Retail FDI may mean luxury brands

Customers will get better service and price.

The government's decision to allow 51 per cent FDI in single-brand retailing has been welcomed by the industry. However, most are of the view that its impact will be largely limited to attracting more luxury brands.

"We welcome the move. It will only help some luxury brands enter India," said Pantaloon Retail Managing Director Kishore Biyani, who was initially against the opening-up.

Shoppers' Stop Chief Operating Officer Govind Shrikhande, said, "There will be more retail chains and more competition. Thus Indian customers will get better service and price."

As the industry tries to figure out the exact implications of the government's move, there is no talk yet of the "Mom and Pop stores" disappearing, which is one big argument against the FDI in retail, or of franchisees facing threat.

Companies like Starbucks may still prefer the franchisee model as that would be more in line with their business model.

"I do not think the small franchisees have anything to lose though some master franchisees may seek partnership with the international brands," said NV Sivakumar of PricewaterhouseCoopers.

For consumer durable majors LG and Samsung,who have exclusive franchise-owned stores, the shift from the time-tested route looks unlikely right now.

"Since we are not considering a chain of exclusive stores, this decision does not impact us at present," said Girish Bapat, vice-president, marketing, LG Electronics India.

While some brands like Louis Vitton and Fendi are looking for a higher level of control, others are interested in some form of partnership that will help them understand the Indian consumer's mind better, according to Devyani Raman, director, World Luxury Council, India.

"Luxury brands, when they enter a market, need to invest in opening high-quality stores. The high tariff structure means not many people will be ready to partner them," said Ravi Thakran, president, Asia Pacific, LVMH.

Retailers like Ikea, Zara and H&M, which do not take licensing or franchisee route, may look at entering the Indian market. The move may expedite expansion of some brands.

"FDI will allow us to move faster and more aggressively in our retail expansion," said Andreas Gellner, managing director, Adidas India Marketing.

G Kannan, country manager, Swatch Group (India), said, "We can now expand more actively in India as we can now be in charge of the investment."

Arvind Singhal, chairman and MD KSA Technopak, however, said, "It would be unproductive for a multi-brand company to invest separately in its different brands."

Pranay Sinha, president and CEO, Select Infrastructure, pointed out that the brands that wanted to be in India were either already here or on their way through fanchisees.

"International 'retail/manufacturer' brands which may not have considered India so far... can probably do so now," said Raman Mangalorkar, principal retailing, AT Kearney.

Additional reporting with Nayantara Rai, Priyanka Sangani and Prince Mathews Thomas