Retail Chronicles Sept 16, 2018 Issue

RETAIL CHRONICLES Fortnightly Newsletter

| Volume 3 - Issue 5 |

16-30 September 2018

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What is new in 02 Flipkart Walmart deal

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HUL: Pioneer of the Rural Retail Market

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Netflix to HotstarIs the idiot box in its last stage?

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Retail News

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Retail Lab SIMSR K J SIMSR, Mumbai

Contact: +91 8896732500, +91 8449248227 retaillab@somaiya.edu

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What’s new in the Flipkart - Walmart Deal? By SHUBHAM THAKUR Last month on 18 th august when Walmart announced their investment in India’s largest Ecommerce website Flipkart. That decision was not welcomed by Indian traders, their association – Confederation of all India traders (CAIT) filed case against them. They accused Walmart that they’ve violated the norms of investments in marketplace based e-commerce according to the Press note 3, FDI act 2016.

When CAIT appealed in the National Company Law Appellant Tribunal (NCLAT) against Flipkart – Walmart and asked them to explain about their way of doing business in India. The NCLAT, which is also the appellate authority for the Competition Commission of India (CCI), has asked Walmart International Holdings Inc. to file its reply before it by September 20, 2018. It has also given CAIT a go ahead to dig deep for finding more and more proofs regarding malpractice that they have claimed that accused were involved in.

But last month, while clearing Walmart’s acquisition of Flipkart, the CCI observed that complaints about the deal violating FDI rules “may merit policy intervention but that did not fall into this category, and it is likely to not have any adverse effect on competition in India” and that way they have cleared that deal. The deep discounting practices that was the main acquisition in the case earlier was not the matter of present. It is already prevalent in market, so asking question on their business policy doesn’t make sense here.

On replying to CAIT Walmart recently announced that it had complied with tax obligations of its $16 billion acquisition in Flipkart but they didn’t specify the amount which they have paid as tax.

The Authority has given 7 th sept as last date for depositing remaining amount as Withholding tax on deal amount that Walmart paid to shareholders of Flipkart.

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Withholding tax or retention tax is an income tax to be paid to the government by payer of the income rather than by the recipient of the income. Here this withholding tax pertains to the capital gains made by Flipkart shareholders.

According to the provisions by of the Income Tax Law, Walmart had to deduct withholding tax on payments made to sellers and deposit it with Indian authorities on the seventh day of the subsequent month, which was 7th Sept 2018.

There are 44 shareholders that Flipkart has and among them Softbank, Naspers, Venture fund Accel Partners and eBay are significant ones. Co-founder Sachin Bansal also sold his stake to Walmart.

Long term capital gain tax is levied at 20% for the shares sold by foreign investors after 24 months of purchase. However, the law also provides for a taxpayer to pay at a lower or almost zero rate if he is eligible for benefits under the Double Taxation Avoidance Agreement between India and the country from where the investment was directed. The Income Tax department has been reviewing section 9(1) of the IT act, which deals with Indirect transfer provisions, see if the benefits under the bilateral tax treaties with countries such as Singapore – Mauritius, could be made available for foreign investors selling stakes to Walmart. Singapore registered Flipkart Pvt Ltd holds majority stake in Flipkart India.

Now tax officers would look into taxes deposited by Walmart for every shareholder who sold shares in Flipkart. In case of a discrepancy the Department would write to Walmart seeking its response for failing to deposit taxes.

Douglas McMillon President, CEO and Director at Walmart Inc. said they are learning a lot from retail market all around the world and especially from China and India. There is tremendous amount of opportunity in these markets. If it had been some other smaller market, they would have been passed decision of funding but it is India. Moody’s VP Charlie O’Shea had earlier said that as Flipkart is expected to generate meaningful losses for at least next few years, this is clearly investment of Walmart for future.

Reference: https://economictimes.indiatimes.com/industry/ services/retail/flipkart-buy-may-impactwalmarts-net-income-thisfiscal/articleshow/65740188.cms https://www.livemint.com/Search/Link/Keyword/ Walmart%20Flipkart%20deal

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HUL: Pioneer of the Rural Retail Market -By Bharat Gupta It is said that India is not composed of a few hundred cities, but of few thousands of villages According to the provisional data released by Census India, the population of India is 1.3 billion Comprising rural and urban population that is 68.84% and 31.16% respectively. A vast majority of the country’s population resides in rural areas.

Today, the retail sector is witnessing exponential Growth with retail development taking place not only in major cities and metros but also in Tier-II and Tier-III cities including the rural and semi-urban areas. With organized retail increasingly Taking off in India, retailers are fast penetrating rural markets with different models to serve the Shoppers of rural and semi-urban India with many innovative ideas like smaller size products that Appeal to this segment.

The retail market in rural India is highly fragmented and mainly dominated by small and Independent traditional shops. Following are some major retailers, who are, at present, catering to a Rural segment of India, Future group and Godrej’s joint venture Aadhar, ITC’s Choupal Saagar, DCM’s Hariyali Kisaan Bazaar, Triveni Khushali Bazaar, and Mahindra & Mahindra’sShubhlabh. Particularly in Asia, Unilever has pioneered a number of innovations that it has exported to other Regions in its focus on addressing rural market opportunities. Rural continues to be a key area of Focus for them.

During the (2013-14) year, they reached out to 8,500 villages across India, with an ambition to improve the health and hygiene of children, through school contact and mohalla (neighborhood) programmes. Also, they significantly stepped up investment in digital media, which is expected to be the media channel of the future.

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Also, they significantly stepped up investment in It was launched in October 2013 in Bihar and digital media, which is expected to be the media Jharkhand and the service was expanded in other channel of the future. As for rural markets, HUL parts of India. To enjoy the content of the channel the audience has to give a missed call on the toll free has since 2009 tripled its reach in these areas, where it plans to further Expand and strengthen its number 1800-30- 000-123 and in a few seconds the business by adopting the following strategies: with caller receives a call back from the channel offering 20 Minutes of free popular Hindi content. “Khushiyon ki its Shakti initiative, Hindustan Unilever Limited Doli” is a rural marketing initiative launches in three (HUL) pioneered the concept of Training local states – Uttar Pradesh, Andhra Pradesh and women as rural sales agents who sell Unilever Maharashtra. The main objective of the campaign is to products door to door in their communities.

According to the report, HUL primarily enhanced reach out to media dark villages with HUL brand messages and to engage with Consumers deeply to its direct retail Presence in rural areas, adding rapidly change brand adoption metrics. The main aim 17,000 Shakti Ammas (female distributors) in is to change Attitudes of the rural mass to inculcate 2013-14. HUL is also driving the ' perfect village' initiative, through which consumers good personal hygiene and through this create Greater preference for the company brands by are Educated about categories such as association to daily hygiene habits. Underlying HUL’s conditioners, face-wash, body lotions, fabric Conditioners and liquid hand-wash. Kan Khajura success in rural India is a program that requires managers to spend a Month during their first year Tesan, India’s first free and on-demand living in a village. They see how rural consumers live, entertainment mobile radio Channel owned by and Get a firsthand perspective on their needs and Hindustan Unilever Limited. aspirations. That personal experience gives them insights that they could never gain from reading reports or conventional market Visits.

Thus, it can be considered as a beginning of a new era in retail sector of the rural market. With HUL being a pioneer, other companies to follow it’s footsteps to penetrate in the rural context of the retail industry. The competitors of HUL should realize that urban markets are becoming saturated – competition there is growing ever-more fierce. Forward-looking companies like Unilever cultivate an inclusive growth strategy that considers rural consumers as part of their Plans for growth.

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Netflix to Hotstar- Is the Idiot Box in its last days?

By Sagar Anam “Kyuki Saas Bhi Kabhi Bahu thi…” yes the same tone Does this indicate end of the traditional which is reciting in your mind used to be heard at television watching? .

10pm from every house in India in the last decade.

Have we truly reached a point where online Now the times have changed and the tones also, a video is replacing traditional broadcast different tone for every individual, all thanks to the television? online video streaming sites such as Hotstar, Netflix, More than 55% of people watch 2 hours or Amazon Prime, Voot, etc. more of online video streaming, with more Since its start in the year 2015, just in 3 years, than 11% of them watching more than 10 hotstar has increased its customer base to 75 Million hours. But this does not mean that people Subscribers, which is the 24% of the people using have started using online content as a the Internet in India; this also includes those who substitute to the TV. For most people, it is access the internet only for basic necessities like nothing more than an add-on to their whatsapp and facebook. traditional television experience. For most of The reason is the independence to watch whatever the people in US, these 2 hours are an add-in you want, whenever you want, wherever you want to their traditional TV watching of 5 hours a and that too with minimal ads. day.

Not only hotstar which is launched by Star network, below is the list of the channels that have also opted for online streaming: The transition from TV to online streaming Voot - Viacom 18 depends on following three factors: Alt Balaji- Balaji Telefilms The consumer behavior: people want to Sony Liv- Sony Entertainment watch traditional television content wherever Ozee- Zee Entertainment they are, on whatever device. But the Netflix demand for television content anywhere is Amazon Prime also a byproduct of how intrinsic the All these Apps and sites account for almost 44% of smartphone and mobile data have become in the advertising industry, which is even more that the our lives. budget spent on the TV ads in US.

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The Business Model: the content makers are transforming their content from solely dependent on the Ads to a subscription based model like amazon prime and hotstar premium.

Delivery Capabilities( The Broadband Speeds): A major role in the success of the online streaming is dependent on the internet speeds- more the speeds, more will be the viewers- rather, lesser the speed, the number if customers will keep on decreasing, Considering the Indian scenario, the speeds were not up to the mark unless Jio came into picture and that is when the online streaming market started gaining high volumes of customers.

Thus it can be said that the decline in the traditional TV has already begun; according to a study, only 12% people in the US wanted to never cut off their cable connections, meaning 88% of the people want to cut off their connections, provided all the above points are satisfied, but as that is not the case with most of the countries in the world, including US and China, we still have got quite a few years to go before the online video streaming completely replaces the traditional TV experience.

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Retail news at glance Alibaba's Jack Ma to retire from company.

Govt. reaps Rs 10,000 cr. tax bonanza from FlipMart deal.

Traders to launch 90-day protest against FlipMart deal.

China's Tencent may invest significantly in Swiggy.

Samara Capital, Amazon to acquire Birla's retail chain.

Ramdev's Patanjali set to milk the dairy sector.

Redington to retail iPhone XS, iPhone XS Max; Stock jumps 3%.

Retail to etail, festive sales may grow in double digits.

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Our Team Content Head

Raveena Gupta

Junior Team

Retail Chronicles is a bi-monthly newsletter of Retail Lab, the Retail committee of KJ Somaiya Institute of Management Studies & Research, Mumbai. Images used in Retail Chronicles are subject to copyright.

Bharat Gupta Sagar Anam Shubham Thakur

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K J Somaiya Institute Of Management Studies & Research, Mumbai

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