International retailers target India

India is the favoured prospect for international retailers looking to move into emerging markets to offset worsening economic conditions in developed countries, according to a new survey.

CB Richard Ellis, the property agents, and GfK, the market research company, surveyed 300 international retailers about the markets they intended to enter in 2008 or had entered for the first time last year.

In spite of restrictive rules on foreign retailers, India emerged as the preferred destination for 27 per cent of respondents compared with 24 per cent selecting Ukraine and 22 per cent picking Russia, according to the report due to be published on today.

However, delegates to the World Retail Congress expressed frustration about rules on foreign direct investment that oblige most retailers to operate with an Indian franchise partner.

“We are happy to be one of the biggest franchisers all over the world,” said Jose-Luis Duran, chief executive of Carrefour, the French supermarket group. “But in India [we would have to place in the franchisee’s] hands 100 per cent of our brand name, know-how and credibility. I’m going to wait as much as possible until I find the right partner.”

Mr Duran’s sentiment was eclipsed by stronger resistance to the Indian model expressed by Anders Dahlvig, chief executive of Ikea. “We can only have 51 per cent ownership at the moment…We don’t think that is sufficient.”

Mr Dahlvig said he was working to persuade the government to loosen the restrictions but until the law changed he would not open Ikea stores in the country.

Peter Gold, head of cross border retail in Europe, the Middle East and Africa at CBRE, said: “We believe India will maintain its position as a popular new location for retail expansion as further trade restrictions are lifted. And, in the same way that Ukraine is now benefiting from retailer interest in Russia, retailers will again be looking to expand to adjacent markets around other emerging destinations.”

Although entering India is a focus for retailers, China was a more talked about country at the conference in Barcelona with store groups excited about the growth prospects and pleased with the government’s looser restrictions on investment.

Source: FT