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Foreign players in Indian Retail - When & How will the wait end?

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 arena.

 

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 & ordering frequency.
  • 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 behavior.
    • 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.

G-Localization:

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.   


Comments

Hi Nidhi,
Agreed with your view points, All the Major Global players would come with a well-planned strategy to address the issues mentioned. Hence they are coming in collaboration with the local players as partners to understand the nuances of the business operations and use their local expertise in India.


True Inder. India partners can help them understand Indian markets better. However, even the government policy (only 51% FDI) is forcing them to find an Indian partner.

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