Mass grocery and apparel are the two most favoured segments for foreign direct investment in multi-brand retail, according to a study by Deloitte Touche Tohmatsu India. The study, titled Indian Retail Market-Opening More Doors, which comes at time when the country has opened its doors to FDI in retail, says each policy condition is expected to have different implications on various retail sub-segments. “A policy condition might have a low impact in one segment but could be a major stumbling block for another segment. Mass grocery and apparel are two of the fastest growing organised retail segments in India today. In both these segments, there are large domestic retailers who could be potential joint venture partners for foreign retailers,” Gaurav Gupta, Senior Director, Deloitte Touche Tohmatsu India, said in a statement.
He said foreign retailers could enter India by forming a joint venture company that could have multi-brand retail stores. “Alternatively, the foreign investor may also consider acquiring 51 per cent stake in the existing business set-up of the potential Indian joint venture partner,” he added. The report stated that the fact that mass grocery retailers already source many products directly from producers or food processing units was an advantage for this segment. But to meet sourcing guidelines and have better margins, foreign retailers would need to cultivate relationships with local manufacturers, it added. The study said the condition on sourcing would continue to be a major bottleneck for various segments such as consumer electronics, footwear, furniture and furnishing, among others.
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