| India's growth story may have drawn the attention of the world's best-known hypermarkets and supermarkets to the country, but specialty retailers are not ready to buy the story just yet, reports Economic Times.
Prominent specialty retail majors GAP, H&M, Zara, Office Depot and grocery retailer Target have decided to stay away from India till the time 100% FDI is allowed in retail trade. Legal experts attribute their skepticism to concerns about preserving trademark and best practices.
"In the retail business, companies tend to develop certain internal intellectual properties, which they are not comfortable sharing. If a company has to franchise its business, it will have to share some critical information and data with the franchisee," says Akil Hirani, managing partner of corporate law firm Majmudar & Company.
Perhaps, this is the reason why foreign brands haven't rushed into the country despite the government allowing 51% FDI in single-brand retail. The only two known brands that have come in are Lee Cooper and Louis Vitton who have formed joint ventures with Indian partners.
Even though GAP, Zara and H&M have the option to operate in India through this route, they have stayed away as they require full operational freedom. "Permitting foreign partners to hold 51% in single-brand retail is a classification unique to India and reflects the mindset of the Indian bureaucracy. No serious foreign player would consider entering India on this term. Wal-Mart is an exception as it operates in a different segment and on a different scale,'' says Arvind Singhal, chairman, Technopak Advisors.
According to industry sources, even high-end grocery retailers Target has a reason to get bearish on the India story.
"The chain operates in the premium segment and would like to catch the metropolitan consumers, unlike hypermarkets, which may find a good number of takers in rural and sub-urban areas as well. However, availability of commercial real estate in metroes is low. This is acting as a deterrent for the company," said a Mumbai-based consultant who had done a market survey for the Target group.
Following controversies on the FDI in retail, many mass-market retailers have also put their plans on hold. Last month, Carrefour India head Gerard Freiszmuth had said the firm would wait for clarity on the FDI front before announcing a plan.
Full Story at http://economictimes.indiatimes.com
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