by Paul Goater | Comments: 0
Walmart, Tesco and Carrefour have been eyeing up India’s retail pie for years. Last month, it looked like they could sell direct to Indian customers – and take their slice of this $1.3 trillion pie. Last month, the pie was snatched away again.
On Thursday 24 November, it looked like years of campaigning by global supermarket chains had paid off.
At last, the ban on foreign direct investment (FDI) by multi-brand supermarkets had been scrapped. They could now own a 51% stake in their Indian outlets and sell direct, not just wholesale. The country’s retail pie – which The Associate Chamber of Commerce and Industry in India expects to be worth $1.3 trillion by 2018 – was finally in their grasp.
On 3 December 2011, this $1.3 trillion pie was snatched away again.
The World’s Biggest Untapped Retail Market – Still Untapped
The Indian Government had revoked its decision.
Politically vulnerable, it couldn’t withstand the pressure exerted by millions of small, family-owned kirana stores who were worried big multinational supermarkets would jeopardise their livelihoods.
But it’s not just multi-brand retailers that lost out on what Times magazine calls “the world’s biggest untapped retail market”.
Single-Brand Foreign Retailers, Like Nike, Also Lost Out
Brands like Levi Strauss & Co, Nike, Reebok International and Marks & Spencer have been in India for years. But they’ve only been allowed to own up to 51% of their stores. The proposed bill had offered the tantalising prospect that their ownership could increase to 100%.
This would have allowed them to extend their operations – and make big profits from Indian consumers who are increasingly middle class and increasingly into big brands.
International Retailers’ Desire to Feed Indian Consumers’ Hunger
Even back in June 2006, John Menzer, then president CEO of Walmart’s international operations, was eyeing up Indian’s middle class. He told shareholders and analysts, the Indian “consuming class has grown from 35 million families in 1996 to an expected 80 million [in 2005].”
This is a similar proportion to the US, and shows just how enticingly lucrative retail – India’s second-biggest industry sector – is.
The $1.3 trillion question: what’s next for foreign retailers in India?
But will foreign retailers and brands (including your brand) ever get to have a proper bite of the Indian retail cake? It’s the $1.3 trillion question. And when we know the answer you’ll be the first to know.