Adidas gets nod to run one retail, wholesale biz

Clear break from past rules allows firms to operate different businesses as one entity

In a clear break from past red tape, the Centre has permitted the German sports goods maker Adidas to operate fully-owned single-brand retail stores as well as cash-and-carry wholesale business under a single entity.

Till now, companies with more than 51 per cent foreign direct investment (FDI) had to operate under distinctly separate entities for single-brand retail, wholesale and online operations, thereby making it a cumbersome business.

Now, however, the company will have to keep accounting separate for different stream of business, according to a condition specified by Department of Industrial Policy & Promotion (DIPP).

Along with Adidas, another German sports goods company, Puma, had sought clarity and permission from the DIPP earlier this year on moving multiple platforms to a single entity to ease the processes linked to inventory, accounting and taxation.
 

Several international companies want to have a combination of stores - fully owned single-brand and franchisee-run outlets. The wholesale businesses of firms such as Adidas and Puma are meant to supply to the franchisees.

DIPP had, in November 2015, eased the retail sector rules, allowing foreign entities with single-brand licence to have online operations too. But there was no clarity on whether or not the various services could be operated under single entity.

Confirming that Adidas can have multiple platforms under a single registered entity, an official at DIPP said earlier the government had allowed companies to engage in both retail and wholesale trade but they had to apply for the same as separate registered entities.

''However, the government has done away with this practice, as is evident from the case of Adidas," the official added.

THE FDI RACE

2015

• March: Adidas files application to operate single-brand retail stores with 100% FDI
• November : DIPP relaxed rules to allow single-brand retailers with FDI to operate online and have wholesale outlets too. But companies had to maintain separate entities for each platform

2016

• March: Adidas and Puma sought govt permission to have all the platforms under single entity for easier business processes
• July : DIPP allows Adidas to operate single-brand, wholesale and online under one entity, while keeping their accounting separate

Dave Thomas, managing director, Adidas Group India, told Business Standard, "We are delighted on being given the go-ahead to introduce our own retail format stores for Adidas India. India is a key market for Adidas, and we are fully committed and focused to winning market and mind share in the key cities of the country.''

While the consolidated FDI policy does not mention any relaxation to companies regarding registration of separate entities for trading, it does so for manufacturing firms.

The latest amendments to the FDI policy, made public by the DIPP last month, said, "Foreign investment in manufacturing sector is under automatic route. Further, a manufacturer is permitted to sell its products manufactured in India through wholesale and/or retail, including through e-commerce without government approval."

Adidas does not have a manufacturing base in India.

But the India MD had said in an interview to this newspaper in December 2015 that it sources more than 70 per cent from this country for its worldwide operations.

Asked about the company's Make in India plan, he had said, "We have nine to 10 partners across India. We will ramp up capacity.''

The sports goods major wants to launch its first own retail store in India in 2017 and double the business in this country by 2020.