Consolidation, the way forward for India’s retail

The big merger of Future Group and Bharti Retail has happened at a time when physical retailers are suffering because of growing competition from ecommerce leaders like Flipkart, Snapdeal and Amazon. Also rising number of consumers is now turning to online shopping because of the variety, convenience and discounts offered by these platforms. However, this recent mega-merger is now seen as an answer to the way forward for organized physical retailers in India.

The Future-Bharti merger, once completed, will create a Rs15,000 crores retail business with 570 stores. Earlier, Bharti Retail was sharing partnership with American retail major Walmart and even Future Group was eyeing to crack a deal with French retailer Carrefour. But with multi-brand retail FDI rules still in limbo, foreign retailers have either exited or are focusing on wholesale business. Meanwhile, Bharti parted ways with Walmart last year and has now joined hands with Future Group leading to the birth of giant retail conglomerate.

FDI dilemma hurts foreign retail majors

With no hope for the FDI in multi-brand retail and top level executives quitting the company, French retail major, Carrefour, the world's second largest retailer, exited India. Walmart, on the other hand decided to go solo with its wholesale business after parting ways with Bharti Retail.

Domestic retailers are viewing this as an opportunity to grow sans stiff competition from global rivals. International biggies, once keen to explore the country’s lucrative retail market, have put their plans on hold sighting stringent FDI rules. Also the current government’s anti-multi-brand FDI stand as put hurdles to their prospects. Experts also point out that these foreign retailers were also not able to gauge the complexity of Indian retail business.

Despite e-retail, retailers chalk growth strategies

While battling stiff competition from online marketplaces, brick-and-mortar players are introducing various initiatives to grow their businesses. For instance, after selling majority stake in Pantaloons to Aditya Birla Nuvo, Biyani has been busy streamlining his retail empire by dividing them into three separately listed entities called Future Retail, Future Consumer Enterprises and Future Lifestyle Fashion, an apparel retailing company. The hyper and supermarkets food and grocery retail chains Big Bazaar, Food Bazaar and Food Hall are included in listed flagship Future Retail. The convenience stores Nilgiris, KB's Conveniently Yours, Big Apple and Aadhaar are listed under Future Consumer.

As competition heats up among ecommerce majors, physical retailers as well as among online and offline retailers, this step could give a much needed turning point to organized retail industry. Future Group’s competitors Mukesh Ambani's Reliance Retail operates around 616 stores in the same category, RP-Sanjiv Goenka-owned Spencer's Retail has 135 stores and 33 hypermarkets across 40 cities and More from the Aditya Birla Group has 438 supermarkets and 16 hypermarkets under the Megastore brands. After Flipkart-Myntra, Snapdeal-Exclusively.in, Madura F&L-Pantaloons, and Future Group-Bharti Retail…will there be more consolidations happening in near future – the time will tell. But consolidation seems to be the key to growth in the current market scenario.