very efficient data collection and processing
to provide a strong base for the decisions.
Secondly, direct interaction with the consumer
makes retail a tricky business as a lot depends
on the behaviour of the consumers. Many of
the decisive factors influencing this parameter
are not easily quantifiable. Business research
has proven its worth in various industries by
delivering good results in such situations in the
past. This discipline has vast applications in
retail sector, especially in the present context,
and must be understood well by the relevant
companies to utilize it in the best possible way.
Research is all about finding something,
the absence of which may distort our ability
to take informed decisions[3]. The ability
to take an informed decision isgenerated
through a systematic study that is conducted
through various interrelated stages.To design
something, various parts are put together to
complete the phenomenon. The same process
is done to conduct a research. All the steps in
a research are interrelated and no independent
activity is launched without considering
the decisions on the previous stages. One
has to really understand that, from problem
identification to presentation of findings,
every step is interlinked and interrelated. For
example, a research project title or objective
is set as Consumer motivation to purchase

11

12

a refrigerator: A comparative study between

two leading brands. The title of the research
project itself introduces the dimensions of
these interrelated steps. In the light of the title,
a researcher has to first construct a theoretical
model of consumer motivation. All other steps
such as the questionnaire design, setting the
research questions, and setting the hypotheses
are related to the title and are interrelatednot
independent.
The figure explains the process of conducting
a business research. A research design is the
detailed blueprint used to guide a research
study towards its objective [4]. In the previous
section, it has already been discussed that the
steps in conducting a research programme are
interlinked and interrelated.
A good research is conducted using 10 steps. Let
us have a look at these one at a time:
1. Problem or Opportunity Identification
The process of business research starts with the
problem or opportunity identification.
Actually, the management of the company
identifies the problem or opportunity in
the organization or in the environment. For
example, a manager in a supermarket might
identify a problem like diminishing footfalls in
the supermarket.
2. Decision Maker and Business Researcher
Meeting to Discuss the Problem and
Opportunity Dimensions
The decision maker contacts the business
research firm and then discusses the problem
or opportunity with the business researcher.
The researcher can only suggest solution to
a problem, but the actual decision is taken by
the decision maker. Hence, it is important that
the decision maker should understand the
dimensions of the research and the researcher
should also understand the scope of decision
making by the decision maker.

sales in a retail store. This management problem

focuses on the symptoms. Research problem is
somewhat information oriented and focuses
mainly on the causes and not on the symptoms.
This is to determine the consumers opinion
on psychological pricing and to estimate their
purchase behaviour for the psychological price
being offered by the retail store.
4. Formal Research Proposal and Introducing
the Dimensions to the Problem
Next, the researcher prepares a formal proposal
of the research and develops the approaches to
the research problem. It includes the following
steps:
i) Preparing a Theoretical Model: A set of major
factors that decide the visiting intentions
of a customer are identified. In our case they
could be location, prices of the products, range
of products offered and behaviour of the staff.
Apart from these some moderating variables
are also identified. They can be age, gender and
income of the customer.
ii) Preparing Questions for Questionnaire:
Each main variable identified is explored in
details and statements characterizing them are
obtained from literature. These statements are
used to form questions.
iii) Forming Hypothesis: Based on the main
factors, several hypotheses are formed. In our
example, one hypothesis could be location of a
supermarket has a significant linear impact on
the visiting intention.
5. Approaches to Research
Approaches to research consists of making
a suitable decision regarding research
components like types of research, measurement
and scaling, development of questionnaire,
sample size-determined sampling techniques
and data analysis plan.

All researches can be classified into three

groups:
3. Defining the Management Problem and i) Exploratory Research: mainly used to explore
Subsequently the Research Problem
the insight of the general research problem. It
The management problem is concerned with the must be used with other types of research and
decision maker and is action oriented in nature. never alone.
For example, the management problem offers a ii) Descriptive Research: it is conducted to
psychological pricing to enhance the quantum of describe the business or market characteristics.

13

iii) Causal Research: helps in identifying the 10. Management Decision and Its
cause and effect relationship between two or Implementation
more business (or decision) variables.
As the last step of conducting a research
programme, the findings are conveyed to the
decision maker after consultation with the
6. Fieldwork and Data Collection
The fieldwork and data collection activities are research programmer. The decision maker
now planned. Supporting ideas are collected analyses the findings and takes an appropriate
through the analysis of secondary data sources. decision in the light of the statistical findings
The researcher also decides whether he should presented by the researcher. The researcher
go for a survey or adopt observation methods presents the results and conclusions/options to
and whether the project requires a field data the decision maker. It is then left to the decision
collection or a laboratory experiment. Only then maker to take an appropriate action for his own
the fieldwork is carried out. For our example, company.
the decision could be to conduct a survey
among shoppers in the supermarket and in As shown in the above steps, business research
other supermarkets in the vicinity.
is a highly systematic and methodical way to
assess and study any problem or opportunity
and provides with logical options with a lot
7. Data Preparation and Data Entry
After field work, the collected data are in raw of clarity and predictability. It is unfortunate
format. Before performing data analysis, it that in India, many managers still base their
is important for a researcher to structure the decisions on ad hoc analysis or observations
data. There is a specific scientific procedure to and gut feelings, when the chances of success
deal with the missing data and other problems of any decision can be dramatically improved
related to the data-collection process. After by employing business research. The future
preparing the data, a researcher has to feed of Indian retail at least partially depends on
it into a computer spreadsheet in a pre- the realization of this fact and subsequent
determined manner to execute the data analysis appropriate application of this tool in business.
exercise. Preparing this data matrix through References
the spreadsheet is also a scientific exercise and
requires a lot of expertise and experience.

[1] Future Group buys Transmart India

warehousing business. Economic Times, 12
December 2011.
[2] Online stores see strong business from non8. Data Analysis
The data thus obtained is analyzed using the metros, villages.Economic Times, 21 April 2011.
appropriate parametric or non-parametric
[3] Nwokah, N. G.; Kiabel, B. D. and Briggs, A. E.
statistical tools.
(2009): Philosophical foundations and research
9. Interpretation of Result and Presentation relevance: issues for marketing information
research, European Journal of Scientific
of Finding
Research, Vol. 33, No. 3, pp 429437.
The researcher interprets the result and nonstatistical findings derived from the statistical
data. A meaningful interpretation of the result [4] Aaker, D. A.; Kumar, V. and Day, G. S. (2000):
is a skilful activity and is an important aspect Marketing Research, 7th ed. (John Wiley & Sons
of research. The researcher has to determine Inc), p 70.
whether the result of the study is in line with the
existing literature. It is also important to present
the findings in a scientific manner. Considering
our example, the result could be that the prices
of the products being offered are comparatively
higher than those in other supermarkets.

14

Agriculture and FDI: Farmers Point of View

Abhay Shankar, Akshay Agarwal, PGP 2011-13

Indian Institute of Management Raipur

ecently, we have witnessed upheavals

and debates on (not) allowing foreign
direct investment (FDI) in Indian retail
sector. Amidst the chaos, one of the most
talked about communities, which many believe
would be directly affected by the decision of the
government, is that of the Indian farmers. The
basic idea is that the retail giants would, to offer
their consumers low prices, directly buy farm
produces from the farmers, thus eliminating
the middlemen. It is also believed by many
that this would also benefit the farmers since
they would be offered better prices. Besides,
these huge organizations are capable enough
to develop and maintain proper and adequate
food infrastructure and supply chain networks
in the country. But the ground reality might not
be as simple. In pursuit of the true picture, we
have met a few farmers and gathered their views
about FDI as well as some common, but not so
well-known practices followed in the fields.
Dressed in a white shirt and gray trousers and
wielding a Nokia, Prem Kumar Sahu, aged
around 30, seems somewhat busy but calm, as
he talks to us as well as receives frequent phone
calls. He has been cultivating vegetables and
fruits along with his father on their 6.5 acres
land on Murra Road in village Datrenga near
Raipur. He supplies the produce, which includes
tomato, cabbage, cauliflower, banana and
some other vegetables to Mohanlal Khillumar,
an arthiya (middleman) in Shastri Market, a
major fruits and vegetables mandi of Raipur.
The transaction takes place three or four times
a year and each time, Prem gets his payment
in cash from Mohanlal around a week after the
delivery is made. Some of the money he uses to
pay the wages of the ten odd labourers in his
fields and buy resources for the next crop, i.e.
seeds, fertilizers, pesticides etc. When asked
about the reason for this delay in the payment,
Prem readily replies that the payment is made
on the basis of the sales of his produce during
the week. He gets, according to him, a fair
price the selling price sans an eight per cent
commission that is kept by the middleman.
The huge fluctuations in the market prices of

fruits and vegetables are a concern though,

which at times, eat away the profits. And
sometimes, in order to get rid of access
inventory, the middleman sells the produce
at prices lower than the actual prices. But
Prem seems to agree that he has little choice.
The produce, being perishable, must be sold
without much delay. Besides, Prem and other
regular suppliers of Mohanlal easily get credits
of a couple of thousand rupees from the arthiya
in case they run out of cash. So the farmers feel
secured against the occasional bad yield, price
hike in fertilizers, drop in the market prices of
the produce, etc.

When asked about his views on the effects

of foreign direct investment in retail sector
on farmers, Prem seems unfazed, and after
thinking for a while, he says that farmers might
be benefitted but only if the retail giants buy
directly from them. But wouldnt they have
strict quality norms? he quickly questions,
clearly voicing concerns regarding the selective
buying practices of the major retail players. In
contrast, the arthiyas buy all of the produce
regardless of the quality, and even sell some
of the low quality vegetables or do number ka
maal along with the good quality produce at the
same prices.
So strong is the trust between the farmer and
the middleman, that Prem doesnt recall selling
to anybody else. He even claims that no farmer

15

in the village or the surrounding villages, in his

knowledge, has ever sold to any big retail chain
or store. He himself has never even thought of
selling to anyone else, owing to the years of
seamless business with Mohanlal.
Prem also grows dhaan (paddy) on around ten
acres of land that he has leased. The government
buys paddy from the farmers through rural
banks at minimum support price. Mr. Jai Kumar
Sapara, who works at the nearest Bachat Bank
in Boria Khurd, explains that each farmer can
sell only upto 20 quintals of paddy per acre of
land (the quantity cap varies with region and
state) owned by him to the government. Some
of the remaining produce, they again sell to
the government, but under the names of other
farmers who own land but do not grow enough
paddy, and pay some commission to these
farmers. If they are still left with some paddy,
it goes to middlemen in mandis at prices 1520% lower than the minimum support prices.
Prem readily agrees having been following the
above practice from many years, adding that
he doesnt know, and is not even interested in
knowing the commission earned by the arthiya
in Pandri Dhaan Mandi in Raipur, where he sells
the dhaan that he fails to sell at the bank.

quality paddy, and is mainly used for making

chiwda (rice flakes) and other processed food
products. This paddy has to be sold to millers
at 20-40% lower prices as compared to the
minimum support prices that the government
offers for kharif crops. The transaction is done
directly or through middlemen. Anil adds that
even if FDI is approved and giant retailers enter
the market, they would have to buy only milled
rice for direct selling to consumers, and so, they
would not be able to do any direct purchasing
from the farmers. Instead, they would go to the
millers. The same is true for other farm products
unfit for direct consumption. The farmers would
benefit only in case the retail players widen their
scope of activities by getting the milling (and
other processing) done themselves. The major
impact of FDI in retail sector would be seen in
the fruits and vegetable markets, as far as food
sector is concerned.

Another interesting way for middlemen to make

profits is to exploit the differences between the
minimum support prices in the adjacent regions.
For example, suppose region A has higher
support price than region B. An arthiya would
first approach the farmers of A who have spare
selling capacity and determine the maximum
quantity that could be sold to the bank in A
Anil Chandraker, besides being the owner of a under their names. Then he would buy the same
fuel station on Dhamtari Road, Raipur, is also quantity of paddy from farmers in region B at
a farmer. He grows paddy on 75 acres of land, prices slightly better than the support price at
producing over 1600 quintals. Since he uses B, but substantially lower than that at A. The
high quality foundation seeds, he is able to paddy would be sold to the bank at A and the
sell most of the produce (around 1350 quintals) farmers in A involved in the transaction would
to National Seeds Corporations Ltd, which pays get some commission. Thus the middleman and
around Rs.500 more than the minimum support the farmers both derive benefits and the only
price. The Seeds Corporation conducts several loser seems to be the government.
rigorous tests before accepting the paddy.
The reject goes to the government through the Both Anil and Prem react in a similar manner
Bachat Bank, where only the moisture level is the when asked about their recommendations to
criteria. The only farmers who sell to middlemen the government for the welfare of farmers. The
are usually those who immediately need money major discontent is due to the recent steep price
and cannot wait for the bank to start buying the hikes in agricultural necessities like seeds,
produce (The bank procures from farmers from fertilizers, pesticides, fuel etc. They believe that
around 1st November to around 20th January). in case these prices cant be controlled, they
Thus there is little involvement of middleman, must be matched with an equivalent hike in
as far as the kharif crop (reaped in winters) is the minimum support prices. Secondly, there
should be some system for providing relief to
concerned.
the farmers producing fruits and vegetables,
But things change in case of rabi crop (reaped in similar to the minimum support price scheme
spring). The latter does not produce very good available in case of cereals.

16

FDI in Retail: Role of MIDDLE MAN

Anshu Katiyar and Harish Verma, PGP 2011-13
Indian Institute of Management Raipur

s far as FDI in Indian retail sector is

concerned, the speculation levels are
high but, again, these are the views of two
farmers near Raipur(Read Article: Agriculture
and FDI: Farmers Point of View), Chhattisgarh
and might differ vastly from some other farmers.
What we can conclude is that even if the retail
giants enter India, it will be a new challenge for
them to eliminate the middlemen, and perhaps,
not even in their best interests.
FDI in retail in India is perceived to be as
a magic wand which will remove inflation,
unemployment, commission agents, improve
farmer`s condition and help the economy to
recover from slow down. But considering the
past records, FDI in retail is not going to bring
big differences unless the firm tries hard to reach
the farmers. Most of the big retails prefer to buy
product from the middle men, the so called
Arthiyas rather than going to the farmers.
These practices have made them the famous
Bad Boys of retail due to the commissions
involved in the trade.

local wholesalers to the door to door vendors

could clearly give a clear picture about the
responsibility and complexity of job undertaken
by these Arthiyas. They cannot be accused of
charging heavy commission as they play an
important role in establishing the market and
organizing them. One can also say that from
the present structure, they form an important
backbone and a channel of goods transfer. Some
might think it is unethical for them to charge
such a high premium as commission without
doing anything productive and would like to
blame them for the so called inflation but their
role is not limited to the market itself. They may

The middle men are blamed for the unorganised

market conditions and enormous agricultural
wastage as they rot either due to bad weather
conditions or due to poor handling of the
goods. Cold storage could turn things around
as this would definitely prolong the life of the
goods, but looking at the present facilities made
available to farmers in our country we can realise
that its farfetched from reality. Middle men are
also accused of paying less to farmers of what
they deserve but there is no guarantee even in
the present bill that will ensure better condition
to the farmers in our country. No doubt the bill
may be drafted considering the interest of the
citizens and the development of our country
but only its implementation from the root level
will create the difference by adding value to the
society.

be the bad guys or could be better termed as the

commission agents but they are considered to
be very respectable in the market not because
of their position and power but because they
associate themselves with their suppliers
(farmers) and buyers (local wholesalers and
door to door vendors). Normally Arthiyas charge
5% commission of which 1% is being paid back
to the mandi. Big retail chains can save this
commission by procuring the products directly
from the farmers thus saving expense and it
could directly be transferred to the consumer in
form of cheaper products. But how the condition
of a farmer is going to be improved remains a
big question. Even in the present scenario many
big firms prefer buying from middle men rather
Considering the present market size where tons trying to reach farmers. Now this is a tricky
of vegetable and fruits are brought from various situation as in such situations the prices are
parts of the country and are being sold from the going to increase than decrease, as it`s similar

17

to adding one high profile commission agent in

the chain and the condition will become more
adverse.
When Mr.Rajender Kumar Mishra, a middle
man himself was interviewed it seemed as if the
government took no notice of such a group of
people. A Master of Commerce himself, he has
been in this business for 15 years and knows
quite a lot of how the policies of the government
would affect their business. He manages a basic
storage as he mostly clears the stocks on a day
to day basis where the quality of the goods is
in the condition in which it was procured from
the farmer and this negates the need of cold
storage. Mr.Rajender also owns vehicles that
aid in the delivery of goods across the state. We
also found that the price decided by any the
middle men are purely based on the supply and
demand at that point in time, thus fluctuating
often and approximately a daily volume of
60-80 sacks of 100 Kgs each clearance. He
supplies to some retail outlets and hotels too.
Mr.Rajender is firmly against the FDI stating
that it will definitely affect his business and
put its future in doubts. He also claims that
the policies are corrupt and has no relevance
to ground realities. Unhappy with policies and
taxes levied, Mr.Rajender suggests that the
government should shift its focus on helping
traders rather than levying taxes, which seem to
be quite a valid point.

other community functions. So now it`s not the

pure business we are talking about it`s about the
emotional bonding which is created between
farmer and arthiyas over a period of time. There
are farmers who have been associated with some
specific arthiyas for generations and farmer
won`t be able to leave such strong bonding for
petty gains. Lot of local wholesalers and local
door to door vendors also purchase the products
on credit, roughly they are given a time of 7 to
8 days to pay their debt. A normal note book is
being maintained where each vendor registers
his name and signs at the time of collecting
goods, while at the time of paying, the collector
put his signature to clear him from the debt. It`s
not so easy to deal in these accounts as crores
of rupees are at risk and no organisation can
think of working in such manner. These farmers
and local vendors are totally dependent on the
arthiyas for the credit sales as they do not have
sufficient fund to invest in their business. It is
amazing to see such an untraditional banking
system working in the market in very efficient
and effective manner where there was no case
of cheating or fraud being heard as everyone
knows each other very well.

Quality of the product could be another factor to

be considered as many times it does happen that
due to poor infrastructure and facilities the crops
get affected which results in poor production
of quality or quantity. As the big retailers are
renowned for their high standards and their
A share of the Arthiyas may not have access to practice to cherry-pick the best product, what
formal education but the vast knowledge they will happen to the crop which is slightly below
possess in the field of their expertise gives them their standards? Where will the farmer find the
an upper edge, they can state the difference market for such products?
between the similar looking fruit/vegetable and
which will last longer and thus know which There is no doubt that the consumer will get the
product they need to sell first. This knowledge best product on the shelves and they should
helps them in managing the inventory wisely get it as they are paying hard earned money
in these huge unorganised markets. But this is for buying the product. They should not suffer
not the end of the story as the most important for the flaws in the system, but isn`t it the
part played by these arthiyas is as follows; they responsibility of the government to provide the
are considered to be the financiers in the market necessary infrastructure and equipment to the
as they lend money to the farmers for buying farmer so they are able to provide the best quality
the seeds and fertilisers at the time of crop product in the market. Looking at the farming
plantation, they even pay for sacks which are conditions available in our country where the
used to store and carry grains. Cash in lakhs are farmers depend on rain water for irrigation,
given many months in advance to the farmers. traditional methods are used for farming, they
Arthiyas also give them money for building do not have access to good quality seeds or in
their homes, for buying cattle, for marriages and some cases farmers lack funds needed to buy

18

seeds and fertilizers. Electricity is still a distant

picture for majority of the villages and the
dropping water level adds to their misery. Few
places are suffering from floods and few from
drought in such adverse conditions how can we
believe that making policy will help the country
grow and will equip them completely in the
global market. How can we dream of a shining
India? The necessity of time says we need to be
strong enough in implementing the policies and
monitoring them at regular intervals as it`s not
the poor policies which lead to the failure rather
the poor implementations of the policies which
make things miserable.

big retailers are revising their plans and are

looking for various alternatives to enter India.
Similarly Government of India needs to make
things more transparent as to how it will help
the citizens and an action plan which could
aid in the development of India. The bigger
worry will be the way in which the bill would be
implemented which has always been a debacle
for India.

Unless we are clear with our action plan for

the near future we won`t be benefitted from
the huge investments to be made by the big
firms in India. To cash it in for the best interest
of the nation we need to improve our basic
infrastructure because only then will we be
able to fight at the international level with the
standard quality and quantity of our product.
Clearly we need to lift our standards as the
world has become a global village thus we can`t
expect our government to protect the domestic
market by trade barriers for longer duration as
its a hindrance to the national growth. Thus
we need to work together and improvise our
standards making India a premium brand not
just by drafting bills and allowing the foreign
brands to capture our markets rather competing
with them on the level ground.
The bill is still in the box and a consensus needs
to be reached before it could be implemented
but before that there are quite a lot of facts
that needs to be made clear as people are still
not sure about how the bill will help them in
developing their business. For instance it is
being stated that foreign retailers can wholly
own their business but need to source 30%
of their product from SMEs with revenue not
exceeding Rupees 5 crores but considering
the size of the product required by these big
retailers, if a supplier meets their demand he
will cross the Rs. 5 crore mark very easily and
would no longer remain a SME. If the retailers
go for several suppliers it will be difficult for
them to maintain the uniform quality among
their products which may hamper their brand
image and the trust created over decades. Many

19

Quick Fact:
Workers in China cost
about 92 cents an hour
compared with $1.2 in
Thailand, $1.7 in Mexico
and about $21.8 in the
United States. Only India
among the major export
countries, at about 70
cents an hour, is cheaper.

Implementation Strategy for Logistics Hub at Raipur

Aditya Kumar Konathala and Ranjith Kumar Ram, PGP 2010-12

Indian Institute of Management Raipur

hhattisgarh economy has witnessed

fast paced growth over the last decade,
making it one of the preferred investment
destinations for multinational corporations
and a recognized industrial hub to the world.
Chhattisgarh is the central hub for steel, iron,
power, aluminum, medium scale industries
in India. This, in turn, has resulted in
increased demand for world-class logistics and
warehousing services at Raipur, the capital city
of Chhattisgarh.
Chhattisgarh State reveals a well connected

Truck Terminal, Warehouses (Open/Covered),

other facilities such as Commercial Area with
provision for Office complex, Maintenance
Workshop for equipments & Cleaning, Auto
Service Centres with Spare Parts& Accessories
and so on.

region in terms of three modes of transportation

(rail, road and air). The Raipur region is
strategically located in central India with the
Mumbai Kolkata rail link and the major eastwest (NH-6) corridor connecting Surat/ Mumbai
to Kolkata passing through it. Chhattisgarh
Logistics Hub, project site is located between
NH-6 and Raipur-Vishakhapatnam Main Broad
Gauge Rail Line, at the northern boundary of
Naya Raipur City. As a part of the Logistics Hub,
NRDA (Naya Raipur Development Authority)
is planning to establish a Railway Siding,

of various modes of freight transportation

viz. roadways, railways, ports, waterways and
airways. The report also examined steps that
can achieve increased efficiency and ensure
a more balanced and planned growth of the
logistics sector.

Today, the biggest challenge before the logistics

industry is to increase efficiencies and become
more cost-effective, thereby increasing overall
cost arbitrage. We presented the SWOT analysis

For an efficient and effective Logistic hub

at Raipur, we presented the supply chain
network design and Multimodal Distribution
Planning with Cross-docking, which are critical

20

in facilitating coordination among suppliers,

manufacturers, distribution centres and
customers.

dedicated autonomous body that stimulates the

development of the entire hub.

An optimized distribution centre model will

help in reduction in logistic cost in addition
to this facility. Since there will be two kind of
flow handled by logistic hub at Raipur Goods
which will be exported from Raipur to all over
India or outside India, Goods which will come
from outside India or all over India to Raipur
or Chhattisgarh, we proposed an Intermodal
logistics model that use transportation costs,
xed location costs, modal connectivity
costs, modal transit times and service time
requirements, for three modes of transportation:
road, rail and air. The inherent benefit of
There is a need for national logistics strategy intermodal shipments lies in the cost advantage
that can improve efficiency and lower costs, in obtained by the joint use of multiple modes of
order to achieve high customer service at low transportation: road, intermodal rail, air and
cost. This strategy aims at aligning diverse state ocean freight.
and central government policies, set targets
for the growth of this sector, chalk out roles Thus logistics hub will improve the
for the public and the private sector, focus on transportation capability of the region, enabling
infrastructure development and facilitates the it to provide alternative transportation modes
with improved levels of service, capitalizing
entry of new players in the logistics industry.
on the existing industrial and agricultural
Emphasis has to be on creating the need to production capabilities within the catchment
meet operational challenges by adopting area, while providing a new focus on higher
world-class technology and business processes value added goods for the major target markets.
The total number of truck registered in
Chhattisgarh are more than 40000. Out of the
total, 35000 trucks are operated from Raipur and
rest are from Raigarh, Jagdalpur, Ambikapur
and other places. Out of the total number of
trucks, 70% are in Out-Bound and 30% are
engaged in In-Bound Services. Approximately
7000 move towards Allahabad, 5000 towards
Orrisa, 8000-9000 towards Maharashtra, rest
towards Ramanujganj, Konta, and other places
of the country including Andhra Pradesh.

in establishing a successful distribution and

logistics hub at Raipur. For instance, the
procedures to obtain railway and airport cargo
clearances will need to be improved immediately
through exercises such as business process reengineering. In the longer term, the State will
need to match the performance of international
hubs on aspects like on-time delivery and easy
access to information for users. Practices like
using Electronic Data Interchange (EDI) for
submitting forms and checking delivery status
will have to become routine. In addition, there
is also a need to significantly expand the skills
of staff working in the hub as well as ensure
continual retraining.

Chhattisgarh logistics and distribution hub is

a logical extension of the overall infrastructure
initiative and a tangible way for the State to
jump-start trade. It will also play a vital part
in the success of many growth engines with
an emphasis on exports, such as poultry,
horticulture and labor intensive manufacturing
industries.

(The above article is an abstract of the research

paper Implementation Strategy for Logistics
Hub at Raipur. This paper was selected for
the finals of the International Operations
Conference organized by IIM Calcutta and
There is a need to create an autonomous body Society of operations Management, India on
to manage the hub. The success of the hub will Dec 16, 2011)
depend not only on the efficient functioning
of its individual components like ports, roads,
railways, airports, etc., but also on how these
facilities are leveraged in tandem. The best
way to achieve this would be to set up a

21

E-Tailing in India
Vishal Singh, PGP 2011-13
Indian Institute of Management Raipur

Abstract : This article gives an inside view of the

e-tailing industry in India, its growth prospects
and current scenario. With the high growth
potential of the e-tailing industry this article
also cites certain examples from the industry
explaining how this potential is being utilised by
the traditional and new start-ups. How the growth
is happening in India in e-tail through the tier 2-3
cities is also being explained in the article. And
at the end, general aspects like how the e-tailing
happens, advantages and challenges of the
e-tailing business in India are explained.

-Tailing (short for Electronic Retailing) is

defined as selling of retail goods through
internet where the buyer and seller are
not at the same physical location. Some of the
goods sold though internet are like computer
hardware, cinema, Books, Music cassettes /
CDs, travel tickets and gifts etc. In India where
the internet user mark has crossed
100 million and is expected to grow
to 300 million mark in next three
years according to the Internet and
Mobile Association of India (IAMAI)
growth potential of this business
is immense. Real time facts also
support this assumption e.g in year
2011 total e-commerce business in
India was around Rs 46,250 crore,
a growth of 47% with respect to Rs
31598 crore in year 2010 exceeding
the expected 10-15% growth per
year. Out of this Rs 46,250 crore
business at Rs 2,700 crore, e-tailing
accounted for around 6% of the total
net commerce market, but is expected to grow
more than 30% in coming years.
According to the Industry experts apart from
popular items like mobile phones, books, and
electronics the trend of selling fashionable
items like jewellery, accessories, apparel and
footwear is catching fast in India. The reason
being the brand preference, ease of selection
and shipping make this category a preferred
choice for online transactions. For example

seeing the huge potential in the e-tailing market

retailers like Shoppers Stop, Globus, Gitanjali
and Futurebazaar are looking at expanding
their online presence like Shoppers Stop is
looking at increasing its reach to more delivery
locations, convenient payment methods, and
better integration with its stores. Over the next
3-5 years, Shoppers Stop expects its online
business to be equivalent to one of its larger
stores. FutureBazaar.com, the e-commerce
arm of the Future Group, that links to its stores
including eZone, Pantaloons and Big Bazaar
online delivers goods across 1,500 cities and
towns in India covering 16,000 PIN codes. Apart
from these traditional retailers several startups offering multi-brand products like flipkart.
com, Snapdeal.com, fashionandyou.com and
Naaptol.com. are also cashing in on the growth
potential of the e- tailing industry for example
Flipkart which has now become Indias Amazon
selling 30000 items a day with more than 2
million registered users.
The
rapid
growth
of
e-commerce
industry
has
attracted huge investment in
past years in India e.g in 2011
alone $350 million investment
was done into 57 internet
start-ups which is more than
the collective investment of
the past four years. E-tailing
is the second fastest growing
online commerce segment
after online travel bookings,
say industry experts. In 2011 $3
billion worth of e-commerce was transacted and
this is expected to grow to $20 billion in coming
5-7 years with 12-15% contribution of shopping
through online.
Globally with 100 million users, India ranks
third in terms of total number of users in a
country and this number is rapidly increasing.
Rapid internet penetration and demand in
the tier 2-3 cities and rural parts of India are
fuelling the growth of e-tailing industry. In

22

tier 2-3 cities where there is brand awareness

but no availability of products and services the
demand supply gap is very high which is giving
an opportunity for growth for the e-tailing
companies. Online retailing portals such as
eBay.in, Snapdeal.com, and Naaptol.com are
registering anywhere between 40 and 60%
of their sales from rural areas apart from the
tier II and III cities like Vadodara, Faridabad.
Jaipur, Visakhapatnam, Kanpur and Lucknow.
According to eBay India Census 2010, about
3,296 Indian cities shopped on eBay last year,
of which 2,234 were tier II and tier III cities, and
1,045 were rural towns.
In order to understand the e-tailing business
there are various aspects which are required to
be known which are as follows:
How does e-tailing happen ?
After logging in to the company
website, consumers order the
product that they want after
browsing through the options
available. Goods are delivered
through couriers or any other
logistics partners. Payments
are made either on delivery or
upfront online through credit
cards with links to secure payment gateways.
E-tailing provides advantages for both sellers
and buyers. Buyers are benefited as products
offered on e-tailing websites are usually 10-15%
cheaper than traditional retail stores or shops. A
wide range of products are available to choose
from and sometimes virtual modelling options
are available to help trials in some cases.
Information about the products is easily
available on internet because of which
consumers are sure whether they are buying
the right product or not. It saves time for the
consumers to shop while sitting at home and
not spending time going outside searching and
buying the products and devoting this saved
time into their professional and domestic more
important work.
E-tailing helps companies save substantially
on overhead expenses that include real estate
rentals, staff salaries and store maintenance
expenses, while also saving time. In retailing,
as much as 50% of the initial investment could

go towards acquiring real estate. But, online

retail only asks for brand trust, nothing more.
E-tail gives a wide customer base for the company
as the site can be accessed from anywhere in
India or in fact any part of the world therefore
building nationwide presence for a brand, even
in far-flung places for example Bata boasts of
e-tail sales from the Andaman and Kashmir.
Out of stock chances are low as the goods are
delivered direct from the warehouses.
The basic requirements for an e-tail business
are:Building the Suppliers base- For every business
a good supplier and distributor base is important
for smooth functioning of business. And in
e-tail business where products are almost
always sourced from suppliers
in real time and as and when
the customer places an order
and major part of business is
the delivery of goods building
a good supply chain base
becomes important.
Building
Infrastructure
for
OperationsBasic
infrastructure like company
offices, warehouses at strategic
locations are required for the e-tail business.
Since delivering of goods at consumers location
in an essential part of business tie-ups with
major courier companies is also important.
Use of Information system: Use of technology is
an integrated part of e-tail business. Companies
use sales to predict the inventory levels. All
parts of business unit need to be integrated
to know when, where and which items stock
needs to be replenished. Use of technology to
track the delivered good is also important. The
customer needs to be updated about the status
of his shipment via email or on the website.
Major challenges for E-tailing are :Lack of trust among consumers
Security of online transaction
Many consumers want to touch, feel and trial
products before buying.
In spite of 100 million users, new users may not
readily start shopping online

23

Interview with Mr. Arvind Singhal

About Mr. Arvind Singhal Mr. Arvind Singhal is
Chairman and Managing Director of Technopak.
He has done his Engineering from IIT, Roorkee
and MBA from University of California, Los
Angeles, USA. He has more than 30 years of
experience in the industry. He is a regular
contributor to various national and international
publications that include Wall Street Journal
and Washington Post. He has also been writing
a fortnightly column for Business Standard for
the last 10 years and now a monthly column for
Economic Times. He regularly addresses Indian
and International conferences and has given
guest lectures at leading educational and other
Institutions in India & abroad including Harvard
Business School (USA), Wharton (USA), ESADE
(Barcelona), various IIMs and IITs etc., and the
Vatican (Italy).
Strive: Please let us know your views on the
Governments latest decision to allow 100% FDI
in Single-Brand Retail?
Mr. Arvind Singhal: In my opinion, this decision
taken by The Government is meaningless
because of the riders attached to it. Take the
condition of 30% sourcing from Small Scale and
Cottage Industries. This condition is infeasible
to achieve. Ikea, one of the Worlds largest
retailers for example sources tens and thousands
of products from multiple vendors located at
several locations like China and Europe and
these vendors need to be highly competitive.
If Ikea were to source 30% locally, the vendors
need to have high quality and need to be highly
efficient. If these vendors were to invest more
than US$1 Million in their plant and machinery,
they would no longer remain Small Scale and
Cottage Industries. No Retailer would want to
develop so many vendors. Luxury Brands like
Lleyton Hewitt dont even outsource. Recently,
I read an article about how By law, Swiss
Watches cant be called Swiss Watches as most
of the components are produced and assembled
outside Switzerland. The decision taken by the
Government is infeasible and has no relevance.
Strive: What is your opinion on whether
Government should allow 50% FDI in MultiBrand retail?

Mr. Arvind Singhal: The Government should

allow 100% FDI in all sectors other than those
that are of strategic importance. It hardly makes
a difference whether a foreign player or an
Indian player sells some products. Both have
the same dangers, then why should there be
a distinction between the two. Dumping cant
be done as Indian laws are strong enough to
prohibit them. Companies cant affect pricing
because of excise rules and MRP of products.
Such issues have not happened in any other
country and hence this discussion is irrelevant.
Rather, the policy should encourage small and
medium-retailers against the large Retailers.
Strive: What according to you are the
advantages and disadvantages of allowing FDI
in Retail Sector?
Mr. Arvind Singhal: The decision of allowing
FDI in Retail Sector has no disadvantages. It has
only advantages. Firstly, it will aid in reducing
prices. The country suffers from Inflation and it
can be controlled if the foreign retailers bring
the vendors in India. Secondly, Competition in
the retail sector is good for the consumers.
Strive: Please give us a glimpse of the current
state of retail Sector world-wide and how is it
different/similar to that of India?
Mr. Arvind Singhal: No country has restrictions
regarding ownership. Retail sector is one of

24

the largest employers in the world. There are

fears that large retailers have impact on local
communities. But this has happened only when
these retailers are large and dominant and
hence restrictions have been imposed on them
in the small cities. It has been observed that as
the economy slows down, it has an impact on

consumption which leads to increased stress

among the retailers. In addition, Europe and
USA have started to see an impact of online
retailers as consumers look for cheaper goods.
Hence, the Retail Sector world-wide is not very
good.
Strive: How is the overall environment,
especially from the investment point of view, in
India?
Mr. Arvind Singhal: The overall environment
from the investment point of view in India is
largely subdued. The indicators are not good.
The Index of Industrial Production grew by just
1.8% y-o-y in December 2011 compared to 5.9%
increase in November 2011. There is a lot of
negative news in the market and concern among

both the Indian and Overseas Investors. While

the Government may claim the investment
environment to be good, Investors need Stability
and Good Governance. The Environment needs
to improve.
Strive: What do you think should be the entry

strategy for Foreign Retailers who want to

enter into India keeping into consideration the
various obstacles and challenges faced.
Mr. Arvind Singhal: Foreign Retailers need to
understand that India is a good long term story.
There is diversity in buying behaviour of Indians
and understanding of Consumer Behaviour
is important. This requires a lot of patience
and perseverance. Beyond this, the strategy of
different retailers would be different depending
on their business.
Strive: Do you think that the Present state of
Infrastructure and Supply Chain is sufficient
enough to support the future growth in the
Retail Sector? If no, Please let us know some
recommendations for improvement.
Mr. Arvind Singhal: The state of infrastructure

25

in India at present is insufficient. You can

see that the price consumer pays for could be
200% - 400% of the price that the farmer gets.
For instance, In Punjab, Haryana and Northern
India farmers are dumping potatoes on the
roads. On the other hand, potatoes are available
at Rs. 3-4/ kg in Delhi Mandis and at Rs. 5/kg in
Retail shops. Farmers dont even get Rs. 1/kg for
what they produce. The delta between the point
of production and the point of consumption is
quite significant. This leads to a lot of wastage.
Once the proper Infrastructure is established,
the farmer may or may not get more. But, at
present there is a lot of wastage and middle men
in the Supply Chain which need to be removed.
Strive: Some experts say e-commerce has a vital
role to play in the retail industry ahead. What is
your opinion?

B-Schools you see students focussing on weekly

tests and hence their vision is not long and is
quite measurable. A job is meant to be for years
and decades. But, we see young managers
asking for increments after a few months and
switching jobs in months. Young Managers
want excitement in their life. Any sector has ups
and downs and employers do well sometimes
and not so well at other times. Managers need
to learn and develop their competence slowly
and steadily.
(As told to Rohit Bhagat)

Mr. Arvind Singhal: E-Commerce plays a

significant role in the Retail Sector. In the next
4-5 years, it will be the most dominant form of
shopping. Not just 20-30 cities in Urban India,
but 300-400 cities will go online. The Online
retailers dont face any limitations in terms
of space. Consumers also prefer e-Commerce
as they have to pay reduced prices and it is
convenient for them sitting at home to order
what they want. The prospects of E-Commerce
are bright.
Strive: Please give some advice to Budding
Managers.
Mr. Arvind Singhal: Surely, I would be pleased
to do so. Firstly, I would advise Budding
Managers to become Experts in a particular field
and not just Generalists. By this, I dont mean
specialisation in Finance or Marketing etc. They
should gain competency in an Industry. E.g
the Healthcare Sector is expected to do well in
the next 10 years. Now, the Budding Managers
should learn how to manage the business
issues of Healthcare. They should understand
the Supply Chain of Healthcare which would
be quite different from that of an FMCG, or the
Marketing of Healthcare would be different
from the Marketing of Telecom and similarly the
HR Issues again would be quite different from
those of other sectors. Hence, it is important
to develop expertise in a sunrise industry.
Secondly, I would advise them to not run life
like a 100 metre dash but like a marathon. In

26

Dominos - Story of Success in Retail

Ajay Kaul, CEO
Jubilant Food Works Ltd.

Mr. Ajay Kaul is the CEO

of Jubilant Foodworks
Limited
(formerly
Dominos Pizza India
Ltd.). Mr. Kaul has over
20 years of Experience
in Industries such as
Financial
Services,
Airlines,
Express
Distribution and Logistics
and Food Retail. Prior to
joining Jubilant Foodworks, he was working in
Indonesia as the Country Head of TNT Express
Division. Mr. Kaul has been Whole Time Director
of Jubilant Foodworks Limited since March 14,
2005. He holds a Bachelors Degree in Technology
from Indian Institute of Technology, Delhi and
did his MBA from XLRI, Jamshedpur.
Mr. Ajay Kaul has won CEO with HR orientation
award in Asias Best Employer Brand Award
2010 presented by World HRD Congress, Retail
Professional of the Year 2010 award presented
by Franchisee India and Entrepreneur of The
Year 2010 award, presented by Ernst and Young.

n December 2011,
Dominos
sold
over 5.5 million
pizzas in India, the
highest
monthly
sales so far in the
country. The brand
has enjoyed 31%
same-store growth
and 51% system
level growth in nine
months of FY 201112. Such success has
become a routine for Dominos in India. But
things werent always this way, especially when
the global giant was entering the country back
in 1995.
The competitors were many fast foods like
burgers, street foods like chats and samosas,
south Indian snacks like dosas and also the
traditional food cooked at home.
In fact, Dominos had to shut down in twenty

cities after year 2000. Thus it was operating

100 outlets in the country in 2000, and again
the same number of outlets in 2005, while it
was starting to recover. The major reasons for
this set back were weak operations and supply
chain. Unlike most retail products, the last mile
value addition is very crucial in case of pizzas.
This necessitates the presence of an efficient
and robust supply chain network for the success
of this business. Another issue was an acute
shortage of trained manpower. Add to these the
inadequate cold storage infrastructure in the
country, and quality complaints also entered
the picture.
When Dominos entered the Indian market
through its franchisee Jubilant Foodworks
(erstwhile Dominos Pizza India Private
Limited), it faced a double challenge
1. To create a completely new segment in a
market which was completely alien to the
concepts of pizza as well as home delivery and
2. To establish Dominos as the leading brand in
this segment.
In the beginning, the message communicated
to the people was
Hungry
kya?
Dominos Kha!. The
goal was to ingrain
Dominos into the
psyche of the Indian
consumers
as
a
quality food provider.
All the promotions
including
TV
commercials
reflected the same
message. In fact,
the delivery services
offered by Dominos were not pitched in order
to avoid confusion among the consumers.
This stage can be aptly called Functional
Laddering as the brand was making its way
into the minds of the consumers by fulfilling a
functional requirement hunger relief.
Once the brand had established itself in the
market, the other very important part of its
service had to be highlighted. Thus came a

27

string of TV commercials with the slogan 30

Minutes or Free. The concept itself made sense
to very few people. The pizza had to be delivered
at the consumers doorsteps within 30 minutes
of placing the order, and if delayed due to any
reason, it had to be delivered free. It simply
defied logic due to more than one reasons.
Firstly, giving away free pizzas was not
profitable. Also, given the problems associated
with traffic, bad roads, weather conditions etc.
a lot of pizzas could go out for free.
Secondly, this service could be provided only
in a limited area around each outlet 2.5 km
radius/8 mins drive time (also called Lakhsman
Rekha in company parlance). Thus Dominos
was actually refusing to take orders from the
consumers outside this zone, even if they were
not asking for the 30 minutes or free service but
just a delivery. This was a very difficult task for
any store manager because it contradicted their
fundamental goal
to meet the monthly
targets.
Needless
to say, there were
a few deviations,
especially in the
beginning,
in
complying with the
new rules. But the
management
had
their minds made up.
A very strict militarylike regime was
established to train
the store owners and
their staff members.
Also, a culture of
celebrating the first
free delivery was introduced, which aimed at
getting rid of the stigma one would naturally
associate it with. An interesting rule in Dominos
is that each quarter, everyone in the senior
management has to work in one of the stores as
a staff member. This serves the dual purpose of
understanding the customers first hand as well
as absorbing and refreshing the unique cultural
traits of Dominos.
Apart from combating the operational issues,
i.e. enforcing new rules and developing a
fresh culture, the 30 minutes or free concept
required a robust logistics and supply chain
network. It is worth noting that on an average,

15 minutes go into the preparation of an order.

8 mins are reserved for delivery time, giving
buffer of 5-6 mins for bad trafiic conditions. The
stores locations played a very important role
here and hence they were strategically placed.
Latest softwares are being used to select the
quickest route for each delivery. A happiness
hotline has been created, which can be reached
by the all-India number 68886888, which then
redirects the call to the Dominos store nearest
to the caller. This not only saves the customer
from the trouble of finding the contact number
of the nearest Dominos, but also ensures that
the order goes to the nearest outlet and not any
other outlet. Another problem that cropped up
in the earlier days of implementation was the
occasional delayed, yet non-free delivery.
The reason, not surprisingly, was the kindness
of the customer because of the misconception
that a free delivery would result in penalties

against the delivery guy. To tackle this issue,

every delivery boy was provided with a badge
stating that he would not be fined for delivering
free and was made to compulsorily wear it while
delivering any order.
Despite all these hurdles and complications,
Dominos has been maintaining an impressive
non-free or on time delivery rate of 99.3%.
The remaining 0.7% deliveries do look like
an operational loss, but in reality, this loss
represents a completely justified marketing
expense. The number of free deliveries is
monitored at the CEO level on daily basis.

28

While Dominos was engaged in establishing its

brand and supply chain network, it constantly
innovated to introduce new products - the
cheese burst pizza was named as the best
product launched by Dominos worldwide in
2006. Pizza Mania, or Rs. 35 pizza, aimed at
penetrating the market, was launched in 2008.
The next step was to enter the emotional
space of the consumers mind, i.e. Emotional
Laddering. This step involved showing the
consumers that Dominos provides more than
just food or pizzas, it delivers happiness. The
new slogan was Khushiyon ki home delivery.
The commercials associated with this strategy
highlighted the emotional aspects of happiness
and sharing on any occasion.
Needless to say, the strategy has worked quite
well, and from the mere 100 outlets in 2005,
Dominos is now operating over 400 outlets and
has plans well in place to aggressively grow
year on year.
During this exciting journey in the Indian
market, Dominos also set some other
milestones. Jubilant Foodworks Ltd. is the only
food service company to be listed on the Indian
bourses. Dominos Pizza India was globally
rated amongst top 3 in Operational Excellence,
consecutively for 4 Years by Dominos Pizza

International. It was also awarded as the most

Admired Retailer of the Year: Foodservice
bestowed by Indian Retail forum at the 8th
annual Images Retail Award and has been
recognized as one of the 10 brands that have
changed the consumer behaviour and set new
trends in last decade, presented by Brand
reporter & agency faqs.
Dominos India has also started online ordering
system for pizzas, which serves the following
advantages:
1. Dominos employees do not need to engage
on phone and explain the customers about the
pizzas, add-ons, prices, varieties etc.
2. The customers get the visual descriptions of
the products along with the prices, offers etc.
Apart from making the choice easier for them, it
prompts them to order more.
Around 7-8% of the delivery orders in the
country are being made online and this number
is growing fast.
To add another colorful feather to its cap,
Jubilant Foodworks has already become a
franchisee of the coffee and donuts giant Dunkin
Donuts and will be bringing them to India this
year itself.

29

Retail in China: What India can learn?

Kriti Singhal and Umesh Chopra, PGP 2010-12
Indian Institute of Management Raipur

Abstract
With highly effective government stimulus
action in place, Chinas economy was the first to
rebound from the economic downturn among the
major economies in the world. The official GDP
growth rate reached 8.7 percent, surpassing the
countrys growth target of 8 percent. Chinas
retail industry in particular demonstrated
remarkable topline growth but also suffered
serious margin compression. Although Chinese
consumer confidence fell dramatically as a result
of the global financial crisis, it was boosted again
by the recovering global economy, as well as by
central and local government policies designed
to stimulate domestic demand, maintain growth,
and restructure certain industries. Traditionally
Chinas retail was as fragmented and unorganized
as what is Indias retail in the present times. But
it survived the liberalization in terms of foreign
entry into its market. Indian can learn a lot from
them and perhaps implement before going further
with liberalization.

owned supermarkets emerged. Food retail was

opened to 100 percent FDI in the late 1990s
and global retailers like Tesco, Walmart, Metro
and Carrefour were quick to enter. If we look at
this timeline, the Chinese retail environment
is about 15 years ahead of us. Looking at their
market today might give us a rough idea of how
FDI in retail in India will be in the coming years.
Despite an inconsistent policy environment
and difficulties in tackling with the Chinese
bureaucracy, foreign players have been fairly
successful and have opened almost 3000 stores
in mainly the wealthier coastal cities. Most
are now turning a profit, although only after
adapting to local customs and preferences.
Their outlook is positive and they look to expand
operations significantly in the near future.
However, in spite of this success, they account
for only a tiny fraction of the overall food retail
market. They have been unable to challenge
local retailers like Lianhua, Non-gong-shang
and Wumart for market dominance and it is
unlikely that they will do so in the near term.

fter a recent series of mishaps created by

the Government of India and opposition
alike on the issue of FDI in retail, a
Continuous provoking thought is still there. Are
we overestimating the impact that FDI will have
on the existing Indian retail structure?

Apart from bringing their own expertise

to Chinese shores, their presence has also
benefited Chinese retail indirectly. To compete
with the global players, the incumbents were
forced to improve customer service and product
quality while reducing costs, all of which has
Our retail markets are disorganized but it is vast. led to greater efficiency in distribution and
Is it possible for a single entity like Walmart to streamlined supply chains. The customer has
emerge as a dominant player, even if it has a lot also benefited from more choice at the store and
of luck, unlimited capital and a vast amount of product levels.
expertise? Apart from establishing a full-fledged
business, it would have to fight both organized At the same time, because the market is so
and unorganized local players, who will contest large and growing so quickly, organized retail,
with foreign players in every possible way. whether local or foreign, has been unable to
Havent they shown their efforts by forcing the displace the traditional mom-and-pop stores.
Even today, hypermarkets, convenience stores
government to put FDI thing on ice?
and other examples of organized retail make
To understand what might happen to our up less than half of the urban food market.
structure lets look at a China, historically it Their presence in rural China is much smaller.
had a vast and fragmented retail structure. The The organized sector has been growing rapidly
Chinese began liberalizing retail in the early some estimates put growth at 30 percent
1990s, when the government began dismantling annually but has barely been able to keep
the state-operated system and the first privately pace with the surging expansion in demand,
itself is a consequence of Chinas rapid growth.

30

The organized sector has thus captured a large

proportion of the growth in retail, but has
been less successful in replacing traditional
less-efficient retail networks in their historical
stomping grounds. The retail pie has been large
enough for everyone to get a slice.
China has one of the most lucrative and rapidly
growing retail markets in the world with
the retail market growth at around 18.6 per
cent. Despite the global economic downturn,
Chinas retail sales hit $1.8 trillion in 2009, up
15.5 percent year on year. Some of the major
Chinese retailers are Suning Appliance Group,
Gome Electrical Appliances Co. Ltd, Bailian
Group, Dashang Group. The booming economy,
increasing income levels, deregulation of retail
sector and increased confidence of Chinese
consumer still makes china a lucrative market for
international retail players. The Chinese retail
sector comprises
of almost all the
retail
formats.
The
customary
large-sized
departmental
stores continue
to serve a large
section of the
population. The
hypermarket
&
supermarket
format
of
organized retail is
emerging to satisfy the demand and provide an
alluring shopping experience. The supermarket
chains, specialty & convenience stores are also
blossoming with the change in the consumption
patterns.
According to the data analysis reports, the
growth rate of consumption of China has been
around 6.9%, the highest in the world and is an
indication of the extensive room for the market
growth in the country. In the future, Chinas
retail market will continue to share the benefits
from the fast development of Chinas economy
and increasing personal consumption. The
factors that have primarily contributed are
rapid urbanization, increasing middle-class
population and improving social security
system and moderate inflation helps retail sales

growth.
The retail sector rules and regulations related
to business records, capital investment, fixed
establishment, personnel compensation and
products have been explicitly mentioned by the
Chinese Government which makes the foreign
entry in this sector, a complicated but an
extensively planned venture. PRC government
regulations restrict foreign investment in
certain sectors but offer opportunities in others
such as e-commerce, fuel stations, and drug
retailing. Chinas retail drug sales increase at
an average rate of approximately 15 per cent
and the governments intention to transform the
fuel stations to service stations provide for huge
growth opportunity. Although the licensing
process for foreign investors is very complex and
strict, still the Chinese Government provides its
best support for the development of the retail
industry in the country as exemplified by its
conducive policies. In
its 12th Five Year Plan,
Chinas government
is
committed
to
increasing
the
proportion
of
household income in
the national income
and salary income in
total income. Other
major
initiatives
include boosting the
domestic household
consumption
by
implementing unprecedented policy initiatives
to raise Chinese residents disposable income,
build a well-developed social safety network,
push the development of economic housing and
promote consumer finance.
Another feature of retail sector in China is its
highly fragmented nature and is composed of
many small and medium-sized retailers. The
highly fragmented retail markets in China
provide a compelling opportunity for investors
as each one has different market demands,
consumer behaviors and the competition levels.
Retailers in China need support from efficient
business partners like distribution, Supply
chain management, 3PL solutions, etc.
Something which is very unique to China

31

retail is the channel diversity, with chains

and franchise retailers capturing only a part
of the retail value. Niche malls, for things like
computers, accessories, and parts, or flooring
and wall coverings, are also becoming branded
chains, but they only brand and rent the space,
occasionally distribute or warehouse goods.
They are retail-relevant brand owners but they
do not engage in retail themselves.
The retail might look very lucrative in good
economic conditions. But during bad times it
becomes zero-sum game with big players. In the
year of financial crisis, many retailers focused
on increasing sales volume and shifted their
focus of expansion to IIIrd and IVth tier urban
markets. The central and local government
policies were redesigned to stimulate the
domestic demand, maintain growth and
restructure certain industries.

competitive.
Looking at the story of China retail, foreign
players may not be as much as a threat to retail
as perceived by the media. Foreign players and
Indian players alike have to understand the
cultural and culinary environment of India.
Everybody has to prove that format is helping
Indian farmers and consumers alike. We hope
that we can learn from the struggle and success
of China retail and implement the learnings and
improve the flaws in our system.
References:
1. Delloite: China powers of Retailing 2010
2. Insight (April 2011): Cracking the Chinese
Retail Market.
3. AtKearney (2011): Retail Global Expansion: A
Portfolio of Opportunities

A key point is
that the top 100
chain
retailers
in 2009 actually
underperformed
the sector average.
Their sales totaled
1.36 trillion RMB
(USD 199 billion),
up 13.5 percent
annually,
also
underperforming
the Top 100 increase
in 2008 of 18.4%. The top 100 accounted for 10.8
percent of total domestic retail sales. Within that
group, the Top 10 chain retailers demonstrated
an aggregate sales growth of 10.1 percent, even
lower than the 13.5 percent total sales growth of
the Top 100 chain retailers. The fact that sales
by the Top 100 chain retailers accounted for a
reduced percentage of total sales of consumer
goods, combined with the fact that the Top 10
accounted for a shrinking proportion of sales in
the Top 100, seems at first mystifying in light of
the fact that consumer confidence is increasing
in China, and the Chinese customer has ever
more disposable income to use towards the
purchase of consumer goods. Retailers should
be having increasing success as opposed to
diminishing sales. The reason is that retail
sector in China is becoming more diverse and

32

Quick Fact:
Coffee was not the drink
of choice until Starbucks
came to China. But now,
Shanghai and Beijing
have more than 2 dozen
Starbucks.

Amul : Organized Retail

S.Madhula, PGP 2010-12
Indian Institute of Management Raipur

Abstract: Started in 1946 with the objective of

preventing farmers from corrupted middlemen,
Amul is still striving to provide the maximum
benefits for the farmers through its innovative
methods. Amul has already spurred the White
revolution of India, which has made India the
largest producer of milk and milk products in the
world. Adding to its cooperative union, supply
chain practices, innovative products and ICT
usage, the latest in the row is their Amul preferred
outlets (APOs). They are aimed at effectively
facing the shift that is currently happening in
the food retail in India and the effect of the same
against the milk producers. Amul has already
succeeded in establishing several thousands
of APOs at their preliminary strategic locations
throughout the country within a short period of
time. And now they are aiming to take these APOs
to the neighborhood of each and every customer
before 2020, thus paving way for the second
white revolution in
the country.

ujarat
Cooperative
M i l k
M a r k e t i n g
F e d e r a t i o n
(GCMMF),
the
owner
of
the
Amul brand is so
far well known
in the country
for their successful cooperative network with
interlocking arrangement and Supply Chain
mechanism, where they primarily combined
both social and market development in an
emerging economy.
Every day Amul collects 447,000 litres of milk
from 2.12 million farmers (many illiterate),
converts the milk into branded, packaged
products, and delivers goods worth Rs 6 crore
(Rs 60 million) to over 500,000 retail outlets
across the country. Amul has been credited with
positively impacting the lives of 3.1 million
milk producer member families, 15,760 village
societies, 15 District Unions and of having
the Largest Cold Chain Network in India. Its

founder, Mr. Verghese Kurien is credited with

being the architect of Operation Floodthe
largest dairy development program in the
world. Kurien helped modernise the Anand
model of cooperative dairy development and
thus engineered the White Revolution in India,
and made India the largest milk producer in the
world.
Even countries like South Africa are looking up
to Amul for learning the technical-know how
of such a dairy cooperative model to replicate
the same as they believe that this could be the
answer to the poverty problems faced by their
communities. But in the recent years Amul is
often hitting the headlines for its superior
organized retail efforts. Towards the end
of 90s, RETAIL One of the largest sectors in
India was going through a transition phase.
Particularly the food
retail was facing a
major boom and there
was gradual shift from
the unorganized retail
towards organized in
the same. That was
the time when GCMMF
realized the significance
of organized retail in
the future and in 2002
they opened their first
AMUL
PREFFERED
OUTLET (APO).
The other objectives of opening a APO was to
capture the untapped market of exclusive food
retail outlets in India, to provide the entire
range of Amul products under one roof, to
reach customers directly, and to create a launch
pad for new products. Also Amul studied the
US and European diary markets, where the
big supermarket chains adopted pricing and
supplier strategies that were ultimately creating
a loose-loose situation for dairy farmers. Also
unlike the usual 8 per cent margin to retailers,
they were giving a whooping 15-16 per cent
margin to the modern retailers. And the
situation was only expected to worsen. Thus

33

Amul believed that APOs will be the crucial

instrument in their hands to face the organized
retail boom and also to deliver the total brand
experience of Amul to the consumers, without
depending on the retailers. At present Amul
has around 7000 Amul Parlors and 1000 Amul
scooping Parlors (focused on ICE creams)
throughout the country and most of them are
through franchisee agreements. The Parlors
come under the market penetration strategy of
Amul where it is trying to expand its customer
base in the existing market. Also the new product
development and differentiation strategies of
Amul are tested in these parlors as they serve as
the main launch pad for all their new products.
Amul parlors provide customers with the entire
gamut of Amul products including fresh milk,
ice-creams, pizzas, chaas and flavored milk.
However, they still sell the products at MRP.

continuous innovator is also continuously

working on the social development of the
country by impregnating it in its DNA. After the
brilliant success of Amul parlors and scooping
parlors, GCMMF has now entered in to the quick
service restaurant market with the name Amul
Caf. After getting the green signal from the
test run reports of the two federation owned
outlets of Amul Cafes at Ahmedabad, GCMMF
is now planning to spread the network of cafes
across the country in the coming two years.

Also it has crossed the $2 billion mark (Rs 9774
crore) in turnover during 2010-11 fiscal. It took 33
years for them to cross the $1 billion mark and
just 4 years for bringing it to $2 billion. Thus in a
fast track growth phase, continuing its focus on
retail operations, GCMMF plans to open at least
10 Amul Cafe outlets across the major cities
of Gujarat within this year. After which they
The total contribution of these organized retail are expected to go for a pan-India expansion
stores to the GCMMFs business is 4% with a starting with Maharashtra, Karnataka, Tamil
37% year on year growth rate which shows a Nadu among other markets.
very bright future for APOs. Also Amul is getting
a better mileage from the organized retail set up Amul is also known for its efficient E-Supply
as there is no one to influence the consumer chain management system through the
behavior like kirana stores where shop-keeper Automatic milk collection system units
pushes rival brands that might be fetching (AMCSU) and the Enterprise wide integrated
better margins for him. Apart from conventional application system (EIAS). Each of these parlors
locations like residential and commercial areas, are connected via internet and all of them send
Amul Parlors are also coming up at educational daily reports on sales and inventory to the main
institutions, railway stations, bus stands and system at Anand. Amul has even ventured in
other high traffic locations. They are planning to the e-commerce through the Amul cyber
to have more than 1 lakh APOs to reach the stores where it gives free home delivery for
neighborhood of each and every customer products nationwide for a minimum order of
by 2020, which would basically be nothing Rs.200. Thus the ICT enabled supply chain
but the second white revolution. Amul management practices at Amul are helping
has also planned to increase the capacity in it to have a greater control over these parlors.
existing plants to meet the growing demands of Thus with an impulse to continuous innovation,
consumers. In the recession times of 2009 and effective supply chain & distribution strategy
even now, when layoffs are the common story and appropriate technology, Amul is all set
in all sectors of the economy, GCMMF expects ready to create the second white revolution in
Amul parlors to become a catalyst to give birth India through its organized retail.
to thousands of small entrepreneurs all over
India. This is because any enterprising person
References:
can set up an Amul parlor with an investment
of around Rs1 lakh to Rs1.5 lakh and a shop Business Strategy for complex supply chain :
with an area of 100-300 square feet. GCMMF will story of Amul by Pankaj Chandra, Devanath
provide such entrepreneurs the entire range of Tirupathi
Amul products and help them set up an outlet The e-experience of Amul by Anup Kotla
as per our standards. The franchisee can start www.amul.com
in a small way and then can be expanded as
the business and revenues grow. Thus the

34

Walmart - Operations Strategy

Somya Ranjan Mallick, PGP 2010-12

Indian Institute of Management Raipur

al-Mart Stores, Inc. or Wal-Mart is

an American multinational retailer
corporation that runs a chain of large,
discount department stores. It was founded by
Sam Walton in 1962 and has been recognised as
largest public corporation by revenue, biggest
private employer in the world, and the largest
retailer in the world.
Always Low Prices That is Wal-Marts Slogan
and its business model- Low prices enabled by
operating efficiency and buying power.

costs and improved supply chain management.

Wal-Mart uses advanced data mining technique
like RFID(radio frequency identification) in
order to understand information regarding
usage of customer purchase behaviour. This
has led to increased customer satisfaction
through more accurate forecasting of demand
and lower costs through reduced inventory
and shrinkage by improved matching of supply
and demand. Customer oriented workforce
culture has helped Wal-Mart to provide

Wal-Mart has a distinct competitive advantage

that makes it more successful than its
competitors. Wal-Mart has an effective
and efficient distribution system. They use
cross docking, real time point of sales data
transmission and a centralized hub and spoke
system of warehouses and distribution centers.
Wal-Mart has maintained a strong relationship
with suppliers. They have integrated suppliers
via IT and treats them well in terms of pricing.
Their large This has led to lower distribution

uncompromised good customer service and thus

is more flexible to changing demand and have a
continuous improvement mindset. Finally WalMart ELDP(every day low price) strategy has
improved customer satisfaction by following a
volume driven strategy, low advertising costs
and steady pricing. Wal-Mart uses formats
like Neighbourhood stores which offers a
convenient and quicker shopping experience
for customers who need daily home products

35

and merchandise at ease by using everyday low

prices(EDLP) method.
Wal-Mart has grown and developed over years in
the global operations field as well. It has achieved
this by using the strategy of EDLP, converting
their discount formats to supercenters, and
by implementing one-stop solution through
store-in-store
speciality stores,
introducing
new
product
and services as
per
different
customers
perceptions
and
demand,
using customer
o r i e n t e d
workforce, good
partnership
relationship with
vendors
and
suppliers. Thus
it has successfully gained market share and
attained profitability.
So, the strategy of Wal-Mart is to extend all it
products to every common man and household
possible. It is achieved through wide distribution
network stores spread all over. By doing so,
they bridge the gap between Wal-Mart and its
suppliers, provide empowerment and jobs to
many people.
Wal-Mart in India:
In India Wal-Mart has a joint venture with
Bharti Enterprises. The joint venture has been
established for wholesale cash and carry and
back-end supply chain management operations
that is in line with the government of India. It
operates under the brand name of Best Price
Modern Wholesale store. This store meets the
daily needs of hoteliers, caterers, restaurant
owners, fruit and vegetable resellers, kiranas
etc. The products are available at competitive
wholesale process thereby allowing retailers
and owners to have a low operations cost.
The joint venture also established an efficient
back-end supply chain management operation.
They have established an efficient supply chain
infrastructure that has benefitted farmers and
manufacturers on one end and retailers and
consumers on the other. It has also played an
important role in guiding the famers to be a

successful entrepreneurs. Walmart has been

sourcing a variety of products from suppliers in
India which shows their expertise in sourcing,
supply chain management and logistics.
Wal-Mart scope in India:
The contributions that the organized retail like
Wal-Mart
can
make with more
open FDI in retail
are as follows:
1. I n d i a n
farmers would get
an
opportunity
for better support
and
sustained
agricultural
produce. It will
help in waste
reduction
and
higher efficiency
of perishable food
supply chain. It
also ensures increased food safety and quality
and meet the growing expectations of Indian
consumers for better food hygiene through their
expertise and technology.
2. Since SMEs are the backbone of our countrys
economy, global retail partners can create lots
of opportunity and thereby increase production,
export and employment.
3. FDI in retail can make a real difference with
inflation which is the key economic concern. An
increase in FDI is estimated to reduce inflation
rate by 50 to 70 basis points.
References:
1) http://forbesindia.com/article/magazineextra/walmarts-strategy-through-theworld/6042/1?id=6042&pg=1
2) Operations Management - 5th Edition by
Roberta Russell & Bernard W. Taylor, III
3) http://walmartstores.com/

36

Gurumantras: RFID
Q) Sir, these days we hear a lot about RFID. Q)
Sir, these days we hear a lot about RFID. What
is RFID?
A) Radio Frequency Identification (RFID)
is a short term radio - technology that
communicates information between a movable
and a movable/stationary object.
Q) Please throw some light on the History
behind RFID.
A) The technology behind RFID can be traced
back to the nineteenth century where scientists
Michael Faraday, James Clark Maxwell, Hertz
and Marconi worked on electromagnetic waves
(radio waves). Since one form of Radar is the
combination of Radio broadcast technology and
radar, it is expected that the thoughts of RFID
occurred on the heels of the development of
radar.[1]
During the World War, some crude methods
were used to alert the radar crew on the ground
about the nationality of the planes.[2] An early
work was done by Harry Stockman in his
landmark paper, Communication by Means of
Reflected Power published in 1948. However,
it was only in 1950s that RFID techniques were
further explored and gained momentum.
RFID tags were first used commercially in
1960s by Sensormatic, Knogo and Checkpoint
which developed systems to counter the theft
of merchandise. At that time, they could only
detect the presence or absence of tags; however
the tags could be made inexpensively and
hence were quite effective in reducing pilferage.
These systems were known as Electronic Article
Surveillance (EAS).
In the 1970s, notable advances were realized in
the field but the intended applications were for
animal tracking, vehicle tracking and factory
automation. Mario W. Cardullo claims to have
received the first U.S. patent for an active RFID
tag with rewritable memory on January 23, 1973.
Over the years, technology has been developed
for multiple uses of tags across different
business segments. The latest technology allows
a reduction in the size of circuitry, reduction
in cost of tags, increased functionality and
increased reliability.

Q) Sir, How does this technology work?

A) RFID tags are programmed and data is stored
in the microchip of the tags. The RFID readers
antenna transmits electromagnetic waves on
the tags antenna. The tag sends radio waves
back to the reader using power from its internal
battery or power harvested from the readers
electromagnetic field. The receiver picks up
these waves and interprets the frequencies as
meaningful data.[3] The data transmitted by
the tag may provide identification or location
information, or specifics about the product
tagged, such as price, date of purchase, etc.
The radio frequency used determines the speed
of communication and the range. Low frequency
tags (LF) operate at less than 135 KHz and are
appropriate for short range uses like animal
identification and anti-theft systems. Devices
that operate at 13.56 MHz are known as High
Frequency (HF) devices and are primarily used
in contactless Smart Cards. Frequencies above
900 MHz are known as Ultra High Frequency
(UHF) and are used by major retailers in their
Supply Chains.
Q) How is RFID different from Bar Codes?
A) RFID technology doesnt require direct line
of sight whereas Bar Codes require a direct line
of sight. RFID tags can be read upto a distance
of 300 feets compared to Bar Codes which can
be read only upto 15 feets. These two factors in
addition to the fact that RFID tags can be read
upto the read rate of 40tags/second makes RFID
technology quicker to process and less timeconsuming.
RFID tags are reusable and the information is
alterable due to the read/write nature of the tags.
In a RFID tag, Data can be encrypted, password
protected, or one can include a kill feature to
remove data permanently, so information stored
is much more secure. RFID require minimal
human cost, once the system is set-up compared

37

to Bar Codes which require humans to scan

each code individually. However, RFID tags are
typically more expensive than barcodes.[4]
Q) Where all is RFID used in the industry?
A) RFID is used in the following industries:Animal Tracking In ecological studies, Wild
animals are tracked using RFID technology.
Many pets that were tagged have been returned
to their owners.
Asset Tracking RFID technology is used by
hospitals and pharmacies to meet tough product
accountability legislation.
Supply Chain - WalMart, Target, BestBuy,
and other retailers have discovered that
RFID technology can keep inventories at the
optimal level, reduce out-of-stock losses, limit
shoplifting, and speed customers through
check-out lines. [5]
People Tracking - People tracking system are
used just as asset tracking system. Hospitals and
jails are most general tracking
required places.
Document tracking - Availability
of large amount of data and
documents brings lots of problems
in document management system
along with the financial and legal
implication of losing documents.
An RFID document-tracking
system saves time and money by
substantially reducing the time spent searching
for lost document and the inconvenience caused
due to it.
Government Library - Many government
libraries use barcode and electromagnetic strips
to track the books. RFID technology is used for
reading these barcodes. The advantage of using
RFID over barcode reader is that it can read
multiple items at the same time. This reduces
queues and increases the number of customers
using self-check, which in turn will reduce the
staff necessary at the circulation desks.[6]
Retail In an ideal scenario, RFID readers are
placed throughout the stores including the trial
rooms. RFID tags are used to tag all the goods.
Sales staff is given a small handheld reader
known as wand. The advantages of such a
system would be that the sales staff would have
instant access to all the information related to
a product using the wand. The reader located

around the store can identify buying pattern

which can be used to upsell additional items
to the customer.[7] But, the retailers have to
ensure that they do not intrude the privacy of
the consumers.
It is estimated that the US Retail Industry loses
$180-$300 Million annually because of poor
Supply Chain Visibility, the inability to track the
location of products as they make their way from
manufacturer to retailer. As a result, retailers
are not always able to keep high-demand
goods in stock, or they may have inventory
that they cant move. RFID technology can be
used to bridge this gap and collect information
regarding the movement of goods through
the Supply Chain, hence improving visibility
in multiple stages of the Supply Chain. In
addition, the information collected using RFID
would be more reliable in comparison to that
collected through Bar Codes as the former is
less susceptible to Human Errors. Hence, RFID
provides information that can be used to place
inventory at the right places and
also remove pilferage.[8]
References
[1] http://autoid.mit.edu/pickup/
RFID_Papers/008.pdf (last
accessed 25/1/2012)
[2] http://www.rfidjournal.com/
article/view/1338/2 (last accessed
25/1/2012)
[3] http://electronics.howstuffworks.com/
gadgets/high-tech-gadgets/rfid1.htm (last
accessed 25/1/2012)
[4] http://www.technovelgy.com/ct/
Technology-Article.asp?ArtNum=60 (last
accessed 25/1/2012)
[5] http://www.ti.com/rfid/shtml/apps.shtml
(last accessed 25/1/2012)
[6] http://www.fibre2fashion.com/industryarticle/11/1023/rfid-applications1.asp (last
accessed 25/1/2012)
[7] http://www.bin95.com/case_studies/RFID_
Technology_Applications.htm (last accessed
25/1/2012)
[8] http://www.ftc.gov/
os/2005/03/050308rfidrpt.pdf (last accessed
25/1/2012)

38

Is FDI in Retail Beneficial for India?

FOR
Foreign direct investment in
retail, if allowed, would have
huge implications. After all,
retail giants like Wal Mart have
vast investment capabilities
and Indian retail market is still
Anurag Tripathi
in a nascent stage, with a lot of
PGP 2010-12 potential.
One of the most obvious outcomes of such a
move would be creation of a large number of
employment opportunities in various sectors
namely agro-processing, marketing, sorting,
logistics management and front-end retail.
Another major change would be the elimination
of middlemen, thus enabling the farmers as
well as the factories and industries to get a
better price for their products. At the same
time, the consumers would be offered a better
deal, as is the USP of mega retail chains. They
emphasize on smart procurement and inventory
management to fulfill this requirement, while
maintaining high quality standards through
better technology and experience of foreign
markets, where quality norms are much stricter
than in India. In a broader sense, FDI in retail
would help in checking inflation, resolving the
slow growth rate and bringing an immediate
correction in prices.
The foreign players would certainly invest in
back-end infrastructure including cold storage
chains, refrigeration, transportation, packaging,
sorting and processing. Thus the post-harvest
losses would be minimized. Offering best prices
to the consumers also means maintaining high
supply chain efficiencies. Apart from reducing
wastage of perishable food items, this would
provide the local players a learning opportunity.
Some say that FDI in retail sector would
displace small shopkeepers, but such fears are
mostly exaggerated. We have already witnessed
the harmonious co-existence of supermarket
chains and neighborhood pop-and-mom stores
after the allowance of investment in retail by the
domestic majors. It wont be much different in
case of FDI. Besides, impressive growth in retail
and wholesale trade has been observed in many
countries which approved of FDI in retail. Some
of these are China, Germany, South Africa, UAE
and Thailand.

AGAINST
The biggest threat that FDI in
retail poses is to millions of
small retailers, most of whom do
not have many alternatives for
livelihood. This might further
cause increased social tensions
Sarvagya
in an already poor and yet
developing country like India, PGP 2010-12
where tens of millions are still seeking gainful
employment. The already established supply
chain would be completely destroyed. Though
the consumers might benefit by low prices, the
traditional kirana outlets would close down
owing to the predatory pricing power of the
foreign players. Such decisions must aim at
collective well-being and not based on the
welfare of a specific section of the society. In
fact, FDI in retail would also cause consolidation
of markets, thus making the consumers captive.
Even in the manufacturing sector, jobs would
be lost, as structured international retail chains
would make most of their procurements from
foreign markets. This has been the trend in
almost all the countries which approved FDI
in retail. Besides, comparing India to China
in this regard is inappropriate as the latter is
predominantly a manufacturing economy and
being the largest supplier of Wal Mart, it had
nothing to lose by allowing FDI in retail sector.
On the other hand, India might have to face a
slump in employment in both manufacturing and
retail sectors, leading to a complete disruption
of the current balance of the economy.
The perception that only the foreign retail
giants can create a robust supply chain for
farm produce is incorrect. The government of
India is capable enough to create and manage
the required infrastructure. Another misplaced
idea is that food inflation would be curtailed
by FDI in retail. In reality, food inflation has to
do with supply side shortages and distribution
bottlenecks that have mostly to do with
government policy in each case. It is a derivative
of the paralysis of government and states and
nothing to do with FDI in retail. The enabling
of farm-to-store supply by elimination of the
middlemen is another myth. The fact is that
the existing middle men would be replaced by
bigger, more organized and more prosperous
middlemen.

39

Summer Internship Experience

Ankit Kalra, PGP 2010-12

Indian Institute of Management Raipur

did my summer internship

with Reebok India Company.
I was assigned a project
on Reverse Logistics where
I had to study the backward
flow of materials coming into
Reebok. Reebok sells 4 different
Ankit Kalra
types of products: footwear,
apparels, accessories and fitness equipment.
Each category had different structure of supply
chain system and thus their returns had to be
managed differently.
Product returns will remain an inevitable part
of the customer-company relationship even as
manufacturing continues to improve product
quality. Despite the companys handling costs
and its revenues lost from refunds, the customers
ability to return products has a positive effect
on his future purchases and actually increase
long-term profits. Returns transactions provide
a critical point of contact between the retail firm
and the customer. Whenever a retailer wants to
return an item, the retailer and the manufacturer
usually had points of disagreement on any one
of the following:

Condition of the item

Value of the item

Timeliness of response
Reverse Logistics as a Strategic Weapon
More and more firms have begun to view their
ability to take back material through the supply
chain as an important capability, emphasizing
reverse logistics as a strategic variable. A goal
of almost every business is to lock customers in
so that they will not move to another supplier.
An important service a supplier can offer to its
customers is the ability to take back unsold or
defective merchandise quickly, and credit the
customers in a timely manner.
The billing of RIC was on increase year-on-year,
whereas its sales were only increasing marginally
because of the big rise in the number of defective
items. The customer returns are located back to
the warehouse through two chains. First they
are sent to the head-office for verification and

then sent to the warehouse. Second, they follow

their route back through the distributor to the
warehouse. This required policy changes in the
customer return document. After the returned
products reached the warehouse, Reebok faced
challenges in disposing off the returned items
in order to free up space for the new stock. From
logistics perspective, the issue concerning
all of these activities was how Reebok should
effectively and efficiently get the products from
where they are not wanted to where they can
be processed, reused, and salvaged. Also, it
must decide the final destination for products
inserted into the reverse logistics flow.
I carried on a thorough research on the Reverse
Supply Chain Management carried on in
footwear and apparel industry. It was desirable
to minimize costs associated with product
returns to permit reduced prices to the customer
and provide improved operating margins for the
manufacturer and the retailer. I recommended
policy changes in the customer return system to
realize savings in 4 areas:
1) Reducing the number of improper returns
2) Improving efficiency and reducing validation
overhead in handling proper returns
3) Increasing the transportation efficiency of the
returned goods
4) System inefficiencies
A good system allows the firm to quickly obtain
credit for returned product, which improves
cash flow management through the reverse
logistics pipeline. A company can change
suppliers, liquidate the old suppliers product,
and get through final resolution much more
quickly than if the reverse logistics information
flow is not automated.
The project gave me a deep insight into
the Reverse Logistics flow of materials. I
had to coordinate with many departments
like the IT department, sales department and
the distributor and retailer network to get the
customer return policies in place. My summer
internship was a great learning experience as
Reebok has one of the strongest supply chain
network in place.

40

Book Review : It Happened in India

Dr. Ashwinkumar Narayankar, PGP 2010-12
Indian Institute of Management Raipur

Single and Multi-brand Retail can bring in $10bn

in Front-end
Kishore Biyani on the Government opening
Indias Retail Sector for Foreign Investment
It can be safely said that very few people
understand Indias retail sector better than
Kishore Biyani, and when he says something
about it, it definitely merits some attention. With
the Government flip-flopping on
its decision about opening Indias
retail sector to foreign investment
it might well serve us good to go
back and read about the beginning
of the organised retail in India.
It Happened in India a lucid
and free flowing book by Kishore
Biyani, traces his journey from
childhood to becoming the
Retail King of India. The story
runs smoothly. Do not expect
fantastically dramatic happenings
in the journey. Instead it is a story
of a man who was at the right place, at the right
time with the right ideas. Kishore Biyani (as we
continuously become more acquainted with
throughout the passage of the book) has always
been questioning the status quo. This streak
begins in childhood with his refusal to believe
in religious superstitions and continues along
when he questions the traditional accounting
systems, the business practices of retailers and
the government policy.
The scepticism is aided by the can-do
entrepreneurial
spirit.
This
synergistic
combination gives rise to many new ventures
a dandiya festival, two movies (Na Tum Jano Na
Hum and Chura Liya Hai Tumne) and of course
the Future Group. In the book Kishore Biyani
narrates the genesis for these ideas and his
experiences through them. Failure doesnt bog
him down and he is always on the lookout for
new opportunities.
A self confessed movie buff and a flaneur,
Kishore Biyani likes observing behaviour of the

consumer in a store the most. It is from these

observations that he derives most of the ideas
that he applies in his retail stores. He classifies
India into three groups- India One is the
consuming class, with substantial disposable
income and forms what is usually called the
upper middle and the lower middle class. India
Two or the serving class includes people like
drivers, household helps, office
peons, liftmen, washermen, etc.
They are the people who make
life easier for India One. The
struggling class or India Three
lives a hand-to-mouth existence.
They live on the peripheries of
the consumption cycle and their
needs cannot be addressed by the
existing business models (read
capitalism).
Big Bazaar through its Isse
Sasta aur Achcha Kahin Nahi
campaign
has
successfully
brought India Two into the fold
of Organised Retail. Incidentally it is Kishore
Biyanis objective to capture every rupee in
the wallet of every Indian consumer, wherever
they are be it an Investment Banker living in
South Mumbai or a farmer in Sangli. As large
businesses enter retail space, Kishore Biyani is
not just concentrating on retail but aiming to
capture the entire Indian consumption space.
From building shopping malls, developing
consumer brands to selling insurance, he is into
every business where customer spends money.
Indias retail space is undergoing rapid and
drastic changes. Foreign investment may or
may not be allowed. Large businesses may or
may not expand in retail. Store formats may
change. Non store retailing may have a big dent.
Even Big Bazaar might be acquired by a foreign
retailer. We cannot predict the future. But we
can definitely read about the past.
Ladies and Gentlemen, It Happened in India
by Kishore Biyani is worth a read.

41

Crossword

Across
2. Average number of times a person reached by a message is exposed to retailers promotion.
5. Unplanned shopping area consist of a group of retail stores.
7. Number of distinct people exposed to retailers promotional effort.
8. Retailers operating multiple outlets under common ownership.
10. Selection of merchandise carried by a retailer.
13. Combination of separately owned retail firms.
15. An item a retailer owns with a monetary value.
17. Closing unprofitable stores or divisions.
18. Activities that are trustworthy, honest and respectful for each retailer constituency.
Down
1. The methods, practices and operations used to promote and sustain categories of commercial activity.
2. Projection of expected retail sales for given time period.
3. Graphical representation of the space for selling and merchandising.
4. The retailer sets it`s own standards and measure performance based on them.
6. Stores at a given location compliment, blend with others to get benefited from others presence.
9. Sign used to display a store`s name and/or logo.
11. A method used for storing and remotely retrieving data using deice like transponders.
12. Reduction from the original retail price of an item to meet the lower price of another retailer.
14. Activities involved in selling goods and services to customer for their personal, family or household
use.
16. Action that encompass a retailer`s daily and short-term operations.

42

Solution to Crossword

Team Strive

Rohit Bhagat

Abhijeet Srivastva

Akshay Agarwal

pgp10051.rohit@iimraipur.ac.in
+91-9899956061

pgp11002.abhijeet@iimraipur.ac.in
+91-8109655130

pgp11004.akshay@iimraipur.ac.in
+91-7587208604

Anshu Katiyar

Navjeet Sidhu

pgp11008.anshu@iimraipur.ac.in
+91-7587208608

pgp11030.navjeet@iimraipur.ac.in
+91-7587208630

43

For Details, Contact

Operations and Supply Chain Club

Indian Institute of Management Raipur
GEC Campus, Old Dhamtari Road, Sejbahar
Raipur 492015, India
Email: opep@iimraipur.ac.in