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Thursday, 06 January 2011 |
 India’s cash-and-carry business is on a growth chart, as this year companies such as Reliance Retail, Tesco, Metro AG and Bharti Wal-Mart, are aiming to gain a foothold in the market on expectations that the government will open up the multi-brand retail
sector to foreign investment. They plan to open at least 20 cash-and-carry stores in 2011 trebling the number of such outlets in the country. Meanwhile the world’s second-largest and first mass apparel retail chain Carrefour has opened its first cash-and-carry outlet in Delhi. The Carrefour wholesale cash-and-carry is located in the Parsavnath Metro Mall in Seelampur, Delhi. Spread across 5,200 sq. mts, it will house over 10,000 SKUs to cater to professional businesses, institutions, restaurants and local retailers. The move comes almost three years after the retailer opened its office in India and expressed its interest to begin operations here.
The development is a sign of the Paris-based group's strategy to be present in major emerging markets that offer significant expansion and medium and long-term growth opportunities. The opening of the first store marks Carrefour’s entry into the Indian market and will be followed shortly by the opening of other cash-and-carry stores. It wants to enter the multi-brand retail segment in the country and is understood to be at an advanced stage of talks with home-grown retail giant Future Group.
However, the existing foreign direct investment (FDI) policy does not permit multi-brand retailing. India at present allows 51 per cent FDI in single-brand retail and 100 per cent in the cash-and-carry segment, but not in multi-brand retail. Government regulations only allow foreign retailers in the wholesale segment and prohibit FDI in multibrand retail. There is stiff opposition from small shop owners and kirana stores and political parties to further open up the retail sector to foreign players.
The retail giant will aim at fully understanding the modalities of doing business in the Indian market before building the company’s presence in other formats. The Indian retail landscape presents a positive outlook for American and European retail companies. The sector is expected to double to $556 billion by 2014. For the 4th time in last five years, India continues to be among the most attractive countries for retail investment for global retailers as per A T Kearney, a US-based global management consulting firm in its Global Retail Development Index (GRDI) study. FDI inflows between April 2000 and April 2010, in single-brand retail trading, stood at $194.69 million.
Robust economic growth of over eight per cent has attracted global attention and also strong domestic demand has helped the economy withstand the slowdown. Growing spends by the country’s expanding middle class has helped domestic retailers and foreign brands to notch up impressive sales. Shopping malls have sprung across small, medium and large towns to cater to growing consumption in Asia’s third-largest economy.
Accordingly, the world’s largest retailer, US-based Wal-Mart, entered into a joint venture with Bharti Enterprises in 2007 to set up their ‘Best Price Modern Wholesale cash and carry store’ in Amritsar in May 2009. They have four such stores in stores in Amritsar, Zirakpur, Jalandhar and Kota and are planning to open 15 more. Likewise, German company Metro made an entry into the Indian market even earlier, in 2003. It currently operates six cash-and-carry stores in Hyderabad, Bangalore, Mumbai and Kolkata.
There is a huge opportunity for the cash-and carry model in India. The business itself will be worth $22 billion by 2017, according to industry estimates. Perhaps that is why Bharti Wal-Mart and Metro say they will continue in this segment even if the government allows foreign retailers to run multibrand retail outlets. |
