Five routes foreign brands can take to enter India’s attractive yet complex brick-and-mortar retail market
New Delhi: India allows 100% foreign direct investment (FDI) in e-commerce marketplaces. However, such companies are not allowed to stock and sell products on their own and they must lend their platforms to other retailers and vendors to conduct business by charging commissions from them. Inventory-led or hybrid models of e-commerce are not permitted.
However, there are a myriad routes for foreign brick-and-mortar retailers to enter India. Any global retailer planning to enter India must thoroughly study the different routes through which they can invest in a retail business in the country.
India’s retail as a policy is segregated into single-brand, wholesale, multi-brand, food-only FDI and franchisee where generally there is no overseas investment involved.
Here are the routes global retailers can take to enter India:
- Single brand
Single brand retailing has the most liberal policy for doing retail business in India where foreign entities can operate a mixture of fully company-owned offline and online stores, conduct wholesaling business and allow other entities to operate their franchisee stores. India allows 100% overseas ownership for a unified license under the single brand route. The catch here is that such license holders are only allowed to sell products under a single label and their sub-brands. For example, Marks & Spencer can sell products under its M&S brand name, it is also allowed to stock products under its sub-brands of Autograph, Per Una and North Coast among other such labels.However, the single brand policy comes with a small rider: Foreign brands seeking to own more than 51% of any single brand entity have the obligation to source 30% of the total value of products they sell in India from local suppliers from the sixth-year of operation of their store/stores.Companies that have invested in 100% overseas ownership through single-brand: Apple Inc. (that is planning to open its company-owned Apple-branded stores in India later this year), Ikea, Uniqlo, H&M.M&S operates through a joint venture with Reliance Retail and Spain’s Zara has a joint venture partnership with Tata-owned Trent Ltd.