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IndiaN retail sector at CROSSROADS

The debate of unorganized versus organized retail not only shifted to offline and online retail but all sorts of retail merged and emerged as one ‘New Retail’ The retail sector of India has been at crossroads and 2018 proved a significant year as it provided a clear direc­tion of the trajectory of retail says DHARMENDRA KUMAR

 

The retail sector of India has been at crossroads. The year 2018 proved a significant year as it provided a clear direction of the trajectory of retail. The debate of unorganized versus orga­nized retail not only shifted to offline and online retail but all sorts of retail merged and emerged as one ‘New Retail’, as Jack Ma, the founder of Alibaba says. Both the times, the de­bate in India was triggered because of US based giant retailers.

 

In 2007 the world’s largest brick and mortar retailer of US, WalMart had finally found a way to foray into Indian retail sector by partnering with Bharti group and built its back end distribution network in the name of cash & carry. Back home, in August 2016 Walmart went online by forging a $3.3 billion deal to acquire startup Jet.com and later partnered with Google for voice shopping using Google Home to compete with the growing clout of its rival Amazon, the king of online shopping. The knock-down clash of these two retail giants of US reached China where both failed due to Chinese policy of protecting and promoting domestic industry.

 

In China, Amazon has a market share of 0.8% and WalMart is just a 12% partner of a local platform with very low market share. The battle between these two US based re­tailers will be fought on Indian turf.

To trade punches rival Amazon, in May 2018 Walmart bought 77% stake in India’s larg-est online retail platform Flipkart for $16 billion. Amazon is only next to Flipkart in India and is fast catching up. If the acquisition of Flipkart goes through, the two US companies will be in control of almost two third of India’s e-retail sector. By September 2018, Amazon acquired ‘More’ of Aditya Birla Retail, the largest Indian chain of supermarkets. Oth-ers in India are following this omni-channel strategy as well. Shoppers Stop and V-Mart retail are preparing to go online. Ezone has already launched its online platform.

Government focus on ‘Ease of Doing Business’ and attracting foreign direct investment (FDI) resulted in series of mea­sures to further liberalize the retail sector. Not only 100 per cent FDI was allowed in single brand through automatic route but attached conditions were also relaxed for foreign investors.

At policy level, decisions were made to facilitate the process. Government focus on ‘Ease of Doing Business’ and attracting foreign direct investment (FDI) resulted in series of measures to further liberalize the retail sector. Not only 100 per cent FDI was allowed in single brand through automatic route but attached conditions were also relaxed for foreign investors. The pictures and videos of stampede at the inaugural day of the first Indian store of IKEA, the worlds largest furniture retailer went viral.

With omni-channel new retail, its digital stranglehold is scaling up primary con­cerns of livelihood to the issues of economic and digital sovereignty. The dom­inant position of new retailers is adversely impacting traders. Margins of MSME and producers are squeezed. With digital power, their hitting capabilities are immense. Learning from the recent Indian experience of destructive use of Whats App and following difficulty in regulating such global companies, it is imperative to rein in digitally empowered new kind of retailers whose impacts simply goes across sectors.

 

Dharmendra Kumar

 

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