Welcome to Michael Zakkour, a recognized expert on doing business in Asia, who brings this guest post on recent big retail news from India to the blog. Michael’s specialties include retail and consumer product development, supply chain and logistics for retail and branding and marketing in Asia. Michael shares his insight below:
In 2005, author James McGregor famously wrote his book, 1 Billion Customers: Lessons from the Front Lines of Doing Business in China. The first half of the title became business-world shorthand for the commercial and consumer product possibilities that companies around the world dreamed about when looking at China.
But what about the other 1 billion customers? You know, the English speaking democracy called India.
No one wrote a book about them because, although India is the world’s largest democracy, and one of the world’s largest consumer markets, it is also the world’s largest bureaucracy, featuring a system slowed to
inertia by red tape, the most fragmented retail market on Earth and a (in)famously closed door mentality about letting foreign retailers in.
The great news coming out of India on September 14 is that finally, at long last, India has cracked the door open and is inviting foreign retailers to ride the elephant, along with the dragon.
As the BBC reports, “Last year, the government suspended a similar plan after fierce opposition from its allies and political rivals. International firms such as Wal-Mart and Tesco will now be able to buy up to a 51% stake in multi-brand retailers. Analysts say the government has reintroduced the measure in an effort to revive a flagging
economy. Prime Minister Manmohan Singh said: ‘I believe that these steps will help strengthen our growth process and generate employment in these difficult times.’ “
‘Flagging’ is putting it mildly. In the last year, growth in India has slowed from an average of 10% to as low as 6%. Foreign Direct Investment in India has dropped by 67%.
Now, this opening in India will come with many terms and conditions (such as openings only in cities of 1 million or more and a 30% sourcing-from-India requirement) but, again, it’s a start.
We have not been particularly bullish on India in the last five years, because it is still a fairly closed market. Opposition from dozens of politicians, parties and small business people have kept it that way.
In addition to this new measure, the Indian government is also opening up the aviation markets, as well as allowing diesel subsidies to lapse – these are more moves toward a more free market based economy.
This news is encouraging for brands, retailers, consumer products companies and the myriad companies who provide services in sourcing, manufacturing, distribution, warehousing, logistics and transportation.
Where Wal-Mart, Carrefour and Tesco go, so must go the supply chain infrastructure.
Finally, we can start writing a new book: Two Billion Customers: Selling to 1/3 of the World.