Foreign direct investment (FDI) in retail and significant investments are required to transform the retail industry. Debating how the infusion of foreign funds is expected to change the landscape of the industry, Indian retailers at the IRF (India Retail Forum) pointed out the advantages of FDI in retail.
In terms of causing unemployment and competing with the kirana stores, Mr Kishore Biyani, Chairman, Future Group, said, “We sell 90,000 SKUs while the local kiranas sell just about 700 SKUs and in that sense we do not compete with them. We need money to scale up and one of the ways to do it is through FDI.”
In fact, Mr Biyani urged that the need of the hour is to create demand. At present, the consumption growth is not in sync with the GDP growth. “Consumption growth at 6 per cent is not keeping pace with the GDP growth which is at 9 per cent,” he said.
Besides, retailers such as Wal-Mart which have already tied up with Bharti Retail are looking forward to launching their own branded stores once FDI is allowed. Mr Raj Jain, President, Wal-Mart India and MD & CEO, Bharti Wal-Mart, said, “We have been in the joint venture with Bharti for the past three years and have been learning about the Indian market. If FDI opens, we are ready to open our stores.”
In fact, Wal-Mart is already using India as a sourcing base and is organising a supplier meet of Wal-Mart buyers across the world. “Later this month, we are having a supplier conference out of India where almost 40 suppliers across several countries will be coming to India.”
Bharti Wal-Mart is also in the process of launching new stores in West and South India next year. “We are targeting 15 stores in the next three years for our Best Price Stores,” said Mr Jain, who said that FDI was the best route for the country. There would be unequal distribution of GDP growth centred on the metros if FDI was not allowed, he said.
Hoping more money will flow into the industry, Mr B. S. Nagesh, Chairman, IRF, and Vice-Chairman, Shoppers Stop, said, “FDI should be allowed and anybody who has money should be allowed to invest. Retail will yield results but only in the long term.” Whether investors are willing to wait that long to make money in an emerging sector such as retail was debatable.
“Retail is a long-haul business and what we need is capital right now. We are not sure whether Indian investors are willing to wait for the long haul,” said Mr Biyani.
In fact, Mr Biyani felt that FDI should be allowed in the non-food sector rather than in the food sector. Most of the companies in the non-food segments have already entered into joint ventures through the single brand retailing route.
“The big players in the organised industry are mainly apparel and jewellery players and there is no large vote bank in these sectors,” observed Mr Bijou Kurien, CEO, Reliance Retail - Lifestyle.
Expecting significant investments would transform the face of retail, Ms Ireena Vittal, Principal, McKinsey and Co, said, “The sector needs more money and the investment can come from anywhere. It is not about the colour of the money.”
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