Nilofer D’Souza, Forbes India
April 2, 2013
what could put the government’s controversial new foreign
investment policy in retail to an impact test, French group Auchan
has announced its first retail store, Decathlon, in Bangalore.
It is the first big-format niche retail chain to open in an increasingly
fitness-conscious urban India that craves for sporting space and
The Euro 43 billion French group’s venture is one of the early bird licences under a new investment policy which allows 100 per cent foreign funding of single-brand retail stores. Though the government had cleared the policy in November, some niggling issues regarding local sourcing had remained and it was finally notified in January. Auchan’s proposal to invest Rs 700 crore went through on February 13, the same day that the FIPB also cleared single-brand retail plans of Promod SAS, Le Creuset and Fossil.
Most of Decathlon’s stores now sport an ‘open to all’
sign to indicate the change in its policy. It states the change
on its Facebook page too. In a comment to customers, Decathlon
Mumbai, says, “FDI in retail did not allow foreign retailers
to sell to individuals directly. We were respecting the law of
the land by being a wholesaler.”
Decathlon does not have a clear competitor as the sports goods
retail market in India is populated with small over-the-counter
stores or a few hundred square feet space in department stores.
It has been present in the wholesale market with a cash-and-carry
model for the past three years. This would be the first test of
big-format retail’s impact on small merchants in a niche
Decathlon stores are big—sprawling over at least 4000 square
feet. In comparison, sports goods shops in the country are tiny.
Even in malls or supermarkets, sports goods get only a corner,
about half the area of a typical Decathalon store. It uses the
extra space for indoor sporting facilities.
“It could turn out to be a category killer, and create
and define the category because of the experience and product
mix it has,” says Devangshu Dutta, chief executive, Third
Eyesight, a retail consultancy, “Even with wholesale operation
in Bangalore, they have done fairly well. They broke even fairly
quickly,” he says.
The company opened a store in Mumbai last week and plans to open
in Hyderabad and Chandigarh too. About 3000 customers thronged
the store on the first day. That is a big draw for a niche segment
currently valued at Rs 2,500 crore but estimated to grow to $6
billion by 2025 in India.
In cities, people are starved for entertainment beyond movies, restaurants and malls. Decathlon has potential to provide weekend entertainment alternatives. That fits with its own target audience – the family.