India represents one of the highest growth potential for retailers in the world, and so for the longest time. Its 1.2 billion people population and its rising economy represents for sure a high potential. Especially while Brazil and China has already been colonized for the longest times by global retailers such as Carrefour, Casino, or Walmart.
But the expansion in China and Brazil has been achieved while ago, and both legislation and poor transportation infrastructure has made it nearly impossible for retailers to grow. After two tries, Group Carrefour, the largest retailer in the world outside its local market, has decided to abandon its activities.
Here is why:
The Indian government opened up the country's $500 billion retail sector to foreign supermarket operators in 2012, but mandatory local sourcing requirements and a decision to let individual Indian states decide whether to allow global chains have deterred new entrants.
Only British supermarket operator Tesco Plc has so far announced plans to set up stores in India.
The new Indian government under Prime Minister Narendra Modi, elected in May, has also opposed foreign investment in the supermarket sector, fearing it will hurt small shopkeepers.
"The barriers were laid down by the previous government and the new government only made it worse by opposing the policy," said Devangshu Dutta, chief executive of retail consultancy Third Eyesight.
"So companies who do not want to lose money in the market have been left with very little choice but to either hold back or fold up," he said.
The world's largest retailer Wal-Mart Stores Inc last year called off its Indian partnership and shelved a plan to open retail stores. The company is now focusing on opening wholesale stores in the country and recently launched an e-commerce venture in India.
But I believe India really need retailer in order to boost its demand and its economy. Hence, retailers will allow the country to grow its purchasing power, and its ability to afford a better lifestyle, which could boost the sales of other international suppliers such as P&G, Nestlé, or Mondelez.
Obviously, India wants to keep control over this important market in order to allow an Indian retailer to keep a competitive place prior to the arrival of retail tycoons. The only issue is that these delays really impact the economy of India, which growths is lowering faster than its Chinese and Brazilian competitors. I don't believe anyway that a local operator may be able to grow enough to assure a high retailing service in such a large country. The expertise of international leaders is required to do so.
The time to market has not arrived yet, and some companies are still looming on the market. But for how long?
