Will the Indian modern retail industry sooner or later be dominated by global giants such as Walmart, Amazon and Alibaba? It looks like they are aggressively doing ground work to spread their wings in India. Walmart is known to be in the final stages of picking up a stake in Flipkart. If it does so, it gets to reach last mile Indian consumers through Flipkart's distribution network. The Indian consumer will get access to Walmart, which currently is allowed to operate only as a B2B cash and carry retailer. Similarly, Amazon is getting set to roll out its grocery retail business in the next six months. Will Amazon pick up a stake in an Indian brick and mortar grocery retail company? Well, India's retail king, Kishore Biyani is known to have recently met both Jack Ma of Alibaba and Jeff Bezos of Amazon. So, whether he plans a strategic investment is again anybody's guess.
"By picking up a stake in Flipkart, Walmart is playing a defensive game. The idea would be to make use of the synergies as soon as FDI in multibrand retail opens up," says Arvind Singhal, Chairman, Technopak. In fact, Walmart across the world has been acquiring online retail companies in order to strengthen its omni-channel presence. It has invested in JD.comin China, while Alibaba bought out two physical retailers Hema and Bailan in China.
Building an online retail presence for a physical retail company or an online retail company building a physical presence, both seem to be expensive propositions. Therefore, global retail giants, just as they have done elsewhere, are trying to get into partnerships in India too. Amazon picking up a 5 per cent stake in Shoppers Stop is an example. "The moment FDI in multibrand retail is allowed, I expect most of the Indian retail companies to join hands with the global biggies," points out Singhal of Technopak, who expects Indian modern retail to be dominated by the likes of Amazon, Walmart, Alibaba, and Reliance Retail. The reason why Indian retail companies would be happy to join hands with the global giants is because retail is a capital intensive business and one needs deep pockets to sustain the business in the longer-term.
Rajat Wahi, Partner, Deloitte, does agree that the Indian retail industry will see domination of global majors, but only in the long-term. "One doesn't know when FDI in multi-brand retail will open up. For the next 4-5 years I see all the local retail companies building scale, consolidation will happen post that." After all, modern retail is just 10% of the overall retail industry and companies need to build their platforms and reach maximum consumers so that they become lucrative buys.
Future Group Chairman, Kishore Biyani, is busy scaling up. In the last two years, he has acquired three retail businesses (EasyDay, Niligiris and Heritage). He recently announced his company's Retail 3.0 plan through which he hopes to become a 1.5 trillion company by 2022 by blending online and offline retail. That surely is scale that could woo any global retailer looking at India. In fact, Biyani likes to be known as a FMCG company and not a retailer. "Our focus has always been to build brands, its only the industry which likes to call us a retail company," Biyani had said in a recent interview with Business Today.
So, will the king of Indian retail exit modern retail in the years to come? Quite possible. For, his biggest passion now is his FMCG business, which he aspires to scale into a Rs 20,000-crore brand by 2021. As per Singhal's forecast, the only two Indian retail companies that would stay in the race in the long run are Reliance Retail and DMart. Reliance Retail because they have deep pockets and DMart because of its valuation. "I don't think any foreign retailer will want to pay that kind of value for DMart."