Foreign Direct Investment in Single Brand Retail and its Impact on Unorganized Footwear Retailers - A Case Study of Hyderabad and Secunderabad

Abstract

India has the highest retail density in the world with over 5 million retail outlets with most of them being small unorganized retailers. India is often referred to as a nation of shopkeepers. Unlike other countries, Indian retail industry is highly fragmented and large chunk of the business is in the unorganized sector. With 100% in FDI in single brand retail being allowed, what could be the long-term implications on the Indian economy in general and on the unorganized retailers is a pertinent question. As far as our knowledge goes, there has been no study on impact of FDI in single brand retail on unorganized retailers and this study aims to fill that gap. The survey was conducted in those places where foreign brand footwear retailers were located nearby to the unorganized footwear retailers (treatment cluster) and also in those areas where the foreign brand footwear retailers are located away from the unorganized footwear retailers (control cluster). The differences, if any observed between the treatment and control sample would help us to know the impact of foreign brand footwear retailer on the unorganized footwear retailers. The foreign brand retailers have no impact on sales and profits of unorganized retailers as the foreign brand retailers' customers are different and the unorganized footwear retailers have regular and loyal customers. The biggest competition of unorganized footwear retailers is stores of similar nature. Presently the foreign retailers and unorganized footwear retailers are serving to different set of customers, but as international experience with FDI in retail suggests, it is only a matter of time that the foreign retailers will be competing with the unorganized retailers directly. Most of the unorganized retailers are upgrading themselves to face up to their competition by refurbishing their store and constantly adding/discontinuing product lines/brands.