Carrefour plans India entry

Carrefour of France is planning to enter India through the wholesale “cash-and-carry” format as it seeks to tap one of the world’s most promising retail markets, people familiar with the plan say.

The move into wholesaling will allow the world’s second-largest retailer to build a presence in India without falling foul of foreign-ownership rules that prohibit offshore supermarket and hypermarket operators from opening front-end retail stores.

It comes at a time of increasing opposition to the entry of organised retailing in India, with mobs in some states attacking stores owned by Reliance Retail, one of the country’s fastest growing domestic operators.

“This makes sense at a time when there is huge political sensitivity regarding foreign retail,” said a person familiar with Carrefour’s plans. “You want to keep the lowest possible profile at the moment.”

Carrefour’s move follows in the steps of Wal-Mart, the world’s largest retailer, which is entering India in a wholesale joint venture with Bharti, a domestic group.

The French grocer, alongside Tesco, has been eyeing the Indian market for a long time. Earlier this year it was in advanced discussions with Wadia Group, one of India’s prominent industrial conglomerates, about a prospective deal, but failed to agree terms. Talks with Dubai-based Landmark Holdings also came to nothing.

Foreign retailers are not permitted to operate so-called multi-brand front-end stores in India, such as those owned gobally by Carrefour, Wal-Mart or Tesco. But single-brand stores, such those opened by Gucci or Zegna, are allowed.

Organised retailing has only about 5 per cent market penetration in India. But it is attracting increasing opposition from the nation’s estimated 12m small shopkeepers, who fear that supermarkets and convenience stores will put them out of
business.

Under the cash-and-carry format, the shopkeepers themselves become the customers.

“The very fact that India has millions of small businesses and it’s possible to be an efficient supplier to those small businesses makes more sense than trying to directly connect with the hundreds of millions of consumers at this point,” said Arvind Singhal, chairman of Technopak Advisors, a consultancy and research firm.