The panel discussion on Funding in Retail: Opportunities and Challenges had industry experts discussing on the topic. <\/strong><\/p>\n

$\"Funding$
Moderator: Ambreesh Baliga, Managing Partner, Edelweiss Financial Services; Paresh Parekh, Partner, EY; Vidya Sarathy, Vice President, Lifestyle International; A Gurudutt, Director \u2013 Finance, Levis; C P Toshniwal, Executive Director, Future Lifestyle Fashion<\/p><\/div>\n
Opening Remarks<\/span><\/b><\/p>\n
Ambreesh Baliga, Managing Partner, Global Wealth Management, Edelweiss Financial Services<\/span><\/b><\/b><\/p>\n
Discounting by E-tailers is an area of concern \u2013 but capital is still abundant. <\/i><\/b><\/p>\n
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E- tailing is the \u2018new kid on the block\u2019 and this is affecting the Brick and Mortar (B&M) retailer. E-tailing has raised a couple of billion dollars of capital.<\/li>\n
There is a divide between Brick & Mortar (B&M) retailers and E-tailers; when it comes to the ability to raise money.<\/li>\n
Is e-tailing a threat or opportunity when it comes to raising capital?\n
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B & M \u00a0is USD 500 billion dollar business globally, E-tailing is around 12.6 billion dollar \u2013 I.e., about 22%. Expect e-tailing to reach 70 to 80 bn by 2020.<\/li>\n<\/ul>\n<\/li>\n
There is no difference as far as capital raising is concerned.\n
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B&M need not be threatened. There is a need to Integrate and not \u2018ape\u2019 e-tailers.<\/li>\n<\/ul>\n<\/li>\n
From an environmental perspective, stable government is required for both types of retailers.<\/li>\n<\/ul>\n
<\/p>\n
Impact of Predatory pricing \/ Discounting by e-tailer\u00a0 <\/span><\/b><\/p>\n
A Gurudutt, Director \u2013 Finance, Levi’s India Pvt Ltd <\/span><\/b><\/p>\n
As a strategy, we offer fresh stock through the store and discount \u2018old\u2019 fashion. <\/i><\/b><\/p>\n
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Huge discounts are offered by e \u2013tailers \u2013 upto 13 times what brick and mortar retailers can offer.<\/li>\n
It is a matter of concern. Levis participates in discount only in particular months and that too very cautiously.<\/li>\n
Levis has tied up with Myntra.com – and we do a balancing between the two channels.<\/li>\n
As a strategy latest styles are offered in the B&M channel and \u2018old\u2019 fashion is offered\u00a0 on discount.<\/li>\n
E-tailing should be done in-store to combine best of the two worlds.<\/li>\n
B&M retailer is loaded with costs – real estate which does not exist for an e-tailer and also the low cost of technology. These two costs enable the e-tailer to discount merchandise.<\/li>\n
Lost sales in-store (due to lack of range, size) can be covered up by e-tailing.<\/li>\n<\/ul>\n
<\/p>\n
Entry strategies by Overseas Retailers<\/span><\/b><\/p>\n
C.P. Toshniwal,<\/span><\/b> Executive Director, Future Lifestyle Fashion Limited<\/span><\/b><\/p>\n
To counter the problem of discounting the MRP rule should be abolished.<\/i><\/b><\/p>\n
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Foreign retailers will not go solo in India as an entry strategy.<\/li>\n
To get a feel of the nuances of the local market\u00a0 they will need a local partner. In the absence of this option, they may choose to \u2018wait and watch\u2019.<\/li>\n
No real estate company will succeed as a retail company \u2013 the business is operationally very different for real estate.<\/li>\n
Brick and mortar retail makes it easier for customers to return merchandise; and provide better service.<\/li>\n<\/ul>\n
<\/p>\n
Issues of Funding <\/span><\/b><\/p>\n
Paresh Parekh, Partner \u2013 Tax and Regulatory Services, EY<\/span><\/b><\/b><\/p>\n
Currently, (Brick and Mortar) retail is not getting the same kind of valuation from the stock markets, as e-tail is from the VC \/ PE community.<\/i><\/b><\/p>\n
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\u00a0\u00a0For the purpose of Funding: multiple ways & investors are available; Franchise route \u2013 getting franchising fee; JVs are created for different regions and categories etc<\/li>\n
\u00a0\u00a0\u00a0Once global situations improve and global retailers become strong on their home turf, Indian economy will be back in the reckoning.<\/li>\n
\u00a0\u00a0\u00a0B&M retailer have not died in countries where E-tailer or ecommerce has matured.<\/li>\n
\u00a0\u00a0\u00a0E-tailer in some categories are taking a lead but not in all categories. Retail\u00a0 is not getting the same valuation from the bourses , they are better with seed capital and private equity. Retail should explore the route of NCD for funding.<\/li>\n<\/ul>\n
<\/p>\n
Expectations of the future \/ \u2018Wish list\u2019 for Policy <\/span><\/b><\/p>\n
Paresh Parekh,<\/span><\/b> Partner \u2013 Tax and Regulatory Services, EY<\/span><\/b><\/b><\/b><\/p>\n
Need policy intervention to open up the ECB route for Retail. <\/i><\/b><\/p>\n
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\u00a0\u00a0Future expectations: B&M retailer will still provide some value and hence survive the onslaught of discounting.<\/li>\n
\u00a0\u00a0Powerful brand will not resort to discounting. Issue in the single brand retail is sourcing criteria only.<\/li>\n
\u00a0Overseas retailers do not have a problem with other conditions.<\/li>\n
\u00a0Policy intervention needed:\n
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\u00a0\u00a0ECB should be rationalized for retail sector<\/li>\n
\u00a0\u00a0Multi brand retail should be a National subject and not left to the state to deal with.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n
<\/p>\n
Funding in retail \u2013 Lifestyle Retail\u2019s Approach<\/i><\/b><\/p>\n
Vidya Sarathy, VP \u2013 Group Accounts, Lifestyle International<\/i><\/b><\/i><\/b><\/p>\n
Most retailers look at different models of funding from sale or return, leasing, vendor funding to equity options. <\/i><\/b><\/p>\n
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Follow different models of funding eg. Sale on Returnable basis, reduce cost of rentals, leasing with companies<\/li>\n
Vendor funding: If sale happens the vendor gets paid or he gets the product returned.<\/li>\n
Leasing with the vendor (IT, and other services) instead of banks.<\/li>\n
Completely opting e-tailing is not the right option. B&M retailer will coexist\u00a0 along with e-tailing.<\/li>\n
On the question \u2018whether a retailer should integrate backwards and become a manufacturer\u2019 – Issues of Excise and service tax has to be visited.<\/li>\n<\/ul>\n
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