Companies

Internal, not external, issues behind Carrefour’s India exit: analysts

Meenakshi Verma Ambwani New Delhi | Updated on July 09, 2014

A Carrefour Wholesale Cash & Carry store in Bangalore (file photo).

Failure to find a local partner and mounting losses key reasons

Internal financial problems rather than policy challenges in India’s retail space is being cited as the reason for the French retail chain Carrefour’s decision to exit the country.

On Monday, Carrefour decided to close its five cash-and-carry stores in India effective September without spelling out any clear reasons.

A senior analyst with a consultancy firm said most global retailers since 2008 have been facing challenges in their home markets, forcing several of them to relook at their international expansion plans. As regards Carrefour, the analyst said its failure to find a local partner and mounting losses are key reasons.



“Although the new Indian Government does not support foreign retailers coming into the country, I think Carrefour’s decision to exit the market is because of the problems the French retailer is experiencing,” said Sourindra Banerjee, Assistant Professor of Marketing at Warwick Business School.

He pointed out that the retailer has been pulling out of other emerging markets, too, and witnessing a decline in revenue. “So Carrefour is getting out of geographies that are not viable.”

Meanwhile analysts back home said considering the company’s operations in the cash-and-carry business were small, it is not a reflection of the overall sentiment of foreign retailers towards India. Despite being one of the first players entering the country, the company’s store tally was limited to low single digits.

Ankur Bisen, Senior Vice-President, Retail, Technopak, said the company’s decision can be looked at from the perspective of its global strategy and that India might not be on top of its radar. It is not a reflection of the Indian retail landscape as there have been both success and not-so-successful retail stories in the past. The cash-and-carry segment does not face any regulatory or FDI hurdles, he added.

Take, for instance, Walmart in India, which despite challenges, has decided to ramp up its cash-and-carry stores in the country and also recently launched its business to business e-commerce platform.

However, Paresh Parekh, Tax Partner-Retail and Consumer Products at EY, said: “India is not an easy market to operate in for foreign retailers. It has long gestation period. It is not a two-three years game, but at least a decade game.” From high taxes and large number of licences required to open stores, lack of infrastructure to exorbitant price of real estate, Indian retailers continue to battle key challenges.

Published on July 09, 2014

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