Thursday, June 29, 2006

FDI in Retail -II


Arguments against FDI in Retail

The most important argument against modern retailing and supply chain integration is that it displaces labour in a labour-surplus society. Till such time that we are in a position to create jobs on a large scale in manufacturing and construction, it would make eminent sense to keep on hold any policy that results in the elimination of jobs in the unorganised retail sector.

The primary task of the government is still providing livelihoods and not create so-called efficiencies of scale by creating redundancies. If we assume 40 million adults in the retail sector, it would translate into around 160 million dependents

Opening the retailing to FDI means dislocating millions from their occupation and pushing vast number of families under the poverty line. The Western concept of efficiency is maximising output while minimising the number of workers involved. This will only increase social tensions in a developing country like India, where tens of millions are still seeking gainful employment

Consider a chain such as Wal-Mart with a single point of procurement entering India. Since it already procures huge quantities from China, this make for a massive entry point of China's largely state-owned consumer goods industry into the insatiable market made up of the new consuming elite.

The global retailers would collude and exercise monopolistic power to raise prices and monopsonistic (big buying) power to reduce the prices received by the suppliers.

Clearly, the number of points in favor of FDI exceeds points against it however, asan observer, that makes little and sense and wisely so. What matters is the gravity of these points which clearly indicates that for every argument that is against FDI, there is a point countering it in favor of it.

Our nation is one of the fastest growing economy in the world and any step that needs to be taken has to be with utmost care but is the question of fair play too big here?

UPA govt. would be putting a big question mark on the jobs of many of those who voted in their favor which might be the biggest “against” for FDI however with the introduction of 51% FDI in single brand retailing, Govt. has sent out a positive signal. But does that mean Menzer should start smiling?... well the answer is no, not immediately and when it would be only Govt policies and time will tell.

FDI in Retail -I

Ask 10 selected americans about their purchase store for daily needs or almaost everything they buy and the answer would be Walmart.
Ask any 1o randomly selected Indians and now atleast 5 would say Big Baaar or Spencer’s
The journey from unorganized to organized has certenely started as far as Indian Retail Scenario is concerned, then what would be the net thing that would take this transition to a higher level or as many have argued might even bring down the level playing field for Indian Retailers. The Answer is Foreign Direct Investment (FDI), Unlike other sectors such as insurance, banking, Retailing has not seen the day light as far as the FDI is concerned.

Earlier this year, A.T. Kearney identified India as the top destination for global retailers and with John Meneer making his high profile visit in may emphasizing upon the importance of Wal Mart’s entry in to India, the case for FDI is only becoming stronger. Also British’s top Retail store TEsco’s CEO is epected to visit India later this year, the scene is definitely getting hotter and the pressure on Govt. getting higher to allow FDI in Retail.
To allow FDI in Retail or not is long standing debate and it would only be fair to consider both sides of the coin before coomenting about its future.

Arguments in favor of FDI in Retail

FDI in retail sector to benefit India, says World Bank
Opening up the retail sector to foreign direct investment (FDI) would be beneficial for India in terms of price and availability of products, according to the World Bank.

FDI in retail — A question of jobs, not ownership

AFTER farming, retailing is India's major occupation. It employs 40 million people. A sizeable majority of owner/employees are in the business because of lack of other opportunities. The decade of liberalisation has so far been one of jobless growth.
Since the agriculture sector is over-crowded and the manufacturing sector stagnant, millions of young Indians are virtually forced into the service sector. The presence of more than one retailer for every hundred persons is indicative of how many people are being forced into this form of self-employment, despite limitations of capital and space.
Trade/retailing is the single largest component of the services sector in terms of contribution to the gross domestic product. It accounts for 14 per cent of the service sector, i.e., twice that of the next largest economic activity in the sector — banking and insurance

. Organised retail trade employs roughly 0.5 million people and unorganised 39.5 million. The fact that about 4 per cent of the population is employed in the unorganised retail trade speaks volumes about how vital this business is to the socio-economic equilibrium in India.
In 2004, Wal-Mart had a turnover of $256 billion and it recorded a net profit of $9 billion. Its 4,806 stores employs 1.4 million persons. The average size of a Wal-Mart outlet is 85,000 square feet and the average turnover about $53 million. The turnover per employee is $1,82,000.
By contrast, the Indian retailer had a turnover of Rs 1,86,075 ($4,100 approximately) and only 4 per cent of the 12 million retail outlets occupied space larger than 500 square feet. The total turnover of the unorganised retail sector, which employs 39.5 million persons, was Rs 735,000 crore. India has 35 towns each with a population of over one million. If Wal-Mart were to open, on an average, one store in each of these 35 cities and if each achieved the average Wal-Mart performance per store, the turnover would amount to over Rs 8,033 crore and number of employees to only 10,195.
Extrapolated to the rest of the country, it would mean displacing around 4,32,000 persons. In other words, every new Wal-Mart employee will render 40 retailers surplus. If FDI retailers with deep pockets were to take over 20 per cent of the retail trade, this would mean a turnover of Rs 1,47,000 crore. This represents an employment of about 43,000 persons, displacing nearly eight million persons in the unorganised retail sector.

Indian Council for Research on International Economic Relations (ICRIER) pushes for FDI in Retail
ICRIER has recommended that at least 49 per cent FDI be allowed in the retail industry initially, but since the sector is highly fragmented and domestic retailers are still in the process of consolidating their position, the opening up should be gradual.
Opening up the sector to foreign investment, will actually help the existing retailers on several fronts.
· It would speed up the growth of organized formats in the country.

· It found that organised retailing has significant backward linkages through setting up of supply chains, investment in food processing industry and manufacturing units, increased productivity of agriculture, growth of interlinked sectors such as tourism and IT.

· Consumers have also gained from organised retailing since it leads to lower prices, improves the quality of products and widens the choice of products available to consumers

· It added that since foreign retailers are allowed to enter the market through other routes, the existing ban on FDI has not really acted as an entry restriction. On the contrary, the country is losing foreign investment while the entry process has become non-transparent and complicated.


· All major developed and developing countries have allowed foreign investment in retailing. Some have imposed certain other restrictions (for example, minimum capital requirement, sourcing conditions and so on) while others have opened up the sector in a phased manner to allow the domestic retailers to adjust to the changes. However, the experience of other countries shows that a major part of FDI is now directed towards the retail sector

· The biggest benefit, would flow from higher exports. They point to the Chinese experience.

· The global retailers taken together buy about $60 billion of goods each year from China for exports. Contrast this with India where less than $1 billion of exports are accounted for by global retailers (mostly metro dairy farm). Clearly, the scope of exports through the global retailers is enormous, indeed.

· Entry of sophisticated branded products affects the unbranded mass market only marginally in a vast poor country such as India. Moreover, in malls where the large retail chains set up their stores, typically, there will also be many small shops which will attract people.

· The street-corner shops will have some advantages over big stores located many miles away in shopping plazas. In India, transportation and parking are big problems for people who want to visit shopping malls

· Farmers would get better prices and bigger markets while the consumers would benefit in terms of lower prices, better quality and greater variety. The resultant rural prosperity may open up markets for other industrial goods and help a more balanced regional development as also job creation in other sectors.


Next: Arguement against FDI and conclusion

Thursday, June 15, 2006

My very own One Night @ Call Centre

During my small stint at a call centre, I learnt many things and the following call is one of those great experience....This my One Night @ Call Centre (No relation with Chetan Bhagat ;))

Read On....

I: Hi, this is Ronnie at America Online, how can I help you today?
Lady: I want to speak to your supervisor.

I: Maam I have the complete authority to resolve your concern and let me assure you that I will take care of every thing.

Lady: (Interrupting) I don’t want to speak with u… get me a supervisor on line…

I: Maam I will surely do that for you however first I need to protect your privacy and security (how stupid I would have sounded at that time, I cant even imagine)…in order to transfer this call to my supervisor.

Lady: All right, go on..


I: Fine maam, may I know the…

Lady: (Interrupting)
Well, I want to cancel my account (now before I could proceed with my script, she went on without a pause of breath!)…. You know you guys have cheated me, I called up to cancel my account about an year back and today I receive a bill of 30 dollars!...what u guys think of yourself that u can charge an old lady for a service she never used and she would pay?

(A little pauses lasting not more than few milliseconds and I grabbed that!)

I: I am sorry to hear that maam but I am going to do everything I can to help you, once again, my name is Ronnie, may I have yours….?

Lady: (she gave me some name that matched with the contact on the screen).

I: In order to help you today, I need to pull up your account and ask you a few questions to protect your privacy and security (It’s mandatory to inform the member about privacy and security as per the guidelines), is that ok? (It was more of a verbatim and still I need to read that despite of the fact that she was so irate that she wouldn’t listen to me at all)

Lady: Do it fast, ok?

I: sure Maam, may I know the answer to the account security question that says (some question that I don’t remember now)

Lady: I don’t remember that.

(The verification part took good 15 minutes where she kept on giving wrong answers and became more irate and finally I had to verify her on the basis of her address and phone number after taking permission from my TA (Team Assistant))

I: Thank you for helping me verify your account (Thank you to my TA otherwise I would have died on the floor verifying a non verified account!), Now since you’ve mentioned that you would like to give up your AOL membership today and I can certainly help you with that, are u moving to a high speed. DSL or any other internet service provider (Again a stupid question however being a newbie at the floor, I had to follow the verbatim)

Lady: Where is your supervisor? I want to speak with him. I was on line with some supervisor when the call dropped… now I want to speak to a supervisor.

I: (Since we were not allowed to transfer any call to the supervisor until situation becomes out of control, I continued…). Maam let me assure there is nothing my supervisor would do differently and I have the complete authority to resolve your concern.

Lady: Get me your supervisor

I: Maam..

Lady: (Interrupting)... Supervisor!

I: Yeah but...

Lady: (Interrupting)... Supervisor!

I: I apologize for all the incon…

Lady: (Interrupting)... Supervisor!

Before that may I know the

Lady: (Interrupting)... Supervisor!
Lady: Supervisor!
Lady: Supervisor!

I: (now completely frustrated and perhaps more irate than the lady), All right maam, can I place this call on hold while I transfer you to a SUPERVISOR!

Lady: Alright, do it fast!

I: Thank you (After pressing the hold button, I literally banged my headset and went to look out for my TA. After explaining the whole situation to him, the response I got from his side was “Ramit, you got to learn and handle these situations, there’s nothing which I can do differently, go ahead and give your best shot!”

(Shot! Or get shot?)

However after gaining all the courage in the world, I continued the call
“Thank for being on line maam:

Lady: am I speaking to a supervisor?

I: (Well I almost gave in and thought of saying at that moment in time, but my senses regained conscious and I was saved from committing a blunder)

Well maam He has just left for the day and I just had a look in to your account and it’s not a major issue and I m definitely going to help you with that…

(Silence for almost 15 seconds gave me a hint of silence before the storm)

Lady: Alright, though I don’t think you will be able to do anything here, anyways lets go on..

I: (Relaxed, as if I have got a new life!), Right, thank you so much maam, now may I know your concern please?

Lady: I cancelled my account an year back and still I m receiving charges of 30 dollars from my bank account!, what u think?

I: (This time I interrupted)….Maam give me a quick moment while I process your details..

Lady: Alright

(After going through her records, I figured out that she accidentally reactivated her account 3 months back online)

I: Maam I really apologize for all this inconvenience (and explained her the whole situation)….

Lady: What?, u r trying to say that I reactivated my account?, do I look like an idiot to you?

I: (well yes maam, I would love to say yes!). Maam I completely understand your concern and had I been at your place, I would have felt the same way and let me assure you that you are completely right at your end however there is something which probably we both don’t know, so let’s try and figure that out.

Lady: (This time a little more relaxed) what is that?

(well after going in to rounds of arguments, finally we came to a solution)

I: Maam may I place this call on a hold while go ahead process your request (Actually this is the best way to take a breather and come to your senses)

(After 40 second or so…)


I: Allright maam, lete o ahead and help uoy with this, I will go ahead and canel your account and I will make sure you get your 2 month’s money back in to your account.
(That’s what is allowed as per rules if there is no usage in past 2 months).

Lady: 2 months? You are tryung to say that I will lose out on one month’s fee which u guys took out before asking me?

I: maam I understand your concern however this is the maximum I can do for you.

Lady: Get me a supervisor on line…that is why I didn’t want to speak with u at the very first place


I: Maam according to the federal laws (this is apowerful word we can use and members usually do take it seriously but as u must have realized, this member was different, read on…), this is all I can do to help you and let me assure you that no body else would be able to help you with more than what I m offering to you.

(What that lady says now shook me in and out and actually forced me to share this experience with you all)

Lady: (in a soft voice)… allright go ahead, I understand that you will not be able to help me with third month’s refund. It might be just a financial transaction for you guys…. And believe me; I am not yelling at you all this while, I was irate at your company and not at you….. (Now sobbing). I don’t know what life has in store for me? My husband died last month, I m living alone here and I don’t have (crying loud now...) enough money and these people (this is the first time she separated me from company) have robbed me

(I, in a shock and awe with no idea about what to say and do...)

I: Maam I am really sorry to hear that and I apologize for all this inconvenience and maam I understand that there are few things which are beyond business and money which forms the core of every person’s heart and that is his emotions and as listening to all this, I could feel the pain and the agony and I really feel sorry for not been able to help you, I wish I could do more for you….

(I don’t know how all this came to my mind and I kept on saying..!)

Lady: (Now much calm and soft now….), No sonny (wow that was something touchy)….i understand your point and thank you so much for your assistance. This 5th call here and this is the first time I got to a consultant who could really understand me and help me.
(Now that was flattering!, I wish my TA could listen to all this)

I: Thank you so much maam and this is what I have done for you…. (Recapped the solution and stated in about how n\much time will she get all her money back)

I: Is there anything else mai I assit you with today?

Lady: Not really, u have been of great help and I really appreciate that.

(Read the full disclosure and took a 15 min badly needed break after the call)

Though I don’t work for this call centre any more but I am sure this experience would always remain with me.

Friday, June 02, 2006

India tour of West Indies, 2006 : What went wrong?

Indian team arrived in Carebbean with their heads and hopes high. And why not they had every reason for that as the domestic success against england, winning streak against Sri Lanka and Pakistan gave them the right momentum and confidence to play on the pitches which they will be facing in the Cricket's mega event in less than 9 months....
The first practice match proved the fact that team is on the right track and ready for the challenge.
What followed is something every cricket fan would like to forget but sadly we cant as the turnaround this team has shown from being one of the top contenders for champions to being washed out 1-4 aginst a team which was ranked 7th. As a result the current rank of Indian team in ODI's is 5 against 3 when they started the tour.

So what went wrong?
Was it that guru greg depended too much on its "experiments" in the batting order or the batsmen became too complacent or bowlers couldn't adjust to the conditions? or may be a combination of all.

To start with, the top order didnt fire and failed to provide the start that is ideally required in an ODI. Forget about the instances where Indian team batted first, the series saw the end to the famous world record of winning continuosly while chasing. Middle and lower order that used to sail india out in the time of crisis failed to do so while crisis became a rule rather an exception for the Indian team in this series. The line up falled like a cycle stand. Batsmen like Dhoni, Raina, failed to sore and fell almost evrytime by playing a careless shot.
Dravid decided to open the innings but couldn't capitalise on the starts hence the onus fell on the lower and middle order. Though Sewag did emerged as the saving grace for the team and found his touch back, even he couldn't bail India out when required. Yuvi followed more or less the same lines of sehwag and i am sure he would not forget that last wicket bowled when India needed just 2 runs to win the match. In the these small things matter a lot and he must have realized it by now.

The bowling department looked pale with most of them couldn't bowl at the right areas. Theking of swing, Pathan couldnt take the advantage of the conditions and failed to provide the early breakthrough. He struggled through out the series and even Greg confirmed his disappointment due to non performance! Guess the pain in in his finger has become too much that he has started crying in public now....
The only exception in this department were the duo of Agarkar and Harbhajan and one sees no logic in the selector's decision of dropping the most successful bowler in the series. " Agarkar is more of a one day player" said Kiran More and obviously hardly any one bought this arguement.. well the good news is that Kumble is back in the test team and so is laxman but as i write, he resting back in the pavillion after spending little time on the crease..

I think its high time Greg must revisit his policy of experiments and focus on basics as fielding which was emerging as India's strengths in the recent past looked like a grey area this time.
So coming back to the question "What went wrong?"...the answer would be .."Well almost everything"
Well ODI's are over and now the real "Test" begins and India can save its prestige by winning the longer version...(well with 175/5 at lunch on day 1, its a long way to go...:( )