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Carrefour's Move Is Symptomatic Of Retail's Tectonic Shift To India

Contributed by Anonymous on Thursday, August 26 @ 09:37:12 CDT

Economy
A news analysis by Manik Mehta

MUMBAI, Aug 26 (Bernama) -- The hullabaloo over plans by French retail giant Carrefour to wind up its operations in Malaysia as well as in Singapore and Thailand should not detract attention from the fact that there is a tectonic shift in the global retail business to strong-growth markets like India.

"I am not surprised that Carrefour is planning such a move.


"The winds in the retail business are changing and moving towards India with its more than one billion consumers and a growing cash-rich middle class hungry for consumer goods and foreign products," Sawant Patil, a Mumbai-based business management consultant familiar with Asia's retail business, told Bernama here.

Carrefour reportedly wants to consolidate its business in some parts of Southeast Asia, and focus on India's booming market.

India is a promising retail market for which foreign retailers are making a beeline to gain entry but Carrefour's Indian unit has - so far, at least - maintained a stoic silence on its future plans for India.

When contacted by this correspondent for clarification about the retailing giant's plans for India, a company spokesman gave a laconic "No comment" response.

India is, however, by no means an easy turf to operate on for foreign retailing companies.

Although it has a burgeoning population of some 1.2 billion and is going to overtake that of China in a few years, its middle-class is about 350 million which constitute a huge reservoir of consumers with a voracious appetite for consumer goods.

This is a major attraction for many foreign retailers who want to be inside this market, even if this category of spenders slips back into poverty if there is a major economic crisis in that country.

Aside from the problem of land which is difficult to get in overcrowded cities such as Mumbai, Delhi and elsewhere, the Indian government's policy on allowing foreign retailers is very restrictive and nebulous, and "full of complexities", as one German retailing agent puts it.

The world's largest retailer Wal-Mart and India's Bharti Group have entered into a joint venture to build their presence in India over the next year and a half, setting up outlets in a number of Indian states such as Karnataka, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh and Haryana.

The activities of the two partners are presently confined to Punjab. The company has plans to set up 12 outlets next year, according to Indian retailing sources.

Carrefour, on its part, has a tie-up with India's largest retailer Future Group to facilitate its entry into that country.

The French retailer is reported to have acquired property for its outlets in New Delhi, Bangalore, Chennai, Hyderabad and Mumbai. The first store is expected to be opened in New Delhi this month.

Aside from Western retailing giants, Asian retailing companies in Japan, South Korea, Hong Kong and Singapore are also closely watching India for opportunities in the retail trade.

The catchphrase for the retail trade is "Go to India or Perish!", as one caption in an Indian business daily screamed recently.

However, foreign retailing companies face a business cultural shock when they first dip their toes in the cold waters of India's retail trade.

Although India allows 100 per cent foreign investment, this is restricted to the wholesale trade. India allows 51 per cent in single-brand retailing but does not entertain any investment in multi-brand retailing.

This has often dampened the enthusiasm of many foreign retailing companies who want "full freedom" to operate in a country whose retail trade, until recently, was confined to the traditional mom-and-pop tiny shops or stalls in traditional bazaars for buying fruits, vegetables and other food products.

Spokesmen of the joint venture between Wal-Mart and Bharti Group have been saying that the retailer would open a multitude of stores if the country opens itself to retail by foreign investors.

India, by one estimate, is inherent with a huge retail volume of a mind-boggling US$450 billion, of which US$25 billion is alone accounted for by organised retail.

It is small wonder that Carrefour and others are pruning or evening closing down completely their operations in Malaysia and elsewhere.

Even in the wholesale sector, India offers good opportunities for those who are willing to work within the tight parameters set on them by the government.

Take the case of German giant Metro which has set up five wholesale Metro Cash & Carry outlets in India and is "very happy" about its operations, despite major issues in the beginning which it now dismisses as "teething problems".

Malaysian - and other Asean - stores could also consider setting up shop in India.

Indeed, Indian and Chinese middle classes are going to replace Europeans and Americans as the global consumers who will drive the global economy, according to the latest study called "The Rise of Asia's Middle Class" released by the Asian Development Bank.

-- BERNAMA

 
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