Sunday, November 27, 2011

Hurdles for foreign retailers in India !



Because of the uncertainty of the FDI in multi brand retail, retail stocks are down 10%. Pantaloon is 196, Shoppers Shop, Trent all are down.

Retailers like WalMart, Carrie Four and Tesco will have to contend with India's poor warehouse space, unreliable transport links and chronic lack of cold chain storage.

This is where local knowledge comes in. Local players with established supply chains can get lucrative deals, as the race for one of the largest untapped retail markets is on. It can mean a windfall for players like Pantaloon, Shopper's Stop, the Tata Group and Trent, industry analysts say.

Countering the argument that the move will phase out small shopkeepers, the Government has stipulated that the foreign players must source 30% from SMEs, invest a minimum of 100 million and spend half of that on back end infrastructure.

WalMart and Co may love to sell to the 1.2 billion Indians, but they will have to tackle India's logistical headaches and will have to rely on local expertise.

"If some of them want to throw dollars, burn some cash to build it, they can," said Future Supply Chain's Singh."We are ready made for them. They can use us."

As bandhs and hartals, initiated by the Communists and the saffronites go on in India against the entry of foreign retailers, India is poised for Retail Revolution.

Despite the immense problems faced by the foreign retailers, India's one trillion dollar market is going to change. The retail landscape will change and let us hope that Retail will do to India what electronics did for Japan !

Shoddy roads, minimal cold storage capacity and a myriad of state regulations and taxes will plague WalMart, Tesco, Metro and others. The initial stages will be difficult.

Traditional supply networks use hand pulled wooden carts more than refrigerated freight wagons. Hence 30 percent of India's 200 million tonnes vast fruit and vegetable production goes waste.

"India cannot be seen as easy," Viney Singh, MD of Max Hypermarkets."There are some players that have been in the retail business for more than 10 years, and till date there is no hypermarket player that has made any money."

"Global retailers have expertise from around the world, but in India they will have to develop it," said Future's Singh. "They will all have to go through the learning curve on their own."

The Communists and the saffronites are against this entry of foreign players. They are calling for boycott. Tomorrow is a bandh day, a day of rest, called by the Opposition parties. In Kerala, even some Congress Ministers are against the move. The whole country seems to be in turmoil. We do not think the problem will be solved by a single day's bandh. All work will come to a standstill tomorrow. There may be furthur bandhs. The Kerala Merchants Association has called for a virtual boycott. So also CPI, CPM and BJP. Their argument is socialistic, that the move will hurt the small players. The demerits of the move are highlighted.

The top 30 Retail giants ( turnover in billions of dollars USD )

WalMart 256 billion USD
CarreFour 79
Ahold 63
Metro 60
Kroger 53
Tesco 50
Target 48
Rewe 44
Aldi 41
ITM 37
Safeway 35
Schwarz 33
Walagreens 32
Auchan 32
Aeon 30
Ito Yokado 30
Edeka 29
Sainsbury 27
Tengelmann 27
LeClerk 27
CVS 26
Casino 25
Kmart 23
Delhaize 21
Loblaw 18
JC Penney 17
Coles Myer 17
Daiei 17


Astrologically, India is going through a tough phase, with Saturn in the adverse 4th and Jupiter in the unfavourable 10th. Exports have slumped to 19 billion last month. IIP is down. The Sensex is down.Food inflation is hovering at 10%. The Rupee hit 52 mark against the dollar. So for some more months ( till Jupiter leaves Aries ), the Indian atmosphere will be turbulent.

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