Global companies must understand consumer needs and let govt regulations settle down before investing in India’s attractive retail market.
Apparently there’s a pot of gold in Indian retail, and big players from around the world want to dip in. Many of them are likely to come up empty-handed.
The volume of high-profile announcements in the sector recently has been remarkable. Walmart Inc. led with a $16 billion deal to buy Flipkart Online Services Pvt. Ltd., India’s largest e-commerce retailer; China’s Tencent Holdings Ltd. will retain its holdings in Flipkart as well. After pouring billions into India to compete with Flipkart, Amazon now says it hopes to pick up a substantial stake in Future Group, which runs over 1,000 brick-and-mortar stores across the country. Google is interested in Future Group too, as is the shopping arm of Indian payments company Paytm, which is funded by Softbank Group Corp. and Alibaba Group Holding Ltd. Meanwhile, Berkshire Hathaway Inc. is also betting on Paytm, whose fortunes will depend greatly on whether e-commerce takes off in India, paying over $300 million for 3 to 4 per cent of the company.
Quicktake India’s Aspirations
Sure, there are a lot of Indians and they’re getting richer; Indian retail is a growing industry. But the current wave of enthusiasm looks excessive. Consider the excitement surrounding Paytm. The company is only in retail as an afterthought. It’s really a digital payments company that depends on a “wallet,” which you fill up from your bank account or your credit card. After spending hard on promotions and incentives, the company accounts for 22 per cent of the volume of banking transactions in India — but still only 0.25 per cent of the value.
The company — which opposition parties in India accuse of cozy ties with the current government — has expanded on the back of favorable regulatory and policy decisions. The initial boost came from a 2014 central bank decision to kill “one-click” credit card transactions, which forced apps like Uber to switch to using wallets. Then it benefited hugely from the government’s decision to invalidate high-denomination notes, which made Indians worry about using cash. Now it hopes to profit from the government’s attempt to force consumers and companies to store data locally, by setting up cloud infrastructure locally.
Where online shopping fits into this is unclear, unless the company is looking to diversify, worried that its products won’t be able to compete over the long run against the kind of cutting-edge mobile payment systems pioneered by China’s Tencent. It’s rare to meet anyone who’s actually bought anything on Paytm Mall: Flipkart and Amazon still have 80 per cent of the market, and Paytm Mall’s Chinese-style direct linking of customers to offline retailers has caused consistent quality issues that force it to regularly delist sellers. It’s interesting that Berkshire Hathaway was quick to insist that Buffett himself had nothing to do with its investment.
Amazon’s interest in Future Group makes a little more sense. The United States behemoth has been expanding into offline retail elsewhere and, in India, groceries already form a significant part of its sales; the company expects groceries and consumables to make up more than half of its business in five years.
Still, the thinking here seems a bit schizophrenic. On the one hand, Amazon is tying up with the small mom-and-pop shops that continue to dominate the Indian market, through Amazon Now. On the other hand, it seems to think that Future Group’s bigger stores are a good investment. The company’s first instinct was probably correct. If organized grocery delivery in India is going to take off, it will be thanks to someone who uses the extensive networks already put in place by local vendors.
Finally, investors worried about Walmart’s purchase of Flipkart because the price seemed too high for the education in e-commerce that Bentonville thought it was buying. Companies can’t simply pick up what they learn in India and apply it everywhere else. Indian consumers have special needs — they’re untrusting, for one, and price-sensitive, for another. They’re unlikely to build up big data trails on any one e-commerce site: Indians shop around constantly for the best deal.
However attractive on the surface, India’s retail market isn’t like those elsewhere; it demands new models. Flipkart revolutionized e-commerce in India thanks to its cash-on-delivery option, since customers here prefer to hold an item in their hand before they pay for it. But it’s important to distinguish between genuine innovation and workarounds meant to avoid regulatory hassles, such as India’s ban on e-commerce companies holding their own inventory. Before reaching for their wallets, international players need to figure out if a model is genuinely adapted to Indian shoppers’ needs and, ideally, should wait for payments, tax and inventory regulations to settle down before spending billions on scaling up.
Foreign companies and investors had better also keep in mind that the giant Indian conglomerate Reliance Industries Ltd. is preparing its own push into shopping. Fresh after using the steady profits of its oil business to upend Indian telecommunications — forcing a series of mergers and exits — Reliance now wants to expand its Jio telecom brand into shopping, among other sectors. Anyone betting on dominating retail in India will have to beat Reliance at home. They could be in for an expensive lesson.- Bloomberg
There are basically 2 axis of behaviour.
1. Direction : Positive or Negative.
2. Speed : Efficient or Inefficient.
Direction is more important.
I would rather a plodding positive than a ruthless and efficient negative.
The nation could be torn apart, and prevented from achieving its bright future, not by enemies outside our border but by our failure to unite and take along all our own citizens.
She lost her mental balance and massaging raga with pen and do not take her seriously as her writing starts at” s”×××and ends at “x”.
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