There was mixed reaction from retailers to Finance Minister P Chidambaram’s announcement that India will open up its $330 billion retail market to foreign investors.
“The statement of the minister had no clear signals as to what the government will allow and what it will not, but if the government lets foreign investment in multi-brand retail as well, Reliance will always welcome that. The move will create a healthy competitive environment that ultimately results in better performance,” Bijou Kurien, president, Reliance Retail, told Indiaretailing.
Asked if this move would have any impact on mom-and-pop stores, Kurien said, “The retail environment in India is as such that both, whether an organised retail chain or a mom-and-pop store, can coexist.” He, however, refused to comment on opposition by small traders.
Even while welcoming the move, HS Sidhu, executive vice-president of Koutons, the “most dynamic brand of 2006” at Images Retail Awards 2007, was also apprehensive as he felt that this could make India a dumping ground for foreign brands.
“We do welcome foreign investment, and whatever the government plans, it would be always for strengthening the economy. In competition, performance as well as quality improves as you get to learn a lot from the competitor. The only thing I fear is that foreign brands might make India a dumping ground for their rejected stocks. We must keep a check on this,” Sidhu told Indiaretailing.
On the other hand, for the upcoming retailer RituWears, which is formulating new strategies to make its place among the corporate retailers, the minister’s statement has come as a jolt, and believes that this move should be kept on hold until Indian retailers are able to carve a niche for themselves in the market.
When asked about RituWear’s take on foreign investment in retail, Samir Sahni, MD, RituWears, said, “I do not think that FDI should be allowed so soon. The Indian retail industry has just started to organise itself and the consumer too is just exposed to a new experience. This is the time when the government should make policies more favourable to the Indian retailers, rather than allowing their foreign counterparts to barge into the industry. The FDI should be kept on hold till 2010.”
Himanshu Jain, CEO of Canary London, a chain of mastige lifestyle brand that is expanding aggressively in central India, is also not in favour of allowing FDI. According to Jain, “This is the time when emerging brands like us have tremendous opportunity to grow. But once more experienced foreign players with loads of dough foray into the market, it will be difficult for us as we have just started to move along a track that some biggies have been treading since decades.’’
While the finance minister has justified the government’s stand by saying that they will patiently educate the mom-and-pop store owners, reactions from the upcoming retailers suggest there’s a lot more that is required to stand by the Indian retail conglomerate.
At present, India allows only 51 per cent FDI in single-brand retail, while 100 per cent foreign investment is allowed in cash-and-carry and wholesale operations. Wal-Mart, for long in the waiting queue to explore India, has already found Bharti as its cash-and-carry partner. Carrefour, the French retail giant, is another one to follow suit.
There may be many more retail biggies who are waiting for more relaxations, and that is what is making small retailers uncomfortable.
– Ranjan Kaplish