Need to stop slicing the retail category

Customers stepping into any major brand outlets anywhere in the world will find it difficult to figure just where single brand retail experience ends and that of multi-brand begins. In the tough market to make shoppers stay in the outlet, companies aim to make it an experience which cannot be captured through a single brand. So at a conceptual level what is easy to understand becomes fuzzy in the real markets. A multi-brand retail would be any one like Big Bazaar or abroad Tesco, Target or Carrefour that sells a humungous number of brands in one outlet. Similarly an Adidas or a Titan shop is a single brand affair. But even here how does one define a Ritu Kumar outlet which sells more than one brand to differentiate its product lines. Essentially customers shopping for relatively high-end stuff are willing to shell out extra money and that cannot be satisfied through a bare bone outlet sticking to a single line of product.

This is the context to understand the trouble Swedish furniture company Ikea has stirred up with the government. An approval for single brand retail means it can sell only related products including cushions, pillows, rugs and kitchen utensils. Slicing within the retail category when opening the sector for foreign investments is therefore complicated. Worse, in the exercise the government risks doing just the opposite of what is envisaged, which is to tap the potential of the Indian market to foreign investment. Globally retail experts distinguish between a small store and big store but hardly ever between single-brand and multi-brand retail.

More than how Ikea handles its clearances with the Foreign Investment Promotion Board, the government will be better off allowing 100 per cent in foreign investment in multi-brand retail soon, dispensing with the single brand category. Companies can then decide if they need a domestic partner with lower threshold to navigate large investments or would prefer to go it alone.

... contd.

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