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BW Businessworld

Ideas Of Change

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Neither the incessant downpour nor the delay in foreign direct investments (FDl ) dampened the mood at the India Retail Forum held in Mumbai recently that literally extended a red carpet welcome to industry stalwarts such as Kishore Biyani and budding players in the sector alike.

 The 2-day event held at Marriott's Renaissance near lake Powai  — which was also beaming in the monsoon — not only discussed the imperatives and challenges faced by the Indian retail sector but also talked about how to tackle these issues while also talking about upcoming trends that might change the face of the industry going forward. The annual gathering for retailers witnessed about 30 per cent growth in footfalls compared to last year.  Over 3000 players participated in the forum, which is apparently the biggest conference for the $28 billion industry despite the murmurs that the government is not willing to open up FDI in the sector, much of which has been a result of vote bank politics.

 "There is no better time than now to open a gate for foreign FDI in India as consumers are becoming global in their shopping preference and there is a set path to developing an ecosystem of inclusive growth in the sector," said Thomas Verghese, Chairman of CII's national retail committee and CEO of Aditya Birla Retail. What Verghese said in his opening remarks at the forum was a common feeling shared by corporate biggies. Viren Shah, president of Federation of Retail Trade Welfare Association (FRTWA) went on to express that with the entry of deep pocket retailers in the country it would be difficult for mom-n-pop stores to survive as the competition will not have a level playing field.

With multiple approaches towards opening up of the sector for FDI, this year's summit focused more on  government policies and uncertainties rather than way ahead post approvals."This year single brand foreign retailers seem more keen to come to India compared to last year because of the growing domestic market and less regulatory hurdles vis-à-vis multiband peers," said a senior delegate of a real-estate advisory firm who had a series of business development meetings during the event. He explained that during the 2008 slowdown, real-estate developers had almost scrapped their ideas of making malls and shopping complexes which is now resulting in demand-supply parity due to international entrants.

The country's biggest retailers, Future Group, Aditya Birla Retail, Bharti Wal-Mart and Reliance Retail are of the opinion that FDI in multiband retail is the need of the hour in order to sustain growth momentum. Liquidity flow will help companies create supply chains and back-end infrastructure which will improve their efficiency in production. As the government's conditional nod to 51 per cent FDI in multi-brand retail seems just around the corner, there were a number of discussions on nitty-gritty of the proposal and charting the way forward.

"Organised retail has grown great categories and formats according to the needs of new age consumers. Now, to sustain this growth momentum we need foreign cash flow to come in system," said Kishore Biyani, founder and group CEO of country's largest retail conglomerate Future Group.

According to one of the PE investors and a delegate, who wished to remain anonymous, "presently, retail trade is disorganised and largely inefficient. As in other economic activities, minimising costs and maximising efficiency are imperative in retail trade. However, it's not only government regulation but also corporate governance issues that making investors like us sceptical towards investing in the sector. Companies such as Subhiksha and Vishal Retail are examples where till last minute no investors were aware of what's going on within the company."

Big ticket retailers were of the unanimous opinion that, concerns about kiranas closing down are not based on facts. Small stores offer customers the convenience of quick doorstep delivery, often extending a month's credit, offering local flavour and tailor made size of grocery which are things that no organised retailer can match.

While people talked serious business at the podium, singer Hariharan and others soothed their soul and mind with Coke Studio.