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December 10, 2011

Pragya Singh

Outlook, December 10, 2011

Single-brand retail OKed: as long as those UPA feet don’t grow cold. With plans for raising FDI in single-brand retail from 51% to 100% getting the green signal, albeit with possibly more riders, all is not lost for India Inc. Single-brand retailers span the entire gamut of Indian consumer demand, from the luxury segment that includes the likes of Louis Vuitton and Fendi, going right down to mid-range consumer brands and sports outfitters such as Nike, Reebok, Marks & Spencer, H&M, Office Depot and Hamleys.

These firms can now either look to Indian shores expectantly, and some may even reconsider existing tie-ups to go it alone. “Single-brand retail, like a Nike or Adidas, will not directly compete with small kirana or independent stores. Hence, the attention of the party has been focused on preventing entry of multi-brand foreign companies,” says the CPI(M)’s Prosenjit Bose.

The biggest beneficiary of this segment will be the rapidly growing cash- surplus consumers seeking ‘luxury goods’. Next in line to benefit will be the millions of school-pass young workers, anxious for jobs with an address more chic than “chacha’s dukaan”.

On growth prospects, Devangshu Dutta, of retail consultancy Third Eyesight, says, “Carefully select the market segment as in the last 10 years many segments have matured, meaning that growth will not be as fast and wide as it was.” Still, be ready to welcome global biggies like home solutions major Ikea, which is among those that have been eyeing the Indian retail market currently worth about $450 billion.

(Read: "Debate on FDI in Retail — More Heat than Light")