The government may widen the scope of foreign investment in e-retailing by allowing FDI in services such as selling of financial products and rail-ticket booking, in addition to transacting in goods.
This, according to officials, will be done only after a consensus is arrived at among the ministries and departments concerned.
Consumer companies’ earnings for the quarter ended September have ignited hopes of a revival in consumer demand in India. After decelerating for about two years, consumer goods makers reported higher growth in revenue and profits during the quarter. Growth in net sales for the 15 companies in our sample list rose 11.4 percent on a year-on-year basis in the September quarter, against 10 percent in the preceding quarter and 11.5 percent in the March quarter.
Shares of consumer goods companies fell on Monday, weighing down the benchmark indices, as investors booked profits after July-September sales growth fell below expectations.
It has been acutely visible over the last three years. Multinational companies in India, in the fast moving consumer goods (FMCG) space, have been able to deliver higher returns on investment compared to their Indian peers.
Be it Hindustan Unilever, Nestle or Colgate-Palmolive, with returns of over 95 per cent, 110 per cent and 150 per cent, respectively, on an average, these multinationals have been able to grasp more than an understanding of the regional nuances of the market and have delivered, and not just on the investment front.
Aggressive expansion in a difficult economic environment and delays in foreign investment are proving costly for the retailers. Spencer's Retail, part of the Sanjiv Goenka group, had looked to break-even targets by the second quarter of 2012, only to revise it to December 2013.
The retail inflation came in at a higher than expected 9.84 per cent in September. This is higher than the consumer-price-index (CPI) based inflation of 9.52 per cent recorded in August.
Retail inflation for rural and urban areas stood at 9.71 percent and 9.93 percent respectively in September. For the previous month, rural and urban area inflation stood at 8.93 percent and 10.32 percent respectively.
Sales growth for fast-moving consumer goods (FMCG) companies is likely to remain muted in the September quarter, as consumers remain unwilling to increase spending.
The decision of Bharti Enterprises and Walmart to go their separate ways in India may suggest that having a foreign partner in a retail venture isn’t a sure-fire recipe for success. But the stocks of most listed retail companies have not reacted to this development.
FDI in retail is an emotional topic as people predict the death of the small retailer in India. This is unlikely. Large retailers such as Walmart, Tesco, Ikea, Reliance, Spencer's and Big Bazaar will co-exist with small retailers in India. How is this possible?
Distribution is the backbone of Indian marketing. India has 14 million retail outlets for a USD1.9 trillion economy, China has three million outlets for a USD8.7 trillion economy, and the US has one million outlets for a USD16 trillion economy.
Global e-commerce majors such as Amazon and e-Bay that have been eyeing the Indian e-retail market may soon have reason to cheer. The Industry Department is working on a draft foreign direct investment (FDI) policy on e-commerce, which includes e-retail. It is also holding consultations with industry and experts.