IKEA stores in India closer to reality, Walmart still a far cry

Tags: Ikea, Walmart, Retail
In a country where haggling is the name of the game when it comes to trade, it is only apt that the highlight of 2013 for the Indian retail story is the hard bargains by multinationals with the government over foreign investment norms in the sector.

Be it Swedish furniture retailer IKEA's push to let it open cafeterias at its outlets as part of its Rs 10,500 crore investment in India or Walmart's quibble over sourcing requirements for foreign multi-brand retailers, there was no end to pushing the envelope.

Ironically, however, when the government agreed to dilute the sourcing criteria Walmart decided to part ways with its Indian cash and carry partner Bharti ending their six-year-old partnership.

In a year marked by economic downturn, the estimated USD 500 billion retail sector in India saw growth slowing down to 10-11 per cent from high double digits growth earlier, according to Boston Consulting Group, Asia Pacific Leader (Consumer and Retail Practice) Abheek Singhi.

The silver lining, however, was that many companies moved closer to profitability during the year and more urban consumers migrated from traditional stores to modern format he added.

When it came to FDI inflows in India's multi-brand segment, the year had nothing to show but the single brand had plenty to cheer.

After a series of presentations by its officials, the government approved IKEA's Rs 10,500 crore proposal in May paving way for it to set up home furnishing stores along with cafeterias in the country. Earlier, as per the government policy the company was not allowed to open cafes and restaurants at its stores.

Besides IKEA, the single brand segment also saw the likes of French sports goods retailer Decathlon, fashion brand Promod, crockery maker Le Creuset, Fossil Inc and Hennes & Mauritz bringing in FDI worth about Rs 1,470 crore.

IKEA had proposed setting up 10 furnishing and homeware stores as well as allied infrastructure in over 10 years in India. Subsequently, it planned to open 15 more stores. It has already identified Haryana, Andhra Pradesh, Maharashtra and Karnataka as possible states to set up its stores.

So far, IKEA's has been the largest investment in single-brand segment ever since the government allowed 100 per cent foreign investment in this sector last year.

The multi-brand segment, however, had no such story. Both foreign and domestic retail firms, including Walmart, Tesco, Carrefour, Bharti, Aditya Birla Group, Tatas, Reliance and Pantaloon wanted government to change FDI norms.

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