September' 2012 marked the opening of Indian retail sector
to foreign players with government of India announcing upto 51% foreign stake
in local ventures. The approval provided by government is however, guarded by
stiff investment restrictions and mandatory local sourcing guidelines. Even
post the passing by of more than four months since, the Government is yet to
receive a proposal from any of the global majors to mark their entry in Indian
But are the government laid guidelines the only roadblocks
hindering free flow of foreign players? A deeper analysis into Indian customer's mindset brings out
interesting consumer behavior patterns.
A typical Indian customer is heavily dependent on "Convenient"
local mom and pop stores (Kirana) on account of the
- Personalization of services - the familiar Kirana owner
would be aware of consumer's preferences, requirements in terms of brand &
- Local credit facility offered by the stores
- Flexibility in terms of conditions for product exchanges
& returns is immense and can't be matched by organized sector.
It is for these advantages catered by mom- pop stores that
the sole survivors in Organized retail are price- point players like Big Bazaar,
Star Bazaar, etc. Other Players which are non-price-point players have been faced with losses which is depicted
by the fact that many of these chains have had to shut down their stores.
A little market research and insight into the positioning of
the key retail players which can mark the true onset of FDI in India, the
factor which stands out as the key deciding factor in MNC's India entry is:
Right Local partner:
- The local partner should be the one which has the correct
understanding of the pulse of Indian consumer, their needs & purchase
- The local partner should be familiar with local market
rules, regulations & should have expertise in warding off the key
challenges Indian market offers (Red- tapeism & Supply chain weaknesses)
Its only after the finding of the Right local partner that
the below mentioned factors would come into the picture. Of course the below
mentioned areas would be efficiently handled in liaison with these partners.
The much used internationalization concept can't be adapted
in a better manner here than anywhere else. It is of prime importance that the
global giants realize the difference in Indian consumer psyche whereby there
are fundamental differences from the western strata. The concept of deep
freezing, ready to eat meals, selling of fizzy drinks in crates are still
limited in terms of adoption. It's thus, of prime importance that the product
reinvention is done post a detailed market research.
Brand recall and Store placements:
While all the three biggies mentioned above are extremely
popular with Indian educated elite class (thanks to their exposure to global
markets), this might not be sufficient to entice the major business driving
chunk. Further, stores such as Wal-Mart operate as destination stores. The
physical distance of the stores from the buying population/ city hot-spots and
brand familiarity has to be directly proportional. Without some unique
positioning & attractive propositioning, destination store model wouldn't
be a success in India.
Human resource retention:
Staff retention in Indian retail sector is another challenge
global retailers would have to combat with to effectively penetrate India.
It is only after the foreign players have a well drafted
plans addressing all these issues that We the common Indian consumer can
finally see the opening of FDI in Indian retail in the truest sense.