Retail Store Expansion in Developing Markets – India

Most companies in UK or US have established a stronger online presence and have reduced the number of retail stores to cut costs. These companies are now looking at other potential markets to establish their real estate presence. These target markets must have the required infrastructure, buying power and a large customer base with the traditional retail store shopping preference, such as India.

Starbucks, H&M, Hamleys, Lacoste and Gron Stockholm are among the premium foreign chains set to be active in the Indian retail real estate space in 2013. American coffee chain Starbucks has already opened stores in Mumbai and Delhi through a joint venture with the Tatas. While the Swedish fashion chain H&M is in the process of applying or India entry. Other like the UK-based toy major Hamleys, French apparel brand Lacoste and European kidswear chain Gron Stockholm are present in India through local partnerships.

Apart from the premium brands, mega retail store chains such as IKEA and Walmart have also entered the Indian market. IKEA is awaiting a clearance from the Cabinet Committee on Economic Affairs for investing 10,500 crore in India for opening stores. IKEA plans to setup retail stores on the outskirts of big cities. Walmart has joined the Indian Bharti group, both for Easy Day and Bharti-Walmart’s cash and carry or wholesale stores.

Most international brands plan to be centered across cities Delhi, Mumbai and Bangalore, while some Indian brands are exploring opportunities to expand in Tier-II and Tier-III cities. This uptrend in leasing activity from retailers is primarily due to the government policy to allow up to 51 per cent foreign direct investment in multi brand and 100 per cent in single brand retail. Most of the premium brands will scout for retail space at malls.

This cycle of international brands reducing their stores in their home countries to expand their online presence and opening retail space in the developing markets, and at the same time domestic brands expanding their reach to rural cities, is happening in all the major markets.  Does this mean that sometime in the future all the major brands will have a stronger presence online for all the major markets?

1.    http://professional.wsj.com/article/TPBSTN000020130225e92q00006.html

2.    http://www.indiainfoline.com/Markets/News/India-witness-consumption-and-retail-explosion/4884593714

3.    http://books.google.com/books?id=ob5Md3ZmQMsC&pg=PT119&lpg=PT119&dq=retail+stores+in+India+explosion&source=bl&ots=L6ApdXSlEc&sig=rR0qJiUlBmo4MY_R6NdTKWsSIEg&hl=en&sa=X&ei=dyItUf3BG4LI0QGq0IH4BQ&ved=0CF0Q6AEwBQ