2006! An Indian retail odyssey
Wal-Mart can relax; India isn’t budging! The government’s recent retail FDI approval is a big no-show
Like 2002 was the landmark year for the real estate sector
, 2006 is anticipated to be the year of the retail. In a move clearly aimed at killing two birds with one stone, on January 24, 2006, the Cabinet eased the FDI noose slightly by allowing 51% FDI in multi-product, but single-brand stores. Of course, this allows the nouveau riche, who were waiting with bated breath for the grandiose entry of big labels like Hugo Boss, Chanel, Rolex, Gucci, Tag Heur, Armani, Louis Vuitton & Canali, to now satisfy their penchant for luxury. But then, such high-end brands never anyway needed the FDI approval route to sell their extremely exclusive products.
Whether this move would or would not see a frenzy of investment in mass market retail brands is what is worth analysing. Harminder Sahni, Principal, KSA Technopak is of the opinion that, Indian companies will be “more than happy to have joint ventures, as it will bring in international expertise at no cost and will give them an edge over other Indian competitors.
”Foreign retailers have, for several years now, made inroads into the Indian retail scenario by
setting up wholly owned or even public limited trading corporations. Companies like Nestle, LG, Unilever, Sony, IBM and others have existed since years based on the model of selling their multiple branded products through dealers and distributors, rather than by setting up their wholly owned shops.
The Cafe Nescafe outlets, or McDonald’s joints, or Adidas shops, or LG stores that one sees, are anyway not owned by the original parent company, but by tried and tested key distributors. These corporations would never like to change the already fruitful franchisee arrangements; and therefore for them, single-brand FDI policy is not something to write home about.
But essentially, FDI in retail was never about the above brands, but about global multi-product retailers like Wal-Mart, Tesco, Albertsons and others; and the current move of the government in no way allows these mega-brands to enter India. According to S. V. Phene, VP, Corporate Planning, Westside, “Indian retailers are incomparable to foreign giants and don’t even stand a slight chance.”
As per retail consultancy KSA Technopak, organised retailing in India is about $6 billion, which accounts for just 3% of the overall retail market and is expected to grow by 25% to 30% to touch $23 billion by 2010. Though the current government move seems useless for the giants, on the positive side it could be inferred that this move is a step towards finally opening up FDI for corporations that sell even multi-brand products. Surely, our own Shoppers’ Stop, Big Bazaar, Westside, Pantaloon, Ebony, and others won’t complain; or would they?
Whether this move would or would not see a frenzy of investment in mass market retail brands is what is worth analysing. Harminder Sahni, Principal, KSA Technopak is of the opinion that, Indian companies will be “more than happy to have joint ventures, as it will bring in international expertise at no cost and will give them an edge over other Indian competitors.
”Foreign retailers have, for several years now, made inroads into the Indian retail scenario by
The Cafe Nescafe outlets, or McDonald’s joints, or Adidas shops, or LG stores that one sees, are anyway not owned by the original parent company, but by tried and tested key distributors. These corporations would never like to change the already fruitful franchisee arrangements; and therefore for them, single-brand FDI policy is not something to write home about.
But essentially, FDI in retail was never about the above brands, but about global multi-product retailers like Wal-Mart, Tesco, Albertsons and others; and the current move of the government in no way allows these mega-brands to enter India. According to S. V. Phene, VP, Corporate Planning, Westside, “Indian retailers are incomparable to foreign giants and don’t even stand a slight chance.”
As per retail consultancy KSA Technopak, organised retailing in India is about $6 billion, which accounts for just 3% of the overall retail market and is expected to grow by 25% to 30% to touch $23 billion by 2010. Though the current government move seems useless for the giants, on the positive side it could be inferred that this move is a step towards finally opening up FDI for corporations that sell even multi-brand products. Surely, our own Shoppers’ Stop, Big Bazaar, Westside, Pantaloon, Ebony, and others won’t complain; or would they?
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Labels: ARINDAM CHAUDHURI, IIPM, IIPM INDIA, THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT






