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Strategies adopted by international retailers to enter India market
 

Strategies adopted by international retailers to enter India market

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Strategies adopted by international retailers (single as well as multi-brand) to enter India market

Strategies adopted by international retailers (single as well as multi-brand) to enter India market

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    Strategies adopted by international retailers to enter India market Strategies adopted by international retailers to enter India market Presentation Transcript

    • Strategies adopted by international retailers to enter India market April, 2013
    • International retailers are present across retail categories in India Food and grocery International Carrefour Bharti Walmart Tata Tesco Metro Max Hypermarket-SPAR Domestic Reliance Fresh More Food Bazaar Nature’s Basket Spencer’s International Bose LG Samsung Sony Whirlpool Bang and Olufsen Domestic Croma eZone Pai Electronics Reliance Digital The Electronics Store Vivek’s Luxury products International Chanel Christian Dior L’ladro LVMH Mont Blanc International Diesel Esprit Levi Mango Marks & Spencer Domestic Chemistry Dolphin Lilliput Mustard Seed Provogue Wills Lifestyle Watches Footwear International Amrapali Titan Nebula Domestic Apparel Consumer electronics/durables Domestic Source: Winning in India’s retail sector, Pwc (2012); News articles Aldo Bata Charles & Keith Hush Puppies Nike Nine West Catwalk Inc. 5 Reliance Footprint Woodland International Baume & Mercier Cartier Chopard Citizen Longines Omega Domestic Ethos Fastrack Helios Titan Watches and More
    • International multi-brand retailers entered India through cash & carry format because of FDI restrictions in the front end retail Cash & Carry through Joint Venture (JV) In Sep, 2012, GOI allowed 51% FDI in multi-brand retail. Cash & Carry through wholly owned Franchise partnership 2003 2007 2008 2009 2010 2011 2012 2013 Discussion & Insights  India allows 100% FDI in cash & carry format which permitted international multi-brand retailers such as Metro, Walmart, Tesco and Carrefour to open wholesale stores through out the country.  Because Government of India (GOI) did not allow any FDI in multi brand retail, international retailers could not enter into the front end retail market. Recently in Sep 2012, GOI allowed 51% FDI in multi-brand retail with some conditions on local sourcing and investments in back end infrastructure.  Walmart and Carrefour are following “wait and watch” policy and wants to understand the FDI norms better before investing in front end retail market.  To enter into the front end retail segment is the long term strategy of both Walmart and Carrefour. Source: Indian Retail Market Opening more doors, Deloitte (2013); Retail FDI: The next growth booster for India?, Evalueserve (2011); News articles
    • International multi-brand retailers are focusing on tier 2 and tier 3 cities for opening up their cash & carry or wholesale stores Discussion & Insights Jammu Amritsar Jalandhar Zirakhpur Ludhiana Bhatinda Delhi  Walmart has 19 wholesale stores across India. It is majorly focusing on tier 2 cities. It is working through a JV with Bharti Enterprises. Walmart opened its first store in Amritsar and its first store in south India in Vijaywada. Meerut Agra Lucknow Bhopal Indore Kota Jaipur Amravati Aurangabad Mumbai Kolkata Raipur Vijaywada Guntur Rajahmundry Hyderabad Bangalore Walmart Cash & Carry store Carrefour Cash & Carry store Metro Cash & Carry store Tesco Cash & Carry store Source: Company websites  Carrefour has 4 wholesale stores across India, out of which 3 stores are based in tier 2 cities. Carrefour does not have any local partner in India and operate wholly owned stores.  Metro has 15 wholesale stores across India. It does not have any local partner in India and operate wholly owned stores.  Tesco operate its wholesale store in Mumbai. It is working with an Indian partner, Trent which is a retailing arm of Tata Group.  With 51% FDI being allowed by GOI, multi-brand retailers will start focusing on their front end retail business.
    • Case Study: Walmart in India Short term strategy: Enter Indian retail market through cash & carry format. Long term strategy: Enter into the front end retail segment by opening its retail stores.  Walmart entered Indian retail market in 2007 through a JV with Bharti Enterprises, Indian business conglomerate with businesses spanning across telecommunications, retail, financial services and manufacturing.  The JV was formed to open cash and carry stores and invest in back end infrastructure in line with the guidelines provided by GOI.  Walmart seems to be targeting the north region of India for its cash & carry business. It opened its first store in Amritsar in May 2009 and subsequently in Zirakhpur, Jalandhar, Kota, Bhopal, Ludhiana, Raipur, Indore, Vijaywada, Meerut, Agra, Lucknow, Jammu, Guntur, Aurangabad, Bhatinda, Amravati, Hyderabad and Rajahmundry.  Walmart’s long term strategy is to open its retail stores across India. GOI’s decision to allow 51% of FDI in multi-brand retail will encourage Walmart to invest in the front end retail segment.  Currently, Walmart is studying the new FDI regulations issued by GOI in Sep 2012 and the impact that they might have on its future strategy.  Walmart has already opened wholesale stores across the country, majorly in tier 2 cities. The new FDI norms issued by GOI allow an international retailer to open retail stores only in some states and cities with over 1 million people. This presents additional challenges for Walmart as its earlier strategy of targeting tier 2 cities does not align with the new FDI norms issued by GOI. Source: Company websites and own analysis
    • International single brand retailers entered India through joint ventures, franchising, distribution and licensing  In 2011, GOI allowed 100% FDI in single brand retail segment permitting the foreign retailers to open their fully owned retail stores in India.  With GOI allowing 100% FDI, International brands such as Ikea (Sweden), OVS (Italy’s Gruppo Coin), Yishion (China) and Chicco (Italy) are expected to open wholly owned subsidiaries in India.  International single brand retailers such as GAP (the US), Arcadia Group (the UK), Prada (Italy), Hennes and Mauritz (Sweden) are keen on an India entry.  Prior to GOI announcing 100% FDI, players who entered India through local partnerships include Louis Vuitton (France), Christian Dior (France), Jimmy Choo (the UK), Canali (Italy), Zara (Spain), Marks & Spencer (the UK).  Some brands which took franchising & distribution route for entering the Indian market are Forever 21, Etro, Tom Ford and Ladybird.  Marks & Spencer entered Indian retail market in 2008 through a JV with Reliance Retail. It plans to continue the JV and expand its store network in the country.  Zara, Spanish clothing and accessories retailer, entered Indian market in 2011 through a JV with Trent which is a Tata’s retiling arm.  Starbucks entered India in 2012 through a JV with Tata Group. Source: News articles
    • Expect more JVs in multi-brand retail space…expect more wholly owned subsidiaries in single brand retail space  Following the 51% FDI norm in multi-brand retail, international retailers are expected to form JVs with local players to open their retail stores across the country. This would mean more investments 1 in back and front end infrastructure, more business for local farmers and local manufacturers. It also means that the multi-brand retail market will receive the required capital inflow and will be a great help to local players who were looking for capital funds to grow their business.  Following the 100% FDI norm in single brand retail, international retailers are planning to open their fully owned subsidiaries in India. This would mean more investments in back and front end infrastructure, more business* for local manufacturers.  This will increase the penetration of modern trade in Indian retail market, which is dominated by traditional retail stores or Kirana stores.  International multi-brand retailers are following wait & watch policy. They are taking their time to understand the impact of new FDI norms on their future strategy. None of them have come forward so far with a proposal to invest in front end retail stores. It is expected that they will form JVs with local players to open front end retail stores.  GOI has received good amount of enquiries about opening wholly owned single brand retail stores in India. International single brand retailers are keen on entering Indian market through wholly owned retail stores. Note: 1GOI has put conditions on local sourcing and investments in back end infrastructure Source: News articles and own analysis
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