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While Commerce and Industry minister Anand Sharma met the top executives of American retail chain Walmart and UK-based Tesco at Davos to talk about their proposed Indian ventures, back home he’s been playing host to senior officials of the largest online player, Amazon, and coffee chain Starbucks. In short, there are all the signs of a run-up to India becoming a destination for international retail shopping . But, the question mark is on the timing of when the global majors will open their purse-strings and invest in the Indian market, pegged roughly at $500 billion.
Going slow
Industry watchers are pretty certain that big international retail will not make significant investments in the Indian market till the 2014 general elections. The silence of players like Walmart, Tesco and Carrefour about their India plans even five months after 51 per cent FDI in multi-brand retail was allowed tells a story that is not quite in sync with the government's expectations. That not a single application has come from multi-brand international chains shows that they are not in a hurry. They would rather see if the next government is pro- or anti-FDI, in the backdrop of statements made by Opposition parties that they would reverse the decision if voted to power. Privately, even politicians representing states opposed to FDI in retail say “it is a non-issue” and that “no party will roll back retail FDI”, but that’s not much of a comfort for a player making big-ticket investment decisions, especially when the economy is on a downside.
Jaideep Wahi, director (retail agency), Cushman & Wakefield India, said recently that multi-brand retail chains are expected to focus on deliberation and research during 2013 once there is greater clarity on the guidelines. However, there would be action in the single- brand retail turf through the year, according to Wahi.
Echoing similar views, Anshuman Magazine, chairman and managing director of CB Richard Ellis South Asia, says FDI in multi-brand retail would encourage international chains to look at India as a destination to set up their operations, but “all of this is not going to happen overnight”. Also, those willing to take risks are dithering now because of the state-to-state permission that a retailer must take to operate in India. So, if the general euphoria around the multi-brand policy was that it was going to open the foreign investment floodgates, one was mistaken.
Gaining traction
In single-brand retail, the silver lining on the cloud has been the Rs 10,500-crore IKEA proposal to set up furniture stores and cafes across India in a phased manner. Treated as a test case by many, IKEA went through many ups and downs with its application and finally the Cabinet Committee on Economic Affairs is likely to take it up soon for a final seal of approval. While the government is on an overdrive to project that it means business and that its retail FDI measure is bearing fruit, the IKEA approval may attract a string of other big single-brand chains into the India market.
If IKEA has brought the largest FDI proposal in the single-brand format so far, others like H&M and GAP are waiting, it is learnt. While Hennes & Mauritz (H&M), a Swedish clothing fashion giant, is almost ready to apply, American major GAP is actively exploring the market. More immediately, FIPB will take up four single brand FDI proposals tomorrow, worth around Rs 750 crore. These will be for French sports giant Decathlon, US-based accessories firm Fossil, French fashion brand Promod and France –based crockery maker Le Creuset. Of these, all eyes will be on Decathlon, which already has a cash-and-carry business in the country and is now planning to invest around Rs 700 crore in B2C.
In single-brand retail, a couple of other applications from the likes of Tommy Hilfiger for a joint venture and Lotus Arts for fully-owned business are pending with the Department of Industrial Policy and Promotion. More than one year ago, the government raised the FDI limit to 100 per cent in single brand retail, from 51 per cent earlier.
Reflecting the optimism in the single-brand category, Anshul Jain, chief executive, DTZ India, an international consultancy, says the retail sector in India is expected to witness a renewed momentum from retailers in 2013 from both international as well as Indian brands.
Interestingly, it is in online retail, where FDI is barred, that action is persistent. Paul E Misener, global vice-president of American online biggie Amazon, which launched shopping service Junglee in India last year, is in the country, perhaps to lobby with the government for changing the norms.
