The Hindu Business Line : No behemoths to fear now in Indian retail space

Wal-Mart, Tesco and Carrefour. Who doesn't know these names as the world's big retailers. With Wal-Mart in, tying up with Bharti Enterprises Ltd, the only unknown is when the other big players will choose to enter India.

And adding to the sizzling in the retail space is a recent report of PricewaterhouseCoopers (PwC) estimating `a staggering $412 billion' investment to flow into the retail sector, over the next five years. Business Line catches up with a retail specialist in PwC, Mr Asitava Sen, Principal Consultant in the firm, for answers to a few questions:

What is that the big players look for in a partnership with an Indian company?

The Indian retail market is very attractive. Growing fast. A big market, with only 3 per cent, as organised penetration. Therefore, opportunities are immense. With the level of competition being nascent, there is a lot of time to learn, trial, pilot, and modify any current experiments, and still grow successfully and fast. Which is why the world's biggest retailers are looking at India.

In what format would a possible retail tie-up be, between a global player and an Indian company?

A global player will look for a joint venture with an Indian company, for various reasons. Firstly, because of regulatory compulsion. Apart from `wholesale cash-and-carry' and `own manufacturing in India' no other format is available for a 100 per cent ownership. Hence, a joint venture becomes necessary, as in the case of the insurance sector.

Secondly, for any global player, local knowledge repository is important. India being a diverse country, in terms of language, culture, habits and so forth, it is difficult for a newcomer to master local nuances, such as identifying the right real estate. And thirdly, there are other softer issues, like public relations, which are as important as technical excellence.

How can a foreign retailer structure its investment in the Indian retail scene?

In the case of a single brand, such as Benetton, there can be 51 per cent of overseas investment. For a multi-brand retailer, however, at the front-end or the shop outlet, there can't be even a single share, as the law now stands. So, the ideal structuring would be where the foreign retailer doesn't own at the front-end, but has significant ownership at the back-end (comprising activities such as sourcing, pricing, quality control, logistics, distribution, and packaging).

Do you foresee consumers benefiting from tie-ups between Indian and foreign retailers?

Yes. Consumers will benefit from an increased choice and competition, leading to lower prices and better quality.

Isn't it risky for a company that has never been in retail to suddenly think of entering the retail space?

Indian organised retail doesn't have entrenched players. Right now, there are no behemoths to fear in Indian retail space, although the existing players are growing rapidly. The largest Indian retailer's turnover is at less than $1 billion, as against a total market size of $300 billion. The playing field, therefore, is open to new players, whether or not they have experience in retail. And, this is the opportune time for new entrants to venture into Indian retail.