Allow entry to WalMart and let Flipkart and Amazon fight it out with Reliance Retail and Big Bazaar

Advertisement
Allow entry to WalMart and let Flipkart and Amazon fight it
out with Reliance Retail and Big Bazaar
Advertisement
Offline retailers want a level playing field. They want 100% FDI in place of the current 51%. They reason that the current rate was fixed to only save small retailers. However, these sellers are anyway facing competition from e-commerce sites.

The Retailers Association of India (RAI), the apex body for offline retailers has recently filed a petition in the Delhi High Court asking for uniform FDI provisions for online retailers.

The current FDI policy for offline retailers comes with strings attached. They need minimum $100 million backend investment and 30% sourcing from small enterprises. State-by-State approvals are required, and FDI is only permitted in cities with a population of over 1 million. Most retail experts feel India needs less regulations, not more.

“There has been the wrong discussion for far too long in India– the ownership of retail. It should be on how to make retail distribution more efficient so that transaction costs are reduced. The government should attract global investment to promote made in India products in the global market”, says Mr. Arvind Singhal, Chairperson of Management Consulting Firm Technopak.

The Indian retail scenario is rapidly changing. E-commerce is biting into revenues of traditional retailers both in urban and rural sectors. This has been fuelled by increased consumer spending due to economic growth and lower inflation. Is it going to be that way?
Advertisement


“Technology allows you to disintermediate. The prospect of having a physical store in rural India is not viable due to the limited number of customers. The only way there is e-commerce”, Singhal observes.

So is this the end of offline retail? Not quite. Most experts feel competition is one of the hallmarks of any healthy market, and with growing competition, both online and offline retailers would have to evolve. It’s true. Most e-commerce companies want physical footprint, either for sales or support. Brick-and-mortar retailers are online as well.

Would large scale foreign investment do away with smaller Indian retailers? Experts beg to differ.

“There is no competitive advantage foreign companies enjoy over Indian sellers. They buy from the same vendors. There shouldn’t be fear in inviting international retailers who would ‘destroy’ manufacturers in India”, Singhal reminds.

So what’s the USP of Brand India now that Modi is desperately pushing the ‘Make in India’ campaign across the globe? Well, India is one of the larger economies in terms of consumer spending. It has a fairly large youth population willing to spend big moolah. If the economy grows at 7-8%, the Indian market will double in the next decade; the country will remain a reasonably attractive country to invest in.
Advertisement

To sum up, it’s party time both for investors and consumers. The former has buyers lined up, the later has a plethora of options on the table to choose from.

(Image credit: SunrisePOS and pfsweb)