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
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
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
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
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.