A slew of break-ups in the retail space
At the ongoing World Retail Congress in Paris, global heads of retail chains were literally mum on India. While Mexico and the Philippines were being touted as the next big markets for commencing retail ventures, India’s policies regarding sourcing and investments have put a question mark on prospective investments.
Closer home, Walmart and its joint venture partner Bharti Enterprises are toying with the idea of ending their partnership. Reports quoted Walmart Asia Head Scott Price as stating that the partnership with Bharti was “not tenable as a base” and the two firms were “looking for the best way to move forward”.
Walmart and Bharti have a 50:50 joint venture for cash-and-carry business in India. Price said Walmart was not keen to invest in India, unless the multi-brand retail policy was made clear.
Analyst say that if Walmart indeed pulls out of India, it may not have any impact on consumers as only eight per cent of the total retail is organised. But, confidence on India as a potential investment destination could be greatly marred.
Arvind Singhal, Chairman, Technopak, who was at World Retail Congress, notes that Mexico and even the Philippines are high on global retailers’ investment agenda but not India.
“This is worrisome as we have waited 8-10 years for the retail sector to open up. But the policy is highly complicated and companies don’t want to invest without getting clarity. The need of the hour is pragmatism and not dogmatism,” he said.
Walmart’s total turnover of $469 billion is more or less equal to India’s total retail sector’s turnover estimated at $464 billion.
“For Walmart, India is still too insignificant, both from a sourcing and consumer stand point. But, the impact of such a big retailer exiting India either totally or partially can send a wrong signal to other investors,” says an analyst.
Last year in September, the Government allowed 51 per cent investment in multi-brand retail trade. Recently, it made amendments to rules after several retailers expressed concerns on 30 per cent sourcing clause, yet-to-be-made changes in FEMA rules, among others.
sourcing clause
Walmart also sought clarity on aspects of the policy, especially the sourcing clause. In July, it expressed an inability to meet the norm requiring it to source 30 per cent of the goods from small industries, saying it could source only about 20 per cent.
Others retailers such as Carrefour and Metro too are expanding in India rather cautiously. Big names such as IKEA, H&M are yet to announce formal store opening in India.
Arpita Mukerjee of ICRIER said, “Nobody has complicated the retail policy the way India has. Doubts over classification and brand-based foreign direct investment policy have confused investors. The root of the problem is between the operating model and what the Government seeks. Therefore, the policy needs to be streamlined.”
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