Home Retail Global retail players eye Indian market, ask for regulatory changes

    Global retail players eye Indian market, ask for regulatory changes


    CapitaMalls Asia, one of Asia’s biggest listed shopping mall developers, organised a forum called Retail Global Connexion in Singapore on October 12. About a dozen prominent retailers from all over the world addressed the audiences, sharing their insights and breakthroughs that turned them into success stories.

    In his welcome note, Liew Mun Leong, Chairman, CapitaMalls Asia, said the company has been investing heavily in developing shopping malls in Asia due to the rapid urbanization of the continent. This is changing the shopping habits of consumers and driving the need for modern, well-managed shopping complexes.

    Liew stressed that Asia, particularly China, has to correct the global imbalance of trade with the Western economies by increasing their domestic expenditures. “If China’s current domestic expenditure of 33.8 percent of its nominal GDP of US $6 trillion is increased to, say, 50 percent, the increase in domestic spending will be around US$1 trillion,” he said. “Urbanites are slowly changing their shopping habits to buy domestic necessities in modern malls. If this trend continues, we estimate that China alone will need something like 12,000 additional shopping malls to cope with this change.”

    Liew noted that shopping malls are much more than mere buildings. “They are a symbol of the aspirations of the community they serve. They are big crowd pullers. They inspire people to work hard to attain the goodies that they showcase and achieve economic success.”

    Talking to IMAGES Retail, Manel Adell, CEO of the Spanish casual clothing brand Desigual, who spoke at the event, said he expects the Asian region to keep growing at a high growth rate because of the demography factor. “We think we have a huge opportunity in Asia to expand,” he said. “Our strategy is to first test all the markets in a particular region and then decide which ones to support with capital expenditure.”

    To test the waters, Desigual has been running a total of five stores in Singapore and Japan. Now it is looking for a faster growth path. “We are actively considering countries such as China, Hong Kong and Taiwan to set up company-owned stores. In the rest of the South East Asian countries, we are looking for partners. We have however, not yet started with India, but that will happen once we have increased our presence in Asia,” Adell said.

    According to him, the colorfulness and style of Desigual’s clothing – which is known for its patchwork designs – will go very well with the Indian market. “But India still has many barriers of entry in place for a small player like us. We need to understand the Asian market more by expanding in different countries of the region and then we will look at entering the Indian market with a local partner. For example, the agreement that Zara has done with the Tata Group sounds very interesting to us. It is likely that we will consider a similar arrangement with a local partner in India,” he added.

    Hirotake Yano, President of the Japanese 100-Yen store-chain Daiso who also spoke at the event, revealed to IMAGES Retail that the company is actively looking to enter the Indian market and has been in talks with Mukesh Ambani’s Reliance Retail for the last three years for a joint venture.

    CapitaMalls Asia has been in India since 2006 but the pace of development could be faster, felt the company CEO Lim Beng Chee. “The pace is probably a bit slow in India, unlike China. We started with a project in Shanghai in 2003, and went in in a bigger way immediately after China entered the WTO in 2005, which is not far from when we started in India in 2006. Today, we have 55 properties in China, whereas we have nine projects in India – two have just opened and there are still seven under construction. When we first started out, we had about 50 to 60 employees and today, we have over 2,700 employees in China. So you can see the different pace of doing business between the two countries.”

    Lim said this has to do with the overall business environment, the openness of the economy and the receptivity of the government for foreign investment. “But we believe that India is a market that will eventually open up.” He remains optimistic about the Indian market, especially the young generation that is full of aspirations for a better lifestyle. “That is why we are investing a lot of resources to understand the business and to grow the people here in India,” said Lim.

    According to Kevin Chee, who heads CapitaMalls Asia’s India operations, the company has until now invested around US$80-90 mn in the Indian market. It is involved in nine projects in cities such as Bangalore, Hyderabad, Mangalore, Mysore, Cochin, Udaipur, Jalandhar and Nagpur. Two malls – in Udaipur and Bangalore – are currently operational while others are under development.

    “Organised retail has come a long way in India but still has a long way to go” said Kevin. “Unfortunately the country has a deficit of retailers. You go to most malls and you will find almost the same group of retailers. As a mall developer, finding enough good retail brands in India is a challenge. India presently does not have the same depth of brands like we see in China, Singapore or Hong Kong, but it will eventually get there. Once FDI in retail is relaxed and per capita GDP picks up, there will be a boom in the retail industry. New retailers will enter the country and more local brands will emerge, who all will need to house themselves.”

    Kevin said the young and growing segment of population in the age group of 25-35 years is a big driver of sales in India but there are regulatory issues that are not allowing the retail sector to reach its full potential. “Getting development sanctions take a lot of time. Anything that would quicken the pace of approvals and make the process more transparent would be welcome. Another regulatory change needed is a relaxation of FDI policy in retail which will be a catalyst for the industry.”

    He said foreign investors are constrained in India by what they can invest in. The Indian government currently allows foreign real-estate developers to invest in Greenfield projects only. “If we are permitted to invest in existing projects, it will give those of us in the real-estate development business an extra boost,” he added.

    According to CapitaMalls Asia officials, the company has a policy of helping budding entrepreneurs by giving them exposure at its malls and facilitating expansion of retailers to other markets where it has properties. It has successfully introduced retailers such as UNIQLO, Watami, Daiso, Best Denki, Challenger and Samantha Thavasa into its malls in Singapore, China and Malaysia. “Many entrepreneurs have good ideas but lack the execution ability. At the most difficult time, they give up,” Lim said. By introducing new concepts into its malls in India, CapitaMalls Asia hopes to encourage budding retailers in India and promote the emergence of new players in the market.

    Many retailers presented their views and strategies to audiences at the Retail Global Connexion. Adell of Desigual revealed how the company managed to grow 50 times in just 8 years, while Yano spoke about the rapid growth of Daiso from a street vendor selling 100-Yen products to become the largest such chain in Japan. Hong Li, Chairman& CEO of Country Style Cooking, shared with the audiences how she turned Chinese food into a fast-food concept that gradually grew to become China’s largest food and beverage company listed on the New York stock exchange.

    Also present were Singapore retailers such as Lyn Lee, founder of Awfully Chocolate; Richard Eu, Group CEO of Eu Yan Sang International; Jeric See, founder of Jeric Salon; and Peter Lim, President, Soo Kee Group.

    CapitaMalls Asia has a total of 96 shopping malls across 51 cities in Singapore, China, Malaysia, Japan and India, with a total property value of around 26.5 billion Singapore dollars and a total gross floor area (GFA) of around 78.9 million sq. ft. Fifty five of the company’s malls exist in China alone, followed by 20 in Singapore, 9 in India, 7 in Japan, and 5 in Malaysia.

    -Sanjay Choudhry in Singapore