The race is on

A plethora of foreign retail bigwigs are eyeing the fast-growing retail market in India. The sector, which is expected to grow at a CAGR of 35% over the next four years, has attracted the interest of a host of global giants from the US, European Union (EU) and Australia.

The rapidly growing retail pie and demographic explosion of the spending population has triggered hopes of profitable co-existence of a number of large players for the next few years. With competition heating up in the US and EU, Southeast Asia and India, in particular, have become attractive unchartered territories.

However, entry into the industry is still regulated, as currently the government allows an FDI of 51% in retailing single-branded products, 100% FDI for operations on cash-and-carry wholesale and franchises and strategic licensees for multiple brand retailers.

Food retailers such as Pizza Hut, McDonalds, Subway and KFC have already built a huge market of their own with franchisee operations, while the German giant Metro AG and South African retailer ShopRite have entered India with the cash-and-carry format.

Metro is expected to invest close to Rs 1,800-2,000 crore in the next three years to open 15-18 stores in all major cities across the country, while ShopRite will be putting in Rs 25 crore to set up a cold chain in suburban areas of large cities.

Recently, the world’s biggest retailer, Wal-Mart, also entered India with a 50:50 joint venture (JV) with the Bharti group. The competition has become hotter with the recent announcement of Tata’s JV with Australia’s biggest retailer Woolworth for creating a multi-brand durable chain.

The world’s second largest retailer Carrefour and the largest grocery retailer Tesco are also contemplating an India presence. UK fashion giant, Next, has finalised its India entry in partnership with Planet Retail Holdings with 20 Next stores in the pipeline.

Other companies having India on their immediate horizons are Auchen, JC Penny, 7-Eleven and AS Watson. With proposals to allow sector-specific retail trade on the table and an estimated FDI potential of $300 billion in the retail sector, the government is expected to further relax entry norms, luring more foreign players into the fray.