Foreign Direct Investment in retail will benefit the industry, bring down inflation, create employment and infuse much needed capital, stakeholders say.

The industry, analysts and industry watchers agree that foreign direct investment (FDI) in retail is a matter of ‘when’ rather than ‘if’. “I think it inevitable that FDI in retail will be allowed in India,” says Anshuman Magazine, CMD, CB Richard Ellis.“As we develop, we cannot keep ourselves closed to products from other countries, especially when India has been trying through the WTO to ensure movement of trade. I don't think after some time we will have any argument left for not opening our markets to foreign products,” he says.

Most stakeholders agree that the benefits of allowing FDI in retail far outweigh any misgivings, whether it is to do with protecting the interests of consumers and small traders or to do with introducing best practices, or injecting much needed capital in the market, improving infrastructure to cut inflation.

Sushil Mantri, Chairman and MD, Mantri Developers, says, “I personally feel that the matter has been under discussion since last many years. I don’t see why it is held up. If we allow FDI, competitive spirit will go up. Common consumer will get a better product at better quality.”Most recently, a CRISIL research linked allowing FDI in multi-brand retail to reduction in the prices of perishable food produce such as fruits and vegetables in India over the long term. "The wastage in the supply chain and the commission to trade intermediaries inflate the final price paid by Indian consumers for fruits and vegetables. Indian consumers pay nearly 2 to 2.5 times the price paid to a farmer as compared to 1 to 1.5 times in developed markets where the penetration of organised retail is much higher," says Nagarajan Narasimhan, Director, CRISIL Research.

Currently, 100% FDI is permitted in wholesale cash-and-carry business subject to certain end-sale limitations and restrictions. At present, FDI in retail trading is prohibited although an exception for FDI up to 51%, with government approval, is permitted in single-brand retail. But no FDI is permitted in multi-brand retail.

The government is looking afresh at relaxing the caps on foreign direct investments in retail. The commerce ministry has presented a discussion paper on retail FDI, seeking views from the public on whether to allow FDI in multi-brand retail and the need for a cap.

A the majority of stakeholders are of the opinion that now, more than ever, the time is ripe for allowing FDI in retail. The move is likely to benefit the construction industry as well. “It’s good from a real estate point of view. Mature retailers will bring in best practices in mall development. There is likely to be more FDI in real estate if FDI in retail is allowed,” says Anuj Puri, Chairman & Country Head of Jones Lang LaSalle Meghraj.Magazine says that it is myth that foreign retailers are queuing up greedily to come to India. “It does not mean in the interest of retail suddenly there would be a dam burst of foreign investment. Investments are not going to happen overnight if FDI is opened. Foreign companies have to hire people, make investments.

“We have consumption increases, income levels have gone up. But the average is still very low. We managed to convince the authorities that the mall is conceived to be an outward looking project,” he said.

“Even if today a large retail format were to open the pricing has to be very pertinent. Prices are competitive. Foreign retailers may not be able to provide those prices.

“If we were to open FDI today, the way the global sentiment is, a lot of retailers don't have the money to get into retail. There are other markets which are bigger – the USA is still the largest consumer market, there is Japan, there is the Middle East.”

In fact, some feel that any delay is a luxury for India that may have costs associated with it. “It is detrimental not to allow it,” says Manoj Motta, COO, Shopping Centres Association of India.“It’ll bring down inflation and generate employment for a huge bank of semi-skilled and unskilled workers in smaller towns. On the other hand, the average retailer does not have balance sheet spreads to open more stores. They need an infusion of capital. Third, inflation will continue to grow. There are a few brands that wish to come, but there is a lot more capital that wishes to come via portfolio investment,” he says.

Magazine agrees, adding, “As part of a long term strategy, India cannot be ignored. A lot of retailers right now may not have the wherewithal to invest for the long term. It needs to trickle down for retailers coming to India.”

Discussions are on about whether the government could allow FDI in the back-end of food retail and open up multi-brand retail. The ministry wants a debate on investments in the food retail chain and whether FDI be leveraged for creating back-end infrastructure. The industry feels that the biggest beneficiaries of this move are likely to be Tier II, III, IV, V cities and that trying to place conditions on it will, in fact, be counterproductive. Market conditions and customer demand will lead to development of the backend.

“Eventually foreign retailers would have to manufacture locally. It’ll improve supply chain management and lead to better products in the export market as well,” says Magazine.

SCAI is of the view that the entire journey of modern retail in developed countries, which took 150 years, needs to be condensed in India to 15-20 years. “Businesses are not sustainable with the existing infrastructure. So they’ll have to improve the backend, why place restrictions on that,” Motta says.

The point of view is backed by research. CRISIL says that this policy measure is likely to stimulate a flow of investments from modern retailers and logistics companies for establishing quality supply-chain infrastructure for fresh fruits and vegetables. An efficient supply chain will enable large retailers to source vegetable and fruit produce directly from agricultural cooperatives, lowering annual wastages, about Rs.630 Billion in 2009-10, and reducing commissions of trade intermediaries.

"Liberalisation of the retail-FDI policy will help increase organised retail penetration," says Sridhar C, Head – CRISIL Research. “A likely increase in the sales volumes of fruits and vegetables through modern store formats will encourage large retailers and logistics companies to invest in cold storage and transport facilities.”

The paper says that FDI in retail had arrived in China 18 years ago. Initially retail chains with 49 per cent FDI were set up in the six coastal provinces, but even this limit has been relaxed now. Magazine says that step-by-step opening up of FDI may be a good compromise to allay apprehensions but it is not the best idea. “The government can take a decision for large formats to first come into some cities, if they wish to do it in a controlled manner, which is not the best thing to do. If you control too much, the retailer who is providing goods at cheaper rates because of huge procurement ability and economy of scale will not be able to do so,” he says.

The white paper outlines that small retailers in the unorganised sector have been growing at 15 per cent annually, while organised entities have seen a dip in profit. An ICRIER study quoted in the paper suggests that mandis and food markets be modernised through public-private partnerships, and cash-and-carry outlets such as Metro should be set up.

Goods should be procured from farmers as is done in China, while farm co-operatives and associations of farmers should be encouraged to sell in the markets.

At the same time, discussions are on about allowing industry status to retail. Together with FDI in retail, a GST regime, this move would bring about much needed structuring to the sector. However, India already has a robust system of regulations which, if implemented, do much to safeguard fair play. “We are not a banana republic. We have regulations in place and no one can come and take advantage of us,” Magazine says.

In fact, says Motta, “traditional retailers will get professionalised. They will start receiving FDI in the form of Institutional or portfolio investment enabling them to expand.”

Developers cite precedents to show that the concern for small traders suffering is unwarranted. “A whole new generation of banks have come to India. Did it hurt Indian banks? In fact, they upped their game to provide superior services and wooed the consumer. In retail too, single brand retail is allowed. Have any Indian brands closed because of that? In fact, over all standards have gone up. This concern is not valid,” says Mantri, responding to sporadic protests on the issue.

 

-By Shalini Seth

How long is long enough?

 

If the mall is a community centre, what is the kind of time shoppers like to spend there?

The time spent at a mall is often related to the amount spent at that mall. Mall developers over the world keep entertainment, utilities, gyms, sports and events to keep shoppers engaged more than a couple of hours. We asked a few shoppers about how long do they spend in their favourite mall.

“The longest I’ve spent in a mall has been four to five hours but that is not usual,” says Poonam Juneja, a homemaker based in Thane. Juneja says she often heads to the mall to shop or hang out while her children stay entertained. While trips to the mall are usual in her household, she tends to spend the longest when she combines her shopping with other activities.

“I spend the longest there when I need to do grocery shopping for the whole month. I pick children from school and head to the mall with my sister or sister-in-law. That is the one place where children don't fuss too much. They know that their fun is around the corner. We make sure that there are activities planned for them as well. And when their Dads join us later, we have dinner and come back,” she says.

For her, and many others, malls have brought fun into what used to be a chore. Many families make use of the anchor stores to plan their shopping and entertainment. In surveys across the world, a majority of shoppers spend two to three hours in a mall, with 90 per cent making at least one purchase. “For those who have children, malls have taken away drudgery from what used to seem like chores. If I have guests from out of town, we can easily head to the mall since there are stores there which are specific to the city,” says Nidhi Kochar, an entrepreneur, who lives in Andheri.

For many shoppers, the freedom from weather is a big thing. “Earlier we would dread guests coming to the city in the summer heat. And we were similarly stuck in Mumbai during the rains. Now, it mostly does not matter,” says Rachna Khanna, a resident of Greater Kailash in Delhi. She says that from Lukhnow to Delhi and Mumbai, most of her shopping needs are met in the mall, over hours and hours.

Out of town shoppers and their hosts seem to spend longer durations of time in malls just browsing through things. “If I go into a mall in Mumbai, for instance, I am happy to see the collection of things there that I used to trawl the streets for, earlier. What that means, effectively, is that the time that we used to spend travelling from Andheri to Churchgate to Bandra is all taken care of in one day,” she says.

On the other hand, shoppers in the same city say that they need constant variety for mall fatigue not to set in. “I find we need to space our visits to the mall, especially if they get too long,” says Deepika G, a Bengaluru-based hospitality professional. “Often shops have the same stuff for a while and children get bored of the same options. So if we go about once a month or so, we spend a good three to four hours, otherwise we shop for what we need and leave.”

Movie-watching at a mall can be one of the most time-consuming activities. But most shoppers say that if they go for a movie, they rarely take out time to do anything else at the mall. “Indian movies are very long and you feel cooped up sitting in one place. Often, if we go to a mall for a movie, we may head someplace else for hanging out later or for dinner,” says Prerna Suri, a media professional.

“I tend to spend hours in a mall, catching up with my friends,” says Justin Fernandes, a frequent visitor to Dubai. “I land up in a mall, meet one friend over coffee and a stroll, then wait for another to arrive while I browse at the bookshop. Sometimes I end up spending the day there, leaving with my hosts after dinner. That is sometimes not possible in India where malls tend to be smaller,” he says.

“Let me put it this way,” says Juneja. “Earlier the only thing we did with the family was go to a restaurant to eat about once a month or less. Now, with a mall we go out more often combining grocery shopping with an evening out.”

Given the choice, Indian customers are choosing to spend longer hours in a mall than they ever did outside. But it would seem, it’d take a while for them to get used to treating it like a whole day out.

- By Shalini Seth

 

 

Bellary airport project to have a mall

The Government of Karnataka has awarded the contract for the development and operation of the greenfield airport at Bellary to Marg Limited, an Indian diversified infrastructure development company.

In addition to terminal buildings, runways and control towers, Marg will also develop access facilities and build utilities necessary to serve the airport during the operational phase. Marg would plan and undertake the development of facilities, amenities and other infrastructure like an aviation academy, exhibition/convention centre, business parks, shopping mall, flying club, theme/entertainment parks.

To develop the Bellary Airport, Marg has incorporated an SPV in the name of Marg Krishna Devaraya Airport. Marg will develop the entire required infrastructure for the project, which is expected to be completed in 24 months from the date of signing of the PDA.

Hidesign launches 50th EBO

Hidesign has launched its 50th exclusive brand outlet (EBO) in India, at Express Avenue Mall, Chennai. The 850sqft store, located on the ground floor of the mall, carries a mix of classic women’s handbags and men's bags, in addition to the latest seasonal lines.

Hidesign now has 10 exclusive stores in Tamil Nadu and Kerala, including this latest addition. The brand is also present in major multi-brand outlets such as Lifestyle, Landmark, Shoppers Stop and Westside throughout the region.

Taking a cue from international leather retailers, Hidesign is eyeing airport retailing, beginning with an exclusive store at Cochin International Airport. By the end of the year, the 450sqft offering will be matched by another Bangalore International Airport.

The group has become the first Indian brand to be retailed at premium international outlets such as John Lewis, Selfridges and House of Fraser in the UK, Myers and David Jones in Australia, Stuttafords in South Africa, Parksons in Vietnam and Robinsons in South East Asia.

Inorbit Mall wins two awards at CMO Asia Awards 2010

After being recognised as the Most Admired Shopping Centre Developer of the Year and Most Admired Shopping Centre of the Year - Marketing and Consumer Promotions at the India Shopping Centre Awards 2010 in May, Inorbit Malls has won two more awards for ‘Brand Excellence in Social Marketing and Brand Excellence in Construction and Real Estate at the recently concluded Chief Marketing Officer Council (CMO) Asia Awards 2010 in Singapore.

Inorbit won Brand Excellence in Social Marketing in recognition of its community building initiatives – Aikya, Bodh & Live at Inorbit. Bodh is about learning where school children go through a mall trip. Through Live At Inorbit, Inorbit provides a platform to budding and talented people to perform and exhibit their skills in front of a live audience free of charge, every fortnight.

European brands in Kolkata malls

Kolkata’s South City mall is set to see a host of European brands just before the Puja shopping fever. Jack & Jones, Vero Moda, Only and Pieces are the four European apparel and accessories brands under Danish retail giant Bestseller. They’ll inaugurate at the Prince Anwar Shah Road shop-eat-hangout later this month.

This, preceded by entry of Mango and Aldo at Courtyard at Forum. The brands will have the same price tags across world cities to cater to the well-travelled shopper.

The brands target various age groups –20-35 for Jack & Jones, 20-35 year old women for Vero Moda and teenage girls for Only.

The Bestseller group has two more brands in its portfolio — Selected, a high-end, clean-cut men’s line, and Exit, the kids’ range — which it plans to bring to town subsequently.

Forum Projects to invest Rs1,000 cr in three years

Realty major Forum Projects is planning an expansion adding 3.7million sqft of retail space within the next three years, with a total investment of Rs1,000 crore.

The projects would be spread across the eastern region and encompassing tier-II city like Bhubaneswar and tier-III ones like Jamshedpur and Rourkela, along with Kolkata and Howrah.

Plans include 2million sqft of mixed-use development by 2012 and another 3.5 million thereafter.

Forum Courtyard, at an investment of Rs 60 crore, was an extension of the Forum mall, and houses international brands, making its foray into the city. These include names such as Mango, Promod, Aldo, Charles & Keith, Mother Care, Anita Dongre, Sisley, Sunglass Hut, Body Shop, and Alcott among others.

Along with retail space addition, Forum is looking at expanding its footprint in terms of real estate projects in Howrah, Bantala, and Adityapur, with a combined space of 6.7million sqft. Forum Projects plans a luxury condominium project adjacent to Science City at Eastern Bypass, at an investment of Rs300 crore.

Mavens Biotech forms joint venture with Garuda Group

Mavens Biotech has signed an MOU with Bengaluru-based Garuda Group to jointly develop projects in real estate, township development, low cost housing construction, power and other infrastructure related areas. This joint venture has already identified three large projects in and around the Bengaluru city for development of a mall, hotel-cum-convention centre and a large township.

Mavens Biotech is engaged in the business of tissue culture plants and bio-informatics. Anil Jain, director Mavens said that the JV marks the company’s diversification into the infrastructure sector.

Garuda Group, promoted by BG Liday, is a Bengaluru-based real estate developer with commercial projects including Garuda Mall, Garuda Swagath & Garuda Mysore with more than 1.2million sqft of shopping and entertainment areas.

-By Shalini Seth