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Retail Chains Scramble to Enter Indian Market
NYTimes.com
Clamoring to enter India's red-hot retail sector, the world's largest chains, including WalMart, Carrefour and Tesco, are seeking the best way to enter the country, despite a government ban on foreign direct investment in the market.
With China's retail sector already open to foreigners, experts said these chains see India as the last retailing frontier left. More than half of India's 1.1 billion people are under the age of 25, and their disposable incomes are rising in a country where the economy is growing on average 8 percent a year. India's $300 billion retail market is growing even faster, at about 30 percent annually.
"India is the hot spot for large international retailers," said N. V. Sivakumar, an executive director who leads the retail industry practice with the consultancy firm PricewaterhouseCoopers in India. "They cannot afford not to be here."
What has increased the urgency for foreign retailers is the substantial investments recently being made by large Indian businesses, like Reliance Industries, the country's largest private energy firm, and Bharti Airtel, its top cellular services firm.
Wal-Mart Stores has already initiated talks with DLF Universal, the country's largest real estate developer.
"We are in the midst of discussions," confirmed Anup Roy, a spokesman for DLF, who declined to comment further.
Meanwhile, Micky Jagtiani, chief executive of the Landmark Group, based in Dubai, confirmed in a telephone interview that it was negotiating with Europe's largest retailer, Carrefour.
Last week, Bharti Airtel indicated that it was in talks with Wal-Mart, Carrefour and Tesco to set up a retailing joint venture.
The government's investment policies are restrictive, allowing only single-brand retail stores, for instance, as a means for foreign investors to enter the retailing market. So foreign retailers are trying to partner with Indian firms as a way to comply with the law, Mr. Sivakumar said.
These large Indian players will eventually want a controlling stake. But if foreign investors wait for the rules to change, it might be too late, said Raman Mangalorkar, head of consumer and retail practice in India at a consultancy firm, AT Kearney. Moreover, a local business partner can help navigate the challenges of doing business in India, he said.
In addition to growth, India's retail sector is attractive because of the many family-run, street corner stores, which have 97 percent of the nation's business.
But this industry trait is precisely why the government makes it hard for foreigners to enter the market. Politicians frequently argue that global retailers will put thousands of small local players and fledgling domestic chains out of business.
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