Naturally, the large players will prefer to go there and put up their shops by sourcing their supplies from the places convenient to them, further states the Paper. Some of the key areas in which retail boom will prevail in towns beyond metros and even large cities will include food items, FMCG products, grocery, sportswear, outerwear, tailored clothing, eyewear, watches, footwear and accessories and the like.
The retail business that will pre-dominantly stay with malls put up in metros and large cities will include apparel, pharmaceuticals, luxury goods and consumer durables, says the Paper. The Paper has suggested that changes should be brought about in Agricultural Produce Marketing Committee (APMC) Act (a key contributor to the large number of intermediaries) such as the introduction of contract farming and allowing direct procurement from farmers by retail owners so that a direct chain is established between the user and farmers for their equal benefits.
It also highlights, pointing out that even in the case of non-agricultural products such as apparel, FMCG and general merchandise, the situation is far from ideal. The key cause for inefficiency is the poor integration between the retailer and supplier. None of the retailers, in view of ASSOCHAM has so far an automated system for information exchange with their suppliers.
In developed countries, retailers practice Vendor Management Inventory (VMI) systems, where the supplier has access to the point of sales data of the retailer and plans automatic replenishments responding to the stocks available at the retailer. On the other hand, best practice retailers globally have implemented techniques like milk runs – having continuous orders to suppliers as the inventory depletes and doing multiple small lot shipments from the supplier to stores.
Non-uniform sales tax laws in India further result in higher distribution costs for retailers since the latter need to maintain infrastructure for state level procurement and distribution rather than a more efficient regional/ national model.
The Associated Chambers of Commerce and Industry of India
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