Foreign Retailer Giants Enter India

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NEW DELHI, India – A concurrent change is taking place in the retail market in India. Multi brand foreign retailers are settling their feet in the fast growing Indian economy. The small Indian retailers that run the commercial retail business in India, say it is an encroachment in the $50 billion Indian retail market.

This week, retail giant Wal-Mart formed a 50:50 joint venture with Bharti Enterprises, a large Indian cell phone company, to build as many as 15 large wholesale outlets over the next seven years in small Indian cities. The first store will open in Jaipur by the end of next year.

For ordinary Indians, the megastore itself will remain aloof as current Indian legislation does not allow multibrand foreign retailers to sell directly to consumers. However, they can start wholesale operations in India. From stationery, footwear, clothing, consumer durables and other general merchandise the megastores will sell grocery, fruits and vegetables to hotels, big retailers, and other institutional buyers. Further as per the arrangement between Wal-Mart and Bharti, the US-based retailer would handle back-end operations and Bharti will set up a retail base in the country.

The rapidly growing middle class in India has welcomed the megastore culture over the past few years. With formation of Indigenous megastores chains like Reliance, Big Bazar and Subiksha in big and small Indian cities with considerable retail market share, other world retail giants like Tesco and Carrefour are eyeing the Indian market.

The small Indians retailers fear that retail chains like Wal-Mart could eventually undermine their business. Analysts see Wal-Mart’s wholesale business as the first stage in a campaign to sell directly to Indian consumers. Retail groups are making an effort to alter the current FDI policies in India.

With Wal-Mart stepping its feet in India, worried small retailers took to the streets to protest against government policies. Raising slogans “Go Back, Wal-Mart” and “Quit India” hundreds of protesters burned effigies with brand names of foreign retailers inscribed on them in Delhi. Similar demonstrations were held in different parts of India, an attempt to mount a nationwide show of opposition to the arrival of companies like Wal-Mart.

Small retail traders have also protested against the indigenous retail chains in the recent past. Reliance fresh, vegetable and fruit retail stores were recently attacked at various places. The groups representing the small retailer fear these chains will monopolise the Indian retail market which will badly affect the ordinary Indian buyer and the retailers equally.

FDI Retail Watch, the group that organized the demonstrations, views large-scale retailing as counter to Indian traditions. “Our culture is not the wasteful consumption that we see in the first world. These large retail companies will push us aggressively to consume more and more.”

According to them, there are other aspects associated with the emerging megastore culture. “It will render millions of people unemployed across the country”. They see other adverse effects of megastores in India. “The Small-scale retailing in India is environmentally more efficient than the international operations. A typical Indian vender reaches to every door without causing any damage to the environment, using no fuels and producing zero emissions.” Wal-Mart or any other retail brand will create disparity in Indian society.