Era of Modern Retail (in India) begins with FDI

The Indian Retail Industry is the 5^th largest retail destination and the second most  attractive market for investment in the globe after Vietnam as reported by Global Research firm AT  Kearney‘s . The  growing popularity of Indian Retail sector has resulted in growing awareness of  quality products and brands

All Indian households have traditionally enjoyed the convenience of calling up the corner grocery/ Mom & Pop or the “kirana” store, which is all too familiar with their brand preferences, offers credit with door delivery. New Mall based shopping formats are gaining popularity in most cities today, the price-sensitive Indian shopper has reached out to stores such as Big Bazaar mainly for the steep discounts and bulk prices, although most shoppers still prefer the convenience and access offered by the local store.

So how would these Western multi-brand stores such as Wal-Mart and Carrefour strategize their entry into the country and gain access to the average Indian household?

Wal-Mart has already entered the market through its partnership with Bharti, and gained opportunity for some early observations. The company’s entry into China sure must have brought some understanding on catering to a large, diverse market, and perspectives on buying behavior in Asian households. Carrefour on the other hand has launched its wholesale cash and carry operations in the country for professional businesses and retailers. The only ways we see these retail giants gain some quick wins while reaching out to the Indian consumer are-

For one, they will effectively harness their expertise with cold storage technologies to lure customers with fresh and exotic vegetables, fruits and organic produce.

Secondly, they will attract Indian consumer with a range of inspirational global foods and household brands.

Thirdly, by supporting domestic farmers will try ensuring supplies of essential raw materials to them.

Surely, these should engage shoppers’ and farmers interest–but what needs to be seen is whether they can effectively combine these benefits, with the familiarity, convenience and personalized shopping experiences that the local Mom & Pop  or “kirana” stores have always offered.

In emerging markets where FDI has been allowed, it has been observed that organized retail can’t grow beyond a point. The average share of Modern Retail in China is about 25%. Back home where it is open to large Indian corporations, only about 25 to 27% of trade is through Modern Retail. Extensive Market research indicates that an average family does three kinds of Shopping- daily, weekly and monthly. In monthly shopping, people usually buy groceries in bulk from larger stores for better deals. Weekly & daily purchases are top-up purchases and the key driver here is convenience. This is largely driven by door-to-door delivery. Modern Retail will struggle to offer such a facility.

Indian organized retail industry is one of the Sunrise sectors with huge growth potential.

Total retail market in India stood at USD 350 billion in 2007-08 and is estimated to attain USD 573 billion by 2012-13.

India is the second most attractive retail destination‘s globally from among thirty emergent markets. Foreign companies ‘attraction to India is the billion-plus population. Also, there are huge employment opportunities in retail sector in India. India‘s retail industry is the second largest sector, after agriculture, which provides employment. FDI in Retail is a blessing which would lead to massive job generation, inflow of foreign investments in villages, reduce farm wastage, provide farmers’ their due in form of higher prices for their produce and will not have any impact on a traditional Mom & Pop store or ” kirana” merchants in any way whatsoever. The strong back-end infrastructure of organized Retail would help reduce wastage from farm production and improve efficiency of a highly-fragmented food supply chain in India and give the much needed push to small & medium scale manufacturers where they can utilize multi-brand Retail chains as marketing interface to promote their brand among masses.

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