Kishore Biyani, founder and chairman of the Future Group, which is India’s largest and most successful retailer told us at the Fortune Global Forum yesterday about how he avoids clashes with old traders who dominate India’s current farm-to-shop distribution system.
He invites local wholesale traders who specialize in various fruits and vegetables to bring their produce to his Food Bazaar supermarkets and sell it themselves. That seems to have prevented them mounting the sort of opposition to his Bazaar outlets that has grown against the Reliance Fresh stores of the Reliance Industries (RIL) group. But other speakers on a panel at the Forum agreed that this was not a model that could be generally applied. Other groups would want to have more control over their stores and will have to find different ways of handling traders, who fear they will lose their jobs as supermarkets expand.
The general mood of the Forum session on India’s booming retail business was positive, including the prospects for foreign direct investment (FDI), even though it was agreed that there is no prospect of the government allowing FDI in on a broad basis before the next general election.
Meanwhile, foreign firms can operate franchises and invest directly in single-brand shops and wholesale cash-and-carry businesses, subject to case-by-case government approval. One of the speakers, Mr H.B. Lee, regional CEO of Samsung Electronics, seemed happy with the 100 franchised Samsung outlets that his firm has opened across India.
Earlier, in another Forum session, Sunil Mittal, chairman of Bharti Enterprises which has a tie up with Wal-Mart (WMT) for wholesale stores and logistics, warned that rising land prices mean that new retailers might have to bear losses for up to four or five years. Arvind Singhal, chairman of Technopak, a Delhi-based retail consultancy, forecast that big-company retail would grow from 3.8% now to 16.7% in 2012 and 26.3% in 2017, by which time sales would have more than doubled. So there is a lot to play for.