The Hindu Business Line : India pips Russia to become most happening retail destination

IN anticipation of the Government allowing foreign direct investment (FDI) in the retail industry, the world's top retailers have said India presents the most compelling international investment opportunity for mass merchandising and food retailers.

According to the management consulting firm A.T. Kearney's 2005 Global Retail Development Index (GRDI), India has beaten Russia this year to emerge as the top destination for global retail giants such as Wal-Mart, Benetton and Tesco.

The index is a study of retail investment attractiveness among 30 emerging markets across the globe. According to GRDI, the Indian retail market, worth $330 billion, is vastly under-served and has grown 10 per cent on an average over the last five years. It is also one of the most fragmented retail markets in the world - the combined market share of the top five retailers is less than 2 per cent.

"The message for retailers on India is clear: move now or forego prime locations and market positions that will become saturated quickly," said the A.T. Kearney Vice-President, Mr Mike Moriarty, adding that retailers who missed opportunities to capture the first-mover advantage in China can make up for it in India.

A.T. Kearney said global retailers such as Wal-Mart, Carrefour, Tesco and Casino would take advantage of the more favourable FDI rules that are likely in India and enter the country through partnerships with local retailers. Other retailers such as Marks & Spencer and the Benetton Group, who operate through a franchisee model, would most likely switch to a hybrid ownership structure.

Meanwhile, to gear up for competition from overseas, Indian retailers such as Pantaloon, Westside and Big Bazaar would also want to increase their scale and enhance logistics and supporting technology, A.T. Kearney said.

India and Russia are followed by Ukraine, China, Slovenia, Latvia, Croatia, Vietnam, Turkey and Slovakia as among the top ten destinations for a retail foray. Neighbouring Pakistan is ranked 30 on the list.

A.T. Kearney said most of the growth in India would be in the food and apparel sectors. Indian consumers spend 45 per cent of their money on food and grocery and this category will offer maximum opportunity to retailers. The apparel industry is another promising sector, the consulting firm said, adding that the industry is expected to grow 4-5 per cent per year in volume terms and 13 per cent in value terms.

While it expressed optimism on the Indian advantage in the global retail scenario, A.T. Kearney warned that the time to secure the early-mover advantage in India would soon run out. Within the next year or so, easing of Government regulations and more liberal economic terms would provide international players easier access to the country's retail market, it said.

The study also said global retailers might have to face some glitches in India. High taxes, poor infrastructure, bureaucratic hurdles and high cost of real estate are some of the challenges that overseas retailers may have to tackle in the country, it said.

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