More than 50 mid-rung global retailers are planning to enter India within the next six months, according to data compiled by Franchise India that has tied up with them for their launches, with their eye mostly on smaller, untapped markets within the country.

eCommerceTrendz Thought Corner

Brands such as Korres, Migato, Evisu, Wallstreet English, Pasta Mania, Lush Addiction, Melting Pot, Yogurt Lab and Monnalisa, many from the US and Singapore, will invest about $300-500 million — all told to open roughly 3,000 stores, triggered by the country’s expanding economy, booming consumption, urbanising population and growing middle class.

“The first retail wave happened a decade ago when bigger retailers and brands entered India,” said Gaurav Marya, chairman of Franchise India Holdings, a retail solutions provider that is helping these 53 brands find partners and get regulatory clearances. “Now, it’s the turn of small and mid-sized brands as they look to cash in on the open retail policy and huge gap in the market for branded products.”

Of the incoming brands, 18 are in food and beverage space followed by 13 each in apparel and lifestyle products and education products.

(Source: ET)

Earlier this month, India replaced China as the most promising retail market in the world, according to an AT Kearney report.

“Government efforts to boost cashless payments and reform indirect taxation with a nationwide goods and services tax are also expected to accelerate adoption of modern retail,” the AT Kearney report added.  (Source: newindianexpress.com)

Relaxed FDI Rules

GST, one of India’s most significant tax reforms in decades, is set to be rolled out on July 1.

The government’s decision to relax FDI regulations in key areas of the retail sector has provided further boost to its growth. The government has allowed 100 per cent foreign ownership in business-to-business e-commerce businesses and for retailers that sell food products.

H&M has opened 15 stores within two years of entering the Indian market, mobile handset maker Xiaomi intends to roll out single-brand retail stores across the country, and German sports goods makers Puma and Adidas are looking for government approval to operate fully owned retail stores and online portals.

Also, IKEA, the world’s largest furniture retailer, plans to invest $1.56 billion to set up 25 stores across India. Amazon and Walmart have aggressive rollout plans, with Walmart aiming to open 50 cash-and-carry stores in the next 4-5 years.

Besides, Saks Fifth Avenue is in discussion talks with local partners to open two stores.

“India is a fast-growing market, huge in size, but Monnalisa’s target is concentrated in Tier 2 and 3 cities, allowing us to more easily reach our final users,” said Thomas Bessi, overseas sales manager, Monnalisa SpA, a European children’s wear retailer.

Opportunity in Global Food Chains

The Indian retail market was worth $641 billion in 2016 and is expected to reach $1.6 trillion by 2026, growing at a compounded annual growth rate of 10%, according to the India Business of Fashion 2017 report.

With food and grocery retail just 3% of the overall market, several global food chains sense an opportunity. The 18 QSRs, mostly snacking and ice-cream brands, will enter a market still dominated by Domino’s Pizza and McDonald’s, although the segment hasn’t been doing all that well of late.

Ecommerce & Mobile First Customer

This year’s A.T. Kearney’s study titled “The Age of Focus,” includes a special section about the rise of mobile shopping and its impact on global retail expansion. In many developing markets, mobile retail is the primary form of online shopping.

“Mobile shopping is challenging the ways retailers think about global expansion, as well as about their role in the value chain,” says Mike Moriarty, an A.T. Kearney partner and co-author of the study. “We are expecting more retailers to use mobile as part of their future expansions plans.”

Also, Indian retail has benefited from the rapid growth in e-commerce. Retailers have been quick to seize the opportunity with 86 per cent of e-commerce dominated by pure-play online retailers in 2016.

America First and Brexit

Global retailers facing high uncertainty amid a changing geopolitical environment and increasing nationalist sentiments expressed by Brexit and America First. Faced with intensifying competition from local and regional retailers that have grown increasingly more sophisticated, and advancements in retail technology and e-commerce, retailers are being forced to pause and rethink their strategies.

As a result, the past year has seen fewer retailers entering new markets or expanding within existing markets, as well as many retailers examining their footprints and logistics network to reduce store counts or exit markets altogether.

Conclusion

India’s strong GDP growth and growing middle class coupled with a more favorable regulatory environment over the past few years have played significant roles in attaining this ranking. Consumer confidence is higher than in the other BRIC countries and the economic participation of women, as well as their digital connectivity, is rising steeply.

However, selecting the best entry strategy for global brands can be challenging.

“Understanding the size and complexity of India’s retail market, especially the dynamics at the state level, as well as the nuances across the nation (with a population of 1.33 billion) is vital if retailers are to succeed,” Himanshu Bajaj, partner with Consumer Industries & Retail Products Practice at A.T. Kearney India, added.

While it is critical to select a properly vetted model that fits their expansion strategy, many brands change the model over time to adapt to new circumstances. In India, as in any other market, infrastructure is truly fundamental to any successful retail introduction strategy.