India’s retail revolution
Foreign franchises by the dozen queuing up to enter more open market. By Narendra Kaushik in New Delhi
India seems to be on the cusp of a retail revolution with a large number of global majors from the food and beverage, health and wellness, services, fashion, furniture and education sectors looking to open thousands of stores in the country in the next six months.
Many of these well-known names are franchised operations and for Franchise India Holdings, there’s never been a better time in its 18-year history, says its chairman, Gaurav Marya.
Headquartered in Faridabad, adjoining South Delhi, Franchise India is part of a group that has 60 offices worldwide and claims to be Asia’s largest integrated franchise solution provider. Franchise India says it now has 56 global investors including Pasta Mania, Migato, Evisu, Wall Street English, Morgan Fields, Pure Nectar, Kioda, Roomraider and Korres lined up at its door. They wish to invest around US$500 million in 3,000 outlets in the next six months in India.
Mr Marya attributes the high interest to India’s growing economy, large urban population, middle class base and consumption potential.
“India is a huge consumption market. The biggest charm of it is the largest urban population, growing middle class and number of mobile users in the country. The investments [in retail outlets] will only increase,” Mr Marya told Asia Focus.
While the rise of China’s consumer economy tends to attract more attention, Mr Marya notes that the markets of the world’s two most populous countries are quite different, with china being more of a producer economy.
“China has home-grown brands [and] it is not allowing many international brands. Uber was not allowed there.” He said. “India is a fundamental consumption market. For brands [that lost an opportunity in] China, India has become an opportunity.”
Apart from its large base of young and digitally connected consumers, India also is benefiting from a more pro-business approach under the government of Prime Minister Narendra Modi. His administration has opened up single-brand retail to foreign investment, introduced a single goods and services tax for the entire country, brought in more transparency and promoted digital payments on a big scale.
“There are a significant number of positive factors in the overall environment. The consumer story is at an all-time high. There is definitely far more clarity in the Shoppers walk past a clothing store at a mall in Mumbai.
system than ever before,” said Sridhar Prasad, a partner for internet and e-commerce services in KPMG in India.
He credits the recent phenomenal success of the local brands Patanjali and Paper Boat among young, affluent
and digitally minded Indian consumers. “More than 400 million of these consumers are using mobile phones. There is a significant amount of smartphones. People are open to trying out new things,” Mr Prasad told Asia Focus.
Mr Marya says he wants to see Thai brands also take full advantage of India’s unsaturated market and Indians’ familiarity with them, and promote themselves like their counterparts from the Philippines, Singapore and Malaysia.
“Malaysia is promoting its brands aggressively. Singapore is doing the same. But Thailand is not doing it,” he said, adding that this would be an ideal time for Thai and Indian brands to collaborate.
Mr Marya identified three major brands from Thailand — the restaurant chains Mango Tree and Greyhound, and the hospitality and food giant Minor Group — as the first from the country to make a big splash in India.
Among the brands listed with Franchise India Holdings, the largest number is from United States, followed by Singapore, Australia and Greece. Around 20 are in food and beverages while over a dozen each are in general retail and education. Many of these brands are looking to open franchised outlets in second- and third-tier cities apart from establishing a presence in the major metropolitan areas.
The Modi government now allows 100% foreign direct investment (FDI) in single-brand retail. It has also relaxed local sourcing requirements for up to three years, with a further five-year break for companies that introduce innovative technology to India.
The Swedish-based global fast-fashion chain Hennes & Mauritz (H&M) has since opened stores in the country, while others expressing interest include the furniture giant Ikea, Apple, the Japanese clothing chain Uniqlo and the American retailers Gap and Massimo Dutti.
The newest edition of the Global Retail Development Index compiled by the consulting group AT Kearney ranks India as the top retail investment destination in the world, relegating China to second position.
It ascribes the growth to India’s strong GDP, growing middle class and a favourable regulatory environment created in the past few years. Malaysia ranks third but Thailand is at the bottom of its 30-country list.
The International Monetary Fund (IMF) said earlier this month that key structural reforms are continuing to pay off in India, greatly improving its growth prospects.
According to an analysis by the India Brand Equity Foundation (IBEF), a resource centre established by the Ministry of Commerce and Industry, the retail market is forecast to increase in value to $1.3 trillion by 2020 from about $600 billion in 2015.
It forecasts revenue from online retail at $70 billion by 2020, from $6 billion in 2015.
India’s FDI inflows reached a record $60.08 billion in 2016-17, up from $55.6 billion in the previous fiscal year.
“Malaysia is promoting its brands aggressively [in India]. Singapore is doing the same. But Thailand is not doing it” GAURAV MARYA Chairman, Franchise India Holdings