One Person Company (OPC) - The new business format for small retailers in India
The retail sector in India is undergoing transformation due to the changing lifestyle of people. The sector is generally characterised by small retailers who conduct business in a traditional manner. But recently there has been a shift towards modern retailing, since education and exposure to contemporary trends have made the Indian consumer look for more professionalism in shopping. This has prompted many corporations (both Indian and foreign) to enter into this sector with the modern retail formats, such as supermarkets, department stores, shopping malls etc. This trend towards organized retailing can be a threat for small retailers. This article discusses One Person Company concept as a strategy to develop small retail businesses in terms of their corporate status.1. INTRODUCTIONThe retail industry is one of the fastest growing sectors in India. It accounts for over 20% of the country's Gross Domestic Product (GDP) and contributes 8% to total employment (Thambala, 2013). It is currently estimated at around US$490 billion and is projected to grow at a Compound Annual Growth Rate (CAGR) of 6 % to reach US$865 billion by 2023 (India Brand Equity Foundation, 2014). India is the 5th largest retail market in the world and the country ranks fourth among the 30 surveyed countries in terms of global retail development (Retailing Sector Analysis Report, 2013). The retail industry comprises of different segments like food and grocery, clothing and textiles, consumer durables, footwear, furniture and furnishings, catering services, jewelry and watches, books, music and gifts, mobile handsets and others. Food and groceries is the largest category within the retail sector with 60 % share followed by the apparel and mobile segments (Indian Retail Sector: Industry Profile, 2012).The retail industry in India is broadly classified into organized and unorganized segments. Organized retailing refers to modern retailing with multi-storied shopping malls, plazas and huge complexes that offer a large variety of products in terms of quality and price, while the unorganized retailing refers to traditional retailing through small shops. In India, the unorganized segment is very large (92%) and dominates the Indian retail market (Deloitte, 2013). It is expected to grow by 5% and reach US$650 billion by 2020 (Federation of Indian Chambers of Commerce). This segment is generally characterized by small retailers such as owner-operated general stores, convenience stores, kirana shops, street vendors, etc. The sole proprietorship is a common form of business in the unorganized segment. As of 2013, India's retailing industry was essentially owner-manned small shops. The larger format convenience stores and supermarkets are present only in large urban centers in India. In 2010, they accounted only for about 4 % of the industry (Accha, 2013). But in recent years there has been a shift towards organized retailing in India, largely due to increased purchasing power, exposure to western culture, brand awareness, growing middle class and the creation of nuclear families (Handa & Grover, 2012). The growing demand for organized retailing has attracted many corporations into this sector. Large business tycoons, such as the Tata group, the Aditya Birla Group, Reliance Communications etc. have entered into this sector. Indian retail sector has been attracting foreign retailers too. The Foreign Direct Investment (FDI) policy on retail has facilitated foreign retail companies to enter the country. This has created an upheaval among small retailers as they have had to face competition from two sides, one from large domestic firms and the other from foreign retailers (Joseph et al, 2008).At this point, the concept of One Person Company (OPC) recently introduced by the Indian Companies Act 2013, discussed as a possible step to corporatize small retailers by integrating them into the organized segment. Secondary sources of data, i.e. published reports, articles and survey results are analyzed in the paper. …
Impact of Organized Retailing on the Unorganized Sector
The retail business, in India, is estimated to grow at 13 per cent per annum from US$ 322 billion in 2006-07 to US$ 590 billion in 2011-12. The unorganized retail sector is expected to grow at about 10 per cent per annum from US$ 309 billion 2006-07 to US$ 496 billion in 2011-12. Organized retail which now constitutes a small four per cent of retail sector in 2006-07 is likely to grow at 45-50 per cent per annum and quadruple its share of total retail trade to 16 per cent by 2011-12. The study, which was based on the largest ever survey of all segments of the economy that could be affected by the entry of large corporates in the retail business, has found that unorganized retailers in the vicinity of organized retailers experienced a decline in sales and profit in the initial years of the entry of organized retailers. The adverse impact, however, weakens over time. The study has indicated how consumers and farmers benefit from organized retailers. The study has also examined the impact on intermediaries and manufacturers. The results are indicative of the mega-and-minimetro cities around a limited number of organized retail outlets. Based on the results of the surveys, the study has made a number of specific policy recommendations for regulating the interaction of large retailers with small suppliers and for strengthening the competitive response of the unorganized retailers.
India’s pattern of development: what happened, what follows?
India has followed an idiosyncratic pattern of development, certainly compared with other fastgrowing Asian economies. While the importance of services rather than manufacturing has been widely noted, within manufacturing India has emphasized skill-intensive rather than laborintensive manufacturing, and industries with higher-than-average scale (though average firm size within industries is unusually small). Some of these distinctive patterns existed prior to the beginning of economic reforms in the 1980s, and stem from the idiosyncratic policies adopted after India’s independence. These patterns have not changed despite reforms that have removed some policy impediments that contributed to India’s distinctive path. We discuss the implications for India’s future growth. JEL classification: E23, E24, L80, O11, O14, O40, O47