Is organised retail getting anywhere in India?

22 February 2008

Exploring divergent views on the Indian retail landscape, Mohini Bhatnagar evaluates why some well known global retailers are steering clear of all the hype and hoopla generated by the companies attempting to leverage the 'growing' retail market in India.

While the Wal-Mart, Bharti Enterprises joint venture is heard making upbeat plans of starting cash and carry operations in India by the end of the year, another global voicing different views.

Speaking at a Technopak summit in New Delhi, Swedish firm IKEA's property and establishment manager Staf Lenders said he was not impressed by the big investments happening in India in the retail sector. He added for good measure that the Indian retail market was flawed and that it is not even an 'emerging one' worth entering right now as it does give a decent return on investment.

He also focused on relaxing FDI norms and rejected any possibility of change in product and pricing strategy to suit the Indian market.

While IKEA's reasons for not wanting to invest in India may be due to pure risk aversion, it is a fact that for global retailers entering India has become a risky proposition. 

With the Left parties denouncing FDI in retail in no uncertain terms there has been no more talk on the issue in political circles for a long time. Things on this front seem unlikely to happen in the future also as the ruling UPA chairperson Sonia Gandhi, the Congress Party president is opposed to the opening up of the retail sector while the Bharatiya Janata Party (BJP), the other national level party, is supported strongly by traders and merchant establishments and may put the issue on the backburner assuming it comes to power.

Therefore, Lender's argument that, "India is not ready for big retailers yet and may be we can talk about it in 2015-16," sounds uncomfortably close to the truth. 

Even Reliance Retail, a purely Indian company, which has successfully opened stores in a number of cities, it has a token presence in India's biggest markets - Delhi and Mumbai.