Business management consultancy AT Kearney has a simple advice for its retailing clients: Think and act as if you want to enter India tomorrow. Forget regulatory constraints. Just try and understand its market complexities.
"Global retailers have to tweak their business models and work around regulations. We are asking our clients to explore models like cash-and-carry, licensing arrangements and various types of joint ventures to get a foothold in the Indian market," said Joshua Chernoff, Vice-President and Leader (consumer products, retail and pharmaceuticals), AT Kearney.
Chernoff is in India to attend the 20th India Economic Summit, organised jointly by the World Economic Forum and Confederation of Indian Industry.
AT Kearney, an influential consultancy in the retail sector working for several Fortune 500 retailers, in its recent study, named India as the second-most attractive retail destination among 30 emerging markets, only behind China.
Retail attractiveness takes into account parameters like purchasing power, size of the market, government policy and long-term market potential.
According to Chernoff, there was a certain degree of frustration among global retailers about their inability to tap a huge market like India. But he added that AT Kearney's advice to them was that they should not let it make them ignore the country.
"Retailers should stay on top of the policymakers' minds and be in a position to cash in when the restrictions on global retailers are ultimately eased," he said. AT Kearney is advocating to its clients the highest level of management focus on India.
Currently, the government does not allow FDI in the Rs 20,000-crore (Rs 200 billion) organised retail sector, but Commerce Minister Kamal Nath recently said specialty retailers, who also manufactured goods, might be allowed entry.
"For large corporations, changing their core business model to suit a particular market is nothing new. Remember, Wal-Mart started its operations in Mexico and Japan through a joint venture," he added.
"French retail giant Carrefoure, too, had growth pangs in China but they re-engineered their formats to suit the local markets," Chernoff said.
He also countered the government's view that opening up the retail sector to foreign competition will not yield substantial amount of FDI.
"To say that it will not bring in large FDI is a self-fulfilling notion for the Government. I would be surprised if the FDI inflows don't go up dramatically when the market is opened up," Chernoff explained.
On the development of the country's domestic retail sector, Chernoff said the emergence of large shopping malls had changed the landscape in the past three years.
"The consumer, too, is learning to adapt to organised retail and that's why global players should come to India and start learning quickly," he said.
