With a booming economy, Indians’ aspiration levels too have risen. More and more Indians are hitting foreign shores. They come back with seamless shopping experiences that they find missing in India. But the situation may soon change. India may soon be home to destination stores similar to those in the United States.

Last week, Union commerce and industry minister Kamal Nath, while speaking at The Indian Express-hosted Idea Exchange, expressed the Government’s positive attitude to foreign direct investment (FDI) in multi-brand retail in a “segmented” manner.

“The Government may undertake segmentation (in multi-brand retailing) so that sectors like electronics, apparel and footwear, which do not affect retailers in the unorganised sector, can be opened gradually,” he said.

FDI in Retail

Currently, the Government’s foreign direct investment policy does not permit FDI in the retail trade, except in single-brand retail where FDI of up to 51 per cent is allowed with certain riders and prior Government approval. The riders are:-

• Products to be sold should be of a ‘single brand’ only

• Products should be sold under the same brand internationally

• ‘Single brand’ product retailing would cover only products that are branded during manufacturing

However, the FDI policy allows for 100 per cent FDI in wholesale cash-and-carry operations, which basically serve the needs of big retailers, corporate houses, traders and small businesses. Wal-Mart, the global multi-branding retail giant, has entered India through a joint venture (JV) with its Indian partner, Bharti Retail Private Limited, in wholesale cash-and-carry operations. Others, like Tesco, have so far stayed away due to FDI restrictions. The Government, in a written statement in the upper house of Parliament, said that investment of $3.31 million has been approved through the single brand route so far. The Government’s experiment with single brand retailing has been successful so far, inviting no opposition.

On the same occasion, minister of state for commerce and industry Ashwini Kumar stated, “Products sold under single brand retail with FDI cater to the brand conscious, young, middle-class clientele having a different niche as compared to that served by small traders. Hence, FDI in retail trade of single brand products is not expected to affect existing small traders.”

Segmented multi-brand retail

Conscious of the recent incidents in which small traders and intermediaries protested against the entry of domestic retail giants into fruit and vegetable retailing, the Government is cautiously addressing the issue of opening of FDI in these segments.

“Retail in electronics is not the retail which will upset the neighbourhood store or kirana store. Similarly, retail in sports goods will not upset anybody. So there is a difference. Retail in electronics, sports goods or stationery are things that do not affect any kirana store but create a chain,” Nath pointed out. Realising the need to address these specialised “segments”, domestic players — the Future Group, Reliance Retail and Subhiksha — are entering the huge market to address these gaps in segmented multi-brand retailing. The Future Group recently opened its first licenced Staples store to address office stationery requirements and technology.

“In India, office supplies are a Rs 40,000 crore market that covers technology and office requirements. It is a large market that no other player had looked into,” said Pantaloon Retail CEO (future retail) Rakesh Biyani. The Group is already looking at making a foray into ethnic wear and the health and beauty segments, segments which have limited organised players.

Similarly, Vishal Retail Limited, which had a presence only in the hypermarket format so far, is looking at venturing into specialised segments. “Specialty stores are very limited right now. There are certain gaps like specialty stores for apparel, watches and luggage. There are gaps even where variety and price is concerned,” said Vishal Retail Limited chairman and managing director (CMD) Ramchandra Agarwal.

The company intends to enter every category — liquor, jewellery, accessories, FMCG and apparel, said Agarwal. “As the purchasing power increases, consumption will increase, triggering the requirement for a store in every format,” he summed up.

Desperate Housewives

• Multi-brand retail in select segments not to affect small traders

• Domestic players looking to plug existing gaps

• Indian economy booming; aspiration levels rising

• Increasing purchasing power triggering requirement for stores in every format