The battle for dominance in India’s physical retail space has seen many casualties. Even the likes of Aditya Birla Group and Godrej Group, which are among the country’s largest conglomerates, had to pack the bags and leave.
In 2018, the Aditya Birla Group sold its More supermarket chain to Samara Capital and Amazon. Then, in 2019, the Godrej Group offloaded its grocery outlets under the Nature’s Basket brand to Spencer’s Retail.
Let us take one more recent example. With more than 1,500 stores, Future Retail was once India’s second-largest retailer. Now, Future Retail, along with other group companies, is being taken to the National Company Law Tribunal as lenders seek to recover their dues under the Insolvency and Bankruptcy Code.
This leaves Reliance Retail and Avenue Supermarts-run DMart as India's top retailers.
However, the going has been just as tough, if not more, for foreign firms. According to a recent report by one financial daily, Amazon, Reliance Retail, Avenue Supermarts, Tata Group, Lulu Group, and Samara Capital are among those looking to buy German retailer Metro AG's Indian cash-and-carry operations for anywhere between $1.5-1.75 billion.
Metro has been running a chain of 31 cash-and-carry stores across India since 2003. According to the report, the decision to cash out came after intense competition and the large investments needed to sustain operations forced the company to carry out a detailed business review.
In 2020, Reuters reported that Walmart Inc, the world’s largest retailer, had fired 56 of its executives in India. The move, agency said that, underscored the challenges Walmart was facing in expanding its wholesale business in India.
Carrefour, one of the largest retail chains in the world, had also exited India in 2014, less than four years after it had opened its first store in the country.
According to a report from March this year, a top official at the American retail giant Walmart said that the company was not keen on opening direct-to-consumer physical stores in India. Instead, it would focus on growing its acquisitions -- which are online marketplace Flipkart and payments major PhonePe.
In 2019, Amazon invested close to rs 1,500 crore for a 49% stake in Future Retail’s promoter entity Future Coupons. Thus, indirectly gaining a 4.8% stake in the former. Amazon's aim was to expand its foothold in India’s retail market. But it didn’t happen.
As a previous Morning Show story had explained, companies like Amazon face more hurdles when it comes to tapping India’s retail consumer base. This is because foreign investment in offline multi-brand retail is tightly controlled. India allows 51% FDI in multi-brand retail under the government route. But, this is subject to the investor fulfilling several conditions. Meanwhile, the states can also decide whether to allow foreign-owned multi-brand stores or not.
Read More at https://www.business-standard.com/podcast/current-affairs/why-is-the-indian-market-a-hard-nut-to-crack-for-foreign-retailers-122052300066_1.html