Retail giants aim for India

25 January 2010

NEW DELHI: Many of the world's biggest multinational retailers are seeking to heighten their presence in India, which is regarded as a key future market in a number of product categories.

According to Technopak, the consultancy, just 8% of retail revenues in the Asian nation are generated through the "organised" sector at present, with this figure falling to almost zero in many rural areas.

Despite this, spending levels in the "modern retail" segment have increased by around 20% annually in each of the last four years, and it is predicted that this rate of expansion will be maintained going forward.

Wal-Mart, the discount giant, and Tesco, its UK-based rival, have both established wholesale operations in the rapidly-developing economy, selling goods to traditional traders and domestic chains.

They opted to take this route as foreign firms are not permitted to invest directly in outlets selling products made by more than one manufacturer.

As such, the Indian grocery market is currently dominated by local companies like Reliance Fresh and Star Bazaar, which are operated by two of India's biggest conglomerates, Reliance and Tata.

Raghav Gupta, president of Technopak, said "people who see India as a good market are coming in with the expectation that regulation will change."

Marks & Spencer established a presence in India around a decade ago, initially via a franchise system, with Planet Retail taking a licence to sell its apparel ranges.

However, M&S ended this arrangement in 2008, and established a partnership with Reliance Retail, which has allowed it to make more rapid progress.

Mark Ashman, chief executive of Marks & Spencer Reliance India, said "until you put people on the ground in a country, you are never going to understand it."

"And when you start putting your money in, you start making different decisions. It brings a different clarity, and clout."

Marks & Spencer is hoping to have 50 stores running in India in the next five years, and to increase the number of goods its sells which have been developed specifically for this market to 70%, compared with 39% at present.

"If you've got a market you think is going to be really big, it's worth thinking about what the consumer in that market really wants within the parameters of the brand," said Ashman.

"Local sourcing is a critical part of our strategy to lower prices," he added.

Data sourced from Financial Times; additional content by Warc staff