FDI in Indian Retail Sector – New Entrant Strategies

As the government appointed panel on FDI in Retail Sector draws up its final blueprint for managing the entry of FDI in India's multi-brand retail sector, several questions abound among lay persons.  While the average consumer is aware that the government's reforms will bring a tempting array of FMCG brands to his doorstep, one would also wonder on how this would change their shopping experience. 


All Indian households have traditionally enjoyed the convenience of calling up the corner grocery "kirana" store, which is all too familiar with their brand preferences,  offers credit, and applies flexible conditions for product returns and exchange.  And while mall based shopping formats are gaining popularity in most cities today, the price-sensitive Indian shopper has reached out to stores such as Big Bazaar mainly for the steep discounts and bulk prices. Retail chains such as Reliance Fresh and More have reportedly closed down operations in some of their locations, because after the initial novelty faded off, most shoppers preferred the convenience and access offered by the local kirana store. 

So how would these  Western multi-brand stores such as Wal-Mart and Carrefour strategise their entry into the country and gain access to the average Indian household? Wal-Mart has already entered the market through its partnership with Bharti, and gained opportunity for some early observations. The company's entry into China will also have brought some understanding on catering to a large, diverse market, and perspectives on buying behaviour in Asian households. Carrefour on the other hand has launched its wholesale cash and carry operations in the country for professional businesses and retailers, and will now need to focus more on understanding the individual Indian customer.

As such, these retail giants will try to gain from some quick wins while reaching out to the Indian consumer.  For one, they will effectively harness their expertise with cold storage technologies to lure customers with fresh and exotic vegetables, fruits and organic produce. Secondly, they will also emphasise on the access that they can create for a range of aspirational global foods and household brands. 

Surely, these should engage shoppers' interest initially - what needs to be seen is whether they can effectively combine these benefits, with the familiarity, convenience and personalised shopping experiences that the local "kirana" stores have always offered.  After all, shopping and consumption are extremely habit driven exercises, and the new entrants will need to invest time and energy in understanding and guiding changes into these behaviours. 

About the author: Lakshmipriya Somasundaram is a Contributing Editor for TradeBriefs. She can be reached at lpsom@hotmail.com