Page 38 - DMGT551_RETAIL_BUSINESS_ENVIRONMENT

Unit 2: Structural Change in Retail Environment

Taking cognisance of the demands made by the industry and the need to give the retail trade a Notes
fillip, the Government is actively considering, removing this restriction. The Ministry of
Commerce has proposed permission for 100% FDI, subject to Government approval on a case to
case basis.
Land & Property Laws are also not very favourable to retailers, particularly the smaller ones.
There is a shortage of good retail space and the rents are very high for what is available.
Only Indians can own property in India. This restricts the entry of foreign players and hence has
a negative impact on FDI.
Stamp duties on property deals are significant (its about 8% in Delhi). The lease alone can cost
upto 6%-10 % of sales, while it is 3%-5% globally, on an average. The initial urban planning of
cities was done with smaller plots, which along with strict building and zoning laws makes the
procurement of retail space difficult. The urban land ceiling and rent control acts have had an
impact on the property markets, leading to exorbitant property prices.
The Labour Laws meant to protect workers are not flexible enough to support modern formats
of retailing. Working hours are restricted, with most shops required to close one day of the
week. The corporation tax is 38% and it would be even higher at 45% for a foreign business.
Essential basic foodstuff is also taxed- 8% on milk. With the introduction of Value Added Tax
(VAT), some of the sales tax anomolies in the supply chain could get corrected over a period of
time.
However, VAT will be imposed at every stage between the manufacturer and the final customer.
This means that the margin paid to intermediaries, including the retailer will also be taxed.

2.5 Socio-Economic Changes

Socio-Economic Development can cause changes in several community characteristics including
demographics, housing, public services, markets, employment and income, and aesthetic quality.
Methods for measuring each of these factors is discussed in the following section.
Development invites growth in new jobs in a community and draws new workers and their
families into the community, either as permanent or temporary residents. When this occurs, the
incoming population affects the social environment in various ways including increased demand
for housing and social services (e.g., health care, day care, education, recreational facilities).
Because residents’ needs depend on a wide range of variables (e.g., age, gender, employment
status, income level and health status), the diversity of service needs are determined not only by
the absolute size of the incoming population but also by the old and new populations’
demographic and employment profiles. As a result, a proposed development may have a
significant impact on the community’s ability to accommodate new residents and adapt to
changes in the social environment for existing residents. Assessing the magnitude and rate of
population change has important implications for community infrastructure and service
requirements and can play a major role in determining social impacts associated with the
proposed development.
Growing communities often attract a variety of new commercial developments including both
free-standing stores and neighborhood or community shopping centers. These developments
provide a community with products, services and conveniences important to the quality of life
of local residents. The challenge to accommodating these types of new developments becomes
one of minimizing losses to existing retailers in the area, such as those downtown, while allowing
the market to respond to the wishes of the increasingly demanding consumer.
To respond to this challenge, community leaders can conduct an assessment of the retail market
with a focus on anticipated market supply and demand by retail category. The intent is to

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